However he added that while Turkey was one of the biggest countries in the region its foreign trade was one-third that of Belgium. His comments came at Thursday's conference held by the American Business Forum in Turkey (ABFT) which addressed innovation and global competitiveness. The Imperial College Center of Health Management Director Professor Rıfat Atun said that the processes of invention and innovation were different. He added that Turkey needs to develop a culture of innovation as well as work to reduce the bureaucratic obstacles placed before innovative studies. A range of Turkish and international experts and entrepreneurs participated in the day-long conference. Discussions focused on innovation and competitiveness, looking at the US and other model countries.Didem Altop, of Endeavor Turkey, opened by emphasizing the non-financial needs of entrepreneurs in emerging markets. Though raising money is the biggest challenge, there is still a host of other needs, including access to role models for their expertise, as well as access to other forms of human and cultural capital -- even emotional capital, she said.
Yes, emotional capital, for it takes special passion to persuade someone to leave a secure job to take a risk on a new start-up company. Endeavor is a non-profit organization set up in New York in 1997, and in Turkey since December of last year, helping some 198 entrepreneurs develop during the past decade -- people who have created billions of dollars in wealth and over 30,000 jobs.
Altop outlined Endeavor's five-step model: from recruiting business and opinion leaders; to helping identify impressive candidates; through supporting and promoting the entrepreneurs; which, in turn, perpetuates the cycle and therefore influences the next generation of people able to start new businesses.
If the whole morning was a mutual love-fest of hopes and dreams for future glory, Steve Hanke from Johns Hopkins University gave a fast injection of reality by way of pointing out serious shortcomings in the Turkish economy. The Economist and Forbes columnist said that while stability might not be everything, everything means nothing without stability.
Turkey has made successful reforms and introduced macro-economic stability since the crisis of 2001, "but the low-hanging fruit has already been picked and it's time for deep structural reforms," said Hanke. "Turkey ranks in the middle of the pack in terms of economic liberalism, ranks poorly," he said, citing Wall Street Journal's "Heritage and Doing Business" study, the country's standing having declined since 2005.
"These rankings are important because in all my work, there's almost a one-to-one link between these metrics and economic performance," he said. "That is, if you improve the metric by 10 percent you're likely to expand economic growth by 10 percent." The main problem in Turkey is the country's very inflexible labor market, which, according to Hanke, is "dysfunctioning, really not functioning at all," mainly due to extremely high taxes.
Hanke brought up a measurement used by the Organization for Economic Cooperation and Development (OECD) to rank labor markets, namely the so-called "tax wedge" -- the portion of taxes that does not go back to the worker. At over 42 percent, Turkey is "way out on the extreme" with the worst ranking of any OECD country, with the average around 20 percent and the US average at approximately 11 percent.
The formal sector in Turkey is quite productive, but labor market dysfunction pushes workers into the unproductive informal sector, and also leads to high unemployment, which Hanke said is around 11 percent in Turkey now. The weak labor market also leads Turkey to export labor to Europe, which is a bad symptom and causes undue political tension with the EU, whose leaders worry that if things open up they will have a flood of Turkish workers; basically, a situation of Turkey dumping labor into Europe.
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