YASED: “Turkey should focus on economy’s priorities and employment generation. We have concerns that political developments will eclipse the economic agenda.”
Chairman of International Investors Association YASED, Piraye Antika: “Turkey should direct its attention and energy from internal political discussions to priority issues of the economy and take the necessary steps for reaching a more stable, predictable and competitive economic structure. We can thus attract investment, increase employment and become more competitive by improving our economic efficiency.”
“This time, the world economy is under the threat of a new crisis wave, which has started off in Europe. The potential of this crisis, our principal export market Europe is going through, to affect our country at a time when economic recovery is just about to gain momentum through foreign trade channels is high. It is of crucial importance in this critical period for us to direct our attention and energy towards our economic priorities.”
“In general terms we as YASED regard the ‘fiscal rule’ framework disclosed by the economy management positive and look forward to its enactment and implementation without any delay”
“Turkey, with its young population, entrepreneur human resource, low household debt ratio, geopolitical significance, and relatively diversified economy aspires to be a locomotive country in the new world order. The next few years however, are very critical. Above all, long-term oriented global capital is now much scarce and extremely selective. A fierce competition is under way for export markets. In this challenging environment, urgent steps must be taken in line with a strategic vision for switching to a more stable, predictable economic structure, which comprises long term targets.
Chairman of International Investors Association YASED, Piraye Antika evaluated the recent political developments, which occupy the public opinion and expressed that Turkey’s agenda was gradually drifting away from its economic priorities. Piraye Antika explained “Turkey will enter an election atmosphere next year. Apart from that, taking into consideration the political discussions witnessed particularly in the recent term and the debates on the Constitution and the prospective referendum process, it seems that Turkey’s agenda will inevitably be shaped almost only by politics in the one-year period ahead. There are however, many urgent steps to be taken in the economy, and any delay in taking these steps will cause severe damages to Turkey’s economy. Tomorrow might be too late for taking the steps that are essential today. Above all, taking into consideration the potential of the crisis, our principal export market Europe is going through, to affect our economy seriously through foreign trade channels, we have no time to lose.”
Underlining the recent fiscal rule statement as an extremely constructive move, Piraye Antika said, “In a period where tolerance shown for economic weaknesses and financial problems have decreased enormously in the world, we consider this initiative taken by the government and the economy’s bureaucracy as a very well-timed and calculated step. Now, the necessary monitoring body should be formed and sanctions should be laid down in order to pave way for the ‘fiscal rule’ to pass the parliament without delay and facilitate its implementation quickly and healthily. We would like to emphasize that the implementation of the fiscal rule will bring to light the crucial importance of the structural reforms, particularly those concerning tax, unregistered economy and social security issues.”
Piraye Antika also underlined the fact that international direct investment inflows to Turkey have been following a downward trend during the last three years, and gave striking figures concerning FDI: “Whereas FDI inflows amounted to USD 22 billion in 2007, this figure remained only at USD 7.6 in 2009, together with the effects of the economic crisis. This decrease signifies a 58% drop on the previous year. The investment inflows in the first quarter of 2010 have materialized merely as USD 1.479 billion. This figure demonstrates approximately a 40% drop when compared even with Q1 2009 (FDI inflows had materialized as 2.419 billion in Q1 2009). In case the necessary economic leaps forward are not made in the present period, where the impacts of the crisis are still being felt, this downward trend will continue, and make the efforts given for closing the current account deficit, - which is liable to grow this year - much more complicated; and this will our bring about irrecoverable economic problems to the country.”
“Global economic realities should not be overlooked”
Piraye Antika added: “Lately, the political agenda - the Constitutional amendment for the most part - has drawn ahead of the economic one. Our country is obliged to take careful steps for minimizing the impacts of the global crisis and continue its path towards growth and development. We therefore are compelled to act economy-focused for the continuation of FDI inflows to our country, by carefully taking into account the developments in the international financial markets, instead of focusing on the political tension which is on the rise. While our next door neighbor is struggling with an economic crisis, our country, trying to continue its path by minimizing the impacts of the global financial crisis, should take into consideration what has been experienced in Europe, and not overlook the global economic realities. One reliable method for this is to give weight to the efforts oriented towards increasing particularly IDI inflows and employment, without compromising from sound economic policies.”
“We have to take our place within the challenging global competition”
Piraye Antika mentioned that, all countries on the world are concentrating on exports in our day, with the purpose to overcome their economic problems and unemployment and added; “Every country therefore, is trying to become as competitive as it can. In this quest, while some countries make use of their foreign exchange regimes, some focus on structural transformation, investments and productivity increases. As for Turkey, the continuation of the economic recovery and the relative stability gain of financial markets are certainly very pleasing for us. But when the economic developments are analyzed in detail, it becomes evident that this recovery is based more on consumption than on production, and that imports have increased faster than exports.”
Piraye Antika emphasized that they as YASED believed in the necessity for searching answers, as soon as possible, to the questions as to, what Turkey should do to increase its competitiveness again and increase its share in overseas markets, how it should position itself for the future, and which goods and services should be given prominence, and added: “Saving rates and capital accumulation, which are currently low in Turkey necessitate foreign resources for growth. The lack of a master plan for increasing savings and income is again carrying us away towards a growth process, dependent on high inflation and high current account deficit; in other words to a ‘costly economic growth.’”
Piraye Antika mentioned that they as YASED are therefore inviting all policy makers to abandon political discussions and focus once again on the economy, and policies that support investments and employment. Antika said, “It is extremely important that not the public but private sector should be put to the front, in these policies.”
“YASED’s Priority Issues”
Piraye Antika also itemized the issues YASED have given priority to, and the problems associated with these issues which wait for solutions, and outlined YASED’s views as below:
Employment and Unemployment
“The principal problem of our country is growth and employment. Unemployment rate, which was 11% in 2008, has increased by 27% to 14% in 2009. Alleviating the existing premium and tax burden on employment, and focusing on the necessity of foreign language and vocational training, for bringing up the qualified workforce which investors are in need of, are the primary steps to be taken in order to develop Turkey’s upper hand for attracting international investments and particularly high-tech and high value-added new investments. Enhancing the qualitative advantages of our workforce before its quantitative advantages should be among our priority goals for global competition.
Taxes and Incentives
“We believe that switching to a competitive tax and incentive system is indispensable for attracting FDI inflows. The steps which will be taken to structure the tax system as a simple, fair, transparent and clear one will be backed by all investors - domestic and foreign alike – regarding the avoidance of informality. Developing the incentive scheme and streamlining the tax system are very significant moves to be made for attracting high value-added investments that will bring in employment, capital and know-how to our country.
The accomplishment of the Income Tax Reform, in line with the vision that comprises the development of the tax system, enlargement of the tax-base and reduction of informality and in this context, taxation of undeserved and unjustified urban incomes, elimination of the inefficient ‘simple method’, augmentation of voluntary conformance by means of modern tax offices and fast and homogeneous tax audits, and thus gradual lowering of tax rates must be taken up within the framework of a systematic and practical strategic plan.
Unregistered Economy
“We consider that the steps to be taken urgently and with determination for the prevention of unregistered economy, which functions almost like a punishment for law-abiding companies and which we regard as one of the priority problems of Turkey will significantly contribute to the healthy functioning of the economy. We believe that the target set as building a Turkey, which enjoys a more fair income distribution and a broader tax base and which has prevented unfair competition by fighting against unregistered economy has priority. We therefore look forward to urgent and determined steps towards avoiding unregistered economy.
On the other hand, we would like to underline that lowering the informality level of the economy is an indispensable priority for attracting international investments and particularly high-tech R&D-based investments to the country. The measures specified in the ‘Action Plan of Strategy for Fight against Unregistered Economy’ issued by the Ministry of Finance should come into force without delay.”