Turkey in need of better connection with Asia to fight economic crisis

Noting that Asia is the growth engine of the world, Dr. Güven Sak, executive director of the Ankara-based Economic Policy Research Foundation of Turkey (TEPAV), has strongly proposed that Turkey should improve its transport connectivity with the region in an effort to boost bilateral trade.

Speaking at the Ankara presentation of the Economic and Social Survey of Asia and the Pacific 2012, a report written up by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), Sak drew attention to the fact that although Turkey's exports to Asian countries have risen in the last couple of years by 25 percent, the figure still remains comparatively very small, while the financially-stricken Europe has a 60 percent share in Turkey's trade.

When Europe fell into a financial crisis a few years ago, Turkey started to think of more ways to further economic relations with Asian countries, considering the economic potential of the region. However, trade means transportation, and Turkey doesn't even have a properly functioning train route to Pakistan through Iran. The present railroad line between İstanbul and Islamabad is a very old one, and the railroad system in Pakistan is not compatible with the Turkish and Iranian systems, making it necessary for the loads to be transferred to other freight cars before entering Pakistan, and for the locomotive to be changed as well.

“In December last year, two test runs were carried out on the line. The journey from İstanbul to Islamabad took two weeks, with much waiting because of the lack fo coordination between the two countries,” Sak said, noting that, for this destination, freight shipment by rail would actually cost less than maritime transport.  

Turkey, which came second after China in terms of economic growth in the last two years, seems to stand in a good position among the Asian Pacific countries. But as Dr. Sak noted, Turkey's position is also risky, given that it's the only country in the region where inflation is expected to nearly double -- from 6.5 per cent in 2011 to nearly 10 this year -- while, at the same time, the growth rate is forecast in the report at 3.2 percent in 2012, down from last year's 8.5 percent.

The ESCAP report, which was presented at the UN office in Ankara on Thursday, is also drawing attention to the vulnerability of the Turkish economy by saying: “Even though the Turkish economy remains relatively more robust, it is not immune to stress in the international markets due to its high current account deficit (CAD), which has made the country dependent on external financing and thus exposed to fluctuations in global liquidity cycles.”

As per the report, overall economic growth in the Asia Pacific countries, of which Turkey is a part, is forecast to decline to 6.5 per cent in 2012, down from 7 last year, because of the declining trend in exports and higher cost of capital due to the global economic crisis. On the other hand, inflation is expected to soften to 4.8 per cent from 6.1 last year. “Despite the slowdown, the Asia-Pacific region remains an anchor of stability and economic growth,” Shahid Najam, an ESCAP economic analyst, said at the presentation meeting.

China and India, the region's growth engines, are estimated to continue to grow at robust rates in 2012. The growth estimation for China, which grew by 9.2 percent in 2011, is 8.6, while India is projected to improve its growth performance from last year's 6.9 percent to 7.5 this year.