End duality of elected president, premier: Business world

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

The Turkish business world’s main preoccupation is bringing an end to terror, but it also greatly desires to see an end to the current dichotomy of having both an elected president and prime minister, according to economy journalist Sefer Levent. 

Businesspeople want the issue to be solved quickly but complain that the issue is being accorded insufficient debate, according to Levent, who is the chief of economic news at daily Hürriyet.

Does the new government’s economic team in terms of ministers give us enough clues about the economic policy for the period ahead?

When it became clear that Binali Yıldırım would be prime minister, pro-AKP [Justice and Development Party] media started to propagate the impression that in contrast to the previous period of putting on breaks, this would be the period for investments. They were also spreading the expectation that this would be a cabinet without the presence of [Deputy PM] Mehmet Şimşek, whose name had become synonymous with fiscal discipline, in order to open the way for investments. Şimşek’s inclusion in the cabinet was a surprise. The markets reacted positively to it.

Şimşek is seen like an anchor of confidence. But then the presence of Nurettin Canikli in the cabinet led to some confusion and the division of labor between the two came as a surprise, too. Şimşek was responsible for the institutions which have control of the money, like the Central Bank, Treasury and public banks. Canikli was put in charge of regulatory bodies above these institutions. The public banks are with Şimşek but the Banking Regulation and Supervision Agency (BDDK), for instance, is with Canikli. So we have a dual system.
In the past some ministers used to criticize the Central Bank for instance, thus targeting Şimşek. Now, Canikli will also find himself in the midst of these debates. 

Institutions like the BDDK are actually supposed to be autonomous. 

Even though they are autonomous, ministries play an important role in terms of the changes in the laws about these institutions or the appointments in these institutions.

But this is a first. The authority that regulates the game is under one ministry, and the actual functional side is under another ministry. Previously, all were centered under one name; we will now see how this model will function. I don’t want to have prejudices about it; perhaps this model might work better. We will see how the two will work. Maybe they will work in harmony.

Why are we facing such a novelty?

Şimşek was both important for domestic and foreign investors. Is he in the cabinet? Yes, he is. But have some of his responsibilities been curtailed? Yes. There could be two scenarios: due to the conviction that there are too many pressures and burdens on Şimşek, they decided to shift part of that; this is the positive scenario from Şimşek’s perspective. Or because there has been too many expectations from him, maybe they are creating a backup by shifting some of his tasks onto someone else, which is the negative scenario for Şimşek.

How did the markets react to this model?

They did not make an issue of it. They just saw Şimşek as the anchor of confidence. And they are now in a wait-and-see mood. They will look at how this model will work.

The confidence factor seem to focus on just one name; what does this tell us about the economy?

It’s not the name but the concept. Şimşek was identified with fiscal discipline. If he were to be replaced by Canikli and there were a continuation of fiscal discipline, there wouldn’t be any problem either. All governments want to go ahead with investments, but on the other hand, you have to control your [fiscal] resources, which were under the control of Şimşek who attracted a lot of criticism. But one of the reasons why [then-Prime Minister] Recep Tayyip Erdoğan’s governments were successful was because he listened to Şimşek, who was careful about opening the taps on resources.

But the same Erdoğan has been calling for an opening of the taps.

It is a matter of how you look at it. The signs of crisis globally have led decision-makers like [former Deputy PM] Ali Babacan to put on the brakes. Sometimes you might think this is the right decision or sometime you might think the brakes have been too much. [Ex-PM Ahmet] Davutoğlu’s government was criticized because some thought there were not enough projects or investments on the agenda. Erdoğan had endorsed a growth strategy that started with the construction sector; that’s why he was rather more critical.

We have been debating names in the cabinet, but does it really matter since the conviction that the president will be the sole decision-maker is becoming well established in Turkey?

Although it has been harmed due to the debates, the current governance system is still there. But it is also true that we are also experiencing a system which we can’t properly name. 

But why has there been a change in the prime ministry? Because people matter. What will be the relationship between Erdoğan and Yıldırım? Indeed, there is the president that you factor in, but there is still a government and a working mechanism. So names matter.

Yıldırım, a name identified with investments, has become the PM; doesn’t that mean Turkey might distance itself from fiscal discipline despite the presence of Şimşek?

In his first statement, Yıldırım said they would roll out a turquoise carpet to investors. That means, there was no carpet in front of investors. Why not? When you ask the business world, they were complaining about there being too much red tape and bureaucracy. There was confusion in terms of the division of labor in the government. They were asking, “Who has the control of investments and whom should we go to and explain our problems?”

What Yıldırım’s statement means is that these issues will be clarified. There will be a system whereby decisions will be taken in a faster way and obstructions in front of investments will be lifted. In the course of past few years we heard nothing in terms of industrial projects. We had a growth model focused on the construction sector. It seems doors will be opened for industry and production in high technology, things we have neglected.

But then we need foreign financing for these projects and for that we need to keep macro figures at certain levels. You need to have a balance between investments and [fiscal] resources. That’s when Şimşek’s importance comes into the picture. So we now have a model of high growth strategy, with fast investment decisions and focus on production without neglecting fiscal discipline. We will see how it will work in terms of implementation.

How do you see the current economic picture?

If you look at the glass half-full, the macro-economic figures are fine, except unemployment. In a country with so much turbulence, you would expect a faster deterioration. On the half-empty side, at the micro level we see a period where it is becoming hard to earn money, margins for profits are getting narrower, there are layoffs and difficulties with debt. The flow of money has slowed down. This could be reversed by the new government perhaps but for that we need structural reforms – EU reforms.

What are the expectations of the Turkish business community?

They want to see an end to internal unrest, especially terror. The number-one preoccupation is terror. Second, they want to trade with Russia and especially with our region. And they want an improvement of the investment environment. 

But above all they want peace and stability.

Do they have a view about the debates on the presidential system?

This debate has entered Turkey’s agenda. The businesspeople want everything to be done after discussions and believe a model based on a definition of a mission tailored to suit a person won’t be the right one. They want the continuation of democracy and secularism.

They do not voice it directly but in private conversations, they complain that there are not enough debates about it. 

They complain about the current dichotomy of having both an elected president and a prime minister. They want this debate to be resolved rapidly with a national vote. But they are not comfortable in taking this path without proper debates.