İBRAHİM ÖZTÜRK

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İBRAHİM ÖZTÜRK
February 15, 2012, Wednesday

Towards a strategic partnership between two rising stars: Turkey and South Korea (II)

In the last column, I briefly presented the case of Korean development within the global context. My aim was to provide a ground for discussing the possibilities of further cooperation between Turkey and Korea.

My hypothesis is that there are several factors of complementarities as well as substitutes between the two countries, ranging from economic to some other fields. Structural similarities among the same sectors such as consumer electronics, textile, etc., not only trigger intense competition on the global scale, but also open the path for further cooperative competition as well as intra-industry trade. The bulk of trade takes place among the most developed countries with more similar economic structures. This is the way competition is taking place in the contemporary world. On the other hand, there are several sectors in which both countries are in a position of complementarities, which should be seen as good news from the viewpoint of comparative advantages.

Let me briefly mention some of my observations on the relationship between Japan and Turkey so that these lessons could be helpful for Turkish-Korean relations as well. I have been working on the rise and decline of Japan’s development model since the 1990s. As an academic working on Turkey and Japan, I have offered several fields or sectors of cooperation between Japan and Turkey so that Japan could more easily benefit from rising market potential in and around Turkey, and Turkey could benefit from Japanese know-how, technology, finance, etc.

However, because of short sightedness, economic crisis and political instabilities Turkey, throughout the 1990s, and Japan, throughout the 2000s, have failed to understand and behave accordingly. As of today, Japan has a population of more than 125 million with per capita GDP [gross domestic product] exceeding $35,000, while Turkey has a population of 75 million with a very young demographic profile where per capita GDP is rising geometrically. Despite their potential to cooperate in trade, the two countries fell apart from each other in a globalized word. The volume of trade is just around $4 billion, meaning simply nothing. Second, although Turkey is one of the most important tourism destinations in the world, Japanese is not among the top 10 countries visiting Turkey. In 2011, more than 31 million tourists visited Turkey, but only 150-200,000 were Japanese. Third, Turkey has become one of the significant foreign direct investment (FDI) recipient countries in the word. However, apart from some significant large infrastructure projects, the share of Japanese capital in Turkey is not significant at all. Turkish citizens love the Japanese, and the Japanese love Turkish citizens. However, this mutual sympathy did not trigger a process to fully exploit the big economic potential. What I would like to note is that sympathy is necessary but not a sufficient condition for cooperation. More purposeful actions, project-based works must be developed. I will not go into the detailed reasons of this relative failure of economic relations between the two countries. What I would like to do is to get a benefit from these historical lessons in improving mutual economic relations between Korea and Japan. First of all, the level of economic development is closer between Turkey and Korea. There is a potential for trade. Second, Koreans are comparatively more open people. Therefore, unlike the excessively high standards and rigidities in doing business in Japan, business practices both in Turkey and Korea are more manageable. Third, the location of Korea in South East Asia and Turkey at the cross roads of three continents offers unique advantages for Turkey to enter Asian markets and for Koreans to enter several diverse market in the Middle East, Europe and North Africa. Fourth, the market potential, rising purchasing power and growth potential of Turkey is itself a big stimulus for foreigners. It is not surprising, therefore, that the volume of trade, finance, the FDI and tourism are rising very rapidly between the two countries. The volume of trade almost reached $7 billion in 2011; however, a lion’s share goes to Korea.

Turkey offers a high potential return in energy, health, agriculture, tourism, machinery, iron and steel, other components of metallurgy and transportation projects, such as high speed trains and the shipping industry. Recently, Turkey has seen its competitive power in the defense industry significantly rise, and both countries could benefit from this. Also, both countries could cooperate on large construction projects globally. The strength and experience of the Turkish construction industry proves such a potential. To sum up, very similar to the case of Turkish-Japanese economic relations, historic sympathy is not sufficient to achieve the desired level of economic relations between Turkey and Korea unless a fair trading approach is cultivated and specific fields of cooperation are defined and carefully worked out. The coming free trade agreement would constitute such a virtuous process in the longer term.