These days Turkey is booming and the country’s leadership has ambitious plans. Alongside China, Turkey is currently one of the world’s fastest growing economies. In spite of the economic crisis Turkey’s economy grew by some 8.9 percent in 2010. Already the world’s 16th largest economy Turkey is planning to make it to the top 10 by 2023, marking the 100th anniversary of the republic. Not bad for a country whose economy, only a decade ago, was balancing on a knife’s edge.
Turkey is shooting for the stars -- this was the message given by Foreign Trade Minister Zafer Çağlayan when he visited Brussels last week. Minister Çağlayan was in town to receive a prize from the Crans Montana Forum for Turkey’s outstanding contribution to international trade as well as meet senior EU officials to try and resolve some on-going difficulties that Turkish businessmen continue to encounter with the EU. Speaking in what I would term a “machine gun style” he fired off a half-hour speech on Turkey’s blossoming foreign trade.
Turkey is a natural trading center, being strategically well placed and having important historical ties with all the countries in its neighborhood with which it now does good business. Even with Armenia, with whom Turkey has no diplomatic ties. Between January and December 2010, Armenia imported roughly $210.9 million worth of Turkish-made goods -- a nearly 19 percent increase from 2009 with Armenia exporting $1.23 million to Turkey. Ankara’s outreach also goes beyond the boundaries of its neighborhood and Turkey now does trade with the Far East, South America and Africa. Over the last three years trade with Africa has tripled to some $12 billion and is set to triple again over the next two years. One-fourth of the world’s population lives in the region, 56 countries lie within a four hours’ flight and two-thirds of the world’s energy resources are located east of Turkey with the country being a reliable and safe corridor for the transfer of oil and gas to the West.
Turkey is ambitious. It is already making big strides in producing its own automobiles, plans to start building aircraft in the next few years and creating the world’s biggest shipping port by 2030. It is a fact that good economic and trade relations usually lead to good political relations. “Zero problems, trade without borders” has become the motto of Turkey’s trade policy. Political and economic stability, following the election of the ruling Justice and Development Party (AK Party) in 2002, went some way to creating the conditions for Turkey’s success, along with reforms in the banking sector, which were carried out by former Economy Minister Kemal Derviş in the aftermath of the country’s last economic meltdown in 2001. In the eight years since 2003, when the government began applying free market rules, the total foreign investment flow was six times higher than in the whole of the preceding 80 years. Turkey now sees itself as a role model for other countries having survived the global financial crisis, managing not to have problems in its banking sector or foreign currency regime. Indeed, Turkey was the only country in Europe that did not have to intervene in its banking sector and is the only country whose credit score has been increased in two consecutive years. The minister claimed the key to this success was important to budgetary and financial discipline and closely following the EU’s Maastricht criteria for internal debts, interest rates and budget deficit.
Having established a Customs Union with the EU in 1995, Europe is Turkey’s most important trading partner. In 2008 Turkey attracted around $20 billion in direct foreign investment, with more than 70 percent coming from Europe. This clearly demonstrates the opportunities that exist in Turkey for investors. However, Çağlayan had plenty to say about relations with the EU, complaining that the EU does not provide Turkey with the sort of support it should with a number of technical barriers to trade remaining. This includes continued visa restrictions on Turkish businessmen and quotas on certain products. Furthermore, the EU has concluded free trade agreements with other countries that do not apply to Turkey. He considered this to be unfair competition and a breach of human rights.
Moreover, the entire “trade picture” is not as rosy as the government likes to project given that Turkey continues to suffer from a trade deficit of some $6.3 billion, which seems likely to increase. This deficit reflects Turkey’s strong consumer-fueled economic growth, with imports continuing to boom. Turkey needs to turn this situation around as the heavy dependence on imports magnifies a potentially fatal flaw in its impressive rebound from economic crisis: a blossoming current account deficit financed by volatile hot money and speculative investments.
