Page 44 - bne_Magazine_June_2017

44 I Southeast Europe bne June 2017
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Foreign investors fear Turkish reform
will take back seat after referendum
..bne IntelliNews
The term “sweeping powers” is not used idly when it comes to the executive presidency granted to Turkey's Recep Tayyip Erdogan by April’s contested referendum. But
it is what the outspoken president might do with those powers that remains foremost in the minds of foreign investors currently trying to assess if Turkey remains a wise play. Any further signs that the rule of law and property rights are under threat could send many international players scurrying for the exit.
For any foreign trader or investor of a nervous disposition, Erdogan is not an easy host to contend with. His regular talk of how high interest rates cause inflation may just be bizarre, but the purge he unleashed against many busi- ness people suspected of being con- nected to the Gulenists he claims were responsible for last year’s failed coup
– more than 800 Turkish firms, worth some $10bn, have been seized – is sim- ply too scary to contemplate. Even the stock exchange has been targeted among the at least 40,000 people arrested over alleged links to the coup plotters, with warrants issued for a total of 102 sacked employees.
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But Erdogan is no fool. He owes much of his success in politics to strong economic growth, while Turkey remains exposed to external financing – gross external financing needs are around 25% of GDP – and around half of Turkish exports are bought by EU consumers.
He is also not a statist. There is no indica- tion he wants to build a large government sector to dominate the economy. Quite the reverse: Erdogan believes private busi- nesses must be the driving force. What- ever his bluster, many analysts expect him to tread carefully from now on.
Turkey has already received some gentle warnings from foreign partners. On May 8, Turkish Economy Minister Nihat Zeybekci was in Berlin meeting his Ger- man counterpart Brigitte Zypries. The Germans, like the Dutch, have remained conciliatory despite Erdogan’s nation- alist jibes against the EU during the referendum campaign, which reached such a point he exclaimed that Europe had become a “rotting continent” that is “the centre of oppression, violence and Nazism”.
Zypries pointed out how Germany needs “clear assurances about legal securities”,
adding: “The rule of law is a central requirement for the German government and German industry. Companies need reliable framework conditions to make investment decisions.”
Encouragingly for those investing, or minded to invest, in Turkey, the post-coup purge has not been widened to include foreign companies or the country’s larg- est business conglomerates, such as Koc Holding and Sabanci Holding, both of which are seen as symbols of the integra- tion of the Turkish economy with global capitalism.
Even the biggest businesses in Turkey felt somewhat stranded on the referendum battlefield during the fraught build-up
to the vote, and the business climate has become thoroughly politicised, but tell- ingly, there was no targeting of members of the staunchly pro-EU business group, Turkish Industry and Business Associa- tion (Tusiad), long seen as the represen- tative organisation of Turkey’s secular business elite.
The ruling Justice and Development Party (AKP) has historically had an uneasy relationship with Tusiad, but the targets selected in the post-coup crack-