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December 31, 2013, Tuesday

2014: Turkey and developing countries

I believe that 2014 will be as important as 1914. There have been some turning points in human history. Some moments from these two years reflect the outcomes of long accumulations of stress in the form of upheaval.

This was the case in the early 20th century. Take 1914, for instance. World War I started a century ago. Three empires collapsed during this period: the Austro-Hungarian Empire, Russian Empire and the Ottoman Empire. The period of nation states started in Europe and Asia. And now, this period is nearing an end.

However, the difference between the ongoing process and the previous period is this: A century ago, the emerging nation states relied on economic sectors that contributed to their conventional industries. The period was first marked by iron and steel and then petro-chemical industries. The technology of these industries was handled by the states that possessed organized armed forces. The system had no option other than waging an all-out war in order to have access to the energy resources and markets these sectors needed and to overcome the crisis. This is not the case now; the main sectors, which destroyed three major empires and divided the world into nation state markets and units, are being replaced by knowledge-based sectors. Integration has become more popular, and the vertical division of technology is being replaced by a new process based on horizontal, rapid distribution and the economy it has spurred. Not only developed countries develop technology now; this was a phenomenon in the 20th century. Now we have passed this reality. To this end, 2014 and what comes afterwards will be extremely important for developing nations like Turkey.

The partial tapering decision by the US Federal Reserve(FED) coincided with the final days of 2013, and the currencies of developing countries were devalued just like in May 2013. Now, this is what is being discussed in Turkey in connection with the political debates: What sort of growth will Turkey display in 2014 and afterward? Of course, after the FED's tapering decision, the fragile developing nations (India, Brazil, Indonesia, South Africa and Turkey) are likely to face greater risks now.

This definition as fragile emerged based on the conclusion that these five countries will be hurt most in case the FED reduces the amount of bond purchases. The common characteristic of these countries is that they have problems with current deficit and inflation equilibrium. In fact, a closer look at these countries reveals that they are determinative powers in their respective regions. To this end, the "fragile five" is a description that stems from the glass being half empty.

These are economically and politically important nations that have a say in the global economic system by virtue of their historical experience. Each of these nations could become a new China or South Korea in the near future. For instance, South Africa could do what China did in the Asia-Pacific in Africa. Likewise, India may follow Chinese development in Asia and become a power that takes this development style to Europe, leaving the European states behind.

Turkey, on the other hand, is strategically much more important than these countries. In the new era, Turkey holds the potential to accentuate the significance of Eurasia, determine its fate and change the balance between the West and the East.

Obviously, Turkey will grow by 4 to 4.5 percent in the 2013-2014 period. However, Turkey will also experience tension in connection with the elections in 2014 and 2015. Despite this political risk, I believe that Turkey will be able to use its growth potential properly because, as a result of the development in the ongoing process, the political risks of the entire Asian continent are all the same. From this perspective, it is hard to believe that political risk in a particular country is greater than the risk in another.

There are two types of countries that display high growth rates and that bridge the gap with developed nations: The first type includes nations that experienced hard times but are now showing some progress. Iraq, Mongolia and Turkmenistan could be considered in this group. These nations also hold serious market, labor and natural resource potential at the same time. Asian countries that can catch up with developed nations show the second highest growth rates. The average economic growth rate in these countries is above 5 percent. The growth in these countries is based on industrialization, which relies on high technology and productivity. In other words, these countries are undergoing a transition period of their industrial societies as well as their information societies at the same time. There is another interesting detail here: Latin America.

Latin American countries, especially Brazil, have shown remarkable performances in their transition from military rule to democracy; however, they have not made any serious progress over the last three to four years. The average economic growth rate in these nations is around 3 percent; a 4 percent growth rate would be regarded a huge success. However, Latin American countries may face serious political risks, like Turkey, in 2014. These risks may take place because of their own domestic dynamics. But despite all these political risks, I believe that the progress and growth in the developing nations and in Turkey will continue in 2014 and onwards.

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