What is structural reform? We break down the basics as the AK Party tables its plan
1 Creating independent and functioning institutions
The transition to the presidential system was earlier than planned. After general elections, scheduled for November 2019, were held one and a half years early, the governing institutions did not completely fit together well. Thus, doing business in Turkey became difficult. A significant number of bureaucrats do not want to take responsibility and refuse to sign anything. They avoid risk and leave decision making to the presidency. I have been repeatedly hearing this from the bosses of Turkey’s largest companies over the past year. I think one of the major structural reforms is to be able to achieve functional institutions.
2 The last exit before the bridge: Education
I’m not an educator, but as a father with two school age children, I can see how much the curriculum, exam system and contents of lectures need to be developed. Instead of rote learning, children should be taught to question and problem solve, we should encourage curiosity instead of how to prepare for test questions, develop creativity instead of memorization. This is the last exit before the bridge, after which the gap between us and the world wide opens.
3 Reducing the effect of politics on the judiciary
The biggest reform in terms of law in Turkey will be the restoration of confidence in the judiciary’s independence. Reducing the impact of politics on the judiciary is an item included in the ratings of credit agencies and reflected in almost all foreign reports. We need to be able to convince people that the law works equally for all, regardless of whether they are Turks or foreigners. If the President of the Supreme Court, Ismail Rustu Cirit says: “In the past, the confidence in the judiciary was 70 percent, now it has fallen to 30 percent,” then there is something seriously worng.
4 Agricultural supports are ineffective
Contrary to popular belief, we spend a lot of money on agriculture. Cash support provided to farmers from 2003-2018 was TRY 117.5 billion. However, we have had food inflation that surpasses headline inflation for 10 years. The supports have not been successful. We need to see measures that can break this trend; and we need to see more actions and follow-up.
5 Budget discipline is key
Five years in a constant state of election campaigning has led to populist economic policies which have eroded the budget, a key anchor for our economic stability. Fiscal responsibility should be a central plank of structural reforms. Moreover, a model is necessary needed which will provide for sanctions if the fiscal rule is broken and a reward mechanism if it is respected. Otherwise, it will not be easy to convince anyone Turkey has adopted spending discipline.
6 Social security needs long term planning
Unfortunately, it will be impossible for Turkey to maintain its pension system over the next few next decades with its current population structure. The number of young people participating in the labor force every year and the burden on the social security system are increasing. A structure is needed that will protect the pension system for the next 20-30 years. For this reason, it is necessary to establish a structure that will provide optimum employment and a return to minimum expenditure.
7 Saving opportunities should be developed
Turkey is a country with a resource deficit. It needs foreign savings as it cannot save itself. That makes us fragile. If the flow of funds from abroad is good, we are okay. Although we criticize others for not investing in Turkey but we should instead make reforms that improve savings, like state support for individual pensions and automatic payroll deductions. These need to be increased and long term savings should be improved. Of course, first of all, we need to increase revenue and make products that bring more revenue.
8 Supporting production is important
The value of our exports per kilogram is $1.30 and is declining. To reverse this, we need to develop high-tech products, support branded products and encourage production. Much of our external funding over the past decade has been used to build Turkey’s infrastructure. Now it is time the use the resources we can find in the right areas such as industrial facilities, which can make added value production and in R&D. Otherwise, we will not have a structure to close our foreign trade deficit.
9 A tax system that does not change constantly
We need a tax system where indirect taxes are reduced, direct taxes are increased, taxes are based on income and rules are not constantly changing. We need to set up a tax system where those who do not pay their taxes are punished, where people will not even think about avoiding tax.
10 Epilogue: we know but don’t take action
This list can be extended. None of these are original ideas. We know this but the problem is we do nothing about it. If we cannot make these reforms at a time when we will have four years without election, we may be too late.