The Economic and Governence Situation and Prospects Following The Presidential Election

The Economic and Governence Situation and Prospects Following The Presidential Election

August 2014

At the first election in which the president was elected directly by the electorate in Turkey, the ruling AKP (Justice and Development Party)’s candidate Mr. Erdoğan obtained 51.79 per cent of the votes.  Mr. İhsanoğlu who was the umbrella candidate supported by the social democratic CHP (Republican People’s Party), MHP (Nationalist Movement Party) and a dozen other smaller parties received 38.44 per cent of the votes. Mr. Demirtaş, the HDP (Peoples’ Democracy Party) candidate, supported by a significant part of the Kurdish electorate as well obtained 9.77 per cent.  Thus Prime Minister Erdoğan became elected President during the first round; had he received 1,8 percentage points less of the votes, a second round would be held. The participation rate was down to 74,13 per cent, from 89.2 per cent at the local elections of 30 March 2014.

 

The Economic Situation

 

AKP and Mr. Erdoğan declare, in their terms, that the latter’s election as President following a long and triumphant historical struggle represents the beginning of the era they call the ‘’new Turkey’’, foreseen as a period of golden advance. Leaving aside in this framework other aspects concerning the nature and substantiation of this declaration, let us look in more concrete terms albeit briefly at some of the interrelated economic development and governance dimensions of Turkey’s situation and prospects.

 

It is important to emphasise that Turkey’s economic development potential and dynamism are quite considerable. After a high growth rate of 7,2 per cent in the 2002-2006 period, growth remained however at 3,4 per cent in 2007-2013. This is lower than potential growth. On the other hand the number of medium size manufacturing enterprises has increased noticeably but they are facing constraints in terms of increasing their productivity and integration to specially the international value chains. In general business corporations suffer from the inappropriateness and unevenness of the rules being legislated and implemented.

 

Exports rose rapidly but their rise has diminished after reaching 132 billion dollars in 2008 and were at 152 billion dollars in 2013. A faster increase is needed to attain the 500 billion dollars target of 2023.  Although Research and Development expenditure rose to 10,8 billion dollars in 2011, the technological dimension of the Turkish corporations’ competitiveness did not rise noticeably.  Despite relatively high Turkish exports to the EU, and EU FDI into Turkey, the integration between EU and Turkish economic enterprises and structures have in general not developed sufficiently. The transformation toward the knowledge economy remained much too slow.

 

Turkey has huge infrastructure needs. However some infrastructure projects in the İstanbul area were prepared and started in a controversial way because of issues including planning and environmental effects as well as the clear cronyism relations involved . The huge İstanbul canal project, which did not start yet, is also controversial with no apparent convincing use. These projects’ total financing need reaches more than 100 billion dollars and is problematic. Such types and scales of expenditures could also have a negative effect on macroeconomic balances. On the other hand, Turkey’s current account deficit has been high, reaching 9,7 per cent of  GDP in 2011, while the deficit decreases as growth is lower. This is also connected to the excessive import dependency of the production pattern, including for exports. The connected significant problem is the very low level of the saving rate which was as low as 12,6 per cent in 2013.

 

The 10th Five Year development Plan emphasises industrialisation and productivity. Despite important developments in some industrial sectors, the share of manufacturing in GDP has so far remained low and decreased to 15,5 per cent in 2013. The corollary is partly an overabundant luxury housing activity and a lack of proper planning in housing construction and urbanisation in general. Though construction in itself is obviously a necessary   and positive economic activity it is its present pattern which causes worry. Urbanisation becomes distorted. The inadequacy of social infrastructures including in education intensify these problems. This is combined with excessive speculative rent seeking and corruption cases in which government officials including ministers are being prosecuted. All this curtails the benefits which the pace of urbanisation in Turkey would be expected to bring about. In fact, in the OECD welfare indicators Turkey is making advances in some areas but not in terms of its ranking which remains at the bottom. Women’s, social and Trade Union rights are also matters of serious concern.

 

Governance

 

It is already clear from the situation concerning the economy depicted above that the existing governance pattern constitutes a serious drawback. In fact the governance structure which is interrelated with and constitutes a vital part of the economy is also alarming at the political level.

 

Starting with some economic aspects of governance; the AKP Government’s economic management structure is flawed in two ways. First there is now a multitude of overlapping departments and groups or circles with no clear division of tasks and definition of authority. Second, decisions of even relatively small significance are ultimately taken or approved by one man, Mr. Erdoğan, the former Prime Minister who has just become President. He is even attacking severely the decisions of and pressurising the Central Bank for interest rate cuts with little regard to the situation of the markets. The independence of the other independent regulatory bodies are being significantly curtailed, with also the help of the Decree Laws issued in 2011 (Cf: Işık, Yusuf., ‘’A Dangerous Course: Decree Laws of 2011, , ReflectionsTurkey, April 2012). Decisions concerning tenders, taxes, incentives, etc. are heavily discretionary. These are also openly used against business or press groups which do not support the Government. The transparency of critical economic resource allocation decisions is very weak . Critical reports of the Court of Accounts are kept away from Parliament. The Government has so far blocked the examination of the serious corruption charges cases against four previous Ministers brought by the judicial authorities. Finally, economic decisions are becoming less and less  predictable.

 

On the justice and political front, a few examples will suffice to convey the severity of the situation in terms of governance: A new law enacted in February 2014 brought the High Council of Judges and Prosecutors under the even closer control of the Government. The independence of the justice system is now a hollow word except for the current Constitutional Court. At the same date a new law brought further and very strict limitations on the freedoms pertaining to Internet use. Twitter and Yahoo were banned until the Constitutional Court reopened them.

 

Beyond these examples the Government often uses state power roughly. One of the most disconcerting cases concerns the Gezi movement of the end of May 2013 which began as a demand for more democracy and participation starting at the center of İstanbul, led by women and youth above all. It was suppressed severely with violence and several youth were killed, thousands injured and imprisoned as has been followed throughout the world. The repression of liberties increased after the Gezi movement. The familiar discourse of authoritarian regimes on encirclement by internal and external enemies often used as a pretext for more repression was at work. More journalists were imprisoned. The discourse became more divisive, polarising, with also elements of sectarian overtones. Foreign policy troubles have increased further the tension palpable in the country.

 

The AKP Government obtained 44 per cent of the vote at the local elections of 30 March 2014. It was a high score but not a triumph compared to the nearly 50 per cent it obtained at the general elections. But Mr. Erdoğan felt encouraged to pursue the same approach in the presidential election campaign, again resorting to mass rallies with inflammatory speeches.

 

 

 Prospects

 

During his victory speech Mr Erdoğan said that he would be the President of everyone. He had said the same thing each time he had won an election since 2002 but never acted accordingly. What counts is whether the polarising governance system which restricts severely freedoms and democracy remains or not. The most likely prospect is unfortunately that this system will not only remain but be consolidated further, and tailored to a rule by predominantly one man while a  majority of 51.8 per cent is presented as consensus. Furthermore, the open declaration by AKP and Mr. Erdoğan that they aim to obtain a 2/3 majority –an unrealisable hypothesis – in the 2015 General Elections so that they can change the Constitution by themselves towards a presidential system does not augur well for the prospect of a more consensual, balanced and democratic government. In fact, the parliamentary system is clearly more suitable for Turkey. One of the reasons for this being the already very centralised nature of the state. Moreover the envisaged presidential system would clearly be more authoritarian as well.

 

On the economic front: The presidency of Mr. Erdoğan is unfortunately likely to bring new uncertainties.  FDI is not likely to increase. Excessive rent seeking activities are not likely to diminish in favour of more industrial activity and investment. The state in which the judicial system has been put is likely to discourage investors as well. Transformation toward the knowledge economy is unlikely to progress. The financing of large projects, notably the step toward the implementation of the İstanbul canal project could lead to difficulties. The Central bank is unlikely to be able to act as independently as it should. Economic relations with the EU are unlikely to deepen. Tender processes are likely to become more complicated and time consuming than even today. Competition policy would be further negatively affected by this. And, finally, Turkey’s competitiveness is unlikely to increase so as to be on target for many of the 2023 objectives.

 

On the governance side:

 

As President, Mr. Erdoğan is likely to polarise further the country and aim to establish an even more one-sided rule. This would be very harmful. This is why CHP had opted for the strategy of proposing the candidature of Mr. İhsanoğlu, a conservative statesman who would fulfil the role of president in a balanced way and be seeking consensus.

 

Mr. Erdoğan’s candidacy booklet mentions such positive concepts as ‘’The open society’’. However there is the immense danger that the continuing practice will be diverging vastly from such discourses.

 

The continuing neglect of the separation of powers and checks and balances would have a disastrous effect on the future of Turkey.

 

It is also crucial to underline that the solution of the Kurdish question equally requires a full-fledged democratic system in the country.

 

The fate of women’s rights will constitute another most critical factor.

 

On the other hand, Mr. Erdoğan is also likely to lead to a constitutional and state crisis as he is likely to try to implement an unrestrained quasi presidential régime from the beginning.

 

Thus, the ‘’new Turkey’’ Erdoğan mentions is only likely to be new in the sense of drifting away from the trajectory toward the group of most advanced countries and the corresponding norms; the further instauration of ‘’The winner takes all’’ system; the institutionalisation of majoritarianism to the service of one man above all and his societal configuration.

 

However, soon after or if Mr. Erdoğan will actually try putting into practice his declared intentions, it will become apparent that such a restrictive pattern of governance is not sustainable in contemporary Turkey.

 

To end with a more positive note, let us hope that the damage until the 2015 General Elections will remain minimal and that those elections will give CHP the opportunity to exercise government power in the direction of Turkey’s further convergence with the EU and its principles.

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