Turkey should ’win 2010’

Speaking to daily Hürriyet after being reelected as the chairwoman of the board of the Turkish Industrialists’ and Businessmen’s Association, or TÜSİAD, Arzuhan Doğan Yalçındağ said the government must abandon the "virtual budget" and accept a "controlled budget deficit" first.

"Turkey was in a position to get over this global crisis easily," she said. "But the developments were not analyzed in time, thus the necessary precautions were not taken. ’This is a financial crisis and our financial sector is sound, so we can get over this easily,’ was the prevailing mentality. As TÜSİAD, we voiced our grave concern in September and said something needs to be done."

The first call by TÜSİAD was to enhance liquidity, and "certain things were done" in this area, Yalçındağ added. "The Central Bank and Eximbank took precautions that enabled the real sector to feed from the financial sector more easily. But these are not enough."

"The more we let the economy cool down, the harder it will be to turn the wheels again," she warned. "We have lost 2009, let us at least be ready for 2010. When the world starts growing again, Turkey should not miss that rising tide as it did in the ’90s. Turkey can be a rising star when the opportunity arrives, just as it has been between 2002 and 2006."

To enable this, TÜSİAD calls for the establishment of financial rules and continuation of reforms, Yalçındağ noted. "We were not ready for the descent, we at least should be ready for the ascent. Let us not lose what we have gained until today. Turkey was able to act rationally for a few consecutive years, but if we continue like this, we will lose those gains, and it will be a pity.

"Managing expectations should have been done skillfully," she continued. "The economy leadership cannot convince anyone that it has grasped the course, that it has formed realistic and persuasive foresights and took the relevant precautions. As uncertainty continues, as trust is not restored, households postpone consumption, businesses postpone investments, the economy contracts and unemployment rises."

Yalçındağ proposed the government implements a "controlled budget deficit" policy which would support domestic consumption but would not harm the tax base.

"According to the budget that has passed Parliament, growth [for 2009] will be 4 percent and the budget deficit will be 18 billion Turkish Liras," she explained. "According to these figures, if growth is between zero and minus 4 percent, the budget deficit would be between 30 billion and 70 billion liras. Let us say the average is 50 billion liras. How can we finance this? This should have been a planned, controlled deficit, in the sense that it could increase domestic consumption, prevent cooling of the economy and the destruction of the tax base. Thus, we could win 2010. Today, we unfortunately cannot see this."

Yalçındağ called unemployment "a painful situation," noting that half the population was under the age of 30. "Unemployment has reached 12.2 percent. Youth unemployment is at unacceptable levels, as nearly one in every four young person is unemployed."

Such levels of joblessness would not create social explosions under Turkey’s family structure, but the country still feels the pain, she added. "As domestic consumption falls, so does production. As production falls, job opportunities diminish. This is a vicious cycle and I am not sure how politics perceives what is going on."

Commenting on the tax levy imposed on the Doğan Media Group, Yalçındağ, who is also at the board of Doğan Group, said she is at a difficult position as TÜSİAD president.

"What we have lived through in the past few days showed once again the importance of unpoliticized tax and the independence of audit. I absolve esteemed officials and employees of the Finance Ministry to avoid any misunderstanding," she said. "But for a government to be under suspicion of politicizing the power of taxation is nothing trifle for a democracy. Democracy is an order in which we entrust the power of state to the government for a certain period of time. The basics of this process is trust, and this trust should not be eroded."

"As government, if you cannot stand being criticized, if you do not want to hear voices of opposition, you would leave democracy without a breath," she said. "Businesspeople are concerned when commenting on the politicization of tax, and they are right. It is not correct to trouble businesspeople."