Turkey

The President Who Betrayed Business

10/24/15
from Bloomberg Businessweek,
10/22/15:

Erdogan targets corporations and the media as he fights to keep a grip on power.

t’s easy to forget that Turkish President Recep Tayyip Erdogan was once the darling of foreign investors and civil rights activists. They and the European Union cheered ahead of each election victory his party chalked up since coming to power in 2002. But not this time. On Nov. 1, Turkey will hold the snap election Erdogan called after his ruling Justice and Development, or AK, party failed to secure a majority in June’s parliamentary contest. Rather than allow a coalition that would hinder his plans to consolidate the power he wields from the 3 million-square-foot presidential palace he built last year, he opted for a retry.

Since then, a war with Kurdish militants that cost Turkey more than 30,000 lives in the 1980s and ’90s has reignited, and a series of terrorist attacks the government attributes to Islamic State suggests the conflict in Syria is seeping over the border. Erdogan’s opponents accuse him of using the hostilities to discredit the Kurdish Peoples’ Democratic Party, or HDP, which tipped the electoral arithmetic against him in June.

Erdogan is also losing one of his biggest selling points to voters: economic growth. Consumer confidence has had a strong correlation to the AK Party’s electoral fortunes, and it’s falling sharply, according to Bloomberg data.

Turkey’s gross domestic product per capita more than tripled in dollar terms during Erdogan’s first decade in power. That led Goldman Sachs in 2008 to predict that by 2050, the nation would be richer than Japan and Germany. Today that looks like wishful thinking. As measured in dollars, GDP shrank last year. That trend is expected to continue through the end of 2016. The deteriorating business climate is due partly to police raids on companies and media associated with Erdogan’s estranged allies in the Fetullah Gulen religious movement. His clash with Fetullah Gulen has also led him to purge the judiciary, which contained many Fetullah Gulen adherents, and turn it into a political tool. Since 2012, Turkey’s ranking for the quality of its public institutions has slid to 75th in the world from 56th, according to the World Economic Forum’s Global Competitiveness Index.

investors and businesspeople are concerned that Turkish economic policy and political pressure on the Central Bank to keep rates low will get worse if Erdogan’s take-no-prisoners approach is vindicated by a clear victory for the AK Party. His closest advisers are talking about introducing an economic paradigm focused on supporting national champions of industry. To some, that sounds too much like the political and economic system that President Vladimir Putin has developed for Russia—“Putinism without the natural resources and military might,” as Yesilada puts it. Turkey’s democracy, however, still has a chance to avoid that fate on Nov. 1.

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