Investors to quiz Turkish PM on reform commitment in London meetings

ISTANBUL - Reuters

Carriages from the cable car that runs over the river Thames pass in front of Canary Wharf and London's financial district in London, Friday, Jan. 8, 2016. (AP Photo/Kirsty Wigglesworth)

Turkish Prime Minister Ahmet Davutoğlu and his deputy and economics chief Mehmet Şimşek will be in London from Jan. 17 to 19 on a charm offensive aimed at convincing investors that Ankara will push through reforms including privatizations and labor market liberalization. Investors will quiz him over the independence of the Central Bank and concerns about the lack of reform commitment, sources told Reuters. 

It will be their first meeting with investors abroad since the Justice and Development Party (AKP) won back its parliamentary majority in November. The cabinet announced its revised Medium-Term Economic Program ahead of the investor visits. 

Davutoğlu said after the victory that economic reforms would top the agenda, and has detailed a list of priorities including labor reform, cutting red tape for investors and changing taxation laws.

“Foreign investors are avoiding Turkish assets because they think President Recep Tayyip Erdoğan’s agenda is running the country and he will do anything to win an executive presidency, including going to another early election,” a senior treasurer from an Istanbul-based foreign bank told Reuters.

Investors argue that if it is to achieve sustainable long-term growth, Turkey badly needs structural reforms to increase productivity and support for industries to lift output of value-added export goods.

The government argues that the current constitution, born of a 1980 coup and still bearing the stamp of its military authors, is making the country more susceptible to political risk and that discussion on a new text will not hinder economic reform.

“Work on a new constitution and economic reforms are not mutually exclusive, they are conducted by different groups and will continue together,” said AKP lawmaker İbrahim Turhan, former Stock Exchange chairman and deputy Central Bank governor.

“Investors should also see that the current system has a bigger potential to trigger political risks,” Turhan, who will also be on the team travelling to London for investor meetings organized by investment bank Merrill Lynch, told Reuters.

Alongside the wider woes of emerging markets as the U.S. starts to raise interest rates and uncertainty over the Chinese economy heightens, Turkey has faced its own specific challenges.

Conflict with outlawed Kurdistan Workers’ Party (PKK) militants in its southeast has reached levels not seen since the 1990s, while it risks being drawn ever deeper into the chaos in neighboring Syria and Iraq. A row with Moscow over its downing of a Russian fighter jet last November, meanwhile, has led to trade sanctions.