BIG DREAMS

Turkey 2013 | ECONOMY | INTERVIEW

TBY talks to Zafer Çağlayan, Minister of Economy, on reaching the country's Vision 2023 goals, the relevance of the EU membership process, and the significance of boosting trade ties with Africa.

Zafer Çağlayan
BIOGRAPHY
Zafer Çağlayan began his career as a businessman and industrialist in 1980. In 1987 he was elected as an assembly member of the Ankara Chamber of Industry (ASO), and he later became the acting chairman of the board of directors in 1991. He was named the Vice-President of the Union of Chambers and Commodity Exchanges of Turkey (TOBB) three times between 1996 and 2005. He began his political career in 2007 as an elected MP for Ankara’s 2nd District, and became Minister of Trade and Industry in the 60th government until his appointment as Minister of State in May 2009, and has been serving as the Minister of State for Foreign Trade since then.

How would you assess Turkey's progress toward achieving its Vision 2023 goals for the economy?

The Turkish economy has undergone a profound economic transformation recently. Although Turkey has experienced deep crises in its history, now it has become one of the main actors in the global economy. Owing to the appropriate policy implementation aimed at solving the structural problems of the economy, the negative impact of the global financial crisis on the Turkish economy has been very limited. Today, Turkey has focused on sustainable long-term targets instead of short-term ones. In order to reach the long-term targets, the Vision 2023 strategy was prepared for the centenary anniversary of the Turkish Republic. The goal of the strategy is to support Turkey in its ambition to become one of the 10 largest economies in the world by 2023 through fast and sustained growth. Achieving a GDP of $2 trillion, reaching $500 billion in merchandise exports, $150 billion in service exports, and taking a 1.5% share of the world's merchandise trade are the targets of Vision 2023. Recently, Turkey has showed a remarkable economic performance. Owing to properly implemented policy measures, Turkey will be able to reach its long-term targets. Past successes are the precursor of coming successes. Turkish exports, which were $31.1 billion in 2002, have increased more than four fold, up to $152.5 billion in 2012. In this way, Turkey has exceeded the export target of $149.5 billion in the Medium-term Program (MTP). Foreign trade volumes, which were $87.6 billion in 2002, have increased up to $389 billion in 2012, and service exports, which were realized at $14 billion in 2002, have increased up to $44 billion in 2012. The major problem of the Turkish economy, which is the current account deficit, has declined by 36.8% in 2012 compared to the previous year, down to $47.5 billion, which is considerably below the medium-term target of $58.7 billion. On the other hand, the strategic plans, formed in light of the 2023 export strategy, contain some concrete elements designed to fight the structural problems prevailing in the production and export scheme of Turkey. Through supporting the 2023 strategy with export-oriented production strategies and input supply strategies, we are looking to enhance exports, advance the export-oriented production system, restrain imports, and increase the prosperity level of Turkey by focusing on employment and foreign investment, among other things. Furthermore, channeling savings toward high value-added investments, increasing production and employment, encouraging large-scale and strategic investment that will increase the competitiveness, and increasing FDI inflows are the targets of the new investment incentive schemes. At the Ministry of Economy, we have been taking new steps in line with the Vision 2023 targets day by day, and in this way Turkey will reach the level that it deserves in the future.

What effect will Moody's foreign currency credit rating upgrade have on FDI inflows over the medium term?

Foreign direct investors take many parameters into account during their decision process, including the economic growth of a country, its prospects, the local market, export possibilities, infrastructure, and the availability of qualified labor. While credit rating agencies also analyze such criteria and reflect those in their ratings, their analyses are much more relevant to financial institutions and financial investments. Direct investors are also interested in the sophistication of financial markets and the availability of credit facilities, but it is not their sole concern. Therefore, in terms of foreign direct investors, the ratings of such institutions are not a major factor in their investment decision process. Still, some investment companies, or consulting companies who provide services for investment decision processes, take the credit ratings very seriously. In some cases, while deciding on a country to invest in, investors may only consider countries that are above a certain credit rating and disregard the remaining countries. Although I believe that this is not a realistic approach for direct investments, Turkey has been upgraded and now it is more possible that our country will be caught on the radar of a certain group of investors who have not previously considered Turkey.

As the uncertainty over the future of the eurozone continues, how relevant is the EU accession process for Turkey's future?

Despite the economic crisis in the EU, and specifically in the eurozone, Turkey demonstrates its determination to receive full membership of the EU on every occasion. Reforms carried out by Turkey in the framework of the EU accession process aim to fasten Turkey's economic and social development process to increase the welfare and living standards of Turkish citizens, in addition to the purpose of satisfying necessary criteria in the process of EU membership.

“The negative impact of the global financial crisis on the Turkish economy has been very limited."

Turkey's current position also verifies this situation. Despite the global economic crisis, thanks to stable macroeconomic policies, structural reforms, and a strong financial sector, Turkey is seen as an example of economic success by many countries in the world. In the current crisis atmosphere faced by the EU, opportunities presented by Turkey become clearer. Today, Turkey is in a strong position to contribute to the EU's economy, rather than being a burden.

Prime Minister Erdoğan's first diplomatic trip in 2013 was to Africa. How would you characterize the significance of Turkey's economic relations with the continent?

Turkey, with its advanced economy, skilled labor force, and experience in international markets, is committed to further increasing its existing trade and investment relations with African countries. This determination has led us to devise and implement a new development strategy toward African countries that we initiated back in 2003. From the initiation of our strategy toward Africa, we have had noteworthy outcomes and these give us the power and courage to continue exerting our efforts in an accelerated way. Turkish-African relations, and our strategy, are not subject to only economic and commercial targets; the most important point for us is that we have an integrated policy that includes the development of Africa and regular humanitarian aid. From an economic and commercial point of view, the total trade between Turkey and Africa, which was $5.5 billion in 2003, reached $23 billion in 2013, meaning an increase of 318%. In the framework of our targets for 2023, trade volume with Africa is expected to reach approximately $100 billion by 2023. The financial support that our Ministry provides to our firms in order to reach higher figures in trade will continue in the forthcoming period. It is one of our priorities to further improve the cooperation between Turkish and African firms in the context of both trade delegations and buyers' missions. Our investments, which are concentrated mainly in North Africa, are approaching $6 billion for African and Turkish construction firms, which have undertaken infrastructure and superstructure projects worth over $45.5 billion cumulatively. In the framework of 2023 targets, the total amount of Turkish investments is expected to reach around $20 billion. Turkey has embassies in 32 countries in Africa. The number of Commercial Counselor Offices reached 23 in 2012, whereas this number was only 12 in 2003. Our efforts continue to complete the legal framework of our commercial and economic relations with all African countries, in order to eliminate the obstacles faced by our entrepreneurs who are expanding their businesses there. At present, Turkey has completed commercial, economic, and technical cooperation agreements with 38 countries, FTAs with four, agreements on the avoidance of double taxation with eight, and agreements on reciprocal promotion and the protection of investments with 12 African countries. To sum up, Turkey is well aware of the increasing importance of Africa. With our unique, inclusive, and collaborative approach, which has already been appreciated by every African nation that we have interacted with, we will walk hand-in-hand with our African brothers and sisters to a bright future.