In-depth look at Turkey’s economic indicators

Maksud Djavadov

Jumada' al-Akhirah 01, 1435 2014-04-01

Special Reports

by Maksud Djavadov (Special Reports, Crescent International Vol. 43, No. 2, Jumada' al-Akhirah, 1435)

Unfortunately, accurate statistics about a country’s economy are always hard to come by. Whatever data is available, however, can be used to analyze its true situation. We start this series by looking at Turkey.

In a series of articles, Maksud Djavadov will examine the economic condition of various Muslim countries in order to determine the underlying reasons for their lack-lustre performance.

When evaluating any country’s economy, it must be viewed as a continuation of its socio-political orientation and situation. The economic weakness and dislocation of Muslim countries is the direct result of their socio-political and military subjugation by imperialist-Zionist powers. That is the reason why economics alone is not sufficient to explain economic problems. Thus, economists invented the discipline of political economy. The current series of economic evaluations will analyze this in light of political economy. Our political economic evaluation does not aim to produce concrete economic solutions. This requires access to real data which governments themselves often find impossible to collect. The aim is to present the existing conditions without hiding behind economic jargon and offer general options of a political economic nature that can create a more just, peaceful and prosperous world.

Basic data

Since the time Turkey joined NATO, the Western imperialist regimes have been projecting it as the so-called role model for the Muslim world. Since the Justice and Development Party (AKP) was elected to power in 2002, the marketing campaign of Turkey as a role model of what an Islamic government should look like went into overdrive. Since 2003 the main emphasis has been on the economic improvement achieved under the AKP government. Therefore, let us take a look at some of the economic data we consider to be crucial in evaluating the economic future and conditions of Turkey.

• While the IMF debt has decreased, Turkey’s external debt has increased from US$130 billion in 2002 to US$307 billion in 2011 under AKP rule. The IMF debt is only a small part of the total external debt (Santa Consultants, June 2013, Ozan Cigizoglu).
• Asian economies (China, India, Indonesia, etc) have performed better than Turkey’s economy in terms of GDP growth. While Turkey’s growth, between 2002–2011, is above the world GDP growth (as expected), it has not outperformed the developing world GDP growth. (Santa Consultants, June 2013, Ozan Cigizoglu)
• Foreign Direct Investment (FDI) inflows to the industrial sectors in 2011 increased by 176% compared to 2010 and reached $8 billion. Yet, in 2012, FDI inflows to the sector decreased by 32% to $5.4 billion. As a result of the acquisition of SAB Miller-Anadolu Efes, food products, beverages and tobacco became the leading sector in the manufacturing industry, receiving $1.9 billion with a share of 49% in total inflows to the manufacturing industry. Chemicals and pharmaceuticals are the other main area of manufacturing industry with a share of 12% in total inflows. In the area of services, in 2012, a decrease by 44% compared to 2011 was recorded. In this context, finance became the leading area in services with a share of 31%. Construction was the second in the services area following finance with a share of 30% (Yased-International Investors Association, 2012).
• Foreign direct investments, which decreased by 18% to $1.35 trillion, are expected to increase again in 2013, returning to pre-crisis average levels and reaching $1.45 trillion. In 2012, Turkey ranked 24th among countries attracting the most foreign direct investments in the world, 14th among developing countries and first in the West Asia region (Yased-International Investors Association, June 2013).
• 85.4% of the people either agree or strongly agree that the gap between rich and poor in Turkey should be reduced. This is the single highest proportion for all 29 countries where LiTS surveys were conducted (Oxford University and World Bank, 2010).
• The Organization of Economic Co-operation and Development (OECD), a group of 34 advanced economies, places Turkey as the third most unequal country in the group behind Israel and Mexico. A recent report released by the Family and Social Policies Ministry confirms the trend of income inequality. A third of Turkish citizens, or 23.6 million people, are poor or needy. (SETimes.com 2013)
• Turkey’s trade deficit decreased in January of 2014 to US$6.8 billion from US$7.3 billion a year earlier and US$9.9 billion in December of 2013. Exports to the European Union increased by 13.7% with Germany as the main export partner and Russia as the top country for imports. The main export partner was Germany (US$1.3 billion), followed by Iraq (US$1.0 billion), United Kingdom ($0.8 billion) and Italy ($0.6 billion). The top country for imports was Russia ($2.5 billion), followed by China ($2.1 billion), Germany ($1.6 billion) and the US ($1.0 billion). (Traidingeconomics.com 2014)
• In November of 2013, Turkish jobless rate increased to 9.9%, after falling in the previous month to 9.7%. Non-agricultural unemployment rate reached 12% and youth unemployment rate was recorded at 19.3%. (0.5%higher than a year ago). The number of unemployed persons increased by 154,000 to 2.784 million. While employment increased to 25.443 million compared to the same period of the previous year, the employment rate declined from 45.9% to 45.5%. Employment in services increased by 0.7%, industry increased by 0.4% and construction rose by 0.2% and that of agriculture decreased by 1.3%. According to data gathered by the Ministry of Finance, the public sector employed 3.320 million persons, a 3.2% increase in the fourth quarter of 2013 compared to the same period of the previous year. (Traidingeconomics.com 2014)
• 30.6% of the Turkish economic activity is part of a shadow economy. (OECD, 2012)

Evaluation

The assessment of the above-cited data strictly from a classical economic point of view in terms of cost and benefit analysis cannot present an accurate picture of Turkey. What does this mean in practice? In September 2012, the US Census Bureau released its data on Income, Poverty, and Health Insurance Coverage for 2011. The report attempted to present the economic situation as improving (what else could it say?), mainly through complex technical jargon that most Americans would not understand. For example, many people worldwide do not know that the US Bureau of Labor Statistics does not consider people unemployed if they have not looked for work in the past four weeks. The economic labyrinth of the US state apparatus is full of similar technical fraud schemes. The reality is that the modern economic mindset is an approach enforced and regulated by the US and its Western allies. Therefore, states and regimes strategically allied with the US use the same or similar approach to economics for intellectual, political and economic reasons. Simply put, due to the manipulative nature of capitalist economic dogma, economic data means different things to different people and can be easily twisted for all sorts of purposes.

It cannot be denied that Turkey is one country in the Muslim world that economically is doing better than others. It is not because Turkey is in great economic shape; it is because other localities in the Muslim world are in worse condition due to foreign meddling that takes different shapes, whether through a proxy war as in Syria or the imposition of a corrupt and inefficient regime like in Jordan or Saudi Arabia.

Taking into consideration the “service” Turkey has done to Western regimes during the Cold War and since, Turkey’s inclusion into contemporary economic game is necessary for Western powers as they want to utilize Turkey as a strategic asset in the Muslim world. Western powers have to make sure that Turkey is in a functioning economic state in order to continue benefiting from its hard and soft power. Turkey will remain within the Western power orbit in the near future and if it ever attempts to significantly distance itself from the Western power circuit, it will be turned into what Syria is today. Therefore, realistic alternative economic options for Turkey today are limited within the Western economic thought. Any sort of alternative economic policy resembling Venezuela will unleash the wrath of the oppressive global economic power centers. Nevertheless, there are sets of policy options that Turkey can pursue in its present condition that would radically change its economic dependence on the West and strengthen it economically. Here are some of the economic options Turkey could pursue without triggering the harsh reaction of Western powers.

• Creating an economic and business environment that would utilize Turkey’s human capital in foreign countries. There is a significant Turkish population in Europe, the US, Australia and Asia. Providing a structured and institutional assistance to this vast human capital and organizing it into a coherent network could open unique economic opportunities.
• Increase trade with Africa and Turkey’s immediate neighbors. According to the Financial Times “commerce with sub-Saharan Africa jumped from $742 million in 2000 to almost $7.5 billion in 2011… commerce with sub-Saharan Africa still represents a fraction of Turkey’s $376 billion overall trade. While Arcelik, a Turkish white-goods manufacturer, acquired Defy, a South African equivalent, for $325 million in 2011, most of the country’s investments in the region are considerably smaller.” One of the main costs of economic transactions is transportation. If Turkey, Iraq, Iran, Syria, Azerbaijan and Georgia launch a coordinated strategic transportation development project aimed at improving trade logistics, improved trade between these states can significantly improve the living conditions of the people in the region and beyond. This would also diversify the sources of foreign direct investment for the entire region and possibly force regional countries to come up with their own banking system.
• Turkey needs to diversify its energy imports. According to Al-Monitor’s March 2014 report “Turkey uses natural gas to produce 32% of its electricity, and the country imports some 46.6 billion cubic meters (bcm) of gas from four gas pipelines. Two of these pipelines — West Gas (with a 16 bcm capacity) and Blue Stream (14 bcm) — transfer Russian gas that constitutes the largest share of Turkey's gas supply at 58%… meanwhile, in Turkey the energy demand growth rate is still above 4% per year… All in all, Turkey’s gas supply security is still as vulnerable as it was during the first Russia-Ukraine gas crisis. In the last eight years, Ankara’s energy-security vulnerability has helped enhance the country’s ties with Russia, while some European countries have become less entwined with Russia in the course of effective measures taken after the last two gas crises. Therefore, in the event of an energy crisis, Turkey will be unable to disassociate itself from Russia due to its continued reliance on Ukraine-transiting gas.” Russia is a historic geopolitical competitor of Turkey. In Central Asia and the South Caucasus, Moscow and Ankara have strategic and historical differences. Russia has on numerous occasions demonstrated that it is willing to use its energy leverage to achieve its political and military objectives.
• Turkish currency, like that of many other countries, is highly sensitive to political climate and manipulation. A system of sorts can be designed where real assets such as gold, oil or a mixture of both or more, back a currency.

As mentioned above the economic policy of a state is a continuation of its socio-political orientation. Readers may legitimately ask why we do not emphasize the establishment of an Islamic economic system in Turkey and how this could be achieved. All Islamic schools of jurisprudence and experts agree that to implement Islamic economic principles, other state policies and the society in general must adhere to Islamic precepts. It would be impossible to implement the Islamic economic model in a country where the government and society do not use Islamic laws as the reference point in policy formulation just like it would be impossible to implement socialist economic model in a society where the state and society are governed by capitalist dogmas. Nevertheless, the above general policy options could lead to a more self-sufficient economic situation in Turkey that would bring about more genuine changes toward an Islamic direction. This can only be achieved if other changes take place in Turkey in parallel with the proposed economic changes. The AKP’s experience shows that superficial symbols of Muslim attributes within a foreign imposed system cannot produce genuine change.

The AKP’s so-called economic miracle upon which its electoral success is based is a product of Western acceptance of its worldview and principles. Naturally the moment that worldview steps out of line, economic screws will be tightened. Despite this, the AKP has done a reasonable job in playing the economic game in advancing its own agenda. In the long run, however, this approach is not sustainable. The main weakness of the current economic setup is the fact that it is not aimed at radically reducing wealth inequality or redistributing wealth in Turkey; this would require implementation of policies that are fundamentally opposed to the contemporary economic mindset. Taking existing conditions into account that are present in Turkey and in its vicinity, economic policy alterations will never be enough if they are not accompanied by other social and political reforms geared toward social justice.