AK Party's 2023 vision

Last Sunday the Justice and Development Party (AK Party) held a congress that revealed two very different aspects of the ruling party: A very personalized leadership and, at the same time, a high capability for producing comprehensive reform agendas. I have been, like many others, very disappointed by the speech by the uncontestable leader of the AK Party, but I very much appreciated the reforms promised in the 70-page booklet called “Political Vision of the AK Party, 2023.” The speech of Mr. Recep Tayyip Erdoğan, admittedly very enthusiastic, was politically vague and empty regarding concrete policies and reforms. On the other hand, the vision for 2023 is full of important reform promises that are capable of improving and deepening our second-class democracy if, of course, they are implemented.
I am aware of the debate about the legitimacy or seriousness of the “Vision 2023” as a party document that was not discussed and voted on in the congress, but just distributed in the hall as an advertising brochure, but I do not care. The AK Party is certainly not a model of internal democracy and this is its way of producing policies, behind closed doors. But this does not mean that there is no debate. A written document signed by the ruling party should be considered seriously, and this is what I will do. Today I will focus my article particularly on the economic field, but let me make some comments about the political agenda. The democratization of the Political Parties Law with the aim “to further widen and free the political space” and radical changes in the Electoral Law for “better democratic representation” and for “allowing closer relations Between deputies and the people” would contribute efficiently to the normalization of the democratic regime. Having said that, let me remark that the two principles guiding the electoral system reform are quite in line with what I have suggested (see my article “Electoral System Reform,” Sept. 27) but the absence of the “electoral threshold issue” must be noted. I believe that the promise to remove the stipulations aimed at legitimizing military coups -- modern or post modern -- from all kind of official documents as well as the changes to courses in military schools in the direction of democratic values will be much more effective in the prevention of military interventions than the actual court cases. Last but not least, allowing the use of Kurdish when accessing public services, in courts, in hospitals, in schools etc., is a very encouraging step forward on the way to solving the Kurdish problem.    To be frank, the economic part of the “Vision 2023” did not fill me with enthusiasm as much as the political part did. The economic vision is very challenging without being eccentric. The 2023 targets are, admittedly, not easy to achieve, although they remain within the boundaries of realism. Good! My concern is not with targets, but with the absence of a concrete and consistent roadmap that would drive the Turkish economy toward these targets. Let's consider the basic macroeconomic vision. The AK Party, assuming of course that it will be in power until 2023, promises $2 trillion of GDP, $500 hundred billion of exports, $25,000 of income per capita, and a 5 percent unemployment rate. If the $2 trillion of GDP is reached, the export, per capita income and unemployment targets will follow. So the issue is how to climb to $2 trillion from, approximately, $760 billion of today's GDP? A simple growth calculation shows that the Turkish economy has to grow by a yearly average of 9 percent in dollar terms. Do not react at once saying, “My God, this can not be done.” Yes, it can be done. There will already be 3-4 percent guaranteed growth assuming a 2 percent dollar inflation and the 1-2 percent yearly appreciation of the Turkish lira in the long term originating from the “Balassa-Samuelson effect.” So, the Turkish economy needs at least a yearly average of 5 percent real GDP growth during the next decade. Moreover, the growth has to be based on exports rather than on domestic demand. If not the target of $500 billion in exports revenue can not be achieved and in the event of domestic-led growth, the 5 percent average growth rate cannot be achieved. So, an export-led growth is a must in order to have a GDP close to $2 trillion in 2023. So the basic difficulty is not with the growth speed, 5 percent being equal more or less to the estimated potential growth of the Turkish economy, but with the nature of the growth. In fact, we have had export-led growth for one year, exports growing more than imports, but the problem is that the growth rate evolves at around 3 percent instead of the required 5 percent. Then, the critical question is “how can the growth rate be raised from 3 to 5 percent without jeopardizing the current adjustment process?” The answer is, of course, not straight forward but its essence lays in the competitiveness of Turkish industry. So, the bottom line of the problem is how to rapidly improve the competitiveness of our industry. This is a gigantic task. Unfortunately we cannot count on the depreciation of the Turkish lira because we assume implicitly that there is no misalignment regarding the exchange rate. If not, the 9 percent growth rate in terms of the dollar cannot be achieved. Then, we will have to turn to lowering production costs and increasing productivity. Both of them demand radical structural reforms in the labor and energy markets, in the fiscal and education systems. Those reforms are crucially lacking in the “Vision 2023” of the AK Party.