Doing Business in ME

A Turkish Renaissance, The story of Turkey’s incredible success

Turkey has witnessed sustained economic growth during the last ten years, with the country achieving average growth of 5% during 2002-2012, despite the fact that it is surrounded by neighbours facing political or economic crisis, representing a rather unstable external environment. Among its neighbours, Cyprus and Greece were deeply affected by the financial crisis that hit the Euro zone while Syria is being ravaged by civil war, and Iraq is unstable.  The latest demonstrations against the Turkish government’s plan to redevelop Gezi Park turned into nationwide protests, particularly by the youth, and constitute a warning message that the views of the youth of Turkey require serious consideration. An important fact that cannot be overlooked is that the youth movements in the region were the main antecedents for substantial revolutionary changes.

Despite the need for caution in assessing Turkey’s economic prospects for the coming years, the country’s success in achieving strong growth so far, amid regional instability, is worth contemplating. In fact, Turkey lacks natural resources such as oil and natural gas that neighboring countries have. However the country generated growth by focusing on enhancing industry, services and tourism, which helped boost its competitiveness. The tourism sector attracted more than 36 million tourists in 2012, rendering Turkey one of the top tourist destinations worldwide. However, this level of growth requires more than reliance on market forces and official development assistance. In order to obtain long-term benefits for growth and poverty alleviation, Turkey engaged in private sector development and structural reforms that enhanced its education and healthcare services, placed stricter controls on public finances and made progress towards combating corruption. Through effective support policies that promote financial resilience, investment, productivity growth and technological change, the country has integrated itself into the global economy and has become one of the major foreign direct investment (FDI) recipients in the Middle East region. (It was rated as the 13th most attractive FDI destination in the world in A.T. Kearney’s FDI Confidence Index 2012).

At the macro-level there is a modern infrastructure with highways and railways that link Ankara, the capital, with other parts of the country. To stimulate technological development, the country has been transformed into an important higher education hub that attracts an increasing number of university students from Asia and Africa. Effective university-industry collaboration has contributed to providing domestic industry with its needs in important fields, including aeronautical technology, IT and electronics. The country has invested heavily in technology development zones with 34 operational technoparks and 16 under construction to support research and development activities and attract investment into high technology fields. Turkey has focused on environmental technology aimed at generating sustainable energy that benefits from wind and other renewable energy resources, enabling it to compete globally in innovative green technologies and products. Furthermore, the country has succeeded in solid waste management, turning Ankara into a safer and greener place to live. Methanol gas and organic waste are used to generate electricity and to produce fertilizers for agricultural products, including strawberries, tomatoes and orchids.

Turkey’s trade and investment strategy is based upon a strategic ‘opening up’ to emerging markets in Asia and Africa and the Middle East, with low entry barriers. Turkey benefits from a Customs Union agreement with the EU, and free trade agreements with several countries including EFTA ( European Free Trade Association) member countries Switzerland, Norway, Iceland and Liechtenstein, and also Egypt, Jordan, Morocco, Palestine, Syria, and Tunisia. This has contributed to growth and increased productivity in both the industrial and services sectors, including green technology and IT.

These achievements would not have been possible without the strong political will of the policy-makers to attain a turnaround in Turkey’s economy and move forward with its EU accession process. They embarked on an incremental process of institutional building and reforms that started in 2003 and aimed at addressing Turkey’s structural problems. The reforms had a positive impact on the banking sector, the management and control of the public budget, and directing domestic investment towards infrastructure, health, education and technology.  In the field of education, concerted efforts by the government and education institutions aim to bridge the gender gap and enhance the quality of education and higher education.

A consistent and incremental path of institutional reforms has led to robust economic growth, increased resilience to the global economic crisis and a remarkable surge in exports, reaching $153 billion by the end of 2012, up from $36 billion in 2002.  Most notably, Turkey was registered on the world economic scale as the 16th largest economy in the world, and as 6th largest economy when compared to EU countries in 2012.

Turkey’s remarkable achievements show that facing the challenge of enhancing international competitiveness and achieving sustainable growth could be met by combining national support policies for investment, productivity growth, and technological change (based in high value-added sectors) with emerging opportunities in the global economy. That is not to say that Turkey has developed a policy for development that can be replicated everywhere. Any process of reform and private sector development MUST take into account the large differences amongst countries and their individual, unique characteristics. Nevertheless, general policies could be considered – as common features among countries do exist – especially where these can be translated into country-specific policies.

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