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On the way to a new Turkey

Interview - January 7, 2015

Turkey has been one of the fastest growing countries over the past decade and is Europe’s 6th and the world’s 18th largest economy. Turkey has also been the second biggest reformer among OECD countries in terms of its restrictions on FDI since 1997. Recently and after several years of almost nonexistent communication, Turkey´s new EU Minister, Volkan Bozkır,  has been reviving talks with the EU, and has recently launched Phase II of Turkey's National Action Plan for EU Accession. This year, Turkey is also presiding the G-20 and will host the G-20 Summit in Antalya.



Turkey has been labelled as a “global success story” of the last decade. What are in your opinion the specific drivers behind your country’s economic performance and do you believe that this growth is likely to continue in the coming years?

First of all, before this last government came into power, our country suffered a major banking crisis in 2000–2001. We got hit hard, thus this crisis obliged us to drastically change the way we were governing our economy. Our government implemented major reforms and has continued on this path up until today, through the guidance and advice of the IMF. Turkey’s reform program has been commended by major international institutions that have repeatedly referred to our economic model as exemplary for the region and the world. I would even say that Turkey has been able to manage the current economic downturn better than many European countries. The banking crisis hit our trade because of lower demand from the international markets, but Turkey did not suffer anything, because we had our own crisis eight years before and we learned from it.

Pursuing our reforms required a lot of investment, which we had to look for abroad. Turkey has been a champion in attracting foreign direct investment. Recognized as the second biggest reformer among OECD countries in terms of its restrictions on FDI since 1997, over the last 10 years, Turkey attracted more than $100 billion of FDI and ranked as the 13th most attractive FDI destination in 2012. A big amount of foreign capital influx went to big infrastructure projects, a trend that will continue in the future as Turkey has set the objective to become amongst the top 5 economies in Europe by 2023. The high-speed train, the Marmaray Railway, the amplification of existing and the construction of additional airports, energy pipelines, nuclear reactors, etc. are all examples of mega infrastructure projects that are connecting Turkey to the world. And last but not least, the success story of Turkish Airlines is without precedent. The company has truly become the flagship brand that represents our country abroad and I am proud of the way they have been able to position themselves internationally.

I must also underline that Turkey has a very young population with tremendous purchasing power and that our middle class has been continuously expanding. In comparison to Europe where an aging population is causing domestic governments to implement difficult and painful reforms, I believe that Turkey has a unique competitive advantage in this sense. This also means that we have a huge domestic market and that we are able to trade amongst ourselves. In addition, our products are of very high quality, which was also stimulated through the Customs Union with the EU. Furthermore the Turkish businessman has been able to penetrate even the most difficult markets. Although the EU remains our biggest trading partner, we have always tried to diversify as much as we can geographically. As a result Turkey’s trade with Africa, Asia, and also the Middle East is on the rise. In parallel, Turkey is also opening new embassies across the globe. We have opened embassies in almost all African countries, are expanding into Latin America, and have almost completed Asia. Having a formal government office abroad helps with trade and investment as well, because it broadens our presence and helps growing Turkish alliances globally. In short, I feel that Turkey has the means, the ambition, and the opportunities to keep growing, and our businessmen are willing to take up the challenges. Turkey has a lot of catching up to do. We have waited for decades to open up and now that we have chosen the path of innovation, growth and development, there is no turning back.

In terms of Foreign Direct Investment, do you think that Turkey will be able to keep attracting similar amounts, especially given a weaker global economic situation?

I am positive that we will because almost 80% of the investments are coming from the EU, not from the US or the Gulf Countries. Europe has always been our first and most important trading and investment partner. Turkey will need huge amounts of additional capital, in particular to fund the mega infrastructure projects that I have mentioned earlier. And I believe no one is better placed as the European investor, who is familiar with our market and who knows what profit he can make.

How would you define the Turkish businessman, given that he has displayed such an ability to develop and grow internationally?

The Turkish businessman has always been able to overcome challenges. He has a mind-set that doesn’t allow for problems to exist for a long time, on the contrary, whenever a difficulty arises, he immediately thinks about a possible solution. This has made him very flexible and resourceful and has also resulted in several very successful Turkish companies. In regards to the EU and the on-going accession process, we have displayed a similar positive attitude. WE have tried to become a member of the EU for a very long time. We have faced and overcome many difficulties, pushing ourselves aside, always trying to aim higher and to comply with the rules and regulations required by the EU. Up until today Turkey’s membership is still not a reality, but this process has made us stronger; we have had to be very creative and think outside the box. The Customs Union for example has brought a lot of advantages for Turkey, enabling us to withstand competition. But even though there were talks about the EU offering us a financial package, because of political reasons this never materialized. Turkey realised that we could compete without a financial package. This has brought a lot of confidence to our nation. Turkey has never waited for something to happen, we have always acted proactively, going in the pursuit of our own destiny.

You talked about infrastructure projects, but what other opportunities would you like to highlight for foreign investors in Turkey?

The services sector has been growing exponentially. Turkey is a growing market by itself. Sometimes it even surprises me to see the amount of people going into our shopping malls, and to realize that the shops are still able to do business. It is amazing to notice the continuous growth of the middle class and that there is still room for growth. Of course we have to get ourselves away from the middle income trap, meaning that we have to find ways to innovate, but Turkey has already anticipated this, especially in regards to education, science and technology. Our goal is to increase GDP per capita, hence our investments in education and R&D.

In regards to education, how is Turkey preventing a potential brain drain, assuring that its brightest students do come back after finishing their studies abroad?

A lot of our students are coming back. We see even young people from Germany and The Netherlands coming back because of the unique business opportunities in turkey. Turkish Airlines has been recruiting several pilots from European countries. In short, there are amazing opportunities for foreigners. Turkey is importing a lot of people.

How far is Istanbul away from becoming a financial capital?

Our treasury has tried to transform Istanbul into a financial capital for some time now. Two major issues are in play: first, we need to develop a very high technological infrastructure, and second, our judicial system is still not up to international standards. We have to pay more attention to speed and to resolving disputes between companies quicker. If Turkey would be able to change old and implement new legislation, I have no doubt that this would result in an even higher flow of foreign investments. With the aim to make Istanbul a financial capital, our government has made necessary reforms a priority.

As Turkey has revived EU accession talks, how would you describe the current mind-set in your country regarding potential membership and what do you say to critics who blame Turkey for moving away from the West?

I believe there have been too many misunderstandings. After the cold war, the world changed and would never be the same. It was a period with lots of opportunities for Turkey. Where during the cold war everything was black and white, either you were with the Soviets or with the Americans, nowadays there is no such distinction anymore. There is a big grey area, and Turkey can play a bigger role now. In the past our country’s interests were different. Today we define our own policies on topics such as climate change, Syria, India, the Middle East, etc. We have different ideas and views, but that doesn’t mean that we are moving away from the West. On the contrary, our goal is to join the EU, and we are working hard to achieve it.

How would you define your role as Ambassador of Turkey to the EU when it comes to bringing the European Union and Turkey closer together?

After a rather rough relationship between Turkey and the EU during the last few years, my main responsibility is to make sure that we make progress. My job is to revive the dialogue, especially given the very poor communication of recent years. Turkey has recently presented its national action plan for EU accession, with phase II launched by the new EU Minister. We are aligning to EU legislation for the period 2015 to 2019, a clear indication of Turkey’s commitment to continue with the reforms. It is impossible to predict the future and we can’t say for sure if Turkey will be a full member of the EU, but I believe it is in both our interests to be as close partners as possible.

What is in this context Turkey’s take on the Transatlantic Trade and Investment Partnership (TTIP)?

I believe that Turkey has reached a critical point in its participation in the EU Customs Union recently over the implications of the TTIP. Because only EU member countries will benefit from the US deal – and Turkey is still in the stage of accession talks – once the agreement takes effect, US products would be allowed into the Turkish market free of tariffs, while levies on Turkish products sold to the United States would remain in place, meaning Turkey could lose revenues from customs tariffs. I therefore believe that Turkey should persuade the EU to have Turkey included in the TTIP. We could also negotiate a separate Free Trade Agreement with the US, although this option does not seem feasible at this moment, because it will take a lot more time to accomplish.

What is the significance of Turkey presiding the G-20 in 2015 and hosting the G- 20 event in Antalya in November this year?

We are concentrating on the economic side of the G-20, although this has a political flavour as well. Presiding the G-20 will provide us with visibility in the world and Turkey will have a unique chance to lead on issues such as trade, investment, financial stability, climate change, poverty and equality, etc. We also believe that the world is changing and we are not particularly happy with the UN system, because it is restrictive, and only has 5 major players. Today there are many more relevant players, amongst which Turkey. The G-20 is an area in which these countries can play a more significant role. Turkey would like to promote this.