Outcome of Davutoğlu’s New York trip
Yes, it is right that there was a huge turnout in the meetings Prime Minister Ahmet Davutoğlu held in New York with finance circles.
The meeting at Goldman Sachs, the first of three meetings, saw participation from the representatives of institutional finance and private capital funds. The meeting at Citibank was attended by portfolio investors. The meeting at Merrill Lynch saw the invitation of critical players directing markets. In the Citibank meeting alone, the participants were together worth more than $9 trillion.
What about the results? The government said the meetings went well, but I have not heard from even one of the finance representatives anything indicating that they were given confidence.
Yes, it is true there are global reasons why the dollar is climbing in Turkey. For example, while the Turkish Lira lost 15.43 percent of its value against the dollar, the Brazilian real lost 16.07 percent and the Russian ruble lost 15.76 percent. In comparison, the lira’s loss of value against the euro is less than 1 percent.
However, in the last three-month period, looking at other emerging countries that can be compared to Turkey, one can see that while the lira nosedived, the Mexican peso lost only 5.78 percent of its value while the South African rand lost 4.04 percent and the Indian rupee lost 0.93 percent.
While the dollar is climbing, those countries that are damaged the most are those with deficits in their macroeconomic balances, and those which are squeezed in international politics.
One participant in the Goldman Sachs meeting, trying to understand the risk he needed to calculate, asked Davutoğlu, “Are you managing the government, or is it President Erdoğan?” I have not heard from even one participant that they got the impression that Davutoğlu’s management has the power to lower Turkey’s political risks.
On the contrary, I talked to one investor who was invited but did not participate in the Goldman Sachs meeting. I asked him why he did not attend, to which he replied, “If it was Erdoğan, I would have gone.” New York has long since decided where the risk is coming from.
Citibank’s sale of its remaining shares in Akbank coincided with Davutoğlu’s New York visit. This sale is associated with the Basel III accord and is part of a process that started in 2012.
Take a look at the Turkey data of the World Bank. Before the global economic crisis in 2008, Turkey was able to attract $22 billion foreign direct investment (FDI) annually.
The crisis is now over, but Turkey’s FDI in 2014 was $12.5 billion. It is not going up. In fact, as it was $16 billion in 2011, it is on a downward trend.
Another concerning dimension is that the rate of equity investments within FDI is also falling. Davutoğlu came to New York for this reason, but I’m not sure whether there will be even one investor who thinks it is time to invest in Turkey when debates stemming from President Erdoğan’s words are added to regional risks such as the Syria crisis.
As one investor I talked to said, the problem is not the confidence of international markets in Central Bank Governor Erdem Başçı. The problem is the question marks raised by Erdoğan’s dispute with Başçı.
Along with Deputy Prime Minister Ali Babacan’s unhappy posture that he is unable to hide in meetings, Prime Minister Davutoğlu cannot eliminate the risks created by Erdoğan.
The question in the minds of investors about who is the real boss in Turkey is strengthening with each passing day.
As a result, Davutoğlu’s New York program left a question mark as to whether it should even have been conducted by the prime minister himself.
The meetings confirmed the following: Yes, there is trouble. But the place where this trouble will be solved is not New York, London, Hong Kong or Istanbul, it is Ankara.
