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‘Turkey and the world need a new model for growth’

Interview - April 7, 2015

As one of the bright business minds entrusted to steer Turkey’s B20 Presidency as a member of its Executive Committee, Istanbul Chamber of Industry Chairman Erdal Bahçıvan argues that a new world order is emerging in which quality growth will prevail

MR. ERDAL BAHÇIVAN, CHAIRMAN OF THE ISTANBUL CHAMBER OF INDUSTRY
MR. ERDAL BAHÇIVAN | CHAIRMAN OF THE ISTANBUL CHAMBER OF INDUSTRY TURKEY

The Turkish economy is expected to grow around 3 percent in 2015, but business leaders and even government ministers have said Turkey should be aiming for growth of at least 5 percent each year. From your perspective, what measures could be taken to increase Turkey’s growth rate in 2015 and enhance the competitiveness of the economy?

We have to admit that the growth trend observed from the beginning of the 2000s in developing countries and emerging economies has begun to decrease across the world. This downward trend is the most important issue on the agenda of world economies, which must try to find a solution.

It is important for Turkey to have a new vision that considers growth in terms of its quality, rather than just as a figure. Other than growth focused on consumption or stemming from investments by the state, or the unsustainable growth observed in the construction sector, we need sustainable and high quality growth. This is important for Turkey and the world.

It should be noted that, following the crisis in 2008, the world has focused on cheap and easy growth using a short term model which ignores quality. This model was preferred by many countries.

However, now the world is changing. We are entering a process in which those with financial resources will be choosier and the abundance of cheap money will dry up. This will be felt more in developing countries. There will be a new world order in which quality growth will prevail.

As the industrial sector, we believe it is vital that Turkey focuses on quality, sustainable growth in a world with limited financial resources.

Turkey is aiming for a foreign trade volume of $1 trillion by 2023 coupled with $500 billion of exports. How feasible are these ambitious targets given the challenges that the world is facing, and how is the Istanbul Chamber of Industry helping Turkey to reach these goals?

First of all, the major axis of the new growth model for Turkey, as I mentioned earlier, should focus on industry, high technology, value added production, value added investments, value added labor force and exports. Growth will be realized since the mentality of industry matches with the program of the government. This is quite a satisfying and open-ended program.

We need a human-oriented, quality-based growth model focusing on high technology and high added-value. We call this model ‘holistic development’. This model was also addressed in the congress organized by the Istanbul Chamber of Industry last year. The main target of Turkey will be or should be a road map for holistic development, covering all these fields.

We also see this perspective in the program of the government as well as in the Tenth Five-Year Development Plan of Turkey published in 2013.

The question was about the measures to be taken to achieve $500 billion. If you do not believe in this target, you cannot be a producer or a businessman. The targets may be challenging or tiring, but we will do our best to achieve them.

Moving towards this new quality-based model, how important is it to encourage financial innovation to help companies to grow and expand their operations?

This is a good question about innovation since we have talked about it often.  The use of the word ‘innovation’ is getting more popular in our daily lives. However, innovation does not only mean a modal change, but a model initiative. For instance, changing the function of a glass or of a pencil requires innovation. But adopting new practices for company management, human resources management, time management, strategy management, especially in the field of finance, will create innovation. Otherwise, only a model innovation occurs and you solve the problem of image. The important thing is different perspectives in management, particularly in finance. If you do not realize this through innovation, it means you have fixed only one leg of a table and the other three remain broken.

Therefore, financial management in a period when the resources of the world are getting sparse turns into a topic which should be addressed by the industrial companies in Turkey. There will be a new period where we require new resources for use in modern financial systems.  We know that Turkey can’t maintain its competitive edge via classic borrowing methods, such as getting loans from the banks. Contemporary methods such as partnerships, intelligent management, public offerings, implementation of stock models and the effective use of the resources by industry, whereby Turkish capital markets are in harmony with the foreign capital markets, are vital in this new period.

Furthermore, the Borsa Istanbul project is also important. We believe the fact that Istanbul will become a finance center in the world financial market will offer significant opportunities for the developing industrial sector in Turkey. It is remarkable that the public debts of Turkey have decreased and Turkey has become one of the most successful countries in the world in this respect.

We believe industry will benefit when the funds stemming from the decrease in public debts are used in the private sector and remain effective in the source market. 

Last year saw the launch of a national branding campaign for Turkish produce under the slogan: “Discover the Potential”. I’d like to ask you a less technical question: What would be your message to the world about the potential of Turkey?

This new campaign was done by the Turkish Exporters’ Assembly.  It can be considered as a great partnership regarding the brand value and brand power of Turkey, as agreed upon by everybody. The most important thing to talk about when discussing the potential of Turkey is its geographical location. Turkey is at the center of the Western and Eastern powers of the world, and Asia has begun to gain increasing importance.

Turkey is located at a very central point, just three or four hours away from the developed markets and thus from hundreds of millions of people with spending power. Considering this potential, Turkey occupies one of the most important points in the future world economy.

Another potential advantage of Turkey is of course the entrepreneurial spirit of the Turkish people. It should be acknowledged that Turkey having a free market economy for a long period of time leaves it open to risks but also to entrepreneurship.

Moreover, Turkey grew accustomed to various economic crises over the decades, and has therefore been successful in finding solutions to problems. It has great dynamism. Based on this ability to create opportunities and find solutions to problems, Turkish society has more advantages than many other nations in the world. This has been observed many times in the past. 

The young population of Turkey represents another important area of potential. When Turkey’s demographic structure is compared with that of Europe, it must be noted that Turkey has a younger and more dynamic population. This makes Turkey one of the most prominent economic markets in the world in terms of both productivity and consumption.

Considering all these as a whole, Turkey offers greater potential for foreign investment in comparison with many other countries. Discovering the potential of Turkey in advance, a number of foreign firms have been successful in taking advantage of Turkey as an internal market and also making it a production center for surrounding markets.

I want to ask you a question about the European Union. I know that you’ve been a very vocal, sometimes frustrated supporter of EU accession. Just a few days ago we had the 20th anniversary of the Customs Union between Turkey and the EU. This may soon be overshadowed by the Transatlantic Trade and Investment Partnership between the EU and the USA, which Turkey could be excluded from. From your perspective what would be the implications for Turkey if it is left out of the TTIP and how can Turkey get around these problems?

Let me say a few words about the European Union firstly, and then we can discuss TTIP. The European Union is one of the most important projects for the Republic of Turkey as a state and as a nation. The European Union process of Turkey began in the 1960s and has lasted for 50 years. I want to emphasize strongly that Turkey applied for project even before some current member countries, which did not even exist then. Unfortunately, these countries became EU members while Turkey, despite its enthusiasm and determination, is still in the negotiation process.

This is really unfortunate. As we mentioned jokingly before, we ‘celebrated’ the 20th anniversary of the Customs Union. This is a unique example in the world. The Customs Union began to be implemented in 1995 as a temporary project to be finalized with the membership of Turkey to the European Union.

The sincerity and goodwill of the European Union in this process is of course questionable. This is a time-consuming debate. Governments in Europe have associated their internal politics with the membership of Turkey to the European Union. Short-term and ineffective policies have constituted a great obstacle to the desired stability and sustainability of the European Union project. This has had a negative effect on Turkish society, people and politicians, and alienated them from the EU. We have to face that fact.   

Moreover, leaving Turkey in a Customs Union whilst excluding us from the TTIP cannot be accepted. There is an obligation to readdress the Customs Union process at every principal point. No other economy in the world will accept being excluded from the decision-making process, despite being in the game.

Turkey’s G-20 and B-20 Presidencies are guided by the principle of inclusiveness, which has international and national dimensions. From an international perspective, Turkey is looking to draw low income developing countries into the discussion process. What does this say about the nature of Turkey’s presidency and the kind of world that Turkey wants to see emerge from the financial crisis?

I believe that Turkey’s presidency will pave the way for discussions on some of the unaddressed topics that the world is facing. This will have a strategic importance for the welfare of the world and also for the balancing of the world economy.

We should also state that this year, small and medium sized enterprises are one of the most important topics of Turkey in G-20, as the statistics show that the resilience of these enterprises in terms of workforce and maintenance of work is stronger than global companies.

Therefore, I believe that Turkey in B-20 and G-20 will provide an important opportunity by creating a different agenda regarding the utilization of small and medium sized enterprises for the welfare of the world, especially in employment and dynamism.

You are on the executive committee of the B-20. This grouping brings together the brightest business minds from all over the world. From your position on the committee, what global economic issues would like to see most urgently addressed?

In the last two Presidencies I personally observed that the bridge between the B-20 and G-20 had not been established soundly.  It is important for us that the G-20 is open to the facts and sensitivities of B-20. I hope that Turkey’s presidency will make the effort to do this. Turkey has already brought a different enthusiasm to the Presidency. We believe that it is vital to rebuild this bridge.

Of course the most important point here is to ensure sustainable and reasonable growth that respects the environment. We must ensure a better balance in income distribution and promote environmentally-friendly technology in industry. If we can make progress in this regard during Turkey’s presidency, I believe that we will have taken a crucial step.

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