Turkish deputy PM calls for reforms

ANKARA - Hürriyet Daily News

This years’s graduates of the Bosphorus University enjoy a ceremony. Deputy Prime Minister Ali Babacan says Turkey should have a better educated workforce to develop a high added value economy. AA photo

Turkey may not hit its target of $20,000 or $25,000 per capita annual income if a number of reforms are not made soon, Deputy Prime Minister Ali Babacan warned in his speech at a fast-breaking meal held by the Independent Industrialists’ and Businessmen’s Association (MÜSİAD) in the capital, Ankara.

Turkey should address its educational problems in order to have a labor force that creates a higher-value-added economy that can avoid the middle income trap, according to Babacan. Other significant areas relate to jurisdiction and the low level of domestic savings.

“The Justice and Development Party government started out with $3,500 revenue per capita back in 2002. It was at $10,400 last year. ... But if we do not make a number of reforms in time, or do not take some necessary steps, Turkey may not reach our intended target of $20,000 or $25,000 [per capita annual income]. Education tops [the list of these crucial] reforms, because people are the most important factor in the economy,” he said.

The government has adopted a private sector program to increase exports to $500 billion and become one of the 10 largest economies in the world by 2023, the 100th anniversary of the republic. The “middle income trap” is the new threshold that the Turkish economy faces, MÜSİAD said in its recently published annual report.

High levels of added value in an economy can be achieved only with a well-educated labor force, Babacan said.

“The average education period of those aged 25 and over is 6.5 years. … The economic size and the added value that Turkey can achieve with such an educational average is limited. It takes a better educated population to move ahead,” he said. The Ministry of Education is currently working to achieve better education for teachers, he added.

Judicial reform

The judicial system is another field that holds an important place in reaching a high per capita income, Babacan said. 

“Turkey must have a well-functioning judicial system and should be a real state of law to become an advanced economy and an advanced democracy,” he said, adding that nothing much had been done to reform the judiciary before the constitutional amendment package referendum in 2010, which paved the way for reform in this area.

“We have to increase the number of prosecutors and judges swiftly. The courts should work quickly and take consistent decisions. This is vital for our business world.”

Over-consuming households

Turkey is trying to grow with external savings and is spending too much without earning, Babacan also said, noting that 45 percent of Turkish households currently spend more than their revenue. 

Loan volumes expanded too fast in 2010 and 2011, so the government started to take measures to curb expansion in loans, Babacan said. “We said we should earn first, then spend. Countries that experience undeserved prosperity get into trouble eventually. There are numerous such examples in Europe at the moment,” he said.