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The Turkish formula

Article - October 8, 2014
One of the five largest emerging economies in the world, Turkey stands as Europe’s hope for growth.
Nothing speaks more convincingly than the facts and the fact is that in 2012, when the world financial crisis had all but bottomed out, Turkey grew its economy more than any other country in the European Union.

In 2002, after a series of unstable coalition governments failed to turn back inflation that had soared to 30 percent, authorities had to negotiate a $23.5 billion credit with the IMF that has since been repaid in full. And as Deputy Prime Minister Bülent Arınç points out, “now we are even in a situation to give a $5 billion loan to the IMF.”

Burak Çelet, General Manager of Turkey’s leading leather goods manufacturer Desa Deri, goes as far as to say that “the reason for Turkey’s success is that it has become immune”. “In the past, we used to have big domestic crises,” he adds, “but over the past 10 years, with the stability and improvements in infrastructure, the restructuring of business portfolios in the country and the way the country’s funds are spent has changed, the country has become more immune to global shocks and the crisis. We have established a stronger banking system, and the country’s infrastructure has improved in many ways.”

As an actor on the world stage, Turkey is aware that it is being observed in a largely positive way in other Muslim-majority countries where “unfortunately, there are repressive and authoritarian systems in power. We have shown that it is perfectly possible to lead an Islamic life and at the same time defend democracy and freedoms to the full.”

That view is echoed by Britain’s former ambassador to Ankara, David Reddaway, who agrees that Turkey serves as “an example of how a secular democracy with a Muslim majority population can provide economic prosperity and social development as well as political rights to its people.” At the same time, he adds, “People see that Turkey’s success in attracting foreign direct investment (FDI) is linked to reforms that are part of its European Union accession preparations.”

Indeed, Turkey ranks 19th globally in terms of FDI inflows, which reached $12.9 billion in 2013. The Central Bank forecasts this will rise to $14.4 billion by the end of 2014.

Even with Europe still going through some very difficult times, economically, some 75 percent of FDI comes from EU countries, says Mr Reddaway, while the EU is still Turkey’s largest single export market.

“Its growing economic strength reinforces economic benefits to the European Union of having Turkey on the inside,” he says.“The UK has always supported Turkey’s bid for full EU membership and we really appreciate it,” emphasises Mr. Arınç. “Our firm belief is that we will not be a burden on the EU, and this belief is shared by the UK,” which has become a steady importer of Turkish-made goods such as automobiles, textiles and white goods.

As Turkey continues to raise its economic profile and FDI inflows are channelled to megaprojects such as Istanbul’s new airport (budgeted at $22 billion), the need for a comprehensive network of financial service centers becomes that much more acute. To prepare Istanbul for its leap into the league of financial capitals, the Istanbul Financial Centre Initiative (IFC-I) has been busy laying the groundwork for a long overdue transformation, which among much else, involves a targeted media campaign.

“The main goal of the IFC-I is to share knowledge and experience between the partners of Turkey, and make Istanbul a financial center by creating the 2023 vision,” says IFC-I Chairman Artunç Kocabalkan.

“We have researched other centers such as London and Dubai to see how they became what they are and one conclusion we reached is: don’t try to do everything all at once. Start off local, expand to regional and then go international.”