Turks need to rediscover confidence once more: World Bank director
Barçın Yinanç - firstname.lastname@example.orgTurkey has lost some of its gung-ho attitude to the rest of the world in recent years and needs to rediscover its confidence vis-à-vis the world, according to World Bank Turkey country director Martin Raiser.
“I hope Turkey rediscovers its confidence and its positive approach to opening up because opening up has been of tremendous importance for Turkey’s economic success,” he said.
Some experts like to go to markets; some talk to taxi drivers. Do you have any special human dimension tools to get a sense about the economic situation?
We use our interactions to try to understand certain type of problems. For me, one of the most impressive sorts of direct encounters was with a lady we met in Nevşehir.
She was in her mid-40s. She had never worked in her life until recently in part because her husband did not want her to leave the house. She described the process how her son-in-law went to her husband and said “father, let her go.” And he eventually said OK.
She was so incredibly happy because she could buy presents for her grandchildren and she had a purpose in life. To me, this story encapsulates a lot of what’s going on in Turkey.
Modernization and the structural change process Turkey is going through is creating a very difficult discussion between generations. The older generation remembers how you respect your elders and do what they say. The younger generations that say “C’mon, I have my own life to live. There are opportunities out there and the country is developing so fast that I want to take these opportunities.”
This is, I think, a very important aspect of what’s happening in Turkey. There are important social transformations.
She is working in a local health center, and 25 years ago that health center probably did not exist. So you see how economic opportunities are expanding and how people want to benefit from these economic opportunities, and this creates social tension because it is no longer as it is used to be.
This is a very powerful story about the process of modernization of Turkey. This is something that cannot be stopped. Where there are opportunities, people will follow.
What are Turkey’s weaknesses and strong points?
My first impression is that Turkey is strong when it looks out at the world. When I came to Turkey, the country felt very confident about itself when it was looking out. Maybe it was a little over-confident. Maybe some of the underlying problems were not properly diagnosed. But it had a positive attitude.
What I have seen in the last couple of years is more nervousness about engaging with the outside world. I hope Turkey rediscovers its confidence and its positive approach to opening up because opening up has been of tremendous importance for Turkey’s economic success.
At the individual level, I see how much Turks are curious about the rest of the world, but also how much the world can benefit from learning from Turkey. When I came here, I knew very little about this country. It has exceeded my expectations so much beyond anything that I thought would be possible. More people should benefit from that, and that only works if people get the impression that here is a country that genuinely welcomes you and engages with you. Otherwise you will miss something.
Turkey should be confident about processes of economic competition and international integration because it works well for Turkey and its people.
And as I said before, Turkey’s structural transformation at the human level is such an interesting dynamic but also a complex social transformation; it’s fascinating to observe. It’s not always easy – it’s always very emotional. We ought to look at Turkey not just for Turkey’s sake; this holds a lot of lessons, as some other countries are going through the same process.
You said Turkey felt more confident before. What went wrong?
There is a certain fascination with conspiracy theories that are not helpful. I think there is also certain defensive reaction against outside commentary at the moment.
It’s important to start by giving credit where credit is due. It’s important to acknowledge achievements, but you can’t just stop there, you have to point out where things need to improve. This is possible and maybe Turkey’s outside partners have not been very good at doing that. I also find Turkey has not necessarily made it easy for Turkey’s friends to have that two-way conversation – acknowledging achievement but pointing to challenges going forward. I find the reaction more recently too risk-averse and too introverted. But there is nothing to fear.
The World Bank has been saying Turkey’s success can inspire others. What are the do’s and don’ts that others should know?
On the do’s: Turkey’s economic integration with Europe and also with the international economy; it was not afraid and it was a success. Do that; open up your trade; open up your financial markets. Regulate them well. Turkey has done that too after learning the hard way what happens when you don’t.
Turkey is a good example for the power of European integration. It’s the best way to get to high income.
Do work on integration within the country. Turkey’s urbanization is a good example for that. Let the people move where the jobs are; don’t try to take the jobs where the people are.
It’s OK if Istanbul grows to 20 million if the jobs are here. What you make sure is that they have public services and that they don’t live in slums. Find the ways to accommodate them when they come. Turkey has done that well too.
And connect the rural part of the country by investing in infrastructure, by investing in roads and railways so that people that cannot move are still connected to the dynamic centers of the country. Bring health and education services to them. Do all that by having a sound public financial framework.
On the don’ts, I would not formulate it as don’ts but to do’s for Turkey. If you have to get to high income, you need to transition from discretion to rules. You can’t have politicians wanting to decide every issue themselves because the way high-income countries works is that there are rules that constrain politicians.
Turkey learned that lesson in 2001, and it established those rules but it was uncomfortable with it. That’s been the source of anxiety for investors; don’t let investors start doubting your commitment to rule-based governance if you want to become a high-income country.
Another “to do” is make sure economic opportunities are available to everyone. There has seen great expansion already, but there is much, much work to do, whether we are talking about women entering the labor force or we are talking about everyone having access to quality education.
What are Turkey’s short-, mid- and long-term challenges?
The short-term challenge is to maintain market stability in the context of an uncertain political situation. The fact that you have an independent central bank and a floating exchange rate is good news. Make sure fiscal policy is not getting out of control because you need to hand out gifts in case there is another election.
Mid-term; use the negotiations with the EU over aligning the Customs Union and the Trans-Atlantic Trade and Investment Partnership (TTIP) as a motor and an anchor for the next wave of structural reforms.
The long-term challenge is to get to high income and to form institutions in such a way that it becomes possible. Turkey has a good chance in the next decade to transit to high income, but it needs to remember the don’ts. Don’t move away from rule-based governance back to discretion.
There are three Ps to go forward: productivity because productivity growth has been flat; participation – getting more women and the youth into the labor force –and persistence. The persistence part is don’t forget the positive lessons that others are wanting to learn from your experience. Don’t go back; go forward. Don’t go back from rule-based governance; from an independent central bank; from independent regulatory agencies. Don’t go back from being an open country inviting foreign investment; have open trade regimes, not protectionism.
Your initial reaction after the elections was that the message of the elections was compromise. Judging from the reactions of the politicians, do you think this message went through?
Negotiations on possible coalitions have started and so, yes, I think politicians know that they are expected to live up to the mandate the voters have given them. That does not make the substance of the negotiations easy, but my impression is that all sides are taking this seriously.
Who is Martin Raiser?
Martin Raiser is the country director for Turkey at the World Bank. He holds a doctorate in economics (summa cum laude) from the University of Kiel, as well as degrees in economics and economic history from the London School of Economics and Political Sciences. He worked for the Kiel Institute of World Economics and the European Bank for Reconstruction and Development, where he was director of country strategy and editor of the transition report. Since joining the World Bank in 2003, Raiser has held positions as country manager in Uzbekistan and economic adviser in Ukraine.
In his most recent assignment, Raiser served as country director for Ukraine, Belarus and Moldova from 2008 until January 2012, when he moved to his current position. Raiser speaks German, English and French fluently, has good knowledge of Russian, and elementary Spanish and Portuguese. He has published numerous articles in refereed economic journals and authored several books.