IN SICKNESS & HEALTH

Turkey 2014 | FINANCE | INTERVIEW

TBY talks to Martin Raiser, Country Director for Turkey at the World Bank, on key challenges for the Turkish economy.

Martin Raiser
BIOGRAPHY
Martin Raiser is the Country Director for Turkey at the World Bank. He holds a PhD in Economics from the University of Kiel and degrees in Economics and Economic History from the London School of Economics and Political Sciences. He has worked for the Kiel Institute of World Economics and the European Bank for Reconstruction and Development. Since joining the World Bank in 2003, Raiser has held the positions of Country Manager in Uzbekistan and Economic Advisor in Ukraine. In his most recent assignment, He served as Country Director for Ukraine, Belarus, and Moldova from 2008 until January 2012.

What have been some of the World Bank's most successful programs in Turkey in recent years?

Our partnership with Turkey dates back many years;the first loan was extended in 1950, and since then we've been involved in numerous different projects. If you're looking at things that stand out as successes,we've had quite a good run in the energy sector, including working with the regulator and the Ministry of Energy and Natural Resources. We have supported the renewables sector and energy efficiency among industrial companies and SMEs with credit lines,and have worked with transmission company TEİAŞ to upgrade the backbone of the transmission system. Now we are working on a smart grid project with TEİAŞ and our colleagues from IFC are doing their own part by supporting private power sector investments. If you put all of that together, you get an idea of how the Turkish energy market has developed over the years, and we have been there every step of the way.We also worked with Turkey on its health reforms, which were so successful in ensuring universal access to healthcare that we are now using the Turkish case as a model for other countries to learn from. We also supported Turkey more than a decade ago in its highly successful banking reform and stabilization program and have assisted the development of the sector ever since through the provision of long-term financing.Of course, we do more than financing; we perform substantial analytical work and, perhaps, one of our most interesting and exciting projects in recent times has involved working together with the newly established Ministry of Family and Social Policies to get more women into the workplace. This is a clear business matter. You could argue that Turkey is only flying with one and a half wings as only 30% of women participate in the labor force.This contrasts with the 53.02% average in the OECD.Our estimates suggest that if you close the gap between male and female labor force participation,which countries like Sweden have done very successfully, Turkey's GDP alone, as a result of that measure, could increase by 30%, which is significant.

There has been significant growth in the Turkish economy over the past 10 years, but what are some of the key challenges that you see facing the Turkish economy in the short and medium term?

In the short term, emerging markets are facing the normalization of global monetary conditions. This isn't happening at perhaps quite the pace people thought in May 2013, but nonetheless interest rates will certainly rise at some point in the US and quite possibly in the eurozone, too. And, for a country like Turkey, which is so reliant on external financing, high interest rates are likely to dampen growth prospects. In the short term, there is not much room for macroeconomic policy to support growth. Policy makers have to be a little careful about pressures on the exchange rate and on inflation and probably need to accept lower growth. But if Turkey uses this as an opportunity to tackle the underlying structural reasons as to why it is so reliant on international finance, it may actually be a good thing. The structural issues around the current account deficit are relatively independent of global economic conditions. Turkey doesn't save enough; it needs to boost its competitiveness and attract more long-term financing, particularly FDI. And why does Turkey not save enough? There are a number of reasons for this and the government is dealing with some of them, particularly on the consumer side. But, on the corporate side, some Turkish companies, particularly SMEs, are not profitable enough to save. And that's related to not being sufficiently competitive. If you want to be more competitive, you need to upgrade technology, and for that you need to invest more, and for that you need to have access to long-term financing.