Friday, January 16, 2009

Live blogging from IEU crisis conference

Mehmet Buyukesi TEA president:
Crisis-fighting tools:
- very happy with the CBT (I wonder if he'll be happy 3 months from now)
- credit guarantee fund
- unemployment insurance amnesty for a year on condition of no layoffs
Emphasized diversification in exports: small export markets increased most.
Said they are not losing morale (but I am, given how fast exports are plunging)

Varol Ciliv (CEO of TEB)
Started with his view of the world.
- started with global imbalances
- claims prices will not increase again unless USA starts consuming again.
- notes that this time we are not faced with our crisis, so our past experience with crises will not work
- he believes Turkey did not decouple from other EM, whereas it should have, i.e. Turkey did not deserve the turbulence of October November.
- banking system is sound, has the capacity to lend.
After that, he went over a concise summary of world conditions, nothing radical, but good for beginners:
- believes world is for more credit constraints
- world stock markets have much further to go.
- Fed, the world's largest hedge fund.
- more corporate bankruptcies
What about Turkey?
- we got outflows because our capital markets are deep and liquid (ED: interesting idea to test)
- we hit on the brakes because of uncertainty, syndication risks, etc.
- CBT policy helped as well
- Believes banks will start lending soon (I don't agree, more later)
Why banking sound?
- crisis experience
- BRSA doing its job well.
Current account was Achilles heel, but
- will shrink as oil prices fall
- need to have CA deficit for growth as well.
Talked about high interest, low FX.
How to get out of crisis?
- oil prices falling
- as developed country firms go bankrupt, opportunity for Turkish firms.
What do firms need to do?
- specialize and focus
- FX risk! Do not do currency mismatch
- interest and liquidity risk
- hh debt/ debt only 15 pcent but we don't know hoe to manage
- cost management
- financing management
- diversify markets
Ad: we did a lot of SME financing, e.g. to KOSGEB.
- credit guarantee fund small, needs to be expanded.
- need to understand the world and follow up.
- emphasized banking-customer relationship.

Mahmut Kaplan- KOSGEB
- we got hit by the crisis rather soon (ED: I don't think so, quite the opposite).
- believes Turkey will emerge from the crisis in a higher position than the 17th largest GDP (ED: it won't, but what if it does?- growth versus levels)
- the crisis has told us the king is naked (i.e. the weaknesses of the Turkish economy).
Message to firms:
- analyzing yourself and the environment you deal with: they found this is the largest determinant of competitiveness (ED: how did they measure?).
- next step is deciding what to do?- doing what others do will not work in the new environment (ED: this looks awfully like a heterogeneous goods trade model)
- innovation + cooperation should be the name of the game--> clustering e.g. Joint marketing, supply management (ED: how does this work in a game theory setting?).
- value chains
- trotting fox better than lying lion (ED: trotting fox gets hunted, trotting lion finds food!)
- we have TRY 1.6bn credit pool.

Oguz Esen- IEU Econ Professor
started with UN, OECD, WB projections
Emphasized the changing projections since 2007
Then talked about the developed country responses to the crisis. Emphasized multilateral, coordinated fiscal and monetary response.
One benefit of the crisis has been the breakdown of the washington consensus of cyclical response to the crisis (fiscal and monetary). (ED: this is because the crisis is global, broad-based and developed country origin)
Likes what CBT is doing, but claims real interest rates still high (ED: I don't agree, 6 pcent not to high)
Believes fiscal stimulus necessary as well. But borrowing will be moe difficult for Treasury this year (ED: this, I agree with, for a change)
Referred to OECD report that says primary surplus of 2.5 pcent would keep debt gdp constant.
Where to use the money?:
- do not delay ongoing projects
- do not cut government purchases
- use it for infrastructure, because infrastructure really bad (ED: examples he is giving are on high prices, that doesn't tell quality is bad- also infrastructure will have slow effects
- education (ED: this is for the very long run)
- health
- credit based on no cut in employment and innovation (ED: good in theory, but in practice).
- deposit insurance (ED: will create moral hazard) but I like his two-tier deposit idea (different rates for insured and uninsured, but really because the difference will be an interesting risk tracker)
- employment tax decreases (ED: totally agree).

Halit Soydan (IEU professor)
Emphasized fiscal discipline, but CBT has failed on inflation targeting.
Real market is coughing up blood in Izmir.
Where will be spend TRY 10bn? Should be injected to the private sector.
Ex-central bankers are against money to banks because it won't go to private sector, besides it will increase money supply and cause inflation.
He believes CBT should give rediscount limits to banks. If they don't lend, will stay as it is.
Likes what KOSGEB is doing, but it is way too small.
Credit guarantee fund: needs to be done as well, mentions the discussions in UK (ED: I am really worried about moral hazard here, need to check the UK discussions. Should we do this to everyone? Exporters and agriculture... He believes export-led growth is the way to go. Agriculture was hurt during the crisis. He believes agriculture should be supported (ED: I really do not like subsidy and supports, too much welfare loss). Also SMEs and industry (ED: I wonder if anyone is left behind, how about Besiktas fans as well?- they are suffering as much as any of these groups). Also fx-debted industrialists as well (ED: only if they agree to give half of the profits they made during the appreciation years to the government- who he trips should not cry).
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