Turkey’s homework: Primary transformation programs
Deputy Prime Minister Ali Babacan has said the expansionary or tightening policies of central banks do not necessarily provide a permanent upward or downward course for a country. “What is really important is the country’s own domestic structural reforms,” he said. Babacan said they would monitor global developments and the effects of central bank decisions, but added that the truly important factor was "our own homework, which is written in the development program that we have issued.”
Babacan was speaking in the “G-20 Finance Ministers and Central Bank Governors Meeting” held in Cairns, Australia. What he calls “homework” are the measures included in the “Primary Transformation Programs” in the Development Program, also referred to as “domestic structural reforms.” These primary transformation programs were cited in the Turkish government's recently announced program, which pledged that they would be carried out for the structural transformation of the economy.
Babacan said they were working on primary transformation programs and a detailed calendar would be issued explaining when and how the over 1,200 action plans cited would be carried out. With the implementation of these plans, steps will be taken for solving the essential problems of the economy, he stressed, “thus proving that the way to reach a permanent high growth potential passes through structural reforms.”
The deputy PM's words have a particular significance in a period when global finance is at the threshold of change. Developing countries like us have started making preparations for the days when we will be attracting less capital, and these countries are primarily seeking to cut back expenses along with planning and implementing measures to increase their income.
However, it can be observed that Turkey has not taken any measures so far against the shrinking global liquidity. Moreover, while we are passing through days that are very risky geo-strategically, with hot clashes with ISIL likely to increase and affected us as a country, the global liquidity shrinkage has even more significance from the angle of stability.
Maybe because no such preparation has been made up to now, it can be seen that the opinion of international capital on Turkey has been worsening recently.
In this climate, Babacan’s reform discourse becomes more significant. When these reforms are listed, we can see there are difficult chapters ahead, such as a new industrialization policy that would decrease the current account deficit and increase savings. Of course, there will be new ones added to the list of reforms, which currently stands at 25.
Also, as well as the content of the reform programs, the action plans and calendars to be prepared will be important in terms of credibility.
In sum, we can say that as far content and timing are concerned; this is generally a correct package. However, it should not be forgotten that the implementation of these reforms will also depend on domestic and political developments, which choices the ruling Justice and Development Party (AKP) will prioritize, and in what kind of atmosphere we will hold the general elections scheduled for mid-2015.