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“As two allies, we can cooperate further in the business sphere in order to boost trade volumes”

Interview - July 23, 2013
Political and financial stability, along with budgetary and fiscal control, have been key to Turkey’s sustained growth over the past decade. Minister of Economy Zafer Çağlayan talks to World Report about Turkey’s economic performance, its relations with the UK and its potential for foreign investors to use Turkey as a manufacturing base with access to a quarter of the world’s population within a four-hour flight.

One of the milestone achievements of Turkey’s government under Prime Minister Erdoğan has been the creation of a more stable and transparent business and economic environment. Considering that your institution was integral in this process, can you briefly elaborate on how you achieved this?

First of all, I would like to wish you success in your endeavours, and we hope that your interest in Turkey will grow more every day. It is not just you who is interested in Turkey; recent developments in Turkey and the future of Turkey – the whole world is interested in Turkey. This is the 11th year of our government in office, and 11 years ago actually Turkey was waiting at the IMF’s door to get a $1 billion loan. If Turkey had been unable to obtain that loan, then it would not have been able to pay the wages of its civil servants just 11 years ago. At the same time, Turkey’s public debts were actually 75% more than its national income. Similarly, the budget deficit was 11.9% more. Before we took power, between 1991 and 2001, the Turkish economy only grew by an average of 2.4%.

It is not possible to compare the current situation of Turkey with a decade ago, because we were the 26th largest economy in the world 10 years ago, but now we are the 17th largest economy in the world. Turkey is growing and developing thanks to its exports. In 10 years, we have developed and improved our exports 3.2-fold and similarly, our GDP and national income per capita has grown more than threefold. It is not possible to compare Turkey’s current position with a decade ago because in the meantime, the world has gone through a severe economic crisis, which has affected the European economies and the UK economy in particular. Yet Turkey has been able to survive this crisis, in a very positive manner.

When we look at the ratio of public debt to GDP as of 2012, it is 36% in Turkey, and the ratio of the budget deficit to GDP is just 2%. Thanks to this, Turkey has fewer debts than 24 out of the 28 members of the EU and its budget deficit is less than that of 21 members of the EU at the moment.

How did we achieve this? First of all, political stability is very important in this regard. Secondly, fiscal stability and the importance we have placed on fiscal and budgetary discipline. We have placed a lot of importance on the development of the private sector. In this sense, Turkey has been able to develop in particular thanks to the efforts of the private sector. Now Turkish businessmen can export to any country in the world. Another important point over the past decade is that foreign investment flowing into Turkey has contributed a lot to this development.

What other associations would you say are vital to increasing economic activity?

MUSIAD (Independent Industrialists’ and Businessmen’s Association of Turkey) and TUSIAD (Turkish Industrialists’ and Businessmen’s Association), as well as ASKON, TOBB/DEIK, TIM, TUSKON, INTES, TUMSIAD and YASED, the International Investors’ Association. You can talk to them and have meetings with them, because they have contributed a lot to the development of the economy, exports and FDI.

Bilateral trade between Turkey and the UK has never been better. In fact you were recently in London opening the stock exchange, and you participated in seminars concerning the UK-Turkey Joint Economic and Trade Committee – JETCO. Please briefly share with us some of the objectives and trade goals that were concluded at JETCO?

Turkey and the UK are very close and important allies. Looking at bilateral trade volumes between the two countries, it has reached $14.3 billion in 2012 and actually Turkey has a trade surplus in its trade relations with the UK, because we are exporting more than we import. UK firms are very prevalent in our country, with total investment from UK firms in Turkey amounting to $6.6 billion by the end of 2012. This enables the UK to become the seventh most important country in terms of investment volumes in Turkey. There are 2,482 UK capital funds that are active in Turkey at the moment.

JETCO is a very important and outstanding mechanism and at the last meeting, we made very important decisions. It aims to improve trade and economic relations between the two countries, and it is there to remove any obstacles or barriers that have a negative effect on investors and people engaged in commercial activities.

Thirdly, we have an intention and we are dedicated to cooperating in JETCO. Fourthly, we have a memorandum for technical cooperation, and this is very important for JETCO.

We can also say that there are very important advantages that Turkey presents. We have ethnical ties with the Central Asian Turkish republics and we also have religious, cultural and historic ties with the North Africa and Middle East (MENA) region. UK firms that would like to be active in these regions of the world would definitely take advantage of any cooperation with the Turkish business world.
Another important point is that you have to study Turkey very well, because there are 56 countries just a four-hour flight away. A quarter of the world’s population is living in these 56 countries (1.5 billion people) and one-third of total global GDP is created in these 56 countries, which is equal to $24 trillion. Out of total global trade, $9 trillion is actually generated in these 56 countries. UK firms could aim at investing in Turkey and establish Turkey as a manufacturing and management centre. If they do this, they will have great access to the hinterland that lies behind Turkey.

What personal message would you like to send to the readers in the UK about Turkey’s economic climate right now?

Turkey and the UK have perfect diplomatic, political and commercial relations at the moment. We are very grateful and we acknowledge the support that the UK has provided regarding Turkey’s EU membership. But our bilateral trade with them could be further expanded and improved. Actually our Prime Minister and Prime Minister Cameron have already specified objectives for 2015, where there are plans to double trade between the two countries. Actually, the Turkish people are very grateful for Prime Minister Cameron’s positive evaluation and assessment of Turkey. As two allies, we can cooperate further in the business sphere in order to boost trade volumes.

A brother of mine has been married to a British lady for 25 years from Bolton, Manchester, and they have two kids and they are very happy. So we are also relatives with you.