For decades, Turkey has been told it was not ready to join the European Union — that it was too backward economically to qualify for membership in the now 27-nation club. That argument may no longer hold.
Today, Turkey is a fast-rising economic power, with a core of internationally competitive companies that are turning the youthful nation into an entrepreneurial hub, tapping cash-rich export markets in Russia and West Asia while attracting billions of investment dollars in return.
For many in aging and debt-weary Europe, which will be lucky to eke out a little more than 1 per cent growth this year, Turkey’s economic renaissance — last week it reported a stunning 11.4 per cent expansion for the first quarter, second only to China — poses a completely new question: Who needs the other one more — Europe or Turkey?
“The old powers are losing power, both economically and intellectually,” said Vural Ak, 42, the founder and chief executive of Intercity, the largest car leasing company in Turkey. “And Turkey is now strong enough to stand by itself.”
Astonishing
It is an astonishing transformation for an economy that just 10 years ago had a budget deficit of 16 per cent of GDP and inflation of 72 per cent. It is one that lies at the root of the rise to power of prime minister Recep Tayyip Erdogan, who has combined social conservatism with fiscally cautious economic policies to make his Justice and Development Party, or AKP, the most dominant political movement in Turkey since the early days of the republic.
“This is a dream world,” said Husnu M Ozyegin who became the richest man in Turkey when he sold his bank, Finansbank, to the National Bank of Greece in 2006. Sitting on the rooftop of his five-star Swiss Hotel, he is scrolling down the most recent credit-default spreads for euro zone countries on his BlackBerry and he still cannot quite believe what he is seeing. “Greece, 980. Italy, 194 and here is Turkey at 192,” he said with a grunt of satisfaction. “If you had told me 10 years ago that Turkey’s financial risk would equal that of Italy I would have said you were crazy.”
Having sold at the top to Greece, Ozyegin is now putting his money to work in the east. His new bank, Eurocredit, gets 35 per cent of its profit from its Russian operations. Ozyegin represents the old guard of Turkey’s business elite that has embraced the Erdogan government for its economic successes. Less well-known but just as important to Turkey’s future development has been the rapid rise of a core of socially conservative business leaders who, under the AKP, have seen their businesses thrive by tapping Turkey’s flourishing consumer and export markets.
Ak, the car leasing executive, exemplifies this new business elite of entrepreneurs. He drives a Ferrari to work, but he is also a practicing Muslim who does not drink and has no qualms in talking about his faith. He is not bound to the 20th-century secular consensus among the business, military and judicial elite that fought long and hard to keep Islam removed from public life.
In June, Turkish exports grew by 13 per cent compared with the previous year, with much of the demand coming from cash-rich countries on Turkey’s border or close to it like Iraq, Iran and Russia. With their immature manufacturing bases, these countries are eager buyers of Turkish cookies, automobiles and flat-screen televisions.
This year, for example, the country’s flagship carrier, Turkish Airlines, will fly to as many cities in Iraq (three) as it does to France. Some of its fastest growing routes are to Libya, Syria and Russia, Turkey’s largest trading partner, where it flies to seven cities. That is second only to Germany, which has a large population of immigrant Turks.
In Iran, Turkish companies are building fertiliser plants and making diapers and female sanitary products. In Iraq, the Acarsan Group, based in the southeastern town of Gaziantep, just won a tender to build five hospitals. And Turkish construction companies boast a collective order book of over $30 billion, second only to China.
On the flip side, the Azerbaijani government owns a majority of Turkey’s major petrochemicals company and Saudi Arabia has been a big investor in the country’s growing Islamic finance sector.