Wednesday, September 10, 2014

The New Political and Economic Era in Turkey

Dear Readers,

International investors of the business world love to read strategic forecast reports. These reports give a preliminary road map to help them know how to navigate in the future. They also originate from local environments and are therefore valued by the investors as they unmask local sensitivities. I hope that the report you are now reading will warrant your attention and appreciation. Please feel free to comment after reading.

In the free and democratic elections for the office of the President of the Republic of Turkey, the former prime minister was elected by 51.8% of the electorate. He was sworn in and quickly moved on to fulfill his responsibilities as the new president.

The new Prime Minister was chosen by the majority party, although we all know that this was not through democratic free elections but by direct appointment as per the "Dilbert Principle" of the famous US cartoonist.

The new Turkish Prime Minister has been referred to as "Hodja" (teacher) seeing that he is a former university academician. It is known that he was not elected, but appointed by the President because he fulfilled the certain preconditions for this post. A new prime minister should be a member of parliament, member of the majority party’s executive committee, and should not serve in excess of a maximum of 3-terms as stipulated by party regulations.

Now a new era is dawning. How do we expect our new President to rule our country? In his new presidential term, is he going to rule with the powers of an "absolute leader/monarch" as is the case in the US and in France? We are skeptical that such an option will become a reality as the Turkish Constitution has not been changed by the Turkish Parliament to open the door to such extended powers.

We can say that it will be difficult to change the legislation in this regard. Up to a point, the new President can enforce some new measures under the existing applicable laws, but for the application of total and absolute power, the legal conditions remain largely absent.

According to the Turkish Constitution, it is currently the Prime Minister who possesses the absolute executive authority to govern the country, whether by designating the budget, making political decisions, allocating public spending, or deciding where to invest. We are about to observe a slow but definite power struggle, albeit rarely publicized. So what does this "new era" entail in the future?

We, the people of the business community, want our elected government to be successful in its endeavors. Each democratically elected government is our government, and we fully support its decisions. And we expect our government to make the right decisions, creating peace at home and with our neighbors, securing our national unity and our borders, keeping inflation and interest rates low, increasing investment, boosting national economic growth, cutting down the "current account deficit" (CAD), reducing unemployment, and increasing everyone’s share of national wealth and access to education and health care services.

A successful democratic government facilitates the success of our own businesses. We are in the business world, and we flourish only if our government flourishes, therefore, we wholeheartedly hope for the success of our government.

"Hodja" has valuable academic credentials. He was the foreign policy adviser to the Prime Minister, was later appointed as the Minister of Foreign Affairs, and recently became a member of parliament.

Earlier he wrote numerous academic and popular newspaper articles. He speaks German, English, and Arabic. He holds a bachelor's degree from the prestigious Bosphorus University in Istanbul with a double major in economics and political science. He also completed his Ph.D. degree at the same university. He is happily married with four well-educated children, two of which are already married. His wife is a very successful obstetrician MD working in a private clinic in Istanbul.

"Hodja" published a book entitled "Strategic Depth (2001)", which was a compilation of his past popular articles in academic and popular journals, putting forth a Pan-Islamist, Neo-Ottoman approach to international affairs in the modern world. To this day, the book has had 91 new editions, all in the Turkish language, but has not yet been updated or supplemented with and major changes in its intellectual content or prevailing arguments.

During his tenure as Turkey’s Foreign Minister, "Hodja" engaged in dialogue with his counterparts from other countries with ease, and influenced them with his broad academic background and vast intellectual knowledge. He advocated the policy of "zero problems with neighbors", and even though it ultimately backfired due to unforeseen, unfortunate developments in the Middle East, all the blame should not be placed on him and him alone.

He is an academician by trade, not a career diplomat. He has limited background on putting his academic work to practice in the Foreign Ministry and has acquired only on-the-job diplomatic training. Although he spent some time at a Malaysian university, he has almost no experience working alone in completely foreign environments, and his ability to empathize with foreign missions is yet to be truly tested.

His background was gained in the lecture halls, where he has spent long hours with his undergraduate and graduate students. Yet everyone has the same question in mind, "if he were not appointed, could he have been democratically elected at the ballot box?!" The answer will be made clear in the nationwide general elections to be held in June of 2015.

When Hodja takes the podium, he can academically postulate for hours on end. For a new listener, his vast intellectual capability is impressive as his speeches are similar to the lectures one could hear in a university course at the department of international relations. Yet, the audience can quickly bore of such stultifying orations. For every occasion he has well-prepared academic documents, whose lengthy, rehearsed contents he reproduces and duplicates in different meetings and settings, regardless of who the audience may be. One has to be reminded that Hodja can probably recite lecture material for every single class of a 4-year bachelors program in International Relations from memory.

Will Hodja limit himself only to foreign policy issues during his office as PM? That is impossible. Will he make radical changes to his Pan-Islamist, Neo-Ottoman ideas over time? We shall see. Will he implement successful and effective domestic and economic policies? How is he going to manage the economy? After a very charismatic and dominant personality that saw unprecedented success on the local level and held the prime ministerial office before him, is he going to be effective? Will the former PM (now the President) interfere in his day-to-day decisions and rule as he pleases?

We feel that it will take some time for Hodja to learn to govern, and that in time he will be very effective. Hodja will change. He has to change, otherwise he will fail and loose the next general elections. This is his "Dilemma", his inescapable "Paradox". We shall all visualize the change he calls "Restoration" in his party meetings, in his public speeches, in his new revisions to his famous book "Strategic Depth".

Departing from the prime minister, positive monetary indices related to the international financial markets, foreign direct investment, and the local stock market have shown that the ministers in charge of Turkey’s treasury and finance ministry are indispensable. As far as it concerns these individuals, the majority party's self-imposed three-term limitation may not apply. While they may not be elected in the upcoming elections as deputies, they may continue their ministerial duties until the top political decision-makers find similarly reputable replacements. This is also the case for the Central Bank Governor, who is very likely to continue his charge for some time to come.

Those deputies (members of parliament) who will complete their maximum three-terms in parliament, will not be appointed to the party ticket in the next general elections based on party procedure. This means that they will have time to recharge, time to rest, time to reflect.

They may return to their commercial family enterprises to work, to earn money. They may join universities if they have academic titles. They may share their political experience with other political institutions. They may take on national and international functions. Although not typical in the Turkish context, they may even write books on their past experience in the parliament.

The new Prime Minister, "Hodja", will quickly learn the ins-and-outs of domestic politics, how to manage the local economy, and how to speak intelligibly to the public. He will feel the heavy burden of the current account deficit (CAD) which is now at $60 billion. He will look for solutions on how to cope with our dependence on fuel imports and how to halt and reverse our ever-increasing foreign debt which has already reached $400 billion.

He will try to find a solution to the Syrian refugee dilemma, as their numbers approach 2 million. He will observe the geographies of Syria and Iraq from a different angle in order to seek new, better and more applicable solutions. We will see his Pan-Islamic, and Neo-Ottoman ideas pass through "Restoration". A new "Strategic Depth" will be considered. Meanwhile, Hodja's hair will grow gray with the weight of his great responsibility.

The fragility of the domestic economy will increasingly be felt. The appreciation of the US Dollar and the debate between floating and fixed currencies will be a constant issue. The real-estate market bubble will need to be addressed. Market behavior and investment dynamics will be carefully monitored. Hodja’s political effectiveness will ultimately increase in time. We shall witness his ever-increasing political efficacy in party meetings, in his public speeches, in his encounters with foreign prime ministers, and in the upcoming 2015 general elections.

Prinkipo, 30 September, 2014

Haluk Direskeneli is a graduate of METU’s Mechanical Engineering Department (1973). He has worked in public and private enterprises, US-Turkish JV companies (B&W, CSWI, AEP, Entergy), and in fabrication, basic/detail design, marketing, sales, and in project management of thermal power plants. He is currently working as a freelance consultant/energy analyst of thermal power plants, basic/detail design software expertise for private engineering companies, investors, universities, and research institutions. He is a member of METU Alumni and the Chamber of Turkish Mechanical Engineers Energy Working Group.


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