Not all aboard Turkey’s fast train to prosperity

The Marmaray Metro offers further proof of Turkey’s booming economy but the experts see trouble ahead

Istanbul’s iconic Bosphorus Bridge linking Asia and Europe

Istanbul’s iconic Bosphorus Bridge linking Asia and Europe

Mon, Nov 18, 2013, 01:05

Turkey has arrived. After years of rhetoric and promises, Turkey’s ruling Justice and Development Party (AKP) has unveiled Istanbul’s Marmaray Metro, a €3.4 billion underwater rail network linking the city’s European and Asian districts in an eye-blinking four minutes.

The metro will help ease Istanbul’s transportation problems, but more than that, it serves as a statement of where Turkey sees itself in the modern world.

As Europe, the US and the rest of the world grappled with international financial collapse, Turkey’s economy has emerged as a shining light. Since 2003, the AKP has invested billions in big budget infrastructural projects; brash shopping malls were built and millions of tonnes of asphalt and railway track laid out.

But for Turkey’s Islamist government, that’s just the beginning. Turkey is pushing ahead with plans for a third bridge over the Bosphorus Strait in Istanbul. Ground-breaking on a controversial €22-billion airport – slated to become the world’s largest – is expected in 2017. Prime Minister Recep Tayyip Erdogan has also put forward plans for a 50km canal west of Istanbul to remove tanker traffic from the Bosphorus Strait.

Destruction
However, environmentalists, including the core unit behind last June’s anti-government protests, say such projects will result in the destruction of millions of trees and damage aquifers essential to Istanbul’s water supply.

Experts say Turkey’s economy benefitted from two major factors over the last decade: a set of reforms in response to the domestic financial crisis of 2000-2001 established a sound banking system, fiscal prudence and targeted inflation. “Another reason why emerging countries attracted a lot of inflow of capital in the last three-to-five years is the historic low interest rates in the US and other developed countries,” said Boragan Aruoba,of the University of Maryland.

As a result, Turkey’s economy has boomed. In 2010 and 2011 it grew by 9 per cent and the AKP’s ability to stabilise Turkey’s economy has translated into success at the ballot box: polls conducted in the wake of the Gezi Park protests last summer say the government still has over 50 per cent support. But concerns persist.

Unemployment has been rising – 9.3 per cent in July, up .9 per cent on the same month last year. Turkey’s semi-official news agency Anadolu announced 363,000 people found themselves out of work that month. For those who can afford to buy cars, Turkey is one of the world’s most expensive countries for fuel.

Of greater concern to international investors, massive anti-government protests calling for the safeguarding of the country’s environment and heritage rocked the country last summer. The AKP labelled the protests – the largest in a decade – the work of “terrorists” and “vandals.”

As a result, the Turkish lira has since hovered around €2.70 to the lira (down from €1.90 in September 2010). In June, the Borsa Istanbul stock exchange briefly lost 20 per cent of its value. Today, analysts say Turkey remains prone to capital outflows by fickle international investors who have invested €292 billion over the past 10 years, while GDP growth is expected to slow to 3-4 per cent this year.

Poverty line
Though economic growth has averaged 5.2 per cent since the AKP came to power in 2003, a massive 17 per cent of Turks live below the poverty line.

“There is growing realisation that such large scale projects will have problems being financed in the future due to less than favourable growth prospects for the Turkish economy,” said Sumru Altug of Koc University in Istanbul.

Istanbul, Turkey’s largest city, is creaking under the weight of thousands of young Turks descending from the countryside in search of work every year, its population rocketing from two to over 14 million since the 1970s.

But this week, no such concerns could take away from what many Turks believe to be Erdogan’s greatest achievement to date – the linking of Europe and Asia by rail for the first time in history.

“#Marmaray” topped Twitter’s worldwide trends across two days after the opening even as teething problems saw one station closed. Turkey’s transportation minister, Binali Yildirim, announced another megaproject: an underwater tunnel to allow vehicles pass from European to Asian Istanbul. Right now, despite expert warnings, AKP ambitions know no bounds.

“With the economy now entering a much more uncertain period and political and social differences that had been kept in check up until now being voiced more forcefully,” said Altug, “the AKP government faces a more uncertain future.”

Markets

Facebook

News - direct to your inbox

Which Daily Digest would you like?