Rising Turkey under Erdogan
Today, 29th October 2020 is 97th Proclamation Day of the Republic of Turkey-a very important day in history for People & Friends of Turkey across the globe.
Turkey is about to embark on the decade leading to 2023, the 100th anniversary of the Republic founded by Atatürk and his companions. President Erdo?an has set as a national objective to have Turkey in 2023 become one of the 10 largest economies in the world. It is a good time to briefly look back at the last 90 years, but even more so, to look ahead forthcoming 3 years and try to see what kind of Turkey is emerging in this first half of the 21st century.
Turkey will celebrate its centennial in 2023. The ruling Justice and Development Party (AKP) has already set 2023 as the year in which a set of ambitious economic goals will come to fruition. According to this vision, by 2023, Turkey will be an economic powerhouse-the world’s 10th-largest economy-with a $2 trillion economy, a per capita income of $25,000, and exports amounting to $500 billion. By comparison, in 2014, Turkey was the 18th-largest economy in the world-down from 17th in 2013-with a gross domestic product, or GDP, of $800 billion, a per capita income of just more than $10,000, and $160 billion in exports. Russia currently holds the 10th spot in world rankings, with a GDP that is roughly twice the size of Turkey’s GDP. The AKP’s stated goals are ambitious, to say the least, and many economists believe they may be out of reach. Most economists and policy analysts agree, however, that aiming high can do no harm and could possibly carry benefits.
As the Western world has a strategic stake in Turkey’s economic success. First, a prosperous Turkey is likely to remain stable and anchored to the West as a reliable and supportive ally. Prosperity often-though not invariably-supports the strengthening of democratic values, a development that would further reinforce Turkish-Western bonds. Second, the West itself stands to gain economically from a wealthier Turkey. In 2015, Turkey was the European Union’s fourth-largest export market and its sixth-largest source of imports. Greater wealth also means greater investment opportunities in both directions. Third, a prosperous Turkey could host, employ, and ultimately-if necessary-absorb its swelling Syrian refugee population, making Turkey a more resilient country in its own right and a stronger neighbor and partner for Europe.
So what is possible for the Turkish economy by the end of 2023? What challenges will Turkey face over the next eight years before the republic begins its second century?
If Turkey is to make the significant leap forward outlined by the AKP, the Turkish economy must escape the “middle-income trap”-a reference to the difficulty that many countries emerging from low-income status have faced in achieving continuous growth, rather than plateauing at middling levels of per capita income. In explaining the dilemma of the middle-income trap, the World Bank argues that:
The factors and advantages that propelled high growth in these [middle-income-trapped] countries during their rapid development phases-low-cost labor and easy technology adoption [from more developed states]-disappeared when they reached middle- and upper-middle-income levels, forcing them to find new sources of growth.
The challenge for Turkey lies in finding those new sources of economic growth. In today’s highly globalized economy, that usually means developing a high-tech sector that can produce goods and services for export as well as for the domestic economy. These high-tech growth sectors, in turn, require the development of a highly skilled workforce. Today, Turkey’s economy lacks a meaningful high-tech sector and the skilled workforce needed to propel such growth.
History illustrates the difficulty of moving from being a middle-income country to a high-income one-defined by the World Bank in 2016 as having a per capita income of at least $12,736. Of the 101 countries that qualified as middle-income in 1960, only 13 of them have emerged as high-income countries more than a half-century later.
Turkey graduated from low-income status to lower-middle-income status in 1955 and remained there for a half-century before being classified as an upper-middle-income country in 2005. According to the World Bank’s 2016 definitions, a lower-middle-income country is one with a per capita income between $1,046 and $4,125; an upper-middle-income country has a per capita income between $4,126 and $12,735.
Turkey’s economy surged in the first decade of this century, following the financial crisis of 2001, with per capita income nearly tripling from $3,500 in 2002 to $10,400 in 2008. Aside from a dip and then a recovery reflecting the global economic situation in 2008 and 2009, Turkey has been largely stuck at the $10,000 level ever since. Despite its failure to move into the high-income category, Turkey is clearly at the upper end of the middle-income level; in December 2014, the World Bank described Turkey as being on “the threshold of a high-income economy.”
Moreover, Turkey’s growth between 2002 and 2012 was largely inclusive, marked by a significant reduction in the poverty rate, major growth in the size of the middle class, and rough parity between the consumption rate of the lower 40 percent of society and that of the national average.
Nor can Turkey be said to be suffering from enduring middle-income-trap status. Economists disagree as to how long a country must retain middle-income status before it is considered “trapped.” Some of these definitions qualify Turkey as trapped, while others do not. By any reckoning, however, Turkey’s 11 years of being ranked in the upper-middle-income bracket do not qualify its case as severe.
Yet Turkey does face many of the difficulties characteristic of nations caught in the middle-income trap, including persistent current account deficits, an economy based on low- and middle-tech production and services rather than innovation-“industry geared to the 1990s,” as one economist said-problems with the rule of law and institutional autonomy, and an inadequate education system. Improvement in these areas would help Turkey tackle one of its fundamental economic problems-lack of investment, both foreign and domestic-and would thereby help it achieve sustained growth.
The important point relates to Turkish “soft power”, particularly in the Middle East and the Moslem world. It is already very effective, but it could grow even more, by an order of magnitude. Turkey’s historical, cultural and emotional links with the Arab countries in particular, are deep and strong. Nobody from Turkey can feel a stranger in these lands, marked by common architecture, familiar sounds of music, similar food and the celebration of common religious holidays. The same holds of course for Arab visitors to Turkey. Atatürk left a legacy of good neighborly relations, but also a strict legacy of peace and non-interference in other countries internal political affairs. Turkey’s influence in the region, greatly strengthened over the past ten years, should remain based on the power of Turkish successful economic, cultural and democratic example, not on attempts to direct others in any way or to interfere beyond our borders. The Arab countries future is and should be in their hands. Neither Turkey nor the Unites States can shape that future. Particularly in the Middle East, which has suffered from colonial and imperial power coming from outside the region in the past, foreign interference will always end up being resented, even if it comes with the best of intentions. No people or country in the long run likes interference coming from outside, even if, in the short term, various factions may appeal for it to further their cause. This is not to say that any of us can remain unaffected by people dying and suffering. Help in the form of attempts at impartial mediation as well as humanitarian aid, may often be necessary and highly desirable. Turkey can and is already playing an important humanitarian role, as far as Somalia. There is also the responsibility to protect all human beings under severe threat, within the framework of the United Nations. But Turkey should not appear to want to become a kind of neo-imperial power in the Middle East. This would badly misfire and undermine the real and positive soft power Turkey can deploy in the service of peace, economic development, human rights and democracy. It is on this that the United States and Turkey can work together. If Turkey can provide a shining example of economic success and internal peace and freedom, this will have a much greater impact on the region, then any foreign policy that borders on direct interventionism.
According to the World Bank, the elements necessary to escape the middle-income trap are:
… an economy open to trade and [foreign direct investment], a sustainable macroeconomic framework that delivers low inflation and limits dependence on foreign capital inflows, low demographic dependency and rising labor force participation rates, a good skill base that facilitates the move towards more innovative production, a healthy business climate, and strong economic institutions that provide for the rule of law, [as well as] effective and accountable government.
Elsewhere in the same 2014 report on Turkey, the World Bank asserted that “improvements in the rule of law, in public accountability and transparency, and in the climate for entrepreneurship and innovation will thus be needed for Turkey to complete the transition to a high-income economy.”
This briefly outlines the issues that Turkey must successfully confront if it is to make major strides toward the AKP’s 2023 goals and obtain high-income country classification. These issues fall into two broad categories: macroeconomic reform and other economic, institutional, educational, and political reforms with an economic impact, with the latter category including institutional, educational, and political reforms. The paper closes with a brief set of recommendations for how Turkey could sequence its needed reforms to achieve its goal of becoming an advanced economy by 2023.
Turkey & Pakistan relations enjoys very cordial friendship and relation goes date back generations before the establishment of the two states, more precisely during the Turkish War of Independence when the Muslims of the northwestern British Raj sent financial aid to the declining Ottoman Empire, which was followed by the formation of the Turkish Republic and the Independence of Pakistan. As a result, Pakistan has enjoyed a positive perception in Turkey and amongst Turks for many decades. Pakistan and Turkey enjoy close cultural, historical and military relations which are now expanding into deepening economic relations as both countries seek to develop their economies.
In fact Turkey and Pakistan has many things in common like, both were close ally to US during the cold war era and signatory to CTO (Central Treaty Organization), RDA (Regional Development alliance, and many other International treaties and platforms. Both are tied with strong religious and cultural bonds. We are on the same page on many international and regional issues, especially possesses same views on Afghanistan. Turkey is supporting Pakistan on Kashmir issue, NSG and many other important issues. Both are Muslim countries and supporting unity among Muslim Ummah. In fact, there are around 2 billion Muslims all over the world, around 57 Muslim countries, around 60% of the natural resources of the world, especially Energy (Oil and Gas), but politically divided, unstable and oppressed. Pakistan and Turkey jointly can lead the Muslim world. Struggling for better economy and independence from outside interference. Geopolitics has forced both countries to re-align themselves according to emerging situation in the region and globally. Both nations have been victim of terrorism and intolerance and insecurity. Both were ruled by Military many times in the history.
However, Turkey has struggled hard and has achieved somehow progress like in social sector, and economic sector. Turkey has overcame terrorism to a much greater extent, social sector developed rapidly. Economy is also well stable. Tourism and Agriculture are major sectors, where Turkey has edge. Politically, there is a lesson to be learned by Pakistan from Turkey experience. After having several years under military rule, the politicians have learned to win the hearts and minds of people. They delivered upto satisfaction of its people whenever the civilian were in Government. As a result, based on good governance by politicians, people opposed military coup attempt in 2016, when civilian laid down on streets in front of Military Tanks and made the coup attempt failed.
Bilateral Pakistan and Turkey trade relations
Relations between Pakistan and Turkey are not just restricted to government level. Turkey supported Pakistan in its hour of trial and supported it against Financial Action Task Force’s decision to place Pakistan on grey list. Both Pakistan and Turkey have suffered the most distress in the war against terrorism. Pakistan expresses the hope that the Kashmir issue would be resolved in the UN in a peaceful manner.
Both countries are united friendly bonds of people to people affection based on common faith and objectives and shared fortune as members of Islamic world. Both countries vows to continue partnership for regional peace and stability. The industrialist have emphasized the need of advancement of commercial ties between Turkey and Pakistan by accelerating interaction of businessmen of both nations, exchange of delegations and holding of exhibitions etc.
FPCCI and Foreign Economic Relations Board of Turkey organized a joint meeting of Pakistan Turkey Joint Business Council. They underscored the business and investment environment of Pakistan for joint ventures in CPEC projects, Export Processing Zones and Special Economic Zones. They also depicted the comparative advantages of Pakistan and Turkey in textile, engineering, leather, agriculture, machinery and pharmaceutical etc. which can be for capturing substantial share in global market by preparation of joint strategy and advancement of production.
They also highlighted on transfer of technology and skill in development of SMEs, tourism, health and education sectors. Turkey also focused on the localization, capital accumulation and advancement of supply chain between both countries. Pakistan also shared Turkish investment in several countries in construction and food sector.
Pakistan acknowledged the visit of President of Turkey Tayyib Erdogan in February 2020 and transformation of the existing relations into Strategic Economic Framework which is design for strong economic cooperation for increase of bilateral relations in trade, tourism, healthcare, hospitality, industry, education, housing, agriculture, aviation and banking.
Pakistan has shown concern over the declining of bilateral trade specifically Pakistan’s export to Turkey owing to imposition and constantly rising of advance counteracting duties on textile and agriculture products. Pakistan has also highlighted to India the losses faced by different industries in Covid-19 period. Pakistan in any case ensured his constant efforts and support for the advancement of trade relations.
Federation of Pakistan Chambers of Commerce & Industry (FPCCI) and Union of Chambers and Commodity Exchange of Turkey (TOBB) have urged upon the governments to encourage the process of signing equitable and balanced Free Trade Agreement (FTA) to allow to run free extensive possible available markets.
Turkey said that the bilateral trade between Pakistan and Turkey is very poor and combined efforts and initiatives of both chambers will help achieve our goal. Pakistan emphasized upon need of early fulfillment of FTA for advancement of bilateral trade as decided in the recent visit of the head of the states of both the countries. Being competitors in textile and denim fabric, Turkey should consider concession to Pakistani products at far with these availed by EU, so that Pakistani products could made vide and help balance trade gap.
Pakistan’s exports to Turkey is obstructed by the imposition of countervailing duties by Turkey and the latest increase of custom duties on various items including textile resulting in further reduction of Pakistan’s exports. Pakistan also emphasized upon the need of transfer of technology in various sectors and joint ventures under CPEC. The Turkish businessmen are interested about the low housing scheme introduced by Pakistani Prime Minister which opens vistas for the construction industry.
The ambassador of both the countries made thorough presentations on economic issues and assured their full support to enhance the bilateral trade to US$ 5 billion as desired by the heads of the states.
Both the countries are passing through Covid-19 pandemic which has badly hurt the trade of economy of both the countries reducing their economic activities. They advised to intensify interaction between the business communities of both of countries.
The Board of Directors also exchanged views on different specific sectors including power, solar energy, marble, textile, tourism, education, surgical instruments, construction etc and also discussed the need of organizing business road shows, forums, and trade fairs to explore new avenues of business and investment in both countries.
Over recent years, Turkey and Pakistan have strengthened their diplomatic and military ties. Marisa Lino argues that understanding this ‘special relationship’ may help the West improve its own relations with both Pakistan and Turkey.
Turkey and Pakistan, the recent discussion of an agreement to grant dual citizenship to Turks and Pakistanis. Pakistan had announced plans to celebrate in 2020 the centenary of the Khilafat movement of the 1920s. According to Pakistani Prime Minister Imran Khan, this movement, started on the Indian subcontinent in support of the Ottoman Empire, is a thread of common history that binds the two countries together.
The Turkish ambassador to Pakistan declared recently that the Turkish consulate under construction in Karachi, Pakistan, would be Turkey’s largest consulate anywhere in the world, denoting the significance of Turkish-Pakistani ties.
Erdogan has not forgotten what he surely considers a key lifeline at a serious juncture and he has shown his gratitude by expanding the bilateral relationship. Erdogan has visited Pakistan four times in an official position during his years as prime minister and now president; Imran Khan, who has been in office a much shorter period of time, has visited Turkey once as well.
Most recently, Erdogan visited Pakistan in mid-February to participate in the sixth round of the Pakistan-Turkey High-Level Strategic Cooperation Council. He took a large delegation of ministers, investors and business representatives with him. In addition to the normal high-level meetings and discussions, Erdogan addressed the parliament in Islamabad, for a record fourth time.
The military-to-military relationship is demonstrated by the armed forces training exchange programme, which was inaugurated in 2000. Since the programme began, about 1,500 Pakistani military officers have been trained in Turkey. It also helps maintain Pakistan’s fleet of F-16 aircraft.
Bilateral defence and security cooperation was augmented with significant defence deals in 2018, and these days Turkey is Pakistan’s second-biggest arms supplier after China. For example, in October 2018, the Pakistan Navy commissioned a 17,000-tonne fleet tanker, built in collaboration with Turkish defence company STM in the southern port city of Karachi. It was the largest warship ever constructed in the Karachi Shipyard and Engineering Works,. Turkey is also modernizing three Pakistani submarines.
In 2018, Turkey won a multibillion-dollar tender to supply four corvettes to the Pakistan Navy which then-defence minister Nurettin Canikli said was the largest contract ever granted to the Turkish defence industry. In 2016, Turkey gave 34 T-37 aircraft with spares to Pakistan. It also agreed to purchase MFI-17 Super Mushshak trainer aircraft from Pakistan. New military training programmes are also being planned.
Turkey thinks that extending planned and military ties with Pakistan has helped to increase its influence in Asia and provided new alternatives for its foreign-policy ambitions.
Pakistan must benefit from the accomplishment of Turkey particularly in the tourism sector through which it creates $35 billion revenue per year. Pakistan also wanted to benefit from Turkey’s achievements in the construction sector for providing cheap housing. Pakistan also wants to benefit from how Turkey has raised its economy, checked debts, including the IMF loans, and achieved a turnaround.