After Davutoğlu, will reforms remain?

A new act is starting in the economy with Prime Minister Ahmet Davutoğlu’s withdrawal from the Justice and Development Party (AKP) leadership and therefore the Prime Ministry. The reason Davutoğlu is withdrawing is that an administrative arrangement in the party was prepared without his knowledge and was imposed on him. 

The constitutional crisis ongoing in the country for a while has finally also erupted in the executive body, which is under the same political umbrella. This deepens the existing fundamental issues in the economy because the Davutoğlu cabinet, even though it was only procedural, was emphasizing the most fundamental needs. These were the reforms. Since Davutoğlu came to power in 2014, he has been acknowledging a framework to determine the fundamental issues and efforts to find solutions to them. Even though they were named “reforms,” they were actually declarations of intent. 

While other political pledges made during the campaign were almost completed, there was no worthwhile distance covered regarding the reforms. Even bills sent to parliament were counted as “delivered reforms.”

The real issue post-Davutoğlu is the future of the reforms. When the reform calendar was announced in December 2015, it was not “bought” as a very exciting story by investors. International rating agencies had declared for a long time that they would closely monitor how Turkey’s need for reforms would be managed. If the political crisis deepens, it can go all the way to losing points in international ratings. 

The most remarkable aspect since the beginning has been that while Davutoğlu mentioned reforms all the time, not even once were reforms voiced in the Beştepe Presidential Palace. 

A new party leader, a new prime minister and a new cabinet will mean a new period of uncertainty for the economy. 

The expectation in the past three months of the U.S. Central Bank’s (Fed) slow rate hikes caused the inflow of capital to developing countries and Turkey took its share from this. In the last three months the inflow of $4 billion enabled us to forget our chronic issues, at least for a while. 

Turkey has been in a political crisis for a long time. For this reason, its economic policies and the needed economic reforms were not able to be implemented within a framework, in an integrated fashion or in a comprehensive manner. These short-term capital inflows always cause a forgetfulness of the issues. 

Davutoğlu showed after the Nov. 1, 2015, elections that he was aware of this situation. Even though the content was empty, there was some shiny wrapping. He formed a deputy prime minister position in charge of the reforms; he also appointed Mehmet Şimşek, a person respected by international markets, to the wheel of the economy. 

Now, if the “low-profile prime minister” model designed in Ankara was implemented then even the package of the reforms will be swept away. 

The leader of a party who won the elections with the motto “stability is coming” and who took 49.5 percent of the votes is withdrawing after six months. This executive crisis and political uncertainty will also reflect on the economy. 

It is not a situation to be undermined by saying, “Ahmet is going but Mehmet will come; we will continue from where we left off,” because from a range starting with international loans to the real sector, there will be an uncertainty period when the inflow of capital will fluctuate and be restricted. 

Without those values such as separation of powers, rule of law, comprehensiveness, reconciliation and accountability, election results alone absolutely do not bring political and economic stability.