Inept leaders and lack of transparency leading Turkey to IMF – former minister

Recent governments in Turkey have squandered a diplomatic reputation that took decades to build, and the new executive presidential government has left the country’s foreign relations, trade and economy in poor hands, former minister Kürşat Tüzmen told Ahval.

And mismanagement combined with a democratic deficit and a lack of transparency has left the economy in dire straits that could well require the intervention of the International Monetary Fund, he said.

“Turkey’s become a country whose foreign and economic policies are impossible to predict, and its reputation has come under fire. With the current state of the media, judiciary and politics, its impossible to convince anyone we are a democratic country”, he said.

The diplomatic situation since Tüzmen steered the country’s foreign trade as a Minister of State between 2002 and 2009 has seriously deteriorated, with Turkey moving from a period of good relations with neighbours to problems on almost every side.

While the chaos spawned by the conflict in Syria has doubtless contributed to that backslide, Tüzmen believes it has been exacerbated by the low quality of the new generation of diplomats.

“When we came to power (in 2002), there were very experienced diplomats at the Foreign Ministry ... and we made some great strides with them. Nowadays they’ve been replaced by personnel who prioritise the micro-level. I can’t even call them diplomats,” he said.

The former minister said the loss in experience had accompanied a shift toward an ideology-based foreign policy, rather than the trade-based policies that had guided diplomacy during his terms first as undersecretary for foreign trade then as a minister of state.

“Turkey was highly esteemed back then. When I travelled abroad as undersecretary I was received by ministers, even prime ministers. That reputation is now completely gone”, Tüzmen said, adding that a series of contradictory foreign policy decisions had led to the loss of important markets.

“Our foreign policy has placed us on an axis, very serious mistakes have been made and this is the point we’ve come to. Instead of trade with our neighbours, we now have problems with all our neighbours”, he said.

For Tüzmen, the inept diplomatic performance has been mirrored in the country’s economic management, which led Turkey to the beginning of a technical recession in the final quarter of 2018.

Turkey’s economy has been stricken for even longer by high unemployment, double-digit inflation that peaked at more than 25 percent in October, and a steadily weakening lira. The lira’s value against the dollar fell by around 30 percent in 2018.

Finance and Treasury Minister Berat Albayrak has defended his record by pointing to the current account figures, which recovered sharply throughout 2018 to a surplus in October and have hovered at a low deficit since. Tüzmen does not believe these figures tell the full story.

“It’s not a positive thing to have a proportional increase in exports and a reduction in the current account deficit based on decreased imports ... What needs to happen is that an increase in imports accompanies a much larger increase in exports. Turkey is an economy that is able to export by importing. Cutting imports and lowering the current account deficit by shrinking the economy and setting back manufacturing industry is neither a solution nor a success”, he said.

Tüzmen is similarly scathing when it comes to Albayrak’s proposed economic reforms and the man himself.

The treasury and finance minister has spent recent weeks trying to soothe investors’ fears about Turkey at a series of international meetings where he unveiled planned reforms, including at the World Bank-IMF. His performance at the meetings was not well received.

“His reform package was hollow. Foreign investors look both at the contents of these packages and the person presenting them. There was nothing in the package, and the person presenting it has no career, no history in the field, no credibility”, Tüzmen said.

“You can fool yourself, but you won’t fool people who know their job. And you won’t be taken seriously. Anyway, no one knows (Albayrak), and he’s got no track record … You can’t force success in this field with PowerPoint presentations and talks that nobody takes seriously,” he said.

For Tüzmen, Albayrak’s weak lead at the Treasury and Finance Ministry is a symptom of the decline in bureaucrats’ influence that came with the shift to an executive presidential system last June.

Under the new system many of Turkey’s most important state institutions have been tied directly to the presidency, and Tüzmen said elsewhere the experienced and qualified civil servants who had kept the state running had been sidelined by inept ministers.

All of this has contributed to Turkey’s loss in standing and economic problems, but these have been further cemented by a domestic political scene that has raised serious international concerns about Turkey’s democracy and rule of law, Tüzmen said.

The Justice and Development Party (AKP) government has been accused of using its influence over Turkish institutions to purge or jail political opponents, particularly since surviving a coup attempt in July 2016.

“We need to do away with this view that Turkey is the second most risky and fragile country (for investors) after Argentina”, Tüzmen said.

“For this, the first step is a quick return to democracy, transparency and the guarantee of the rule of an independent judiciary, we also need investment in industrial infrastructure”, he said.

A recent case of creative accounting at the central bank is not likely to improve Turkey’s reputation for transparency. Last week the Financial Times reported signs the bank had taken short-term loans to recoup some of the billions of dollars it had sold to buoy the lira.

“You can’t even be transparent about your central bank reserves, so you fudge the numbers and play games with the figures”, said Tüzmen. “Do you think people around the world don’t see this? Don’t you think the world is talking about it?”

Besides eroding investor trust in the current management of the economy, the former state minister said the latest moves have left the central bank severely short of cash and in urgent need of foreign investment of up to $6 billion to shore up its reserves.

“After that there’s an urgent need to find between $115 billion and $120 billion to use for expenses. I don’t know whether they’d get this from the IMF or what, but they must get it”, he said.

The lack of transparency is pervasive throughout the government, the former state minister said, noting that it had led to the flight of several important foreign companies for which he had worked as a financial adviser.

“Their reason for leaving was the tender system, it isn’t transparent, legal or predictable. They don’t know what they’re going to end up facing the next day. Decisions change in the space of a few hours”, he said.

The ruling party came under fire this week from opposition circles, which presented municipal records that they said showed how public tenders had been used to enrich government cronies.

The tender system in Turkey has been used to funnel vast amounts of money to the construction sector, which has been enlisted to develop huge public infrastructure projects or granted permission to develop housing and commercial projects in cities.

However, this focus on construction and infrastructure has left Turkey far behind its competitors, Tüzmen warned.

“When I left the ministry our exports were at $136 billion, and Italy’s were slightly higher … Italian exports have now reached $750 billion”, he said. Turkey’s exports have risen to no more than $150 billion, he said.

This is down to Italy’s focus on manufacturing and technology, areas that Turkey has foregone in favour of infrastructure developments, he added.

If Turkey does not follow similar policies, by Tüzmen’s account it could be doomed to a long spell in the economic doldrums.

But first, the former minister said, the country faced the even more arduous task of putting its politics back in order.

The opinions expressed in this column are those of the author and do not necessarily reflect those of Ahval.