BY KEREM ALKIN, Daily Sabah
Pointing to Turkey’s advancement in recent years with important structural reforms – often define as first-generation reforms, President Recep Tayyip Erdoğan reiterated in his speech last week how we are accelerating toward second- and third-generation reforms to bolster Turkey’s competitiveness and strengthen its sustainability.
First of the two critical points that Turkey will focus on in the period from 2020-2030 is to strengthen its position in global competition with effective cost management.
The second will be to develop technologies for domestic-national raw materials and intermediate goods for strategic sectors and then increase its claim in renewable energy technologies.
It also needs to support new young entrepreneurs and young minds in cyberspace to become the most-trusted port supplier in the world.
Sustainability, green energy, green growth and sustainable growth for the socioeconomic and natural environment will also be top priorities.
Subsequently, all these second- and third-generation reforms that will bring fluidity and dynamism to the Turkish economy will also allow the country to get rid of structural issues responsible for creating friction that has led to a slowing in the economy.
The force of friction, literally defined as when two objects come into contact and the contact makes movement difficult, plays a key role here.
As you may know, friction effects solids, liquids and gases. The economy is also fluid in terms of the amount of money in production, trade and the market.
Therefore, the dynamism of a country’s economy is essentially directly proportional to how fluid you can make production, trade and money transfer; in other words, how much you can reduce the force of friction.
The friction coefficient, on the other hand, is calculated between 0 and 1 and as it approaches 1, fluidity decreases as does speed.
In the Turkish economy, all the political leaders who have made their mark in the history of the country, in order to add dynamism to Turkey, undertook political and economic reforms to reduce the coefficient of friction closer to zero. Examples of such leaders include the founding leader of the country, Mustafa Kemal Atatürk, and former prime ministers Adnan Menderes and Turgut Özal.
Since the 2000s, while the global economy and politics were going through a painful restructuring process, Turkey initiated a number of reforms to reduce the friction in Turkish politics and the economy closer to zero and still continues to do so.
In the field of economy, we can list the issues that increase the friction coefficient as bureaucracy, plaza banking understanding and an oligopolistic market structure.
The digitalization of the services that the bureaucracy is obliged to provide to the real sector, agriculture, manufacturing, trade and services sectors and the reduction of procedures, making faster and market-constructing decisions, are all very important steps to accelerate and sustain the dynamism of the Turkish economy.
In addition to this, instead of a plaza banking approach – also known as collateral banking – which is not concerned with the quality and success of the client’s project, there is another type of plaza banking that will serve the Turkish economy.
Compared to the one that only considers its own risk, takes collateral of almost 1.5 times of the requested loan and only observes the real sector from its seat, this one – a real field banking guides the real sector, who is the customer for its loans and if necessary, supports the real sector to assess the feasibility of the investment in question.
That means it will undoubtedly trigger a process that will reduce the friction coefficient in the Turkish economy. At this point, we can state that our public banks have undertaken a historical mission.
The third critical topic is the oligopolistic market structure. To date, it is an area where many ministers in the field of economics have not been able to penetrate.
One of the main underlying reasons for the food inflation we are experiencing today is the oligopolistic market structure.
Therefore, the steps to be taken in this field, especially with the new generation greenhouses, will also eliminate the adherence observed in inflation.
