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Rising power, growing questions 25 juin 2012

Posted by Acturca in Economy / Economie, Middle East / Moyen Orient, Turkey / Turquie.
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Financial Times (UK) FT Report-Turkey, June 25, 2012, p. 1

By Daniel Dombey

The Erdogan era has brought prosperity but there are calls for the political system to be modernised, writes Daniel Dombey.

On a warm evening in Istanbul, the most powerful man in Turkey’s recent history was holding court.

Recep Tayyip Erdogan, prime minister, had come that day from a World Economic Forum meeting at a nearby hotel, where he exulted in the country’s achievements under his 10-year rule: average growth of more than 5 per cent a year, a tripling of gross domestic product in dollar terms, increased trade and foreign investment and a rising place in the world.

« The experience we have had is an important example, not just for countries in the region, but for countries in Europe affected by the crisis, » he declared.

The contents of his speech were not Mr Erdogan’s only show of strength that day; so too were the circumstances in which it took place.

Having sworn in 2009 that he would never return to Davos, after a dispute with Shimon Peres, Israel’s president, in the Swiss mountain retreat that year, Mr Erdogan had instead made Davos come to him.

Now, he was greeting forum delegates in the grounds of the Dolmabahce Palace, Turkey’s Versailles on the Bosphorus, where 19th century Ottoman sultans lived and Mustafa Kemal Atatürk, the founder of the Turkish republic, died.

Standing in the courtyard before the palace’s great gardens, as an Ottoman-outfitted troupe blared its horns and banged its drums, a rapt Mr Erdogan was in his element, just as he is when addressing football stadiums full of supporters, as he has done several times in recent weeks.

It is not just that the prime minister is comfortable in contrasting settings; Mr Erdogan, a man of great political skill, dominates as perhaps no other leader has done since Atatürk.

Indeed, one of the biggest issues facing the country – perhaps the biggest – is how long and to what its extent, its history will be tied to that of its leader.

So far, the story of Turkey under Mr Erdogan is that of a democratically elected government that has asserted itself since its initial victory in 2002, breaking free from outside influences that had overshadowed and constrained its predecessors.

Those influences include the country’s once coup-prone, now humbled, military, the generals’ allies in the judiciary, who came close to banning Mr Erdogan’s AKP (Justice and Development Party) as recently as 2008, the big business and media barons of Istanbul and even the International Monetary Fund and the EU, whose sway over Turkey is much diminished. Once a cash-strapped supplicant to join the EU, Turkey looks on the eurozone’s travails with more than a touch of schadenfreude, while membership negotiations have long since been stalled.

Sometimes it seems as if the main challenge to Mr Erdogan’s authority is the network of supporters of Fethullah Gülen, an Islamic scholar self-exiled to Pennsylvania. Detractors say Mr Gülen’s followers have extensive influence in the police and prosecutors service and link them to an attempt this year to haul a trusted confidant of Mr Erdogan’s to court. Mr Gülen’s supporters deny all such allegations.

In any case, whoever was behind the power play, it failed: the court’s action was stymied by a law rushed through parliament and hundreds of police and prosecutors were subsequently moved from their jobs.

In a landscape in which the prime minister stands all but alone, the next stage of Turkey’s story is of peculiar significance.

For Turkey is not just a country of dynamic entrepreneurs, with a popular government and a growing voice in the world. It is also a country where defendants in high-profile trials complain of fabricated evidence and where judges hand down stiff jail sentences for students unfurling banners demanding free education.

Sinan Ulgen, a visiting scholar at Carnegie Europe, says: « As the country has moved away from military tutelage, it has failed to strengthen the democratic institutions that provide checks and balances. »

He adds that recent initiatives by Mr Erdogan – such as redrawing the education system to give more space to religious schools – are part of a trend in which big changes have been rammed through, increasing divisions in an already polarised society.

A central problem, both supporters and opponents of the government say, is the country’s current constitution, an authoritarian document dating from 1982, when the generals still ruled the land, that privileges state rights over individual rights.

p. 2

Increasing power, growing questions

Turkey’s main political parties have now begun work on a new constitution, with the goal of completing it by the end of this year. Still to be determined is how far the new charter will enshrine individual rights, whether it will be agreed by consensus or put to referendum, and whether it will achieve Mr Erdogan’s current great goal – an executive presidency that would unite the roles of head of state and government.

Mr Erdogan is coy about his personal ambitions, but his own party’s statutes forbid him from another term as an MP or as prime minister. And although the next presidential election is not until 2014, polls show he is by far the most favoured potential candidate.

Meanwhile, the prime minister has to do his best to square the country’s economic and political agendas – much of the AKP’s success in office is due to the growth of the past 10 years. And, as the government often argues, the political stability the party has provided has underwritten the country’s economic performance.

Turkey’s economic problems are of the sort that many eurozone countries, reeling from crisis to crisis, would kill for. Not only have living standards raced up under Mr Erdogan, but a new breed of Anatolian entrepreneur has put its mark on the world, government services have sharply improved – particularly in healthcare – and a strong middle class has emerged as poverty has been reduced.

Güler Sabanci, the head of Sabanci Holding, one of Turkey’s biggest groups, says: « I remember in the 1980s, when we went to Italy, we used to ask why there were so many more small and medium-sized enterprises, ». Now, such companies are to be found throughout Anatolia, she adds. « It’s very entrepreneurial – it is the guarantee of a market economy. »

But while Turkey has impressive areas of export expertise, such as the car industry, the motor of the economy remains domestic demand, financed in large part by foreign funds.

With half the population under 30, appetite for consumption is formidable, as are the country’s infrastructure needs – far beyond what can be underwritten by a domestic savings rate of just 13 per cent of gross domestic product.

Ministers say the growth of the past two years – which at one point exceeded an annual rate of 11 per cent – was unsustainable. The government expects 4-5 per cent for this year, which would be enough to accommodate new entrants into the labour force, although some private sector analysts are more bearish.

Even with a lower rate of economic expansion, Turkey is expected to run a current account deficit for the year of some $65bn, down on last year’s $78bn, but still representing some 8-8.5 per cent of GDP.

And despite Turkey’s growth, the country cannot be said to have decoupled from the eurozone. The EU remains Turkey’s biggest trading partner, by far its biggest source of investment, and – particularly important in a country with few means of raising long-term capital domestically – a leading financier.

Indeed, as the eurozone crisis deepened and the Turkish lira came under pressure last year, the previous unorthodox monetary policy of keeping interest rates low to prevent inflows of hot money was effectively abandoned. Today, speculative cash, drawn in by higher interest rates, helps fi-nance the current account deficit.

For now, Turkey remains an anxious handmaiden on external events that partly determine whether the money keeps coming.

In late June, Moody’s, the rating agency, upgraded the country’s rating to a notch below investment grade, citing an improvement in government finances and recent incentive schemes for savings and investment. But in the longer term, more structural reforms may be needed to cut the deficit further.

« If we can fix the current account deficit problem, we will be on the right track, » says Izzet Karaca, who from his Istanbul base is responsible for Unilever operations in 35 countries and has seen the company’s Turkey business triple in 11 years.

In foreign policy, too, expectations have been adjusted since the euphoria of last year.

The uprisings in the Arab world have undoubtedly bolstered Turkish influence, particularly in countries such as Tunisia and Morocco, but the central problem Ankara faces is Syria, where the limits of Turkish power have been revealed.

Mr Erdogan had once hoped to persuade President Bashar al-Assad, a former close ally, to embrace reform, but the Syrian leader proved impossible to persuade and, even after Turkey turned against him, hard to eject from office.

Today, Ankara has testing relations with all three of its southern neighbours – Iran, Iraq and Syria. This matters. Not since there was a sultan in Dolmabahce palace has Turkey been so active in the region.

Surveying the world from the same spot, Mr Erdogan is all too aware – and his officials freely admit – that what comes withthat more active role is a region likely to be unstable for at least a decade. He also knows his country’s economy is deeply entwined with his own political fate.

In the Turkey of today the big decisions are his to take. Much rests on what they will be.

Download full report (Format Pdf)

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