Mithat Melen

In Turkey if you try to make the necessary reforms in the infrastructure of the economy, some will be deeply disturbed. During the last seven years, the two AKP governments enjoyed an abundance of international credit. But recently the instability in the production and consumption equation and with the global economic crash the Turkish economy's downward slide began The summer months are going to be very hot for Turkey. Although we got lots of rain in March and April and still in May the weather is not so warm. The political and economical atmospheres all are getting warmer gradually. With the Cabinet reshuffle and six new ministers being appointed in charge of the economy, now everybody is talking about economics. As a couple of indicators turned out to be positive, some started even asking if in fact the global crisis had bypassed Turkey.

First and foremost, we have to study the recent ministerial appointments. Some think the appointment of the foreign minister to the post of boss of the Turkish economy is a success.

But for others, myself included, the appointment means the signal for an early election as the mentioned personality has never come forward with strong ideas or never put himself to the forefront. With the recent government reshuffle, it is obvious that the Justice and Development Party, or AKP, is preparing for early elections in 2011 with the aim to win again. It is also obvious that the prime minister, his ministers of industry and finance and the other newly appointed three ministers will successfully manage their duties vis-a-vis the economy.

In a nutshell, this group that is in charge of the economy will never dare take radical decisions and will try to satisfy everybody within the AKP and its supporters.

In Turkey if you try to make the necessary reforms in the infrastructure of the economy, some will be deeply disturbed. During the last seven years, the two AKP governments enjoyed a abundance of international credit. But recently the instability in the production and consumption equation and with the global economic crash the Turkish economy's downward slide began. If the AKP, which won two consecutive elections, had made the necessary structural reforms today, all of us would be in a comfortable position.

The ones who drew rosy pictures during the heyday of the economy are still retaining their posts today. I am ready to be mistaken. I hope they will do something in the next two years. Although the economic issue has to top Turkey's agenda, the government and the president are insistently changing the agenda.

The recent example is, the following slogans they use: "Let's not miss the chance" and "Constitutional amendment." The unemployment rate in Turkey has reached the 30 percent level today. If you say, "If the rate of unemployment is 30 percent why don't we have any social outbursts? Everybody seems happy with their way of life," it means you are blind. To look only at the number of judicial cases is enough to tell you the state of social instability we are in. Also there are incidents that have not become court cases. In big cities everybody is carrying guns and any time you may witness a gunfire exchange in the middle of a street. Many car drivers are carrying baseball bats to protect themselves against a potential attack.

You switch on the TV and see people fighting with each other. Every morning looking out of the window I watch and listen to the drivers’ foul language. There is a direct link between economic stability and a peaceful and secure way of life. The important thing is to increase the public level of wealth. On the other hand, lying with statistics we present a fake rosy picture. Another point is pumping people with make-believe funds and putting them into debt, misleading them to believe their artificial wealth will be sustainable forever. That's why people commit suicide for 10,000 liras of debt.

Take a look at the market. How many people really pay back their debts and how many people simulate payment? It is predicted that the U.S. economy will enter a period of recuperation by 2010 followed by the EU countries in 2011. I wonder whether we in Turkey will follow suit or continue on the same path until the elections. EU countries seem to partly abandon the free market economy in favor of a more public model as we in Turkey seem to be in a state of limbo.

The weather is getting warmer. The best thing for us to do, it seems, is to go out in the sun and get warm.

A horrible blood bath at a wedding party. It is not important where, when or by whom it happened. The important thing is to take immediate action after such a mass assassination in Turkey. No measures were taken beforehand. Politicians, for elections and votes, trying to tread through murky waters, didn't do anything to take action against such assassinations. "My physicians are earning illicitly under the name of surgery money," says one minister. Do other ministers say, "My public clerks are earning illicit money"? If you utter such words, then you have to do whatever it takes. Otherwise it would be a double standard to blame some and turn a blind eye to others.

Everybody knows that in Turkey nothing is done perfectly. Many things are swept under the carpet or covered up. Nobody has anything to say to the other. Today in Turkey most of the production of services is under the responsibility of the public sector. To get a hold of the government, you get hold of all these benefits and are able to distribute the goods to your supporters.

Today I regret my wrongdoing against the Treasury and its system 30 years ago. Compared to 30 years ago, almost all of our institutions seem to have gone backwards. Has the politician become a slave or has the bureaucracy enslaved him, I ask myself. It is not enough to follow the new technologies in the world in a shallow manner. You have to do the social transformations and developments parallel to these new technological changes.

As an example: As incredible global transformations are happening in the world, we are unable to adapt our human resources to them. Let alone making the necessary adaptations, we are proudly saying we are not changing while enjoying the new technologies. We are insisting on using the market economy while not raising human beings who will have the ability to compete equally in the market economy.

On one hand, we are defending the market economy, and on the other we are pressuring our politicians to get a share of the benefits from the public sector. The politicians on their part are ready to pay the price of the demands coming from the population in exchange for getting another mandate in the elections.

The duty of Parliament is not only to make legislations and pass them. It also has to follow carefully whether these legislations are applied correctly and sufficiently. It has to calculate the possible and potential problems and take action before they happen. You decide on a cigarette ban in public places but turn a blind eye to smoking in the stadium during football matches. And these smokers are the ones who passed the smoking ban bill themselves.

Now we are going to say, "If 44 people were killed during a wedding party, so what?" The same happens when we hear about casualties in traffic accidents every day. We have to admit that our system doesn't work correctly. The duty of a government should be to discourage the killing of 44 people during a wedding party. We have to confiscate all licensed or unlicensed weapons wherever we find them. What kind of a tradition it is to fire in the air during every wedding, after every football match or at the arrival of a state dignitary? In traditional Turkish society, horse, woman and gun are sacred. But in Turkish tradition there is no such thing as firing in the air and killing the neighbor's son after a football match, let alone storming a wedding party and killing 44 people. We have to think if the legislation against tradition killings is sufficient. Let alone discouraging all our media is encouraging those killings. On every TV channel every day, you can watch programs that teach you how to be smooth murderer.

We have to analyze the Mardin incident very carefully. To fight with such mass murders we have to set up a parliamentary inquiry commission. We have to assess the results carefully and set up a social structure. This duty belongs to every one of us.

It is not enough to pray that such horrible incidents don't happen anymore. Everybody should be aware of their responsibilities and do their own duties.

Turkey's Caucasus policies seem to enter into a cul-de-sac. On one hand the AKP Government seems to be willing to normalize relations with Armenia despite Azerbaijan's concerns and fears. The Azerbaijani President Ilham Aliyev has strongly protested the rosy atmosphere that has seemed to develop between Ankara and Yerevan.

Although both President Gül and Prime Minister Erdoğan insistently assured the Baku government that without a solution to the Nagorno-Karabakh problem and unless Armenian troops withdraw from the occupied Azerbaijani territories borders with Armenia will not be opened behind closed doors different matters are being negotiated, press reports say.

Meanwhile, another development in the Caucasus check game is a last minute decision encounter between Azerbaijani President Ilham Aliyev and Armenian President Serge Sarkissian during the Minsk Group meeting that will be held in Prague on May 7.

Deeply concerned with the Turkish-Armenian dialogue that started last September when President Gül went to Yerevan to watch the Turkish-Armenian national teams' football match with Armenian President Sarkissian, Azerbaijani President Aliyev was outraged by the recent developments between Turkey and Armenia. "Is Ankara destroying our policy of one nation, two states? Are we being deceived by our Turkish brothers?" he exploded.

To top everything last week end the U.S. President Obama has delivered his long awaited speech for the anniversary of the so-called Armenian genocide. He didn't actually utter the word "genocide" but in Armenian he said, "A great disaster had happened." Obama's speech had a bombshell effect in Ankara whereas the Armenian diaspora, which expected Obama to pronounce the word "genocide," was deeply disillusioned.

The diaspora even accused Obama of not keeping his word he gave during his election campaign. Prime Minister Erdoğan said he considered Obama's speech as wanting to balance and satisfy all parties. "But I for my part am not satisfied," he said. President Gül said not only Armenians but millions of Turks also lost their lives during the incidents that happened in the First World War. Opposition CHP Leader Baykal strongly criticized Obama, saying, "He didn't say genocide but he admitted that he shared the Armenian diaspora's interpretation." Also MHP leader Devlet Bahçeli said, "Armenia is questioning Turkey’s integrity with her policies and Mr. Obama is in a way giving an easy hand with his April 24 speech."

Meanwhile, on the Azerbaijani front, the Baku government, in retaliation to Ankara's moves of rapprochement with Yerevan, is preparing to increase the price of natural gas it sells to Turkey. The announcement from Baku said the decision would be retroactive, starting from April 15. The increase in the price of Azerbaijani natural gas has created a strong reaction in Ankara. "The Azerbaijan Government's decision leaves room for great concern. To increase the price of natural gas while the price of oil is dropping is very surprising," said Prime Minister Erdoğan.

In Baku, Rövneg Abdullaev, the director of the Azerbaijan State Oil Company SOCAR, said, "We had signed the Shah Deniz Agreement in 2001. According to the agreement the price of natural gas we were selling to Turkey was $120. But since then as the prices have very much increased we had to make a raise."

Caucasus analysts say as Turkey moves toward a rapprochement with Armenia and Azerbaijan striking back at Ankara means it is moving closer to Russia. "But this move may not be to the benefit of Azerbaijan," these analysts added. It seems that in the coming weeks the political and diplomatic climate in the Caucasus region will become suffocatingly warm.

Atatürk's idea to set up a Turkish Grand National Assembly goes back to the late 19th century. Even when he was a cadet at the military academy, he wanted to create a parliament that would be independent from the palace. All over the world and in Europe, almost all intellectuals had been under the influence of democratic winds and democratic trends that emerged after the 1789 French-elected governments were not enough to hinder wars. If you look at the past 100 years, you will see that the struggle for democracy goes hand in hand with the pressures for war. It is up to historians to explain the whys and wherefores of this phenomenon. But to explain the causes of these wars, it is important to keep in mind economic changes and the distribution of wealth.

As soon as he landed in Samsun on May 19, 1919, Atatürk without any doubt knew that he was heading for a war of independence. His hope was to found a new republic and create a new nation. Atatürk and his friends had inaugurated the Turkish Grand National Assembly on April 23, 1920, which encompassed deputies from all ethnic groups and religions. If you study the text closely, the Lausanne Agreement is an international acceptance of Turkey's legal borders and the Turkish nation. Again studying it closely you will realize that the only international agreement dating from the early 20th century that has never been amended is the Lausanne Agreement. This means that the existence of Turkey, its territorial integrity and the integrity of the nation will be sustainable under the roof of the Turkish Grand National Assembly. You may criticize it, sometimes you may not like some of its functions, but the 89-year-old Turkish National Assembly is the important guarantee of the Turkish Republic and our region. We owe this fact to Atatürk and 35 or 40 of his devout followers.

Atatürk dedicating April 23 to the children revealed Turkey's social targets. He stressed that giving importance to our children means putting importance to our future and our Republic. I would like to refer to a chapter of Nationalist Movement Party, or MHP, leader Devlet Bahçeli's speech, which he delivered at his party's parliamentary group meeting:

"According to the International Children's Rights Agreement, which Turkey is also a signatory, everybody under the age of 18 is a child. According to a census conducted in 2008, the number of persons in this age bracket rose to 23.5 million. Without any doubt, the number of young people rising in our old world is an advantage for our country and means the expansion of human wealth. But this potential power should be supported with care with education and a national culture. Otherwise we will not reap a sufficient product from a young generation that has to struggle with all sorts of problems.

"According to a study done by the Turkish Statistical Institute a couple of years ago, 1 million children between the ages of 16 and 17 had actively joined the working force. It is possible that this number has risen. Instead of preparing themselves healthily for a good life, to force these young people to go and gain their living should be considered a great social loss. Of course it is not possible to say that a political system that forces its children to go to work is contemporary, wealthy, developed and just. Because, according to our belief, a nation which puts the utmost importance on its children will have a bright and strong future." I wish you all a happy April 23 Children's Day.

After six months of waiting Ministers Nazım Erken, Kemal Unakıtan and Mehmet Şimşek held a joint pres conference in which they revealed certain economic measures that were being taken by the government and the government’s targets. This is an important development. Although analysts say the reason for these declarations were the consequences of the negotiations held with the IMF the numbers the government released are a much more realistic reflection of current economic conditions. We know that the middle term economic plan, which will be revealed in May, will encompass the periods 2009 and 2012.

It is clear that these fiscal measures will ensure fiscal sustainability and strengthen the control on collection of taxes for the coming three-year period. It is also clear that new negotiations are going to be held with the IMF especially on fiscal issues. According to the three ministers’ declarations the economic growth projeçtion for 2009 has been revised from 4 per cent to -3.6 per cent. Although markets regard this forecast as -4.4 per cent it is important that the Turkish government finally admitted the economic reality and has narrowed the differences of opinion with the IMF.

Economic growth projections for the 2010-2011 period were more realistically predicted as 3.3 per cent and 4.5 per cent, respectively. The respective current accounts deficit predictions for 2010 and 2011 were announced as 11 billion dollars. These numbers should be expected between 18-20 billion dollars. Also the budget deficit is expected to reach 5 per cent of the GDP in 2009. But to reach these targets the government has to find an extra 10-15 billion Turkish liras resource.

The debt ratio is expected to remain stable in 2010 and 2011 at 44 per cent and 43.3 per cent. The primary surplus will be increased to around 2-2.5 per cent and it may be possible that the overall budget deficit will be brought down to 3.7 and 3.5 per cent respectively.

A new bill regulating fiscal rules will be introduced to Parliament this year. The bill will enable fiscal adjustment going forward under the new IMF program. The fiscal rule will help anchor market expectations as Turkey moves to lower primary surpluses compared to former years. It is clear that the government is revising its old economic policies. Another example to this is that the expenditure limits of municipalities will be revised and brought down.

The tax auditing capability of the Revenues Administration will be strengthened. This is expected to wipe out differences with the IMF. It is understood that this is related to the modified set of proposals coming from the IMF. Big sums of taxes and surcharges are expected to meet the fiscal targets. These funds may cover charges on a wide range of services.

Either the IMF of the EU, does Turkey really need an anchor? Turkey has to ster her derailed economy on the right path. Prior to local elections nothing has been done except introducing certain face lifting measures to the Grand National Assembly. Especially after the g-20 meeting Turkey has become more interested with the IMF which got hold of a 1.1 trillion dollar fund.

We have to keep in mind that developed countries will have more claim on the 80 per cent lump of existing world funds while these funds will drop by 80 per cent compared to 2007 and Turkey will be much more in need of IMF funds. Now the question is where will Turkey spend the funds expected from the IMF.

If Turkey as before will not pay attention to make the necessary infra structural reforms, will not readjust its financial structure and string back an atmosphere of security she will not be able to reactivate production and consumption. Additionally if Turkey will not be able to receive the necessary amount of funds she needs she will have great difficulties in the coming three years. Even today with the 15 per cent jobless rate we are having big difficulties.

While watching Mr. Obama deliver his speech in the Turkish Parliament, a thought came to my mind. About 30 years ago clairvoyants in the U.S. had foreseen that an African-American president would one day rule the country. Actually the predictions of the clairvoyants turned out to be true, or a perfect product named Mr. Barack Hussein Obama has been introduced to the American people. I had the opportunity to meet and listen to the speeches of several former U.S. presidents. It seemed to me that the best educated and cultivated of them all is Mr. Obama. The speech he delivered at Parliament was obviously a carefully prepared and very well studied one. It seems the U.S. Embassy in Ankara played an important role in writing the text.

It is natural that we should have differences of opinion with the U.S. But the important thing Mr. Obama tried to convey in his visit to Turkey and during his speech at Parliament is that to minimize these differences of opinion we should start from somewhere. If the U.S. has five international issues that take priority, four of them are over Turkey and one concerning this region. To straighten out these issues, the U.S. has to talk to Turkey. Turkey, on its part, has to make long, short, middle range plans concerning the U.S.

First of all there is the south Caucasus issue and mainly the normalization of relations with Armenia. To bring peace to the south Caucasus region, the Nagorno-Karabakh problem should be solved. But you cannot do it solely to satisfy the Armenian diaspora in the U.S. There is no need to create concerns in Turkey, in Azerbaijan, in Iran by bringing Azerbaijan closer to Russia. To safeguard the energy flowing through Turkey, stability should be brought to the Caucasus region. It is true also for the Middle East. The great concern for all parties is the vacuum that will be created after U.S. troops will pull out of Iraq and who will get hold of the American arms that will remain in the country.

Two reasons were influential in the creation of a strong opposition in Turkey against the U.S. The first is the aid given to forces supporting the Kurdistan Workers’ Party, or PKK, and the second is support given to forces that demand the acceptance of the so-called Armenian genocide. The expectation here is that the U.S. should find solutions to these two main problems. Coming to the economy. At the G20 meeting, the IMF was burdened with the mission of saving the world. Including Turkey, the IMF procured additional financial aid for several countries. Time will show is if this financial support will be enough. But there is a strong possibility that these can change the export-import balance to Turkey’s benefit. 2009 will be a difficult year not only for Turkey but for European countries as well. It is impossible to think that European economies and the U.S. economy will recuperate before 2010 and 2011 consecutively. On the other hand, President Obama’s insistence that Europe, which wants a relationship based on privileged partnership, should give accession to Turkey is meaningful.

You can remember that also in 1999 the U.S. had pressured Europe in Helsinki to accept Turkey’s membership application. It is important that Mr. Obama has given a message to Europe that the U.S. wants Turkey within Europe. But Europe is reluctant in accepting it. It is obvious that these days that Europe has its own serious economic problems and doesn’t have time to pay attention to Turkey. Most important of all, Europe doesn’t want to talk economics with Turkey and seems satisfied to open and close chapters during accession negotiations, always bringing up the condition of solving the Cyprus problem. All the world knows that a solution to the Cyprus problem and all problems in the eastern Mediterranean is directly related to the consent the U.S. will give.

In the meantime both in Ankara and Istanbul people had a very difficult time in going to their jobs and coming back to their homes during the Obama visit, though they seemed to like the new U.S. president very much. Maybe tight security was exaggerated by police forces, but innocent of what was going on around him, Mr. Obama became the target of most Turks’ anger.

Although I found him very sympathetic, I, too, showed strong reaction when police searched my car when entering the Parliament complex. When we complain about these exaggeratedly tight security measures, officials say, "It is done all over the world." This cannot be an excuse. While trying to guard our guests coming to Turkey, let’s not create feelings of hatred for them among the people.

Following the March 29 municipal elections, Turkey is entering a new era as the electorate has finally understood what is going on in the country and has voted accordingly. This means the voters have given the government party a warning and switched on the green light for the opposition. Actually the prime minister is the one who turned the municipal elections into a general election and a confidence vote for his party. It is not clear whether he got a vote of confidence or not, but saying he "learned his lessons" is important. Now we will see if he learned his lessons or not. Another important point is the reason the AKP lost so many votes. Did it lose because of the economic crisis or because of the fatigue created by staying in government for almost seven years? We have to analyze these points very carefully. World economies have started to be hit by the financial crisis. It is unrealistic to say that Turks will ignore this situation. But the reality in Turkey is that its economy has not been hit because of the shockwaves coming from abroad. The damage has been done because Turkey was unable to solve its economical infrastructure problems.

As for years the world lived in an economic abundance, Turkey ignored its economic problems. In this euphoria created by this abundance of credit for seven years, Turkey didn’t take all the necessary measures. Recently Parliament adopted certain bills, but they lacked the necessary substance for solving the country’s economic problems. During the election campaigns, these measures were revealed in political rallies. This is a new trend for Turkey Ğ announcing all economic packages during election campaign rallies and pretending that something concrete has been done.

The world is in a very difficult situation these recent months. The United States and the EU are going through hard times. Consultations are being made; important meetings are being held. Today the G20 is getting together in London. Prior to this meeting, British Prime Minister Gordon Brown made important consultations to stop the financial crash and to reshape the world economy. But it is clear that there are differences of opinion between the United States and the EU regarding their approach to economic issues. Other countries seem indecisive. These meetings will also design the future of international institutions. Maybe the London meeting will end without any concrete decisions but it is important that such meetings continue.

We on our part are in Brussels to attend the biannual EU-Turkey Joint Parliamentary Commission meeting. This one is the 61st meeting held between Turkish and EU MPs. In these meetings, generally the same issues are discussed and generally the Europeans tell us to do our homework. We generally reply that we do our homework. It is a mutual game of lip servicing. Europe always pretends to take us in, and we pretend to enter. Then the meeting ends. During these meetings, much brilliant rhetoric is made. But the result is clear.

We realize that the world and Turkey are about to transform with this global crisis. We know that a new economic and political order will shape up and new institutions will be formed. Meanwhile both the United States and the EU are aware that if they don’t introduce serious economic measures they will not be able to survive. We have the same problems. Turkey will not have a comfortable three-year period ahead. Whether the necessary measures are taken or not, economic problems and the rate of unemployment will affect all of us.

Since the municipal elections are over, without dragging Turkey to the brink of bankruptcy, we have to make the necessary infrastructure reforms and solve our economic problems. First the government has to take the responsibility but Parliament and other institutions in Turkey have to share the responsibility.

Under the circumstances, Turkey and the EU have to take concrete steps. What are they going to talk about three years later? It is clear that the era for pretension and paying lip service is over. We are on the verge of making vital decisions. Maybe a new Europe, a new world and a new Turkey will be created. Aren’t we late in taking the necessary measures?

For many years everybody has known how sensitive I am about tax paying. There are miscellaneous tax laws that are in effect in the country. Actually we set up the system about half a century ago and then mainly based on tax revenues we made palliative amendments to it. In recent years copying the West and introducing Value Added Tax, or VAT, and the special expenditures tax, or ÖTV, we tried to enlarge the system. We have to face the facts. In Turkey we are unable to collect revenue taxes and we haven’t renewed our system since 1946. If I may give you a small example, we can clearly see that there is a direct relationship with the number of tax payers and voters in many countries in the world. But there is no such relationship in Turkey. In Turkey the number of voters is nearly 45 million people but the rate of tax payers is not even one-eighth of this number. In it, corporate tax payers, indirect tax payers, everybody is included.

It is incredible but true. Until last year 85 percent of corporate taxes were paid by only 11 or 12 large companies. Maybe this year this amount will increase but not nearly as high as one-fourth of the money we seek to get from the IMF. In developed countries around the world tax paying also means registered economy. Speaking concisely everybody reaching the age of 18 has to have a tax payer’s number and submit tax returns. Doing this you register every citizen and you are able to scrutinize their expenditures and revenues.

To be able to control these expenditures you also have to grant certain amounts of immunity. In other words, from the gasoline you put into your car to the guest you invite to diner, from the invoice you get from your dentist to the money you pay as your child’s school fee, you have to be able to get a tax deduction. If you can do this transparently you will be able to overcome unpaid taxes in your economy and increase resources.

Today politics has become the end result of unpaid taxes. It is impossible to trace the sources of the money spent for the elections. It is also impossible to learn how this money was gained, although it is vitally important to be accountable especially during elections.

If you raise funds for election campaigns and get tax deductions for the amount of money you spend, then you create transparency. If you don’t do it politics will not get rude and rough, politicians will not resort to foul language and every day you won’t be witness to another corruption case. Consequently politics will be channeled in the correct way. As the system has never been transparent in big cities, big companies always have problems with tax offices. When tax officials under the ruse of applying the law and defending public interests pay lip service to what they do then everything gets out of hand. As the system, the related law articles or the language used is not transparent and net then the government feels the right to interfere.

I am getting certain unfortunate news, which I want to relate to you in examples. Let’s say you are a tax payer and the tax office asked you to submit your books about certain years. You bring them to the tax office and in return you get a document.

Two years later you are again summoned to the tax office asking you to bring along those particular books. You rush to the tax office. The document is scrutinized by the official closely. In the end you are told that all those stamps, the signatures are hoaxes and you are fined for trillions of liras for not submitting your balance books.

You can reach an agreement, you can go to court, there are those intermediaries. There is big money obtained from these taxes. To overcome all these problems people have gotten used to straightening out such matters by their own means. But one day when things become serious people will start panicking. Can you imagine that there are 10 million Turkish citizens who have court cases against their own state? Most of these cases are about tax paying.

We are having one more election, which has turned from a local one to a general election atmosphere. In this election period we need a revenue tax system that will not create conflicts between the tax payer and the bureaucrat and which will not hurt the government’s image. You cannot solve this problem by creating a Tax Revenue Directorate or telling the IMF that you will postpone certain legislations.

You either renew confidence among the electorate or you will not get a vote of confidence. The ones who renew confidence and the ones who think they are to get a vote of confidence have to give priority to find solutions to the tax problem.