World Bank Turkey director: The electorate said ‘compromise’

Compromise. That is the message the Turkish electorate gave in the general election on June 7, according to Martin Raiser, the World Bank’s country director for Turkey.  

“Compromise is inevitable and the electorate is ready for it,” Raiser told me in an exclusive interview.

What do you think was the message of the Turkish electorate?

To me there are a couple of messages coming out of the election. The first is that people are perhaps less afraid of compromise and the inevitable messiness that a political compromise involves than many have assumed.

People are also expressing a desire for checks and balances, which obviously slow things down but are necessary to make sure one does not make mistakes. 

When I look at the composition of the new parliament, the multiple, very pluralist nature of Turkish society is much more accurately reflected. There is a much larger number of women and representatives of ethnic minorities. It’s a more colorful parliament, which better represents just how colorful and varied Turkey is. 

I also think the campaign was interesting for the salience of certain issues, and I think politicians should take messages from that. Some people put the peace process on top of the agenda, others cite unemployment and the future of economic growth, others express a strong desire to see strengthening of the rule of law.
These are the messages that would have to be considered in the current negotiations. I think compromise is inevitable and it seems to me the electorate has anticipated that and is ready for it.

Many believe that this time election campaigns were more focused on the economy. Did that particularly strike you?

From the World Bank‘s point of view, I think there was a welcome focus on economic issues and a welcome focus on how prosperity is shared. How can everyone participate in Turkey’s improvement? When you looked at opinion polls you saw concerns about the economic future, and that was reflected in the campaign. Unfortunately, as an economist I have to say that the idea that you just decree that everyone should earn twice as much, by doubling the minimum wage, isn’t going to be a solution.

But there is a much more complex set of questions around what it would take for Turkey to benefit from the fact that it has so many people entering the labor force, so many young people and women wanting to work. This means that Turkey needs to create well over a million jobs. That’s an important policy question and if it comes to the center of current thoughts around a new post-election program, it will be welcome.

But the CHP, for instance, came up with a “mega project.”

Development is more complex than such projects. Turkey has invested a lot in infrastructure. The idea that you can have another big infrastructure project is a welcome one, but it seems to me that the development of the construction industry is not where Turkey’s main weakness and challenges are. 

The challenges are more on the institutions side, making sure that Turkey can benefit from the demographic dividend, making sure that private investment rises again, because it has been stagnant.

Some experts said that this time the parties were more careful regarding financial discipline when they were talking about electoral promises. Do you share this view?

I think that what is very welcome, given Turkey’s own history, is how strong the consensus is that Turkey should not try to spend itself out of low growth, that fiscal policy should remain tight, and that running deficits is not a good way to promote economic development. Turkey has learned the hard way and that still seems to be the dominant consensus. 

I think in some campaigns there was also an emphasis on the need for transparency and budget management, which is welcome. We have argued for that for a long time. 

When one party comes first after four consecutive elections, that could be seen as victory. But there is a 9-point drop in the ruling Justice and Development Party (AKP) votes, which is considered a defeat. Is it a victory or a defeat in your view?

I don’t want to comment on that particular result, but I can say that the fact that you have had such a continuity of support for one particular party from a large part of the electorate suggests that they have done something right. 

However, we have always emphasized that credit for achievements needs to be fairly distributed. It was not just the AKP’s achievement, it was also the coalition government between 1999 and 2001 and it was the reforms of Turgut Özal in the 1980s that laid the foundation. 

Look at the improvement in access to services, in infrastructure, in the quality of healthcare, and the improvement to many dimensions of people’s lives where they have noticed positive changes. That generates a lot of support for whoever has been in the power. But there is a sense that maybe the achievements are not enough and we have to look forward, to develop a new growth model, to make sure that the achievements that came from the introduction of rule-based governance aren’t jeopardized. I think a message around that is also coming out of this election.

Looking at early reactions to the result, and in view of the Turkish culture of compromise (or lack of it), would you bet on a coalition?

I am not going to make predictions I think it’s too early. Post-election statements are very strong, but the negotiations will start now. My observation is that people are on the one hand quite emotional but at the same time they are very pragmatic. Emotions do not necessarily make negotiations easier; pragmatism does. You need to see whether both sides have the emotions and the energy but also the pragmatic look.

If I was a foreign investor, what could I take from your statements?

The World Bank has the advantage of being very, very long-term investor in Turkey. I have always been optimistic and these election results make me no less optimistic than before. As a short-term investor, of course you are going to have to adjust to a new political environment. We see an increase in the political risk premium in the short-term. But that will be overcome as soon as the current situation settles.

So it is in this perspective that we should view the early negative reaction of the markets. 

The early reaction of the market show exactly what I said. May be there is an increased risk. The market went up and down, and down and up again. The market is adjusting and it is adjusting fast.