World Economic Forum on Turkey / İstanbul, 23-24 Kasım 2006


Competitiveness & Business Opportunities Printer friendly version Send to a friend
“Turkey’s young and growing population is a challenge, but can be an advantage. If you don’t create the future, the future will create you.”Feyhan Kalpaklioglu
Chairperson, Yasar Holding, Turkey

Turkey’s competitiveness is the key to its future success, particularly as it deepens ties with Europe and moves towards EU accession. The country has achieved much in recent years and now ranks 59th on the World Economic Forum’s Global Competitiveness Index, up from 71st place in 2005, the biggest improvement of any country in the survey. “We will do everything to improve the business environment in Turkey,” pledged Ali Babacan, Minister of the Economy of Turkey, and Chief Negotiator for the European Union. “If the right macroeconomic process is implemented, you will see how quickly change can happen.”Summing up participants’ conclusions at the economic and business-related sessions, Guler Sabanci, Chairperson and Managing Director, Sabanci Holding, Turkey, a Co-Chair of the World Economic Forum in Turkey, found it encouraging that several Turkish ministers openly admitted that some things had not been achieved. Turkey’s potential starts and ends with microeconomic and political stability, two areas in which the country needs to continue to work.
Some of the concrete actions that will lead to opportunities include:
•  Reducing red tape and resolving bureaucratic inefficiencies;
•  Reducing the informal economy;
•  Continuing to fight corruption;
•  Directing more funding towards education and infrastructure;
•  Reforming certain laws, such as the tax laws and the corporate code;
•  Providing equal access to education across all regions and income levels, and once the children are enrolled, providing them with the means of staying in school;
•  Encouraging entrepreneurship, R&D and innovation;
•  Exploring the possibility of creating a government agency to directly encourage investment in small and medium-sized enterprises;
•  Moving Turkey’s economy from a rent- to a profit-seeking structure;
•  Easing the ability to exit investments;
•  Enhancing labour market flexibility, including hiring and firing, and financial and non-financial burdens;
•  Rebranding the country in order to change outside perceptions and enhance the country’s image.
“Education is crucial to Turkey’s future competitiveness,” stressed Sabanci. “Our greatest asset is our young population,” agreed Huseyin Celik, Minister of National Education of Turkey. “Educating and training them well will serve as a competitive advantage for Turkey.”Educational reform needs to focus on early education, access, quality and training, preparing students for multicultural work and, more particularly, preparing skilled students to work in Europe as its workforce declines in the next 20 years. Foreign direct investment (FDI) in Turkey, largely driven by mergers and acquisitions, is also a source of competitive advantage and, more importantly, business opportunities for the country. FDI has reached US$ 12.8 billion so far this year, with nearly 85% going to the banking and telecommunications sectors. Maintaining these high levels will be a key challenge for the country. Turkey’s banking sector is in a competitive position but still faces major obstacles to growth, most notably the under-capitalization of institutions. Given the right mix of investment and regulation, Turkey could become a regional hub for financial services.

The relationship between competitiveness and the gender gap is evident in Turkey. While no country has closed the gap, those in the upper echelons of success in that area are also those that rank highest in competitiveness indices. Nordic countries top both listings. The Global Gender Gap Report 2006 of the World Economic Forum ranks Turkey 105th out of 115 countries surveyed, behind most emerging economies. If Turkey improves its gender gap ranking, it would likely increase its competitiveness performance significantly.

One factor in the poor gender-gap ranking is the low education rate among girls. But there are other factors that keep women from working, and education is not even the biggest of them, according to Ipek Ilkkaracan Ajas, Executive Board Member, Women for Women’s Human Rights-New Ways Foundation, Turkey. Education may be the highest perceived barrier, but in truth, it is a lack of access to childcare and elderly care that keeps women out of the workforce.

But education is important: when girls’ schooling increases, poverty decreases. With some 18 million people living in poverty in Turkey, increasing family welfare by educating girls is a serious opportunity. But current spending on education is not enough – it needs to be double today’s levels for the next 10 years to address the problem.

Turkey will have to watch out for pitfalls that could hinder the country’s competitiveness. Potential ones include a move towards a more conservative governing system and outright rejection of its membership by the EU. The Turkish currency’s volatility could be another. “Expect hiccups,” warned Yvan De Cock, Chief Executive Officer, Fortis Bank, Turkey, recalling how Turkey’s currency was devalued by 20% on the day after he arrived in Istanbul. Most members of the European Union have avoided this kind of price roiling by adopting a single currency.

Other weak points that hamper competitiveness include:
•  low savings rates among the general population;
•  the high public debt burden;
•  the underdeveloped state of credit markets;
•  a labour market that lacks flexibility;
•  weak compliance with the tax regime.
Turkish Prime Minister Recep Tayyip Erdogan maintained that Turkey is successfully implementing a broad reform process that will continue irrespective of the course of EU accession talks. Change doesn’t happen quickly, he noted, but the fundamental will of the Turkish people for such change is strong and the end result will reflect this determination. The end result will also reflect the viability of Turkey’s competitiveness.”We will do everything to improve the business environment in Turkey. If the right macroeconomic process is implemented, you will see how quickly change can happen.”
Ali Babacan, Minister of the Economy of Turkey; Chief Negotiator for the European Union

World Economic Forum on Turkey / İstanbul, 23-24 Kasım 2006