Can Turkey make an economic leap or not?

I would have imagined many things but I would never have imagined that one day I would become some kind of a “supporter of the capital.” 

Let me explain. I may be late in discovering it, but the situation in certain sectors started drawing my attention. First of all, I noticed it in the subsidiary industries of the automotive sector; then I saw that a similar situation was also happening in other manufacturing sectors. 

Here is the situation: If, 15 or 16 years ago, the prime minister of the country said, “I want a brave fellow to produce domestic automobiles,” there would have been more than one volunteer. It was possible, then, to produce a domestic car with zero electronic parts, thus with a price under 10,000 Turkish Liras. Today, this is not possible. 

The reason is that during the 15 or 16 years that have passed, the subsidiary industries of the automotive sector have been bought by foreign companies to a great extent. 

When our domestic entrepreneur started accumulating know-how in parallel with his capacity, when he reached a phase when he could have carried this know-how to an advanced level, if he could find the capital, foreign capital came and bought those companies. With them, production know-how also went away, and not only in the automotive sector. 

Medical equipment, communication, machinery, motor production, certain chemical products and many other subsectors are in the same situation. 

For domestic family companies, the purchase price offers of 60 to 80 million euros mean a huge amount of money. However, from the point of view of the capital owner, this amount is a small rate in the budget. On one hand the capital owner is buying his rival and dominating his market and on the other hand forming his own knowledge monopoly in that production field. 

Yes, while we are rejoicing that foreign capital is inflowing, this joy should not be regarded as true for every sector. There are certain fundamental manufacturing sectors where purchases should be restricted maybe through governmental measures. 

But for this to happen, we should determine three or a maximum of four strategic sectors we have selected for ourselves and we should make an industry strategy. 

We, unfortunately, cannot make this selection. 

I called Professor Güven Sak, executive of think-tank TEPAV, to share my thoughts and to ask for help to be able to look closer at the figures at the sector level. 

He referred me to a piece on TEPAV’s internet blog. According to that piece, Harvard University’s prestigious Center for International Development has estimated that the Turkish economy will grow at an average of 5.3 percent between the years 2013 and 2023 and it will become the 13th-fastest growing country during that period. 

This estimation is a bit too pink. Because, not even our own government expects that level of growth, let alone the fact that the estimations of international institutions such as the IMF and World Bank are much lower. Moreover, Turkey’s long term growth average is quite lower than 4.5 percent. 

Well, why would such a prestigious center as Harvard make such an optimistic estimate? Before going into long details, let me say this: This center focuses on the performances of certain outstanding sectors of countries and it assumes that this performance will evolve into the next level under good management. 
For instance, let’s say you are producing machinery/motors. It assumes that you would be producing airplane motors from there; among your exportation list there would be computer software and a while later you would become a software exporter. In other words, it focuses on your potential to leap to a higher technology. The center bases its estimates on this. 

Well, would we be able to leap despite the sell/purchase mechanism operating for the past 15 to 16 years I explained above? 

We will see…
 
Figures of the country of controversies 

The European Union recently issued an innovation report. Turkey is not in the main report because it is not an EU member, but we are present in the most important supplement of the report, in the country comparisons. 

All of Turkey’s figures are at a varying level depending on where you look. The first example is the number of Ph.D. holders per 1,000 people. Turkey is third from last in this category, but in the rate of growth of Ph.D. holders Turkey is one of the five fastest growing nations. 

The second example is the rate of receiving university education among the population aged between 30 and 34. Turkey is at the bottom; we have the lowest rate. However, when we look at the rise in the rate of receiving university education of the same population segment, then we are again at the top ranks.  

The third example is the rate of spending on research and development in the private sector. Turkey, as you can easily imagine, is on the lowest ranks but the rate of increase for the private sector spending on research and development, Turkey again climbs to the top slots. 

The last example is euro-based and on the parity of purchasing power, the number of patent applications per billion euros of the national income. On this list, Turkey is last place, while it climbs to the top places in the rate of increase of patent applications. 

You decide; is this glass half-full or half-empty?