The Turkish economy faces a number of key structural problems and conjectural challenges. However, the main issue that the country must immediately resolve is its poor image abroad and the eroding of confidence in potential investors’ eyes.
Turkey needs to improve its image abroad to revive investors’ confidence in the country and to allow its entrepreneurial dynamism to flourish, a top official from the World Bank’s private sector arm, the International Finance Corporation (IFC), told me this week.
IFC Vice President Dimitris Tsitsiragos said Turkey should focus on restoring its image after a recent tough period.
“Turkey has come a long way since 2000. Its income per capita has nearly tripled in nominal terms, employment has increased, and standards of living have improved across vast parts of the country. The private sector has worked hand in hand with the authorities to achieve this progress, by creating new jobs and providing rising wages. The challenge now is to building on that progress in an uncertain economic and geopolitical landscape,” Tsitsiragos noted.
The IFC is an institution that has been on the ground in Turkey since 1964 so it knows the country very well.
“We consider ourselves ‘local’ in terms of understanding Turkey’s markets, private sector, dynamics and people. We have a chance to see the strengths and challenges from a closer view. But when foreign investors look at Turkey from outside, they see a different picture, especially since the failed coup attempt and the series of bomb attacks. Turkey needs to work on improving these perceptions outside in order to restore investors’ interest. Confidence matters here,” he also added.
According to Tsitsiragos, Turkey should kick off a wide-ranging program to reform the labor market and the judicial system, combat corruption, encourage investment, spur domestic savings, and overhaul the tax system.
“Implementing the plan is urgent, but last year’s events intervened and have slowed down the process. Now is the time for Turkey to take action and fully execute its reform agenda to get a new boost in the economy,” he stressed.
Turkey is the IFC’s second largest country of operations globally with a $5 billion portfolio. In the current fiscal year, the IFC plans to provide close to $1 billion in long-term investments, short-term trade finance. Through mobilization of funds from its partners, it aims to support Turkey’s private sector and PPPs, with a slight decrease compared to the last year’s figure. Since last July, the IFC has provided $540 million in long-term finance in seven projects and $675 million in short-term trade finance lines, according to IFC officials.
However, in the last couple of weeks there have been a number of reports claiming that the IFC may close its Istanbul office and transfer its operations to a new hub in Vienna.
Tsitsiragos dismissed such claims as “nonsense,” stressing that Istanbul would remain key for the IFC’s operations and vowing that the institution would continue to have a strong presence in Turkey.
“The IFC will add another operational hub in Vienna to service the Europe, Middle East and North Africa [EMENA] region. The IFC’s Istanbul hub will continue to be the largest in this region and the second largest in the world after Washington,” he added.
But he also noted that the IFC currently has problems with luring foreign labor into Istanbul.
“It was not case six or seven years ago, but is not easy to attract foreigners to work in Istanbul now. That is the only challenge we have been experiencing at the moment,” Tsitsiragos said, adding that this challenge was also related to Turkey’s deteriorating image abroad.
Turkey presents an interesting picture right now to potential investors, who are mostly waiting and seeing to understand what is next for the country. In this process, improving Turkey’s image should be key.