Frankly speaking, the timing as well as the content of the criticism was quite appropriate in the sense that five years of strong economic growth were the chief reason the pro-business government of the Justice and Development Party (AK Party) received a solid mandate for a second term.I have also personally been quite anxious over whether the early signs of inertia or reform fatigue are going to capture the psychology of the AK Party government in the second term. Yes, it is agreed that not only the government, but also the entire society has been worn out by having to face so many recent issues such as long-lasting election tensions; enhanced Kurdistan Workers’ Party (PKK) terrorist activities; ever deepening deteriorations in the US economy -- this time triggered by mortgage woes, but in essence caused by structural deficiencies -- persistent consumer inflation in the domestic market; and an increasing volume of foreign financial inflow, creating further pressure on domestic currency.
Unfortunately, life is difficult and there is no lasting tolerance for extreme ignorance in this world of survival of the fittest. Therefore both society and foreign and domestic businessmen in the financial sector wait for the economy to be fueled by new and promising future-oriented projects so that economic agents will be motivated to be loyal to their investment decisions. This is particularly important in countries such as Turkey where a culture of early satisfaction has persisted.
As a matter of fact, I am still frightened over the recent state of inaction, not to mention inertia, because of my feeling that the government hasn’t any concrete road map for the “post-International Monetary Fund (IMF) program.” If this is a correct understanding of the psychology dominating the AK Party government, this means that they are waiting for the details for the new era to emerge from negotiations with the IMF.
Fortunately, while thinking about all these issues, two months after returning to power, the AK Party government finally announced its new economic action plan on Oct. 10 for the three remaining months of the year. Let me elaborate on the quality of the action plan.
As a matter of fact, the program proposes a major policy change with regards to its priorities for the economy such as employment, further growth and strengthening of industrial competitiveness. Recall that the previous programs were frequently criticized as favoring financial sector priorities. Five basic pillars of the action plan have been formulated in order to achieve these targets: a comprehensive rise in employment, stronger industry, developing technology, human resources and macroeconomic stability.
By looking at the action plan, we can say there is quite strong continuity as well as new elements. The program also reflects the expectations of the business world as well as society. First of all, one area considered vital is the revival of stalled social security reforms, which should free up resources that can be used for education and training. A second aspect is to prepare a fiscally solid budget for 2008-2010 so that the disinflation program and efforts to reduce public debt are not threatened. A third is to improve tax collection as well as to cut the higher rates, showing a dedicated effort and the required reforms to reduce the extent of the unregistered economy. And a fourth is to undertake reform in the energy sector -- including allowance of increases in electricity prices -- ahead of the introduction of some element of privatization and of a new regulatory regime.
Now we are in a position to observe the groundwork being laid for implementation before creating further expectations in society.
