Today, the 97th Republic Day of Turkey is a very significant, historical day for the Turkish people. The country is about to embark on the decade leading to 2023, the 100th anniversary of the Republic, founded by Mustafa Kemal Atatürk and his companions.
President Recep Tayyip Erdoğan has set the national objective of making Turkey one of the 10 largest economies in the world by 2023. It is a good time to briefly look back at the last 90 years, but even more so, to look ahead at the forthcoming three years and try to see what kind of Turkey is emerging in this first half of the 21st century.
Turkey will celebrate its centennial in 2023. The ruling Justice and Development Party (AK Party) has already set 2023 as the year in which a set of ambitious economic goals will come to fruition.
According to this vision, by 2023, Turkey will be an economic powerhouse with a $2 trillion (TL 16.51 trillion) economy, a per capita income of $25,000 and exports amounting to $500 billion.
By comparison, in 2014, Turkey was the 18th-largest economy in the world – down from 17th in 2013 – with a gross domestic product (GDP) of $800 billion, a per capita income of just more than $10,000 and $160 billion in exports.
Russia currently holds the 10th spot in world rankings, with a GDP that is roughly twice the size of Turkey's. The AK Party's goals are ambitious, to say the least, and many economists believe they may be out of reach.
Most economists and policy analysts agree, however, that aiming high can do no harm and could possibly carry benefits.
The Western approach
As the Western world has a strategic stake in Turkey's economic success. First, a prosperous Turkey is likely to remain stable and anchored to the West as a reliable and supportive ally.
Prosperity often – though not invariably – supports the strengthening of democratic values, a development that would further reinforce Turkish-Western bonds.
Second, the West itself stands to gain economically from a wealthier Turkey. In 2015, Turkey was the European Union's fourth-largest export market and its sixth-largest source of imports.
Greater wealth also means greater investment opportunities in both directions. Third, a prosperous Turkey could host, employ and ultimately – if necessary – absorb its swelling Syrian refugee population, making Turkey a more resilient country in its own right and a stronger neighbor and partner for Europe.
So what is possible for the Turkish economy by the end of 2023? What challenges will Turkey face over the next eight years before the republic begins its second century?
Moving forward
If Turkey is to make the significant leap forward, as outlined by the AK Party, the Turkish economy must escape the "middle-income trap" – a reference to the difficulty that many countries emerging from low-income status have faced in achieving continuous growth, rather than plateauing at middling levels of per capita income.
In explaining the dilemma of the middle-income trap, the World Bank argues that the factors and advantages that propelled high growth in the middle-income-trapped countries during their rapid development phases – low-cost labor and easy technology adoption (from more developed states) – disappeared when they reached middle- and upper-middle-income levels, forcing them to find new sources of growth.
The challenge for Turkey lies in finding those new sources of economic growth. In today's highly globalized economy, that usually means developing a high-tech sector that can produce goods and services for export as well as for the domestic economy.
These high-tech growth sectors, in turn, require the development of a highly-skilled workforce. Today, Turkey's economy lacks a meaningful high-tech sector and the skilled workforce needed to propel such growth.
History illustrates the difficulty of moving from being a middle-income country to a high-income one – defined by the World Bank in 2016 as having a per capita income of at least $12,736. Of the 101 countries that qualified as middle-income in 1960, only 13 of them have emerged as high-income countries more than a half-century later.
Turkey graduated from low-income status to lower-middle-income status in 1955 and remained there for a half-century before being classified as an upper-middle-income country in 2005.
According to the World Bank's 2016 definitions, a lower-middle-income country is one with a per capita income between $1,046 and $4,125; an upper-middle-income country has a per capita income between $4,126 and $12,735.
Turkey's economy surged in the first decade of this century, following the financial crisis of 2001, with per capita income nearly tripling from $3,500 in 2002 to $10,400 in 2008. Aside from a dip and then a recovery reflecting the global economic situation in 2008 and 2009, Turkey has been largely stuck at the $10,000 level ever since.
Despite its failure to move into the high-income category, Turkey is clearly at the upper end of the middle-income level; in December 2014, the World Bank described Turkey as being on "the threshold of a high-income economy."
Moreover, Turkey's growth between 2002 and 2012 was largely inclusive, marked by a significant reduction in the poverty rate, major growth in the size of the middle class and rough parity between the consumption rate of the lower 40% of society and that of the national average.
Nor can Turkey be said to be suffering from enduring middle-income-trap status. Economists disagree as to how long a country must retain middle-income status before it is considered "trapped."
Some of these definitions qualify Turkey as trapped, while others do not. By any reckoning, however, Turkey's 11 years of being ranked in the upper-middle-income bracket do not qualify its case as severe.
Yet Turkey does face many of the difficulties characteristic of nations caught in the middle-income trap, including persistent current account deficits, an economy based on low- and middle-tech production and services rather than innovation – "industry geared to the 1990s," as one economist said – problems with the rule of law and institutional autonomy and an inadequate education system. Improvement in these areas would help Turkey tackle one of its fundamental economic problems – lack of investment, both foreign and domestic – and would thereby help it achieve sustained growth.
The Middle East factor
The important point relates to Turkish "soft power," particularly in the Middle East and the Muslim world. It is already very effective, but it could grow even more, by an order of magnitude. Turkey's historical, cultural and emotional links with the Arab countries, in particular, are deep and strong.
Nobody from Turkey can feel a stranger in these lands, marked by common architecture, familiar sounds of music, similar food and the celebration of common religious holidays. The same holds of course for Arab visitors to Turkey.
Atatürk left a legacy of good neighborly relations, but also a strict legacy of peace and non-interference in other countries' internal political affairs.
Turkey's influence in the region, greatly strengthened over the past ten years, should remain based on the power of Turkish successful economic, cultural and democratic example, not on attempts to direct others in any way or to interfere beyond our borders.
The Arab countries' future is and should be in their hands and neither Turkey nor the United States can shape that future. Particularly in the Middle East, which has suffered from colonial and imperial power coming from outside the region in the past, foreign interference will always end up being resented, even if it comes with the best of intentions.
No people or country, in the long run, likes interference coming from outside even if in the short term, various factions may appeal for it to further their cause. This is not to say that any of us can remain unaffected by people dying and suffering.
Help in the form of attempts at impartial mediation as well as humanitarian aid may often be necessary and highly desirable.
Turkey can and is already playing an important humanitarian role, as far as Somalia. There is also the responsibility to protect all human beings under severe threat, within the framework of the United Nations.
But Turkey should not appear to want to become a kind of neo-imperial power in the Middle East. This would badly misfire and undermine the real and positive soft power Turkey can deploy in the service of peace, economic development, human rights and democracy.
It is on this that the U.S. and Turkey can work together. If Turkey can provide a shining example of economic success and internal peace and freedom, this will have a much greater impact on the region, then any foreign policy that borders on direct interventionism.
According to the World Bank, the elements necessary to escape the middle-income trap are "... an economy open to trade and (foreign direct investment), a sustainable macroeconomic framework that delivers low inflation and limits dependence on foreign capital inflows, low demographic dependency and rising labor force participation rates, a good skill base that facilitates the move towards more innovative production, a healthy business climate, and strong economic institutions that provide for the rule of law, (as well as) effective and accountable government.
Elsewhere in the same 2014 report on Turkey, the World Bank asserted that "improvements in the rule of law, in public accountability and transparency, and in the climate for entrepreneurship and innovation will thus be needed for Turkey to complete the transition to a high-income economy."
This briefly outlines the issues that Turkey must successfully confront if it is to make major strides toward the AK Party's 2023 goals and obtain a high-income country classification.
These issues fall into two broad categories: macroeconomic reform and other economic, institutional, educational, and political reforms with an economic impact – with the latter category including institutional, educational and political reforms.
The paper closes with a brief set of recommendations for how Turkey could sequence its needed reforms to achieve its goal of becoming an advanced economy by 2023.
Ankara-Islamabad ties
Turkey and Pakistan have enjoyed a very cordial friendship and relation that dates back generations before the establishment of the two states. More precisely during the Turkish War of Independence when the Muslims of the northwestern British Raj sent financial aid to the declining Ottoman Empire, which was followed by the formation of the Turkish Republic and the Independence of Pakistan.
As a result, Pakistan has enjoyed its positive perception in Turkey and amongst Turks for many decades. Pakistan and Turkey enjoy close cultural, historical and military relations, which are now expanding into deepening economic relations as both countries seek to develop their economies.
In fact, Turkey and Pakistan have many things in common – both were a close ally to the U.S. during the Cold War era and signatory to the Central Treaty Organization (CTO), the Regional Development Alliance (RDA) and many other international treaties and platforms.
Both are tied with strong religious and cultural bonds. We are on the same page on many international and regional issues, especially sharing the same opinion on Afghanistan.
Turkey is supporting Pakistan on the Kashmir issue, Nuclear Suppliers Group (NSG) and many other important causes. Both are Muslim countries and supporting unity among Muslims.
In fact, there are around 2 billion Muslims worldwide, roughly 57 Muslim countries containing around 60% of the world's natural resources, particularly energy, but many remain politically divided, unstable and oppressed.
Pakistan and Turkey can jointly lead the Muslim world that is struggling for better economies and independence from outside interference. Geopolitics have forced both countries to realign themselves according to emerging situations in the region and globally.
Both nations have been victims of terrorism, intolerance and insecurity. Both were subject to military rule many times over history.
However, Turkey has struggled hard and this struggle has achieved a level of progress such as in the social and economic sectors.
Turkey has overcome terrorism to a much greater extent with its social sector having developed rapidly. Its economy is stable and the country has an edge in the tourism and agricultural sectors.
Politically, there is a lesson to be learned from Pakistan and Turkey's experiences. After having endured several years under military rule, the politicians have learned how to win the hearts and the minds of the people – satisfying the civilians.
As a result, based on the good governance of politicians, the people opposed the 2016 military coup with civilians laying on the streets in front of military tanks, ultimately stopping the attempt.
*Pakistan-based media consultant
