Why Turkey is Thriving
Jeffrey D. Sachs
Jeffrey
D. Sachs, Professor of Sustainable Development, Professor of Health Policy and
Management, and Director of the Earth Institute at Columbia University, is also
Special Adviser to the United …
NEW
YORK – A recent visit to Turkey reminded me of its enormous economic successes
during the last decade. The economy has grown rapidly, inequality is declining,
and innovation is on the rise.
Illustration
by Dean Rohrer
Achievements
are all the more remarkable when one considers its neighborhood. Its neighbors
to the west, Cyprus and Greece, are at the epicenter of the euro zone crisis.
To the southeast is war-torn Syria, which has already disgorged almost 400,000 refugees into Turkey. To the east lie Iraq and Iran.
And to the northeast lie Armenia and Georgia. If there is a more complicated
neighborhood in the world, it would be difficult to find it.
Yet
Turkey has made remarkable strides in the midst of regional upheavals. After a
sharp downturn in 1999-2001, the economy grew by 5% per year on average from
2002 to 2012. It has remained at peace, despite regional wars. Its banks avoided the boom-bust
cycle of the past decade, having learned from the banking collapse in
2000-2001. Inequality has been falling. And the government has won three
consecutive general elections, each time with a greater share of the popular
vote.
There
is nothing flashy about Turkey’s rise, which has been based on fundamentals, rather than bubbles
or resource discoveries. Indeed, Turkey lacks its neighbors’ oil and gas
resources, but it compensates for this with the competitiveness of its industry
and services. Tourism
alone attracted more than 36 million visitors in 2012, making Turkey one of the
world’s top destinations.
Even a
short stay in Ankara allows one to see these underlying strengths. The airport, highways, and other
infrastructure are first class, and a high-speed intercity rail network
links Ankara with other parts of the country. Much of the advanced engineering
is homegrown. Turkish
construction firms are internationally competitive and increasingly win bids
throughout the Middle East and Africa.
Turkey’s universities are rising as
well. Ankara has become a
hub of higher education, attracting students from Africa and Asia. Many top
programs are in English, ensuring that Turkey will attract an increasing
number of international students. And the country’s universities are
increasingly spinning off high-tech companies in avionics, information
technology, and advanced electronics, among other areas.
To its
credit, Turkey has begun to invest
heavily in sustainable technologies. The country is rich in wind,
geothermal, and other renewable energy, and will most likely become a global
exporter of advanced green innovations.
Waste-treatment
facilities are not typically tourist attractions, but Ankara’s novel integrated
urban waste-management system has rightly attracted global attention. Until a
few years ago, the waste was dumped into a fetid, stinking, noxious landfill.
Now, with cutting-edge technology, the landfill has been turned into a green
zone.
The
private waste-management company ITC receives thousands of tons of solid
municipal waste each day. The waste is separated into recyclable materials
(plastics, metals) and organic waste. The organic waste is processed in a
fermentation plant,
producing compost and methane, which is used to produce electricity in a
25-megawatt power plant. The electricity is returned to the city’s power grid,
while the heat exhaust is piped to the facility’s greenhouses, which
produce tomatoes, strawberries, and orchids.
Turkey’s
diversified, innovative base of industry, construction, and services serves it well in a world
in which market opportunities are shifting from the United States and Western
Europe to Africa, Eastern Europe, the Middle East, and Asia. Turkey has been
deft in seizing these new opportunities, with exports increasingly headed south
and east to the emerging economies, rather than west to high-income markets.
This trend will continue, as Africa and Asia become robust markets for Turkey’s
construction firms, information technology, and green innovations.
So, how
did Turkey do it? Most important, Prime Minister Recep Tayyip Erdoğan and his economic team,
led by Deputy Prime Minister Ali Babacan, have stuck to basics and looked to the long term.
Erdoğan came to power in 2003, after years of short-term instability and
banking crises. The International Monetary Fund had been called in for an
emergency rescue. Step by step, the Erdoğan-Babacan strategy was to rebuild the banking sector, get
the budget under control, and invest heavily and consistently where it counts:
infrastructure, education, health, and technology.
Smart diplomacy has
also helped. Turkey has remained a staunchly moderate voice in a region of extremes.
It has kept an open door
and balanced diplomacy (to the extent possible) with the major powers in
its neighborhood. This has helped Turkey not only to maintain its own internal
balance, but also to win
markets and keep friends without the heavy baggage and risks of divisive
geopolitics.
No
doubt, Turkey’s ability to continue on a rapid growth trajectory remains
uncertain. Any combination of crises – the eurozone, Syria, Iraq, Iran, or
world oil prices – could create instability. Another global financial crisis
could disrupt short-term capital inflows. A dangerous neighborhood means
inescapable risks, though Turkey has demonstrated a remarkable capacity during
the last decade to surmount them.
Moreover,
the challenge of raising educational quality and attainment, especially of
girls and women, remains a priority. Fortunately, the government has clearly acknowledged the education
challenge and is pursuing it through school reforms, increased investments, and
the introduction of new information technologies in the classroom.
Turkey’s
successes have deep roots in governmental capacity and its people’s skills,
reflecting decades of investment and centuries of history dating back to
Ottoman times. Other countries cannot simply copy these achievements; but they
can still learn the main lesson that is too often forgotten in a world of “stimulus,” bubbles, and
short-term thinking. Long-term growth stems from prudent monetary and
fiscal policies, the
political will to regulate banks, and a combination of bold public and private
investments in infrastructure, skills, and cutting-edge technologies.
Why The World Must Learn From Turkey’s Economic
Miracle: Jeffrey Sachs
By: Jeffrey D. Sachs Date: 28 May 2013
About The Author
Jeffrey D. Sachs, EconomyWatch
Contributor
After a sharp downturn in 1999-2001, Turkey’s economy managed to
grow by 5 percent per year on average from 2002 to 2012 – despite global and
regional crises. There is however nothing flashy about the country's rise; its
success was simply based on getting the fundamentals right, like rebuilding the
banking sector, getting the budget under control, and investing heavily where
it counts: infrastructure, education, health, and technology.
Like The
Bosphorus Bridge In Istanbul, Turkey's Economic System
Can Also Be Described As Where East Meets West
Photo Credit: Mehmet Cetin / Shutterstock.com
Photo Credit: Mehmet Cetin / Shutterstock.com
NEW YORK – A recent visit to Turkey reminded me of its enormous
economic successes during the last decade. The economy has
grown rapidly, inequality is declining, and innovation is on the rise.
Turkey’s achievements are all the more remarkable when one
considers its neighbourhood. Its neighbours to the west, Cyprus and Greece, are
at the epicentre of the eurozone crisis. To the southeast is war-torn Syria,
which has already disgorged almost 400,000 refugees into Turkey. To the east
lie Iraq and Iran. And to the northeast lie Armenia and Georgia. If there is a
more complicated neighbourhood in the world, it would be difficult to find it.
Yet Turkey has made remarkable strides in the midst of regional
upheavals. After a sharp downturn in 1999-2001, the economy grew by 5 percent
per year on average from 2002 to 2012. It has remained at peace, despite
regional wars. Its banks avoided
the boom-bust cycle of the past decade, having learned from the banking
collapse in 2000-2001. Inequality has been falling. And the government has won
three consecutive general elections, each time with a greater share of the
popular vote.
There is nothing flashy about Turkey’s rise, which has been
based on fundamentals, rather than bubbles or resource discoveries. Indeed,
Turkey lacks its neighbours’ oil and gas resources, but it compensates for this
with the competitiveness of its industry and services. Tourism alone attracted
more than 36 million visitors in 2012, making Turkey one of the world’s top
destinations.
Even a short stay in Ankara allows one to see these underlying
strengths. The airport, highways, and other infrastructure are first class, and
a high-speed intercity rail network links Ankara with other parts of the
country. Much of the advanced engineering is home-grown. Turkish construction
firms are internationally competitive and increasingly win bids throughout the
Middle East and Africa.
Turkey’s universities are rising as well. Ankara has become a
hub of higher education, attracting students from Africa and Asia. Many top
programs are in English, ensuring that Turkey will attract an increasing number
of international students. And the country’s universities are increasingly
spinning off high-tech companies in avionics, information technology, and
advanced electronics, among other areas.
To its credit,
Turkey has begun to invest heavily in sustainable technologies. The country is
rich in wind, geothermal, and other renewable energy, and will most likely
become a global exporter of advanced green innovations.
Waste-treatment facilities are not typically tourist
attractions, but Ankara’s novel integrated urban waste-management system has
rightly attracted global attention. Until a few years ago, the waste was dumped
into a fetid, stinking, noxious landfill. Now, with cutting-edge technology,
the landfill has been turned into a green zone.
The private waste-management company ITC receives thousands of
tons of solid municipal waste each day. The waste is separated into recyclable
materials (plastics, metals) and organic waste. The organic waste is processed
in a fermentation plant, producing compost and methane, which is used to
produce electricity in a 25-megawatt power plant. The electricity is returned
to the city’s power grid, while the heat exhaust is piped to the facility’s
greenhouses, which produce tomatoes,
strawberries, and orchids.
Turkey’s diversified, innovative base of industry, construction,
and services serves it well in a world in which market opportunities are
shifting from the United States and Western Europe to Africa, Eastern Europe,
the Middle East, and Asia. Turkey has been deft in seizing these
new opportunities, with exports
increasingly headed south and east to the emerging economies, rather than west
to high-income markets. This trend will continue, as Africa and Asia become
robust markets for Turkey’s construction firms, information technology, and
green innovations.
So, how did Turkey do it? Most important, Prime Minister Recep
Tayyip Erdoğan and his economics team, led by Deputy Prime Minister Ali
Babacan, have stuck to basics and looked to the long term.
Erdoğan came to power in 2003, after years of short-term
instability and banking crises. TheInternational Monetary Fund had
been called in for an emergency rescue. Step by step, the Erdoğan-Babacan
strategy was to rebuild the banking sector, get the budget under control, andinvest heavily
and consistently where it counts: infrastructure, education, health, and
technology.
Smart diplomacy has also helped. Turkey has remained a staunchly
moderate voice in a region of extremes. It has kept an open door and balanced
diplomacy (to the extent possible) with the major powers in its neighbourhood.
This has helped Turkey not only to maintain its own internal balance, but also
to win markets and keep friends without the heavy baggage and risks of divisive
geopolitics.
No doubt, Turkey’s ability to continue on a rapid growth
trajectory remains uncertain. Any combination of crises – the eurozone, Syria,
Iraq, Iran, or world oil prices – could create instability. Another global financial crisis
could disrupt short-term capital inflows. A dangerous neighbourhood means
inescapable risks, though Turkey has demonstrated a remarkable capacity during
the last decade to surmount them.
Moreover, the challenge of raising educational quality and
attainment, especially of girls and women, remains a priority. Fortunately, the
government has clearly acknowledged the education challenge and is pursuing it
through school reforms, increased investments, and the introduction of new
information technologies in the classroom.
Turkey’s successes have deep roots in governmental capacity and
its people’s skills, reflecting decades of investment and centuries of history
dating back to Ottoman times. Other countries cannot simply copy these
achievements; but they can still learn the main lesson that is too often
forgotten in a world of “stimulus,” bubbles, and short-term thinking. Long-term
growth stems from prudent monetary and
fiscal policies, the political will to regulate banks, and a combination of
bold public and private investments in infrastructure, skills, and cutting-edge
technologies.
By Jeffrey D. Sachs
Jeffrey D. Sachs is a Professor of Economics and the Director of
the Earth Institute at Columbia University. He is also a Special Adviser to the
United Nations Secretary-General on the Millennium Development Goals, as well
as being the founder and co-President of the Millennium Promise Alliance, a
nonprofit organization dedicated to ending extreme poverty and hunger. Sachs
has authored numerous books, including The End of Poverty and Common Wealth. In
2004 and 2005, He was named among Time Magazine's "100 Most Influential
People in the World”.
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Turkey: The Big
Winner In The Mediterranean Shale Game?
By: OilPrice.com Date: 31 January 2013
About The Author
The
No. 1 Source For OilPrice Information
OilPrice.com, EconomyWatch
Contributor
The Mediterranean has joined the shale game,
but as most of Europe's Mediterranean countries drag their feet, all eyes are
on Israel, Turkey, and Algeria.
Lift-off for Turkish Shale?
Photo Credit: guillenperez - flickr
Photo Credit: guillenperez - flickr
For Israel, it will be a slow
road without the majors.
For Algeria, it's full speed
ahead, in theory—but the foreign interest is just dabbling for now due to a
lack of shale infrastructure.
For
Turkey, the situation is more promising thanks to a renewed interest by the
majors and a near-perfect blend of good governance and attractive fiscals. Here's what the
playing field looks like:
Turkey
Turkey is the best bet here.
In Turkey, it's all about the Dadas Shale, in which the majors have recently
expressed a renewed interest, making the game immediately more promising for
the North American juniors who are betting heavily on this play.
The
Dadas Shale is being compared to Texas' Eagle Ford shale and Oklahoma's
Woodford shale in both size and potential. What is that potential? Well, those
who are investing in it
say it has more than 100 billion barrels of original oil in place.
While nothing's being
produced, testing is about to begin and new technology has the majors and
juniors highly optimistic.
Positives
• Everyone likes working with
the Turkish government – permits are fast and bureaucracy is kept to a minimum.
Turkey is too keen to become a regional energy hub to let bureaucracy stand in
the way. There's just too much riding on this.
• Fiscal terms are very
attractive: foreign companies get a flat 12.5 percent royalty tax and a 20%
corporate tax rate
• The infrastructure is
already there; it's easy to refine and get to your choice of markets
• Shell has recently renewed
its interest in Dadas (it's about to drill five wells)
• ExxonMobil is in talks with
the government right now about a Dadas license of its own
Negatives
• The National Oil Company is
holding on to key geological data that would help the industry, but this year
should see some new regulations that make exploration even easier
• This is still some way off
(but Shell's drilling in Dadas this year might be the turning point – at least
the juniors think so)
Israel
Some
think Israel is on the verge of a major energy revolution because of the
combination of shale discoveries and a recent conventional natural gas discovery (16
trillion cubic feet).
While Israel doesn't have
much by way of heavy oil, it does have world-class shale oil resources.
Shale
can contain both natural gas and oil, and in terms of oil, Israel's shale plays
put it in third place vis-à-vis expected volume, behind the US and China (but
ahead of Russia).
Positives
• If these shale oil reserves
can be extracted, we're talking about making Israel a rival to Saudi
Arabia
Negatives
• Geopolitical tectonics
• Still in the very early
stages of this game
• The regulatory environment
isn't perfect and the government has raised taxes since discoveries; permits
are also hard to come by
• For now, this will remain a
game for the juniors. The majors aren't interested: it's a bit tricky to
operate in the Arab world and in Israel at the same time
• Because of the above,
exploration and extraction will be SLOW, and the market will ignore it for now
Algeria
Algeria
–suffering from a decline in conventional production and foreign investment interest
recently – has dived right into shale with its state-backed energy firm,
Sonatrach. In fact, Algeria seems to be solely focusing on shale now and all its
efforts are directed at attracting foreign partners to its shale plays.
Positives
• Estimated 2
trillion cubic meters of shale gas reserves valued at $2.6 trillion (in
three provinces that span 180,000 square kilometers)
• Soon-to-come (progressive)
tax laws and regulations governing the industry; these new laws will encourage
unconventional exploration (the opposite that is happening in Europe)
• Contractual terms are
already favorable and the new tax law, if passed, will adjust royalty fees for
levels of production. It will also adjust taxes on oil revenues to be
proportionate with exploration difficulty and exploration risk
• Already-in-place: more
favorable conditions for potential fracking partners
• The government has outlined
an $80 billion energy investment plan; $60 billion of that is earmarked for
exploration, the rest for infrastructure (including refining capacity)
Negatives
• Doesn't have the
infrastructure for shale (though that hasn't stopped the interest—Italy's Eni,
Exxon Mobil Corp., Royal Dutch Shell to name a few)
• Commercial viability is
still a long way off and we're looking at some 400 test wells in the meantime
• The
singular focus of the new hydrocarbon law on shale—at the expense of
conventional exploration—is not necessarily sending the right message to
foreign investors. Algeria needs its traditional oil and gas production
to increase in order to fund its shale ambitions, and infrastructure …
• The
ongoing hostage crisis at a BP-operated gas field in the Algerian Sahara desert bodes
ill for the entire Sahel. This will reverberate throughout Algeria and then on
to Niger and across the Sahel.
So where do you put your money?
Turkey - no
contest. This is a combination package that includes good
governance, good fiscals, brilliant infrastructure and a clear pay off as soon
as the juniors and majors strike shale. This is a solid, long-term play whose
importance to Turkey's overall energy ambitions cannot be understated.
By OilPrice.com Analysts
This report is
part of Oilprice.com's
premium publication Oil & Energy Insider. To
find out more on how you can get a legal inside advantage in
the energy markets please
take a moment to visit: http://oilprice.com/premium.
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