Different approaches towards indigenous car and national currency
For some time, people in the finance sector have been widely debating the future appointments to the economic management team that should restore confidence after the elections.
It is important that the teams including the officials at the Banking Regulatory and Supervision Agency (BDDK), Treasury, the Central Bank and advisors should be reshuffled before a new road map for the economy is drawn. The spasms that private companies, which have accumulated considerable amount of debt over the past 10 years, are having must be treated after the elections. A competent and assuring technical team is needed to keep the economy going and to draw a credible road map.
Even though the Central Bank did deliver an “approved” rate hike, it is crucial that the current management at the national lender should resign and should be replaced with people who are appointed on the basis of merit. The road map should be prepared after those appointments have taken place.
The central bank is the firefighter of the economy. Nobody trusts a firefighter who arrives at the scene late, no matter what the reason behind the delay is. This is what happened in Turkey. Despite the belatedly taken decision to lift the interest rates by 4.25 points, our currency has not recovered.
Under normal circumstances the executives at a central bank that loses control and sees the local currency tumble resign. Why? Because they take the responsibility of the problems and they quit in order to prevent the institution from losing its credibility. They step down so that the institution becomes reliable once again. The latest example of this is the resignation of the head of Argentina’s central bank which saw the local currency plunge 30 percent since April. He resigned last week, saying that “in the past few months, various factors have deteriorated my credibility as the president of the central bank.”
The Central Bank law states that “protecting the domestic and international value of the Turkish Lira” is among the tasks of the national lender. The law says that the “bank shall enjoy absolute autonomy in exercising the powers and carrying out the duties” granted by this law under its own responsibility.
Did the Central Bank do this? No.
In the league of developed nations the rule is that hardworking and competent people are appointed to the positions which are tasked with defending the value of the national currency. If they believe they fail to do their jobs, they pack up and leave.
Vahap Munyar talked about an interesting story in his column on June 17. The authorities contacted head hunter Şerif Kaynar to find the CEO for Joint Venture for Turkey’s Car Industry and Commerce Co.” (Türkiye’nin Otomobili Girişim Grubu Sanayi ve Ticaret AŞ) that was established to produce Turkey’s indigenous car. This is how Gürcan Karakaş was found and appointed to the CEO position.
The question is “if CEOs that will oversee key projects are found through HR companies why don’t we use the same method to find the top executives for the Central Bank?”
Canada and the U.K. use this process when it comes to appointments at their central banks.
Back in 2007, Canada set up a seven-member committee that was in charge of finding a chairman to the central bank. This committee determined the criteria for potential candidates and cooperated with an HR company. Advertisements for the position appeared in local and international newspapers. Applications were collected. The cabinet finally appointed a name from a short-list.
In the U.K., they do not even care if the central bank head is “native and indigenous.” If the central bank head does his job well, he naturally does everything to defend “national interests.”
Here in Turkey, someone who did not study economics was appointed. Being a developed nation is all about institutions and rules. It is about whether the appointments to key positions are based on merit and how things are handled by those appointed to those positions. It is not about people.