What credit rating agencies don't see in Turkey

Someone may come up very good reasons for this by considering the quite sophisticated computation methods of these agencies and other types of leverage, like EU membership, for example. But this is more psychological than computational. They cannot adapt themselves to the new Turkey and the highly flexible, pro-business and solution-based state of economic management in Turkey. But, luckily, international investors do not think like credit rating agencies. That is why Turkish banks are getting quite good commercial loans at pretty low interest rates from international markets to finance domestic demand. A number of international firms operating in Turkey also tell the same story. Some 7,500 new international firms were established in Turkey over the last two years. Foreign direct investment (FDI) has also shown the same kind of signals over the last two years. What are we talking about when we say “new Turkey”? This is not a political statement, nor an ideological one. This is purely related to effective government and the problem solving capacity of elected officials, as well as a highly dynamic and effective civil society engaging with the policy makers instead of lobbying for their own interests.

I would like to give a concrete example to explain what I am trying to say here. If you listen carefully, you'll hear Economy Minister Zafer Çağlayan talking about a new investment incentive scheme to be implemented over the next couple of years, including very generous offers for strategic international investments, high value-added goods production and literally tax-free investment opportunities for low income parts of the country, especially in the Southeast.

This package is not giving money to investors, as was done before, resulting in unfinished investments in the Southeast. This program lowers the cost of doing business enormously to attract labor-intensive sectors to the region instead of sending them abroad to Egypt or China. So here is the first target. This package is trying to decrease income inequality through positive discrimination. As well as strategic, patent and innovation-based investments, high value-added products will also reap the benefits of tax-free investment opportunities no matter where they are located. Research and development investments are also in this category, which aims to restructure the value chain. Today, two-thirds of Turkish exports are low-to-mid value-added products, which is unsustainable in the long term. Rising exports and export-driven growth strategies are enough to graduate a country from the low income to medium income country class, but it is not enough to become a developed economy with over $20,000 per capita income. This second strategy targets high value-added export goods from one-third to two-thirds of exports and domestic production. The third component of this incentive scheme is to decrease the CAD by lowering the import dependency for energy, intermediate goods and services required in the industry. Hydropower projects and renewable energy investments are getting all sorts of incentives, while imported oil and gas-related power generation facilities are lacking this opportunity. Don't you think this is the right type of leadership after all?

In his three-day trip to the US, Çağlayan promoted this new package in three different states. The Texas Turkish American Chamber of Commerce (TTACC) organized a dinner to honor him in Houston. It was amazing to see 350 Texan businessmen showing up to listen to a Turkish minister on a cozy night, instead of having fun at home with their families. And in turn they managed to establish a direct flight to Houston from İstanbul. Once again TTACC showed that we need to have local grassroots organizations to increase the level of trade and investment. Hosting six business delegations in Texas and the surrounding states in three months' time, in partnership with the Turkish Confederation of Businessmen and Industrialists (TUSKON), is quite an accomplishment. Now we look forward to witnessing the concrete results of these efforts.