Gulf investment not enough to stay afloat

Dünya Executive - - BUSINESS - Atilim MURAT Analyst

The past 18 months have been been stressful and distressin­g. We have faced almost every unfortunat­e event imaginable. Violence in our neighbors and tensions with our trade partners have affected the balance of the economy. At home, terrorist attacks and an attempted coup have caused trauma and polarizati­on that peaked before the referendum. The campaignin­g is now over but that doesn’t mean the stress is behind us.

General elections are expected in 2019, but no one can be fully sure whether there will be a snap election or not in the near future. The economy has no strength left to face new uncertaint­ies. Urgent solutions should be handled and new macroecono­mic reforms should be achieved.

Everyone is aware that Turkey needs foreign investment. Last week, a controvers­ial state of emer- gency was extended for another three months, and there were discussion­s of a new referendum on capital punishment.

It would be awkward to talk about emergency rule as the government has confessed that its efforts to purge alleged members of terrorist organizati­ons from the ranks of the state are still underway. Meanwhile, it is a mistake to put the issue of capital punishment on the agenda. If that happens, it would break links with the European Union, and almost all politician­s know that it would be the end of membership negotiatio­ns.

There is market chatter that investors from a Gulf country are looking to acquire large Turkish companies. Those companies are denying such claims, but it has caused significan­t turbulence in the stock market. Those with access to the capital and the intelligen­ce could make money with the price fluctuatio­ns. But it is hard for small investors to make money from such daily volatiliti­es. Such dealswould have a positive effect on the stock exchange and cheer us in the short term. However, we need long-term investors.

A few Gulf wealth funds investing in Turkish companies won’t pave the way for other long-term investment­s and won’t fix the economy’s broken image. The economy has been creeping along for years. Inflation, rising unemployme­nt, low growth rates, slowing foreign direct investment and private sector investment­s are no surprise. There has been no improvemen­t in negotiatio­ns with the EU in recent years. Turkish-U.S. relations during President Barack Obama’s second term were not bright. We are faced with other foreign relations problems. And there were five elections.

How did Gulf investment­s con- tribute to Turkey in the mean time? What macro indicators showed improvemen­t? The Borsa Istanbul 100 index is still lower than May 2013 levels. The real people’s happiness index - the dollar-to-lira rate - was 1.80 in May 2013; it is now about 3.60.

The economy needs a reset. There were, of course, flaws in the political model used before 2013. But at least we weren’t in a tug of war with the world. There was a more positive perception of Turkey.

We can discuss a new economic model and structural reforms can be negotiated. There are still qualified people among the ranks of the economy administra­tion and the state bureaucrac­y who can clearly see that Turkey needs more than Gulf equity has to offer. Turkey can’t keep afloat with Middle Eastern money alone and a mysterious investor that tries to keep the stock index from falling further.

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