Thursday, October 8, 2009

Daily Hurriyet Column: Impressions a la Turca

The unedited version of my last column covering The Meetings is below; you can read the final version at the Daily News web site. Incidentally, the day the article appeared in Hurriyet, I ran into a couple of buddy from Boston who, I learned, happens to follow my columns. His one big critique was that the article was written from the viewpoint of an expat, not like a Turk. All I can say is that is that is indeed the case, I am really happy:) One of the best things I like about Hurriyet Daily News is that it is extremely objective. In fact, despite being part of a big media conglomerate currently at odds with the government over a tax issue of a few billion quid, it has been extremely objective towards the government as well. This might bring a "so what", but remember that this is Turkey; we are talking about a country where people become polarized because of football. Anyway, that's all I have to say about that:)

I am concluding my week-long coverage of the IMF-WB meetings with my impressions regarding Turkey.

Before I go on, I should say I was very disappointed by the Turkish delegation’s presentations, with the possible exception of the Central Bank of Turkey President Durmus Yilmaz. With the world coming out of a major crisis, I would have expected the delegation to highlight Turkey’s experience with past crises, particularly the 2001 vintage that handed the country a sounder banking system. Also, despite the growing importance of the G-20, especially given the responsibilities it bestowed on the IMF at Pittsburgh, I would have thought the delegation would play to Turkey’s membership in the club.

Instead, the emphasis was on making a financial center out of Istanbul and the Medium-Term Economic Program, or MTEP. The attendees did not take the former seriously and did not care about the latter. Especially entertaining were Econ tsar Babacan’s efforts to present the MTEP as an exit strategy, boldly claiming that Turkey was the first country that had enacted one. That seemed to bring a smile to quite a few faces.

As for the MTEP, opinion was divided, with the Turkish delegation and foreigners, with the possible exception of the still-cautious Fund, hopeful and locals equally cynical. Policymakers relayed their disappointment with the harsh local critics, noting that it has been tough to get the PM agree to even this much. Perhaps so, but this is no reason not to highlight the fiscal deficiencies of the program.

As for the Turkish economy, the attendees were divided on the underlying cause of the Great Turkish Contraction: The IMF laid the blame on the greater weight of manufacturing on GDP; Turkey’s durables have indeed been hit hard by the crisis. Others saw it as a typical case of capital account/ financing issue.

The World Bank noted that the poor had been hit very hard by the crisis in Turkey, highlighting the results of a recent survey conducted by the Bank, UNICEF and Economic Policy Research Institute, or EPRI, a think-tank in Ankara. Although the fact that unemployment doubled in a year is worrying by itself, the more scary part is the Bank’s finding that the incomes have been falling among the poor and self-employed.

Speaking of EPRI, the absence of Turkish think-tanks in the Meetings was a shame. This is partly because EPRI is the only real Economics think-tank in the country, which highlights the level of the intellectual policy debate. Another casual observation was the lack of Turkish presence in key events without celebrity speakers, two of which I have covered in previous columns. The quality of questions by the Turks, covering the whole range from the shoe incident to sector-specific requests and the standard anti-IMF rhetoric, was equally appalling.

The IMF and EU dilemmas

Another small detail I noticed was the relative lack of interest in the host country. This is perhaps understandable, as most of the attendees had more pressing issues in their minds, and the Turkish delegation did not help either, but I saw this as the only positive Turkey development of the Meetings. After all, you are usually at the table in the Meetings because you are in trouble, and next to Latvia, Ukraine or the financial sector, even Turkey looks OK. The one issue that came up repeatedly was the possibility of an IMF-Turkey deal. While I will cover the issue in detail on Monday, the general opinion was that while an agreement is not necessary, it will probably be beneficial.

Another topic relevant to Turkey was the EC’s response to crisis-stricken countries in Eastern Europe and the Baltics. While attendees were positive on the level of support to EU members like Latvia, Ukraine vice PM Hryhoriy Nemyria, LSE professor Willem Buiter and others were extremely critical of the EC’s ignorance of their troubled neighbors to the East. Even with Latvia, evidence on the EC success is mixed, as the Fund had to take as given the constraint of the pegged exchange rate. Buiter thought letting the exchange rate go would not have worked, as the real and nominal exchange rates are independent in small open economies, but I think that accelerating adoption of the euro at a depreciated exchange rate would have addressed his concerns. The Fund would probably agree with me, although they would never criticize the EC publicly. The lesson for Turkey is that the EU could not and should not replace the Fund as an Economics anchor.

The Meetings definitely put Istanbul on the map for a week, but I doubt Turkey made the most out of it…

No comments: