TURKEY: Insurance Against European Risks

By IPS Correspondents Reprint | | Print |

Jacques N. Couvas

GENEVA, Nov 16 2006 (IPS) - Europe faces serious new risks and should rely on Turkey’s membership of the EU to mitigate several of them, the World Economic Forum (WEF) says ahead of its next regional meeting to be held in Istanbul Nov. 23 and 24.

The event will gather 360 delegates from politics, academics and business to discuss the challenges and opportunities presented to Western corporations in their expansion towards the Near East and to Turkey.

IPS met with Felix Howald, Director and Head of WEF for Europe and Central Asia. Howald is enthusiastic about Turkey’s capabilities to become a developed economy over time, but does not minimise the roadblocks that its government has to remove through legislative and administrative reforms.

IPS: The last WEF meeting in Turkey was in 1998. Has the Turkish government adhered to any of the recommendations proposed as result of that meeting, or will there be a repetition of the past agenda and action lists?

Felix Howald: Turkey in 1998 was a different country, politically and economically. Prime Minister (Recep Tayyip) Erdogan and many of his senior ministers have been coming annually for the past six years to the Davos symposium and made important contributions towards understanding the regional issues.

IPS: You have said in the past that WEF members are very interested in Turkey for business opportunities. What are their main concerns in entering the Turkish market?

F.H.: I have noticed more excitement than concern, to be frank. Turkey is a huge market and a natural hub to Central Asia, a region most business executives believe can be better handled out of Turkey. This is confirmed by the expected strong participation at the meeting of officials from the Black Sea and Caspian areas. In addition, the prime ministers of Syria and of Northern African countries, and the foreign minister of Iran, have also accepted our invitation to speak.

There are, obviously, uncertainties about next year’s presidential and parliamentary elections, the influence of the military on the state, the economic direction Turkey will pursue in the coming years, and the materialisation of the expected reforms. The Istanbul meeting aims at getting answers directly from the Turkish ministers relevant to the international business community.

IPS: According to the World Bank’s 2006 Country Memorandum, Turkey still has some way to go as regards Contract Enforcement and Foreign Direct Investment (FDI) regulations. In your discussions with the government, have you detected true willingness to accelerate the pace for substantial reforms in these and other areas in order to encourage the inflow of foreign capital?

F.H.: In my view, Turkey is truly willing to waive all obstacles to FDI. Our research has established that the country is the easiest in the region for setting up new companies, and business sophistication is high. Turkey needs, however, to identify new industry sectors to sustain its competitiveness and attract foreign investors.

IPS: European Commission negotiators often complain that for every step forward in Turkish reforms there are two steps backwards when it comes to their implementation. Do you think that patting Turkey on the shoulder, like your meeting does, is helpful to change Turkey’s attitude or does this rather endorse lax attitude on behalf of the Turkish government? In other words, what is more productive: the stick or the carrot?

F.H.: The Istanbul meeting is very likely to stimulate the Turkish government to move forward with reforms because of the pressure that will be put on it by the representatives of the private sector, both Turks and foreigners. The Turkish ministers present in Istanbul will get the message first-hand.

Encouragement is more important for reforms than sanctions. We have been supporting this attitude for some time now through the Davos Spirit. To be fair, the WEF’s perception is that Turkey is making two steps forward for each step backward, rather than the other way around. Its government faces many challenges simultaneously inside and outside the country. But things are moving, although sometimes slowly. It is more important to keep things going at the country’s pace than forcing the march.

IPS: One of the topics for the Istanbul meeting is identifying Turkey’s long-term competitiveness. You are aware that Turkish productivity is low and the employment rate is 46 percent, based on 2004 results. The Lisbon Agenda targets a 70 percent employment rate by 2010. Do you really think Turkey has a chance to get close to such target?

F.H.: It’s difficult to answer this question with accuracy. Turkey has been advancing in this area and its track record is good, although its position is below the average European rate. But it should be noted that the country is already ahead of some new EU entrants, such as Romania. The business processes are sound. If the microeconomic conditions improve, the employment rate will also increase satisfactorily.

IPS: You have also said that the meeting will seek, in addition to business opportunities, to identify intercultural opportunities with the West. As you know, in September there were major clashes between the President of the Republic and the Army, on the one hand, and the Prime Minister on the other hand about secularism. Are your members concerned that the General Staff’s claims that Turkey is sliding slowly but surely towards Islamism may eventually materialise?

F.H.: On the contrary, Turkey can serve as an example for Muslim democracy. Mr. Erdogan is a highly respected politician by Muslim and Western statesmen alike. Istanbul is really a good place to continue WEF’s drive to bridge civilisations. At next week’s meeting we have an opportunity to gather personalities from different cultures, evaluate progress and assess what mechanisms are needed to achieve results in cultural rapprochement. Turkey is already playing a significant role in this effort.

IPS: Transparency International has found that there is correlation between poverty and corruption. Turkey ranks 60th in TI’s corrupt countries list, and 50th in OECD’s (Organisation for Economic Cooperation and Development, a group of 30 rich nations) list. Is this a deterrent for your members’ investment plans in Turkey?

F.H.: At WEF we have tackled the issue of corruption negatively influencing FDI. It’s true, there is correlation between corruption and competitiveness and we will be bringing the subject on the table for discussion at two different sessions, together with corporate governance.

IPS: Some NGOs are concerned that the meeting looks like an encouragement to the Turkish government’s current policies at a time the EU is putting pressure on it to drastically improve legislation on freedom of expression. Is this criticism justified?

F.H.: The Forum is not there to say who are the good or the bad guys among states. Our focus is on economy and business. We leave the scrutiny of government behaviour to institutions established for such judgment, such as the IMF, the EU, the U.S., or the European Court of Human Rights. Our members are, of course, free to praise or criticise Turkey, but in reality progress in democracy-related issues will greatly depend on the effort the country needs to make to achieve accession to the EU through improvement of social and living conditions.

IPS: If Turkey eventually joined the EU, which are the major contributions it could make to Europe’s economic growth and well-being?

F.H.: The WEF is constantly evaluating the risks faced by Europe in the medium and long terms. We have so far determined that Turkey’s major contribution is geopolitical, by mitigating related risks, among which the most serious affect energy security, demographic stagnation, energy supplies, territorial security and terrorism, and understanding non-Western cultures.

Another non negligible contribution to Europe’s standing as a world power is that if Turkey, a Muslim state, were accepted to join the European club, the EU would be sending a signal to the developing nations that it is a truly multicultural and tolerant organisation.