Have reform packages improved the economy? | ECONOMY | DW

Especially in recent years in Turkey, the phrase ‘reform’ has been repeated frequently. The new package of economic reforms will be announced today by President Recep Tayyip Erdogan. The package, prepared by the Ministry of Treasury and Finance, is expected to highlight steps to improve guarantees and financing conditions for foreign investors.

On April 10, 2019, former Treasury and Finance Minister Berat Albayrak announced a reform package called ‘Steps to Structural Change’. The announced program includes goals such as reducing food inflation, ensuring sustainable growth and employment, and fiscal discipline. Stressing that Turkey was out of control four and a half years ago, Albayrak said that foreign investors would continue to Turkey indefinitely during these reforms. So far, the reform package has been announced, what was the solution to the economic problems in Turkey?

‘Problems are not solved’

Prof. Dr. Özgür Orhangazi

Speaking to DW Türk, Kadir Has University, Head of the Department of Economics, Prof. Dr. Özgür Orhangazi said that a number of ‘new’ reform packages or economic programs have been announced since the 2018 currency crisis. “All these packages or programs are a series of promises instead of identifying and developing the main structural problems of the economy. A policy framework consisted of “a set of goals that are not based on expectations or on which economic model or framework.”

Stating that macroeconomic trends in the foreign exchange crisis in 2018 became dependent on hot money, Orhangazi said that in Turkey, the economy is also entering a high interest rate and turnover. Orhangazi said, “When we look at these packages, neither the interest rate nor the framework for how the currency pin will be resolved has been presented yet. “No policy has been developed to reduce the dependence of production on imports and to prevent any currency shock from increasing inflation,” he said.

Following the announcement of the package, high interest rates in the Turkish economy, high inflation and a slowing economy after the depreciation of the Turkish lira, unemployment increased.

Foreign investment is declining

According to the latest data, annual inflation, which was 11.84 percent in 2019, rose to 15.61 percent in February 2021. During the same period, food inflation rose from 10.89 percent to 18.40 percent. Despite the ban on layoffs, which began in the pandemic, as of January, unemployment continues at 12.2 percent, youth unemployment at 24.7 percent. Net direct investment inflows, which were $ 9.4 billion in 2018, fell to $ 6.1 billion in 2019 and $ 4.6 billion in 2020.

Stating that Orhangazi has not had enough capacity to create employment and increase the growth rate of the Turkish economy for a long time, he said that the credit expansion policy has been applied through low interest rates and state banks since 2017. Orhangazi says this has always led to currency congestion due to foreign dependence.

Türkei TR with Infographic Direct Investment

‘YEP reform announced’

Speaking to DW Turk, Prof. President of the Department of Economics, Istanbul University of Culture. Dr. According to Sinan Alci, the three-year economic programs announced every year are far from trusting international organizations and investors. Reminding that the name of the Medium Term Program, which has been implemented since 2006 and provides three-year prospects for economic goals, was changed to the New Economic Program (YEP) when Berat Albayrak took office, Alçın said the announced program did not meet reform expectations.

Stating that macroeconomic data began to deteriorate in early 2018 and reforms were postponed after the elections, Alçın said, “Reform expectations have increased as the government takes time to build after the elections. On the other hand, Pastor Brunson’s crisis with the United States caused a strong currency shock in mid-August. After this currency shock, in September, then Finance and Finance Minister Albayrak said they came up with a new program. This is called the New Economy Program. But in fact, it was a renaming of the Medium-Term Program, which has been in place since 2006. ”

Former Treasury and Finance Minister Berat Albayrak, finally announced a reform package on April 10, 2019 under the name 'Steps to Structural Change'.

Former Minister of Treasury and Finance Berat Albayrak, finally announced a reform package on November 10, 2019 under the name ‘Steps to Structural Change’.

‘Far from the nature of reform’

Gypsy wrote that the program has been the goal of the Middle Ages since its inception, “Turkey is experiencing all seasons of the year due to special conditions, we see this program being reconsidered. It has become a tradition after a while. It has become a kind of sport toto search. “We can say that structural reform is far from natural.”

The new reform package to be announced came after the Human Rights Action Plan. In 2019, economic reforms were announced at the same time as the Judicial Reform Strategy.

‘Hot money will be withdrawn’

Prof. Orhangazi is based on a reform of human rights and democracy over the past few years to ensure that foreign investors do not re-grow into the Turkish economy and establish a very reducing and false equation.

Stating that the reform package is a situation where democracy is protected for foreign capital, Orhangazi said, “It should be clear that human rights will not come with a plan of action announced from above. “If we want to include the part of democracy, we need to add decisions that have not already been implemented in the ECHR,” he said.

According to Sinan Alci, the package, prepared in parallel with the legal reforms, will include efforts to attract foreign investment and hot money.

What should the reform package look like?

‘Growth strategy must be changed’

Prof.  Dr.  Sinan Alçın

Prof. Dr. Sinan Alçın

Prof. Alçın says that the main features that distinguish structural reform are the extent to which they change production relations.

Alchin said, “For example, a structure can be a structure where skilled production and skilled labor are replaced. However, the measures to be taken to promote any segment more are incentive measures. This is an incentive package. Similar stimulus packages were announced almost every two months after the pandemic period. “These are just make-up to offset the negative effects of the current economic turmoil,” he says.

Alçın stressed that the last structural reform was the Strong Economy Transition Program, which began in 2001, and that the program was financially disciplined, transparent and predictable. At the same time, he says the productivity-based growth strategy included in the program is a growth based on cheap labor and natural resources, and has led to the impoverishment of large sections of the population in the long run.

When gypsum will be at the forefront of a structural reform in the Turkish economy, it is necessary to increase the production strategy based on a return to quality production, leaving youth employment and productivity rapidly. Exports in Turkey should be converted into a structure purchased instead of quality products built instead of cheap Turkish lira. Alçın argues that the distribution of income will be fair as the skilled sector strengthens.

‘Problems must be identified correctly’

According to Orhangazi, for a successful reform program, the problems must first be properly identified. Pointing out that a participatory planning perspective is needed to do this, Orhangazi said, “It is clear that there is no political environment at the moment for such a thing to come up. Therefore, the words of the latest reforms are becoming a hollow in Turkey, “he said.

Noting that the Halkbank case in the United States is approaching and global conditions are changing, Orhangazi said it was unclear how effective the proposed reform package would be. Orhangazi said, “The US Federal Reserve will do something to determine the current course of events in the coming period. “It looks like we’re going to be a little out of touch by interfering in bond markets and lowering global interest rates.”

Pelin Unker

© Deutsche Welle Turkish

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