With dim coalition hope, business world wants elections without delay

Barçın Yinanç - barcin.yinanc@hdn.com.tr

The business world has serious concerns about uncertainties in Turkish politics and after the apparent failure of coalition talks it favors early elections as soon as possible, daily Dünya editor-in-chief Hakan Güldağ has told the Hürriyet Daily News.  

“[The business world] just wanted to see the formation of a government as soon as possible - either a coalition or a single-party government - to see the way forward,” Güldağ said. 

“The main hope is now to get rid of uncertainty. Although a similar outcome might result from an election, a coalition might be formed as there will be no other way left,” he added, while also describing Turkey’s current economic picture as “full of uncertainties.”
What has been the initial reaction of the economic world to the election results? Was there disappointment?

Not really. People just wanted to see the formation of a government as soon as possible - either a coalition or a single-party government - in order to see the way forward. Their preference was either a long-term coalition that would address Turkey’s economic problems, or early elections without delay.

In fact, the election results had initially led to some hope. Erosion in the legal system had been observed.

There were suspicions about whether Turkey was going toward authoritarian rule, which is not desired in the medium- or long-term by the business world. The business world wants an environment of trust, as well as an environment of freedoms. When things get bad it cools toward the environment of freedoms and prefers an environment of trust. But generally its preference is an environment of both trust and freedoms.

So initially the election results were seen as avoiding a slide towards authoritarianism?

Yes, there were hopes that this outcome will not lead to uncertainties. The first expectation was for a grand coalition [between the Justice and Development Party, AKP, and the Republican People’s Party, CHP], provided that it would be a long-term government that would tackle Turkey’s economic problems. This would have improved Turkey’s image abroad as well. It would have been perceived as Turkey distancing itself from authoritarianism.

But the fact that efforts to form a coalition were failing and talks for early elections might not take place soon but at a more distant date increased the worries.

As the probability of forming a coalition weakened day by day, the business world’s expectations turned toward early elections as soon as possible. Right now, the main hope is getting rid of the uncertainty.

One of the expectations is that even though a similar outcome might result from an early election, this time there might be a coalition government as there will be no other way left.

So what is the reaction of the business world to the fact that AKP-CHP coalition talks have failed and it looks like we will have fresh elections?

There are not many comments. Some say “an opportunity has been missed.” Some say it was obvious that Turkey was going toward early elections anyway. All want an election without a delay. In general, politics has become the biggest risk factor; due to political chaos it has become difficult to see ahead.

Even though it looks like a slight possibility, how is a coalition between the AKP and the Nationalist Movement Party [MHP] viewed?

No one believes it could be a long term government. Anyway, it will be quite difficult to form an AKP-MHP coalition due to the stance of MHP leader Devlet Bahçeli.

Can you take a snap picture of the current state of the economy?

It is a picture full of uncertainties. There is a wait-and-see attitude [among economic players]. When we look at certain fundamental indicators, the growth pattern is continuing - even though it is not enough. The level of industrial production is the highest it has been in the past year-and-a-half. As far as manufacturing industry is concerned, it is the highest ever and there has been an increase of nearly 10 percent increase.

With the exception of textiles, there is a serious increase in nearly all sectors.

But when you look at the real sector confidence index, which is a critical indicator of the economy, there has been a serious deterioration for the past couple of years. This is a leading indicator for private investments and for the 2012- 2015 period there is a 1.5 percent shrink.

Currently we are in a period of waiting. In the past we were waiting for the elections, now we are waiting for the establishment of a new government. We don’t even know what we will have to wait for tomorrow.

We [daily Dünya] currently contacted real sector representatives and they all said “our problems have seriously accumulated, we are losing blood.” I am not talking about a disaster scenario but they say this blood loss is taking us to the edge of the cliff. They are ringing the alarm bells. So when we look at the general picture we see an economy becoming more and more problematic.

Another indicator is about the number of checks being used for payments. There has been a 47 percent increase in the amount spent with checks and a 15 percent increase in the number of checks used. This is a serious early warning mechanism. What’s more, there is also a 20 percent increase in the number of protested bills. 

There is also a change in the behavioral trends of foreign exchange investors. There have always been foreign currency savings accounts in Turkey, which shows that we don’t trust the strength of the economy.

But there is an increase among foreign exchange investors. The amount held in foreign exchange savings accounts has reached $185 million. But more importantly, the holders of foreign exchange have changed strategy. In the past they used to sell their foreign currency when its value against the lira increased or buy it if its value decreased against the lira. Now they keep hold of their foreign currency. Companies pay their foreign currency debts not from their own resources, but from the markets. This has been pushing the value of the foreign currency upwards.

Actually, this is a trend that can be seen in all developing countries over the past few years. This is triggered first by the expectation of an interest rate hike by the U.S. Federal Reserve and second by the serious shrinking in the world trade.

All this leads to negative scenarios as far as Turkey is concerned. While some countries are developing strong policies against these developments, the current situation makes Turkey’s life harder. Unfortunately there is no government that can deal with the fragilities of the economy.

Why does the absence of a government effect the economy so much? Is the same true for other countries when the formation of a government takes a long time?

No it is not the case in other countries. It has certainly not been the case in Belgium, where they could not agree for a year-and-a-half. But there, the institutions are key. In Turkey institutions are not so strong. We have accumulated problems and there is a need to take measures. In fact, we have a stability based on around 3 percent growth and 8 percent inflation. But if we are stuck in such stability then that means we need to disrupt that stability. We need a new economic program to transform Turkey. If we continue like that we will slowly approach the edge of a cliff. The gap between us and the developed world will become wider.

Problems are becoming aggravated. There is no government and in times like this the bureaucracy stops working. For instance, there is a decrease in the number of tourists coming from Russia. In addition, we now have the return of the terrorism issue. We need to take economic measures, but the government’s focus is elsewhere.

How does the business world view recent developments on the Kurdish issue?

It is very worried, but actually there is resilience despite all the bombs that are exploding. There is still hope that everything is not yet over.

Although there are serious differences of views, there is still hope that this issue can be solved. I think the business world favors the peace process more than the rest of the society. I don’t want to make generalizations, but overall there is an understanding that problems in the areas with majority Kurdish populations can be solved faster with economic improvement.

What about the views of the business world about foreign policy?

A sizable number of voices are not happy about it. They find it risky and believe that it has not brought about positive results in terms of trade and the economy. They don’t voice these views out of fear that they might face some difficulties. But they have become more vocal since the June election. They don’t believe the government is conducting the right foreign policy.