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Saturday, May 21, 2011MIGRATION of the BLOGIt is time to say goodbye... Well not really: Nouriel Roubini's new Economonitor site is up: So are the new blog sites, including that of your friendly neighborhood economist: All my previous Roubini columns have been transferred there, and I set mobile blogging on my Bberry as well with Wordpress for Bberry.... In short, I am all set to go. Therefore, starting today, this blog will no longer be active, as I will be blogging over at my new blog. Why did I decide to do that? Two reasons, mainly: First, I wanted to open myself up to new readers by joining forces with Roubini's Economonitor to satisfy my inflated ego. Second, I was sick of Blogger getting banned in Turkey from time to time. While I could easily work around the ban, thanks to my computer-whiz brother, my readers couldn't, so basta with that! So I was thinking of switching to Wordpress anway, so Wordpress + Roubini seemed like a good deal:) Anyway, thanks a lot for following this blog, and I'll be glad if you follow me at Economonitor as well. The upside is that if you get tired of my mumbo jambo ramblings, more serious columnists, including Nouriel himself, i.e. those who don't squeeze football (soccer for you Yanks) to every third or fourth column and those without a huge eagle tattoo on their back, are only a click way... If you were subscribed to this blog through email or RSS and can not do that in the new blog, or if there are other inconveniences, please let me know via a comment here or just emaling me @ emre.deliveliATgmail.com. I am very new to Wordpress, but Roubini has IT guys who are quite proficient, judging by design of the Economonitor site in general and more specifically, my header:), so I will forward any requests to them... It has been a good run here at Blogger for almost 3 years. See you over at Economonitor!!! Friday, May 20, 2011The end of an era or twoI learned this week that Hurriyet Daily News & Economic Review's South Weekly, to which your friendly neighborhood economist was a regular contributor, is no more:( Monday's issue was the last. I learned this when I called in the editor on Wednesday to keep my promise of a column for next week... Anyway, I am listing below, along with hyperlinks, all my South Weekly editorials: But there is another end of an era, which is even more important, at least for me: Roubini's new Economonitor site, which will include outside bloggers, including your friendly neighborhood economist, is opening doors today. So I will not be blogging to this blog anymore. I am not erasing it; in fact, all my posts until now will stay, but I will be blogging at Roubini's from now on. I will be sharing with you my new address later today or tomorrow... Hadi hayirlisi:).... Thursday, May 19, 2011Roubini Post: Jordanian Lessons for a Turkish EconomistThis post already appeared in Hurriyet Daily News this week; Roubini Global Economics Emerging Markets EconoMonitor is just republishing it, but I just wanted to cross-link for the readers who might have missed it the first time around... This column is the result of my two-week consulting gig in Jordan and the second of two columns on the country. The first column, just my impressions on Jordan, is a fun and easy read and would make a nice supplement to this one. I will have an extensive addendum in the next few days, where I will address reader critiques that I should have mentioned corruption as well as add in a few general observations on Jordan... Tuesday, May 17, 2011I really seem to have found my niche......in the popularity department that is: Unless I write a controversial column, I seem to have settled down in the lower parts of Hurriyet Daily News & Economic Review's top-10 rankings:  I got quite a few comments with this one as well....  ...although most comments weren't all that positive:) In fact, they were positive- in the sense that I learned that I have readers who care enough to tell me that they are disappointed with the column. And I appreciate all feedback, so I was happy at the end of the day:) As for the critiques, as I mentioned earlier, I will be addressing them in an extensive addendum in the next few days. Pardon my appreance....... while I am in construction, of the blog that is...
I just came back from a two-week consulting gig in Jordan and will be posting several posts in the next few days... Monday, May 16, 2011Weekly Hurriyet Column: Jordanian lessons for a Turkish economistBelow is my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website. I just returned from Jordan after a two-week consulting gig. Among other goodies, like lots of hummus and felafel, and of course Petra (I am still mesmerized, it definitely lives up to its hype), I ended up with two columns, one on my impressions on Jordan, the other on an informal comparison on the Turkish & Jordanian economies.This is the second column. If you'll look at the comments under the column, you'll see that I got quite a few arrows from my readers for failing to mention corruption in Jordan. I'll address those issues, as well as my general impressions on Jordan, in an extensive addendum, but first on to the column: Two weeks in Jordan is enough to make you throw two decades of Economics down the drain. At least, part of it. We teach in economics classes that a fixed exchange rate is not a good idea. You make yourself open to speculative attacks and lose monetary policy autonomy. It is argued that corner solutions, such as a fully flexible exchange rate or leaving one’s currency altogether, by adopting a common currency or another country’s, are preferable to in-between solutions like a fixed exchange rate. However, being pegged to the dollar seems to have been working rather well for Jordan. Government officials and the IMF agree that not only has the peg played a vital role in anchoring inflation expectations, it has also helped maintain financial stability in a volatile region. As for monetary autonomy, Samar Maziad of the IMF finds that there is some room for flexibility in operating monetary policy in the short-run. But some things never change. My time in Jordan has also reminded me that there is no secret formula for development. Each country has its own specific circumstances that it needs to take into account. Otherwise, you would be hard-pressed to explain why Jordan doesn’t fly and touch the sky despite an open economy, an educated workforce and success in attracting foreign direct investment. Of course, Jordan has many constraints on growth as well, such as its small size and lack of water. But Singapore and Dubai have been able to overcome arguably tougher challenges. I must admit that size does matter, especially when you try to understand Turkish industry’s edge over Jordan’s, or make a comparison of the two stock exchanges. The latter story is quite interesting. As Nader Azar, Deputy CEO of the Amman Stock Exchange, noted, when the Istanbul Stock Exchange opened 25 years ago, Turks would come to the ASE to learn. Now, the ASE sends people to the ISE for training, where average daily trading volume was 136 times higher in April, despite both exchanges having more or less the same number of listed companies. No wonder you see wild price swings at the ASE. Another lesson is that just as you can’t force banks to lend less, you also can’t oblige them to lend more, either. Jordan is one step ahead of Turkey in that regard, as it is, to my knowledge, only depending on market mechanisms rather than Ali Babacan-like outright threats. While reducing required reserves in exchange for loans to small and medium-sized enterprises has not been deemed sufficient by bankers, it is nevertheless a useful first step. You also appreciate the wisdom of the 1990s sitcom Seinfeld. As Kramer explains, “when there is no work, people are restless. Who do you think they come after? El Presidente!” While this is an oversimplification of events in the region, it also explains quite well the recent extra budgetary measures in Jordan, which have not only widened the deficit, but also have pushed debt dangerously close to the 60 percent legal ceiling. Finally, seeing Jordan so serious about the reform agenda makes me wonder why Turkey’s ruling Justice and Development Party, with the extra security of robust macroeconomic fundamentals under its belt, has shied away from structural reforms. With their new investment law, the Jordanians are actively targeting the variables that factor into the World Bank’s Doing Business and World Economic Forum’s Global Competitiveness rankings. Many other countries are engaged in this rat race as well, so I am worried that Turkey is falling behind. There is one more thing that Turkey lacks in comparison to Jordan: Decent falafel. You haven’t had falafel until you have had it at Hashem in downtown Amman. And now I need to go and get some before my flight back. Emre Deliveli is a freelance consultant and columnist for Hürriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at http://emredeliveli.blogspot.com. Wednesday, May 11, 2011Another decent performanceI again made it to the top 10 with my impressions from Jordan:  Speaking of the column: If you thought I have an inflated ego (I know of at least one person who does), you are finally right: I do have an inflated ego after two week in Jordan: Being treated like the citizen of a regional superpower just felt great: Everyone was praising Turkish companies & products and of course the Turkish PM. Speaking of the PM, I am convinced that having him move to Jordan and become the PM there would be a definite Pareto improvement: Most Jordanians would love to have him, as I have heard some say that they would prefer him even to their beloved King. I and people who think like would love to see him go away. Of course, there is the problem of his supporters, but I believe they can be convinced to let him go under the pretext that he will help regional stability and even world peace... Monday, May 9, 2011Weekly Hurriyet Column: Impressions from JordanBelow is my Hurriyet Daily News & Economic Review column for this week (it is actually last, as I am posting this exactly a week late, but I am sticking to its original date for archiving purposes), which you can also read at the Daily News website. I just came returned from Jordan after a two-week consulting gig. Among other goodies, like lots of hummus and felafel, and of course Petra, I ended up with two columns, one on my impressions on Jordan, the other on an informal comparison on the Turkish & Jordanian economies. So without further chit-chat, here is the first column: I was rather surprised to see a deserted city when I landed in Amman on Tuesday night for a two-week consulting gig on the Jordanian economy, banking sector and capital markets. My curiosity was satisfied soon enough: I found my hotel’s bar packed, with people glued to the screen watching the Barcelona-Real Madrid game. I learned from an analyst I was meeting with the next day that both teams are very popular in Jordan, and that as many as 1 million people (from a population of 6.5 million) may have watched the game on Tuesday. The abundance of players with El Clasico experience on its squad may explain Beşiktaş’s popularity in Jordan over its two Istanbul rivals, who have their own version of El Clasico. But two Turks are more popular in the JK than any member of my beloved team. Everyone here knows the actor Kıvanç Tatlıtuğ, although he is often mentioned as the “blond guy,” as his name is a challenge for Jordanians. The Turkish soap operas, mosalsas as they are called here, that made him famous are a big hit in Jordan as in many other countries in the region, and I was told that Jordanians watched the closing episode of Aşk-ı Memnu with teary eyes Wednesday night. But even Tatlıtuğ’s popularity is dwarfed by that of Prime Minister Recep Tayyip Erdoğan. The first thing taxi drivers do when they learn I am Turkish is to mention his name with a big smile. I receive a much more sincere “Wa alaykum salam” to my “As-Salamu Alaykum’s” (I have used the phrase more in the past week than the rest of my life) when it is known beforehand that I am Turkish. It seems the “one minute” and “flotilla” incidents have won the hearts of Jordanians as in the rest of the Arab world. Although I had dismissed both as cheap politics at the time, I have to admit I do like the free respect they have brought me here. Yes, I am such a spineless opportunist! Joking aside, seeing the teary-eyed refugees looking at the Golan Heights and the Sea of Galilee from the lookout point at the Decapolis city Gadara/Umm Qais is worth reading a dozen books on the Palestinian problem. But I am still not convinced that Erdoğan’s outbursts have brought us closer to a solution at all. However, even the analysts, economists and executives I have been speaking to, all with fancy U.S. degrees and flawless English, think highly of Erdoğan. They may start with disclaimers such as, “I don’t know your political inclinations, but…” showing that they are well aware of the controversies surrounding him and his policies. Still they praise his zeal to make Turkey a regional leader by increasing its political and economic power in the Middle East. That economic power is apparent in the statistics: According to the Central Bank of Jordan’s Monthly Statistical Bulletin, Jordan’s imports from Turkey increased from around $450 million in 2009 to $600 million last year. The 28 percent yearly increase puts Turkey at the number six spot, but the countries whose exports to Jordan have increased more than Turkey’s all have much smaller absolute figures. In fact, Turkey is now the seventh-largest exporter to Jordan, and I am not sure the mosalsas are in these official statistics. But even casual observation reveals a strong Turkish business presence: For one thing, hearing Turkish regularly at my hotel speaks volumes. Many Jordanian ready-wear apparel companies have clothing manufactured in Turkey, to which they affix their own labels. Sarar’s suits are highly regarded by professionals, although the $200-$300 price tag is deemed a bit expensive. Supermarkets are full of Turkish products, mainly by the Ülker group. There are also several construction companies in Jordan. As for Jordan’s economy, that’s for next week. * Emre Deliveli is a freelance consultant and columnist for Hürriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at http://emredeliveli.blogspot.com. Another update in processAs I mentioned before in the column, I am in Jordan, in the middle of a consulting gig for the Jordanian economy, banking sector and capital markets. My hotel does have super-fast internet, a nice work table with audio/video, S and HDMI cables on the wall and even free coffee and tea to help me with the long blogging sessions, but time is the binding constraint: As a result, I have neglected my blog a bit. I will not be able to blog much until I am back to Turkey on Monday, but I will at least put my Hurriyet / Roubini columns in so that my readers who follow me from the blog can have a look at them. Thursday, May 5, 2011Roubini Post: Turkey: Financial Center Dreaming - III just noticed I forgot to put this Roubini column, which was published exactly two weeks ago, to the blog. Uppsss.... But I will still post it, as it is not time-sensitive at all. I am using the date it was published, just for archiving purposes... Anyway, it already appeared in Hurriyet Daily News; Roubini Global Economics Emerging Markets EconoMonitor is just republishing it, but I just wanted to cross-link for the readers who might have missed it the first time around... And please note that the column is numbered "II" because I had written on the subject before. Monday, May 2, 2011Weekly Hurriyet Column: Financial Center Dreaming - IIBelow is my Hurriyet Daily News & Economic Review column for this week (it is actually last, as I am posting this exactly a week late, but I am sticking to its original date for archiving purposes), which you can also read at the Daily News website. As for the title, yet another cheesy one, or at least one mildly so: I was loosely referring to the Kusturica movie.
As for the addendum, I have ten pages of notes from the meetings, some of which are quite interesting, but have no time to add them. The good thing is that they are not time-sensitive at all, so it will be OK even if I add those in a couple of weeks. Anyway, on to the column: The government has been dreaming about carving a financial center out of Istanbul ever since economy czar Ali Babacan first disclosed the Istanbul Finance Center, or IFC, strategy and action plan, or SAP, to great fanfare on the eve of the IMF-World Bank meetings in Istanbul. That press conference was marked by a lack of foreign journalists, hinting that they had taken the idea with a grain of salt. The foreign economists I talked to during the meetings humorously (and politely) mentioned the traffic as the biggest obstacle, and I and Kaan Sarıaydın shared that skepticism in a column at the time. One and a half years later, I had an opportunity to learn how much ground has been covered with that SAP in the Istanbul Finance Center: Perspectives and Creating Stimuli conference organized by the Foreign Economic Relations Board, or DEİK. In the keynote address, Babacan noted that they have covered 9 of the 71 action plans in the SAP and are working on 13 others. In the second session of the conference, representatives of the different state agencies involved in the project summarized their work. But the show-stealers were the morning and afternoon panels, which brought together a very impressive list of professionals sharing their views on the IFC. I am happy to take Babacan’s word on the progress of the SAP so far and that it would be completed in the next five years. However, I do have serious reservations about such a laundry list approach that not only does not prioritize among the action plans, but also fails to take IFC’s objectives and its competition into consideration. For one thing, one of the highlights of the conference for your friendly neighborhood economist was to learn that Jeju is not a Jedi knight. It is a special autonomous province in South Korea that would like to become a financial center. In fact, the panelists noted that many other countries, all the way from Russia to Colombia and Peru, have financial center aspirations. According to them, the largest financial centers have lost some of their share to smaller ones as a result of over-regulation and a loss of confidence in developed economies after the crisis. In addition, several panelists highlighted that capital will no longer be as bountiful and cheap as in the past, which should strengthen this trend. Therefore, as Domenico Siniscalco of Morgan Stanley noted, becoming a financial center is not an exercise in creation, but one in competition. And in that regard, Istanbul does not fare well: It is ranked 71st in the Global Financial Centers index prepared by the Z/Yen Group for the City of London, up one place from its latest ranking before the SAP was enacted. If the government enacted the SAP and leapfrogged in these rankings, Istanbul would certainly attract more capital, but it would need more than that to become a financial center. As the panelists argued, Istanbul, and other contenders for that matter, needs to find its niche. Those specialties could be geographic or product-based: Commodities, derivatives, exchange-traded funds and Islamic finance were some of the recommendations. It is at least positive that the government is willing to engage the private sector in the process. In fact, Laura Cox of PricewaterhouseCoopers noted that she was impressed by the level of consultation. I have learned that Babacan met the panelists in private the previous night, and State Planning Organization Undersecretary Kemal Madenoğlu confided in his closing remarks that the conference has shown him the need to hold discussions with domestic stakeholders right away. Let’s hope that all this advice is made well use of before IFC turns into yet another one of the government’s “crazy” projects. Emre Deliveli is a freelance consultant and columnist for Hürriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at http://emredeliveli.blogspot.com. Friday, April 29, 2011Live-semi-live blogging and/or a future columnI am at the Sabanci Center in Istanbul (home of Akbank), waiting for the Istanbul as Financial Center conference. Other than being pissed at denied entry to the world's (probably, unless there is one in Langley) only limited-access Starbucks, I am in quite good spirits, as I will be hearing about a topic that first came about at IMF-World Bank meetings in Istanbul in one and a half years ago. I had written a joint column on the subject at the time, so I will be looking forward to seeing (or rather listening) for myself whether things have changed since then. I am not sure if I will do a live or semi-live (i.e. in the lunch break, or right after the break) post, but I will be listening carefully and taking notes, as this is a great opportunity for a follow-up column- in fact, I should append my writing schedule for the next few weeks...
Thursday, April 28, 2011Roubini Post, Turkey: These Economists Are Crazy!This post already appeared in Hurriyet Daily News this week; Roubini Global Economics Emerging Markets EconoMonitor is just republishing it, but I just wanted to cross-link for the readers who might have missed it the first time around... I don't have much to add, just a few small points, which I will be sharing in the next 24 hours or so...
Wednesday, April 27, 2011In store for the next few weeksI will be traveling to Jordan for a consulting gig in the first two weeks of May. Since I will be quite busy there and will be concentrating on an economy other than Turkey for a change, I am planning ahead my columns for the next three weeks. For next week, I plan to do a comparison of the three main parties' (AKP, CHP, MHP) economic programs- I could call it Econ Wars, The Revenge of the Gandhiji:).... I plan to devote the following week to the IMF paper I discussed last Friday. This will take me to the end of my two weeks Jordan: I would like to do at least one column on the Jordanian economy, but I would need to somehow relate it to Turkey. One obvious direction would be Jordan-Turkey trade relations. As if this were not enough, I also need to write an editorial for South Monday. Since I don't have a brilliant idea, I'll probably just write about the latest tourism statistics... Since none of these depends on the latest data, I could do these right away. In fact, I am planning to do the Gandhiji and IMF pieces tonight. Let's see how it goes!...
Tuesday, April 26, 2011Another decent performanceWith not sufficient power in my Bberry to run the radio, I was completely bored at the Adana airport, waiting for my flight in a terminal with a density of at least 3 people per square meter, so I just wanted to see how popular my column was, using the screen grabber application:  Not as popular as last week, but still a bronze medal. Can't complain!:) BTW, it is amazing how Adanites (Adana natives) defend their crappy airport: According to them, if it were bigger, it would not be so central and the security checks would not be so light. Go figure:).... But there are indeed great kebap places only 3 minutes from the airport, so I can sympathize with them:)...
Monday, April 25, 2011My favorite Turkey graphsI was having lunch on Friday with a group on non-Turkish economists interested in the Turkish economy. Based on their questions, I have chosen my favorite graphs of the Turkish economy. I. Seeing the Central Bank's policies in action (all about interest rates):  The Central Bank borrowing and lending rates are natural bands for the overnight rate. If the Central Bank does not provide enough liquidity, the overnight rate will continuously hover above the policy rate, which kind of beats the goal of a volatile overnight to deter hot money. If you want more on the Central Bank's policy dilemma, you can have a look at my post from last month, which has two complimentary graphs. II. FX deposits and the exchange rate: Anyone who studies the Turkish economy sooner or later hears that FX deposits of residents act as a buffer against lira depreciation. Here's the appropriate graph:  There is a relationship, but it is not as strong as some people believe it to be. At the end of the day, it all depends on expectations, as well as the level at which locals bought their beloved foreign currencies. It is quite possible that if they expect more FX appreciation, they may want to hold on rather than engage in profit-taking.
My-CHP hype cools down....... after Kemal Kilicdaroglu started with the populist promises such as giving SMEs interest-free loans and he like. So although I am not as hyped-up with the CHP's economic agenda as before, I still like their program. In any case, I plan to devote next week to a comparison of the three main parties' economic manifestos. I could maybe call the column The War of the Economic Manifestos:)...
Weekly Hurriyet Column: These economists are crazy!Below is my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website. As for the title, yet another cheesy title, which I explain in the first sentence of the article (and the first "picture") As for the addendum, I don't have anything urgent to add for a change, so I will be waiting for the reader comments to post my addendum- so that I can integrate them into the addendum as well. Anyway, on to the column: That’s what Obelix would have said if he were living in our times, and I would have had to agree.  I know that, with this provocative phrase, I sound like the Cretan philosopher who said all Cretans were liars. After all, if I am, as an economist, crazy as well, there would be no reason for you to take my bold claim at face value. But it is not such a bold claim at all. Unlike Nassim Nicholas Taleb, the Black Swan guy, I hold no everlasting grudges against the economics profession or economists. If I were, I would have to be against myself, similar to the Beşiktaş support group Çarşı, who had to disband, after years of being against everything led to being against itself. Such an existentialist approach, which would lead to self-denial, is just not my cup of tea. However, I am totally perplexed by the declaration of almost all the market economists covering Turkey that the first quarter budget figures are positive and that the government is running a tight fiscal ship. It is true that the raw numbers look impressive. The central government budget deficit turned out to be 4.1 billion liras in the first quarter, quite an improvement over the deficit of 11.3 billion liras in the same period last year. You can see the same pattern in the primary balance, which excludes interest payments: A surplus of 9.8 billion liras compared to a more modest figure of 3.7 billion liras. But once you start digging into the data, things don’t look as pretty: For one thing, the primary surplus, as defined by the Ministry of Finance, includes one-time revenues. To get a better idea of the budget, such non-recurring items should be excluded. The IMF-defined primary balance, which does exactly that, paints a much more sobering picture.  Besides, these central government figures exclude items like the spending spree by the Housing Development Administration of Turkey, or TOKİ. Neither is the arrears build-up of energy enterprises included in the bill, as this too is outside the realm of the central government budget. Even if you decide to ignore these technicalities, the rise in expenditures is hard to overlook. Primary expenditures, which exclude interest payments, have been growing faster than GDP for a while.  Despite this robust expenditure growth, the headline budget numbers look healthy because of the strong increase in tax revenues. In fact, over the last few months, non-interest expenditures and tax revenues have risen more or less at the same rate, at around 15 percent. In other words, the Justice and Development Party government is spending more or less what it is collecting in taxes.  Due to the unnatural (at least by developed country standards) share of indirect taxes in total, tax revenues are extremely cyclical in Turkey. Once you adjust for this cyclicality, it turns out that the fiscal balance has been on the fall, and that fiscal policy is rather loose.  In any case, you should look at a country’s economic circumstances in judging its fiscal position. Given that the government is worried about the country’s growing current account deficit, it should adopt a tighter fiscal stance, one that will rein in domestic demand and support the Central Bank’s efforts to cool off the economy. So you now know why I am perplexed by all this fiscal optimism. But I find comfort in the fact that there is at least one entity, other than my friends at Turkey Data Monitor, who share my concerns about the budget: The suspicious delay of the IMF's latest Turkey Staff Report suggests to me that we are not the only ones who are worried about the fiscal stance. Anyone who knows me can testify that I am one crazy fellow, and my last name proves it as well. But the fiscal optimists are challenging me in the insanity department. Emre Deliveli is a freelance consultant and columnist for Hürriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at http://emredeliveli.blogspot.com.
Friday's conferenceFriday's conference did take place, although I was late for my own presentation: I left home (Cengelkoy) at 8.55, hoping to comfortably make it to the 10.30 presentation. It was 11.45 or so when I was entering the gates of Koc University in Sariyer: I was victim to the Friday morning accident at the entrance of the Fatih Sultan Mehmet Bridge. It is beyond me why an accident that took place at 6.30 am could not be cleared at 9.30, but as a result I spent three hours sitting behind the wheel, less than 12 hours after I had arrived from Marmaris. If I had been driving from Marmaris instead, I would have been at the outskirts of Manisa- made me really depressive when I noticed this:)... But on the bright side, I now know, as I explained in the intro. to my discussion, all the summer concerts advertised on the billboards. So if you would like to know when Bon Jovi or Elton John is in town, I am your guy:) As for the conference, I am eternally grateful to Sumru Oz for shifting the schedules so that I could do my discussion. She has also put all the presentations and discussions at the ERF web site. As for mine, you can have a look at it in PPT as well if the Pdf on their web site is not good enough- gotta love Dropbox!.... And I plan to cover the paper I wrote in my Hurriyet column in the next couple of weeks, although I am also considering to wait until the Staff Report is out- see my discussion for why and today's Daily News column for other possible goodies in the Staff Report.
Thursday, April 21, 2011Why I am voting for the CHP
I am at the Dalaman Airport, waiting for my flight to Istanbul and reading the CHP's Economic Manifesto.
I am impressed! There are parts I don't like, and a few that need clarification, but it is overall way ahead of the AKP's economic agenda, not in terms of promises but solid economic analysis. So the CHP has made me eat my words, i.e. the last sentence of my last Daily News column. And loyal readers would know that I am no CHP fanatic; in fact, I am not a fan of anything except my beloved Besiktas. And as some readers will remember, I have been a staunch critic of some of their policies, leading one fanatic to insult me blatantly once. But I have to render unto the CHP what is the CHP's and that's why I will be voting for them in June; if I didn't, I would not be able to call myself an economist. And I definitely need to do a column on their economic policies soon, although it may have to wait until the following week, as I already wrote next week's column... Sent by BlackBerry Internet Service from Turkcell Reminder: Launch of IMF reports at Koc University tomorrow (with paper links)As I mentioned earlier, you have a chance to hear your friendly neighborhood economist live at the launch of two IMF reports at Koc University tomorrow in an event organized by the ERF. As you can see at the hyperlink, I will be discussing the reserves adequacy paper. And if you are interested, there is also a technical supplement for the paper as well. Sorry for the long title, but quite a few readers asked me for the link to the paper, and I wanted to make sure they know it is in this post. As for the other paper (capital flows), I don't have it in my harddrive, but it is publicly available (both papers were released a couple of weeks ago), so I am sure a google search will direct you towards it....
So much for Central Bank independenceNope, I am not going start on the new Central Bank governor Erdem Basci's long-time (four decades or so) friendship with economy czar Babacan and jump to some kind of "ingenious" conclusion that CBT is no longer independent! But a sentence from the AKP's brochure on their policies so far, which was published along with their election manifesto, speaks for itself: " We have reduced interest rates! We have decreased the Central Bank policy rate, which was 44 percent back in 2002, to 6.25 percent in 2011"... This does not show CBT's independence (or lack of it), but it does show how the AKP top brass see the Central Bank! And BTW, the policy rate in 2002 is not the same as the one in 2011, but I guess that is not as important as the general logic of the statement itself. HT to Radikal columnist Ugur Gurses for mentioning this in his column from yesterday.
Wednesday, April 20, 2011Roubini Post, Turkey: The economic consequences of Mr. ErdoğanThis post already appeared in Hurriyet Daily News this week; Roubini Global Economics Emerging Markets EconoMonitor is just republishing it, but I just wanted to cross-link for the readers who might have missed it the first time around... I noticed, unfortunately after it had been published, that the column needed some clarifications/expansions, partly owing to my usual space constraints, and partly due to, I must admit, bad planning and prioritization on my part. Therefore, I posted an extensive addendum over at my blog right away...
Tuesday, April 19, 2011Competition IndicesI just finished all the contracts for my moonlighting activities, and all the haggling has given me a complete new look into Industrial Organization, one that never crossed my path during my undergrad and grad studies of the subject. Empirical IO has pretty standard measures for measuring the degree of competition in any industry. But once you dig into "the field", you see that simple measures are flawed. For one thing, measures based on the number of competitors or profits do not work at the local level. For example, there are quite a few major wine producers in Turkey, but there are only several serving Marmaris, and out of those, only three selling bag-in-the-box wine. To give another example, most small-scale services guys are working almost like monopolies, despite the huge number of suppliers. For example, I found out, when we were looking into to have a simple ladder for our new pier, that chrome craftsmen were charging twice the prices in Izmir. We ended up working with a guy from Izmir, who was in town for a big job at another hotel; he would have never come for our small job... Nor is market share a perfect measure: Mey, recently acquired by Diageo, has around 90% of the hard drinks market, but the presence of even two very small producers guaranteed that their prices were competitive. Then, there are the micro concerns: It depends on how much a firm is battling its competitors, i.e. willing to forgo profits just to increase its portfolio. And timing is everything, at least in tourism: The suppliers have "budgets" early in the season, which they can use to offer better prices for hotels they really would like to add to their portfolio. As for the hotels, being big always helps, so a sector that looks monopolistic to a small apart hotel can seem perfect competition to a 2000-bed resort. Here are my small notes from field work, with my subjective competitiveness grade (0 being no competition, 10 being perfect competition): Coffee/Tea and Concentrated juices (9): 4 producers serving, one well-known brand unwilling to lower her prices, but the other three behaving as if in perfect competition. Raki/ hard drinks (7): Quite competitive, when you consider one producers has 90% of the market. Beer (3): Two major brands, but entry of a third, low-cost producers increases competitiveness considerably. I would have given a "1" last year. Coke (7): Only two major brands, a couple of local smaller guys, but still rather competitive. Ice Cream (8): Only two producers, but really cutthroat (toward each other) Wine (2): As I said above, only three guys that can make offers, but one can offer prices much lower the others, and since he knows it, he can easily dictate his still-quite-high price. I have no idea if I will ever make use of this in a more concrete context, maybe a column or something else, but I can just leave them here for the time being...
Monday, April 18, 2011Attention attention, ego getting inflated again:)Another great performance from your friendly neighborhood economist, including one gold...  And one silver:  This is the second time I am making it to the coveted (or not so coveted) most popular spot. I had achieved that with my Wikileaks column as well, which had attracted even more comments... In addition, I got at least a couple of dozen tweets- I am not sure because Daily News' counter seems to freeze after 15 tweets, a number I had reached early in the morning. Even more notable was how quick I entered the charts: I usually have to wait until the afternoon, when my American readers wake up, to make it to the top 10, but this time I was in the lists early in the morning, meaning that the column had got quite bit of interest from Turks, or at least residents of Turkey. But there is no need to overreact; as I told reader Kursat, who was congratulating me on my column receiving growing attention: I am glad to have my columns read and make it into the Daily News Top 10. But at the end of the day, popularity isn't everything. I could come up with a controversial topic like today's and make it to the top three every week.... Anyway, next week I am thinking of writing about the mistaken idea that fiscal policy was tight in the first quarter of this year. I am sure that one will not be as well-read, even if I manage to come up with an eye-catching title...
An invitation to hear my ramblings liveYou can see me live at the Koc University / ERF event on Friday. As you can see, I will be the discussant of the first IMF paper. Both papers are quite interesting and caused quite a stir in the international media when they were released a couple of weeks ago. I will withhold writing about these papers for a while, at least until the Staff Report comes out, but I have quite interesting Turkey implications, at least for the reserves adequacy paper I am discussing. I know Koc University is way out, but I can assure you my comments alone would be worth the long drive....
I am not a heartless capitalist pig:)Since I got the serious stuff out of the way, i.e. the column and the express-addendum, I can now do some humor before I officially close shop for the tonight. An anonymous reader commented the following to my column on Turkish bond prospects: Unemployment at 11 something percent and economists still fretting about inflation (currently below 4 percent). So, how do we get economists to worry about unemployment for once? What's that? Oh, I see, they never care about the people. They only care about the 'investors'. Gotcha. That must be the first thing they teach to econ students. To clarify once and for all: I do not care much about investors. That's the main reason I never consider returning to the life of a market economist again. In fact, this is one of the few columns I write about "markets" every year... Besides, I am fretting about inflation precisely because it will not stay at 4%:) But I also do care about employment, as you can see in my column back from 2009. In fact, as another anonymous reader responded: It's all about priorities. Each one of the macroeconomic indicators is equally important. However, at the time being, inflation is the most critical factor and might have further distorting effects on employment unless properly managed. I couldn't have said it better myself. Such comments make me take my columnist and blogging jobs seriously. After all, you get motivated when you notice your are being read by such folks...
Addendum to Hurriyet column: The economic consequences of Mr. ErdoğanAs I mentioned when I posted the column about an hour ago, I am quite unsatisfied on how this turned out. I noticed, after I submitted it of course, that not only I could not clarify some of my points, I also left out a couple of important points. So a quick addendum is in order... Let me start with the clarifications: I now notice that when I compare the AKP's policies in office with the MHP's manifesto, some might think I am comparing apples and oranges. After all, one is what is done, the other what is promised. And the AKP's manifesto had conveniently come out on Saturday, so I could easily have gone gone for a battle of the manifestos had I chosen to do so. However, this is not such a big mistake in the sense that I feel it is the opposition's duty to clearly spell out their policies. Having said that, I should admit that I am kinda disappointed with the AKP's manifesto as well. I will not go into much detail, but while the AKP's 2 trillion-dollar economy goal (by 2023) is realistic, the 5% unemployment target is nearly impossible in the current setting. You'd need serious structural reforms, starting with the education system, to get the NAIRU down to 5%. Incidentally, PM Edogan did mention education reforms during his declaration of his party's manifesto, but he needs to clarify that. But I must also say that the AKP's manifesto is still a couple of shirts above the MHP's, as Turks would say. To give an example, I was impressed by PM Erdogan's mention of making child care affordable, as your friendly neighborhood economist had called for in celebration of International Women's Day. Equally remarkable is his promise that pre-school education would be mandatory. Incidentally (or maybe not so incidentally), both these policies are recommendations of recent World Bank papers, so the kudos to the Bank for making itself heard and to the PM for hearing them... I think reader Kursat says the final word on policies and manifestos with a quick comment to the column: Apparently CHP still doesn’t consider politics as a science, yet median voter decides without reading party agendas, they don’t provide any suggestions on economy. As an economist, would you still vote for CHP knowing the fact that their macroeconomic projections are still groundless and currently worse than AKP’s? Here's my quick answer to him, again in the blog: Well, the answer to your question is in the last sentence of my column, but to be clear: I would not be able to call myself an economist if I voted for MHP after having read their meaningless manifesto. The CHP's is coming out on the 22nd, I think, so I will answer your question then, but honestly, I don't have much hope... BTW, if you are a CHP fanatic, please note, before sending me a hate mail, that I did not say anything- it is my reader Kursat:) And if you are asking for his identity and whereabouts, I will have to refer you to Marky Mark's great scene (00.35-00.45) from The Departed... I guess you are not the only ones who can swear:).... Turning to a completely different direction, I would have loved to link the strong consumption boom during the AKP years to Turkey's current account deficit problem. After all, as I explained while writing about Turkey's savings gap, such untamed growth is not without problems. For one thing, the recent decline in the savings rate is partly the result of this consumption boom I mention in the column. Similarly, economists Murat Üçer and Caroline Van Rijckeghem show that as Turkey’s low savings rate is largely explained by the post-crisis credit growth and housing price increases. But I don’t think even economists would be worried about Turkey’s savings gap while the living standards are improving. With another sharp turn, a couple of words on the IMF comedy are in order: In retrospect, I am sure some readers will tell me that the government did the right thing by not going for the SBA; after all, Turkey did not have serious problems in financing the current account deficit. I should then remind you the story of smart-ass Japanese housewife Tasimasu, who refused to buy earthquake insurance for 20 years. She would always show off to her friends on how much money she had saved in the last two decades by foregoing that. She will be homeless in the foreseeable future! I am kind of done with the clarifications, so now on to the missing: I am ashamed to say that I forgot to put in arguably the AKP's biggest policy crack: Their inaction both during the crisis and the strong recovery aftermath. If you want proof, look no further than the numbers. If the government was fine-tuning the economy at all, would we have contracted so much in 2009, and then grown so much in 2010:  Yes, a picture is worth more than a thousand words, but I elaborate on this argument in the addendum to my recent column on the growth figures... I could have also mentioned the AKP's fiscal policy, which is remarkably loose, despite what almost all economists claim, with the notable exceptions of your friendly neighborhood economist and the Global Source team. This could have gone under the spin-doctoring theme as well, as I am impressed by how the AKP is able to package this fairly loose policy s tight, not only to the layman, but also to all those economists of those fancy banks (yes, I am jealous of their six-figure salaries). Luckily for me (and Global Source), the delay of the IMF's latest Turkey Staff Report tells me we are not the only ones who are worried about the fiscal stance:) Hmmm, maybe this should be next week's column.... That's it, sorry it was a bit longer than usual, and thanks if you stuck with me this far:)...
Weekly Hurriyet Column: The economic consequences of Mr. ErdoğanBelow is my Hurriyet Daily News & Economic Review column for this week, which you can also read at the Daily News website. As for the title, no cheesy movie titles for a page: I am paying homage to the great master. I am now noticing that the column needs some serious clarifications/expansion, partly owing to my usual space constraints, and partly due to, I must admit, bad planning and prioritization on my part. Therefore, I will need to post an addendum in the next hour or so, so that I can link to it in a comment to the column. Anyway, on to the column: With less than two months to go before the elections, it is appropriate to review the ruling Justice and Development Party’s, or AKP’s, economic policies, with a special emphasis on their second term in office. When the AKP came to power in 2002, Turkey was in the process of implementing an economic recovery program, put in place after the 2001 crisis. There were valid concerns that the rookie government would be unable or unwilling to continue with these policies. AKP proved the doubters wrong big time. Commendable execution of this well-planned program towards economic stability, with an expansionary fiscal contraction and banking reforms as its pillars, coupled with very favorable global conditions, did wonders for the economy in the AKP’s first term in office. While it is difficult to prove empirically, that macroeconomic performance was the driving force behind the party’s stellar performance at the 2007 elections. In fact, Yapı Kredi Bank economists have shown that the middle classes have been increasing their share of consumption in the past few years. A short drive through the newly-booming districts of İstanbul such as Ümraniye and Güngören, which have developed into buzzing consumption centers, would confirm their findings. The hope was that, with the macroeconomy more or less in order, the new AKP government would concentrate on the micro reform agenda after their resounding victory in the 2007 elections. That was not the case. Not much has been done to improve the investment climate in the last four years. As the economy czar Ali Babacan candidly admitted during the IMF-World Bank meetings in Istanbul in 2009, the government could not use the global crisis to jumpstart the reform agenda, as some countries have done. Instead of reform, we have been spoon-fed first-rate spin-doctoring. First, the government dragged its feet on the IMF Stand-by Arrangement, or SBA, for months, whereby hearsay that the SBA was about to be finalized would conveniently resurface every time Turkish assets tumbled. Then, the government’s new opiate for the masses became the fiscal rule, which was announced to great fanfare, only to be postponed several times before finally being brushed under the carpet. Part of the problem seems to be Prime Minister Recep Tayyip Erdoğan, who has said several times that he has “the last say in economy matters.” I have been told that the Treasury and the IMF were steps away from an SBA, and that Babacan was very enthusiastic towards the fiscal rule even a couple of weeks before Erdoğan shelved it for good. It seems that the PM’s authoritarian style spills over to economic policymaking as well. Besides, he has an interesting view of economics, underscored by his recent remarks that “low interest rates beget low inflation,” rather than the other way around, as the economics profession mistakenly believes. AKP’s policymaking is showing cracks, but the opposition has failed to produce anything better so far despite promising early efforts such as the family insurance scheme by the main opposition Republican People’s Party, or CHP. We have yet to see their election manifesto. The Nationalist Movement Party’s economy agenda, on the other hand, is vague. Parts of it look like a carbon copy of the one from the 2007 elections. Their macroeconomic projections are baseless, and they offer no clue how they will reach their goals. I am also not particularly impressed by promises such as making the Turkish army the third strongest in the world and keeping the Central Bank in Ankara. At the end of the day, unless the CHP pleasantly surprises us in the next few days, I won’t blame you if you decide that a few cracks are better than a gorge. Emre Deliveli is a freelance consultant and columnist for Hürriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at http://emredeliveli.blogspot.com.
Friday, April 15, 2011Please like me:)As I have pre-announced a couple of times, I will be migrating this blog to Nouriel Roubini's new blog aggregation site soon. I cannot make the official announcement for a couple of weeks or so, as the new page will not be available until the end of the month, but I need to ask a favor in the meantime: The able folks who work with Roubini have incorporated on the profile page of my new blog Facebook and Twitter widgets, which will allow me to have my latest Facebook posts and Tweets all in one spot on my profile page. So far so good. However, Facebook only allows this if I have a “Fanpage” as opposed to a personal page (otherwise it would be opening a private Facebook page to the public, which it doesn’t allow). Therefore, I set up a Fanpage to make use of this nice and convenient feature. Again, so far so good. But I need to get a certain number of likes to be able get a regular Fanpage with my name rather than one with the weird numbers at the end. I know this from doing the same thing with our hotel's Fanpage. So I would really appreciate if you take a few seconds to click here to get to my Fanpage and like "me". I scattered the hyperlinks to the Fanpage all through this post, other than this last sentence, but if those hyperlinks do not work for you, here's the direct link: http://www.facebook.com/pages/Emre-Deliveli/217133121634360 Thanks in advance for this....
I don't want to brag...... as I am often accused of having an inflated ego and all that, and you didn't need little birds similar to Emin Colasan's to figure this one out, as it was quite obvious. But since Erdem Basci has officially been appointed as the Governor of the Central Bank of Turkey, I can now say, "Always remember, folks. You heard it first from Emre".... BTW, my oxymorononic socialist-f3n3v fan friend Sinan had the best response to that column: "Los Ergenecon". Happily, nothing of that sort happened, either with that or with the much more dangerous South Weekly editorial. I guess being being an insignificant columnist writing for a tiny and obscure newspaper that no one cares about does have certain advantages...
Thursday, April 14, 2011Roubini Post, Turkey: I Expect You to Die, Mr. BondThis post already appeared in Hurriyet Daily News this week; Roubini Global Economics Emerging Markets EconoMonitor is just republishing it, but I just wanted to cross-link for the readers who might have missed it the first time around... Please note that I have two addenda over at my blog: One where I sketch my empirical methodology and another one with general comments.
Wednesday, April 13, 2011Addendum to Hurriyet column: I expect you to die, Mr. BondAs you know, I had already posted an addendum to this week's column even before the column was published, one which solely focused on my empirical methodology. So a more general addendum is in order: On food inflation, I devoted an entire column to food inflation, inspired my haggling with the grocer during my moonlighting activities, in November. You can see my methodology in the blog version of the column. As for the volatility of food inflation, you can see it in a previous post as well. As for supply and demand dynamics, one factor to consider is foreigners' demand for Turkish bonds. As flows to EMs have picked up of late, a historical summary is in order:  So there seems to be some room for bonds, if history is any guide at least. In fact, as J.P. Morgan reports, latest figures from the CBT's weekly press bulletin point to very strong flows. As for domestic demand, as mentioned in the column, the reserve requirement ratio hikes mean that banks will not have much appetite for bonds in their investment portfolios, as they will try to get the balance sheet growth from credits. BTW, this substitution effect is another reason why it is not simply RRR up, credit down, as the CBT claims. Similarly, Turkish funds will not buy a lot government bonds, as bank bonds are much more attractive nowadays. We could see some interest from Turkish retail investors, as their bond holdings are tiny for the moment. Finally, as a couple of recent articles show, the points I make about Turkey are also true for many emerging markets. For example, other EMs are signaling inflation scares, and just like Turkey, rate hikes have only been partially priced so far... BTW, not all Turkish bonds are created equally: I am more optimistic on longer-term and variable-rate bonds. My optimism is also supported by the recent flattening of the yield curve. These could also be alternatives to deposits further down the road...
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