Konuk Yazar, 14 Temmuz 2001
Murat Ilican
Turkish Politicians! It is time to deliver
Despite possessing assets as valuable as its very young and dynamic population, Turkey has so far failed to provide its people with proper standards of living and social conditions. It also failed to attain the level of respect it deserves within the global community and most importantly, it created an environment of high uncertainty that renders all its productive forces underutilizable and incapable of unleashing the true potential of the country. Years of populist politics and the lack of political leadership to initiate the right reforms resulted in the current picture of social and economic chaos. The long needed reforms to enable the country to effectively compete within the new global world (dis) order have not been fully realized and as a direct result in the beginning of the 21st century we are faced with a seriously ill, sleeping giant waiting to be awoke.
The country experienced two major economic crises in the last eight months and as usual needed external funds from global institutions such as the IMF and the World Bank to bail itself out. In the last decade, the politicians portrayed this trend of external borrowing as a great success and each time they secured it, they irresponsibly utilized these funds for populist aims rather than funneling it into the seriously needed social, economic and political structural reforms. Due to the wrong policies of the past, the current debt of the country reached over $150 billion with a diminishing GDP/Capita of around $3000. The national currency devalued by 80% since October of last year and the free-floating exchange rate mechanism adapted in February has failed to yield a stabilized Turkish Lira creating extra social and economic pressures in all segments of the society.
Turkey is now ranked fifth on the list of the countries with the worst income distribution. The current gross minimum wage per month (that will not change in TL terms until the end of the year but will surely diminish in dollar terms) is around $115. The inflation numbers of June calculated on the year-on-year basis was 61.8% and 56.1% for WPI and CPI respectively with year to date figures of 44.5% and 32.3%. In the first five months of this year, industrial output fell by 5.25% leaving behind a pool of unemployed that is expressed in numbers of multiple millions. The financial markets are extremely nervous, with declining prices and increasing interest rates. In short, the country is, in simple terms, experiencing an economic depression, which is negatively affecting the current and the future social and economic structure and the dynamics of the whole of Turkish society.
The careful utilization of the borrowed funds as well as the strict implementation of Dervis’s plan supported by the IMF and the World Bank seem to be the only probable, although not guaranteed, way out of the current mess. The economic structuring should be accompanied by the needed political reforms to enable the healthy development of the country. The political leadership should create a new vision that will be supported by the local and international community to enable its success. Trust and consistency as well as hard work is the key to put things right. However, since 1994 (the great devaluation crisis) the political leadership consistently made local and international promises and failed to deliver them. Thus, currently neither the Turkish public at large nor the international institutions have any faith left in the Turkish political establishment.
Turkey has such a bad track record that the latest letter of intends given to IMF is closely watched and monitored. In the last seven years eight letter of intends have been given to the IMF and none has fully been implemented. Thus, currently IMF is simply giving out the massage that even if it has approved a new loan facility of $16 billion for Turkey due to the current crisis, Turkey will need to deliver the required reforms to be able to receive the promised installments. And it rightfully asks to see not only the new laws, but also their implementation. As is the usual case in Turkey, new laws do not automatically translate as actual practice on the ground.
Instead of fully abiding by the former promises given on mutual consent, the current coalition government is having difficulty in digesting the stiff stance of the IMF. Some politicians and economists mainly of nationalist background perceive the IMF’s stance as involvement in Turkey’s internal affairs and advocate that it should not be tolerated. Others insist that this is the only way forward and that, after all, Turkey needs to deliver its commitments not for the IMF or anybody else, but for its people. Restructuring of the banking sector (that has been abused by the politicians and is currently in bankruptcy) is one of the most important steps that will benefit Turkey and its people. The same goes for structuring of the farming sector on which 45% of the population is dependent and which has always been irrationally favored for receiving votes. The examples are numerous.
Dervis is spending most of his time travelling between Washington and Turkey trying to implement the latest economic program for development and growth. He is constantly exposed to resistance to change on the local front and constantly faced with demands needed to be met on the foreign front. His greatest obstacle is to persuade the coalition government; especially its nationalist wing, that what is being done is not selling the country out, but rather abiding by the norms of a transparent liberal economy. The latest crisis between the IMF and Turkey was mainly due to the appointment of Turk Telecom board members. This crisis in turn delayed the approval of $1.56 billion stand-by loan to be released and the markets experienced yet another mini-crisis. The members of the board were perceived to be political party-favored individuals rather than professionals and that was a perception the IMF could not digest, fearing future problems that may spring up in the company’s future privatization.
Almost everybody in Turkey agrees that the country needs to be restructured politically, socially and economically and that the people and the country deserve much better than the current setting. What is missing, however, is the united political vision to lead the country forward. For centuries Turkey saw itself as part of western society and is currently aspiring to become an EU member. Certainly, Turkey for the EU and the EU for Turkey is not an easy ‘meal’, but if the decision of Turkey is to become an EU member then certain ‘musts’ should have to be complied with. On the top of the list lies a healthy economy operating according to the principles of a liberal, global economy that specifically dictate minimal government involvement in the economy and a smaller and effective public sector. Thus, the current political resistance to change at the government level is hard to grasp. Especially, knowing that most of the problems of the country today are due to public sector mismanagement, be it in state banks or state owned enterprises, as well as policies that were geared towards populism. Adding to that the outdated constitution and the laws and regulations of the society as well as inefficient state mechanisms created a Turkey in need rather than a Turkey to be admired.
Today most of the European countries are suffering from aging populations and these countries perceive this trend as among their biggest problems. Young and dynamic human capital is the most important asset of any country and an inevitable part of the production, thus future prosperity and development. Turkey having one of the most hardworking and young populations in the word according to a study conducted by United Bank of Switzerland, a global financial institution is sitting on this invaluable asset and is failing to unleash its potential. This can only be due to political mismanagement and the political leaders of Turkey should get the signal: “Deliver or leave”.