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Economic analysis – Turkey's Economic Comeback
Published in AL HAYAT on 14 - 06 - 2010

The Arab countries unlocked the door wide open to Turkey, quickly benefiting from Israel's barbaric assault on the peace activists, including Turks shipping aid by sea to the Gaza Strip, killing a number of them. Thus, the state of Kamal Ataturk became a tributary of resistance.
Turkey had clearly shaped its Arab role ever since its prime minister described Israel as an aggressive state in the World Economic Forum in Davos, and quarrelled with Israel's president. As such, the welcome extended to Turkey, the heir of the Ottoman Empire – which almost besieged the countries of the Mediterranean in its occupations – to join the ‘resistance front' against Israel, came swiftly. Only a few years ago, Turkey was withholding the waters of the Tigris and the Euphrates from Syria and Iraq, had hardened relations with its neighbours, was in alliance with the occupiers of Palestine, longed to accede to the European Union, and was circumventing the strategic depth of the Arabs on the borders of Israel. But something awakened the Turkish ‘nostalgia' to the Arab southern bank of the Mediterranean.
Politically, no one can question Ankara's position towards Israel, especially when it comes to the intentions of the ruling party; however, the role of the economy cannot be emphasized enough, in this strategic shift taking place in the northeast towards the Arab world.
Mid last week, on the sidelines of the Arab-Turkish Economic Forum held in Istanbul, the foreign ministers of Turkey, Syria, Lebanon and Jordan signed an agreement whereby visas for nations of these countries were waived, and a free trade zone was established among them. They also decided to establish a high-level quadripartite cooperation council and a free zone for the movement of persons and goods. It is likely that this free zone will be inaugurated even before the one approved by the Arabs in the nineties.
Since the last quarter of the twentieth century, the Turkish economy has not been stable. In 1994, 1999 and 2001, the country suffered from many bitter economic crises. Moreover, the Turkish lira deteriorated in value, when the inflation rate exceeded 150 percent. But since early 2005, Ankara adopted a new currency, and managed to achieve an annual growth rate that approached 7 percent in average, between 2002 and 2008, when the Turkish GDP was at 729 billion dollars.
However, the global economic crisis did not spare the Turkish economy, like many other emerging economies. It was thus pulled into the recession that the crisis caused, despite the reforms package that was carried out to strengthen and boost the economy following its collapse in 2001.
In 2008, the growth rate fell to 1.1 percent, and unemployment rose to 15 percent, while the Turkish lira lost a third of its value against the dollar, and inflation rose from 8.3 to 10.4 percent. Consequently, it became imperative for the Turkish government to search for foreign investments, and thus resorted to the World Bank which imposed as conditions structural and tax reforms, and budget cuts. This led the government to push consumption towards primary production sectors, namely, automotive, home appliances, real estate, construction and textiles.
Despite the fact that Turkey has attracted about 23 billion dollars in direct investments in the last year prior to the crisis, these fell to about 18 billion dollars. Turkey is the home of 22 thousand international businesses. This country, where more than 46 percent of the exports head to the European Union and where 66 percent of the direct investments come from the latter's countries, is seeking to enhance its economic ties with the Middle East and Africa. And at a time when Turkish exports to Europe are declining, exports to the Middle East and Africa have been doubling since 2006. This is because the economic crisis and the tension with the European Union are prompting Ankara to redefine and enhance its regional role, without giving up potential partners in the Caucasus or reconciliation with Armenia, and without even budging from its role as a bridge between the West and the East, as, for instance, it incurs around 30 billion dollars annually spent by 38 million tourists, and collects 1.5 billion dollars in tariffs and taxes from transportation alone. This is while noting that Turkey's shores accommodate 156 ports, and a fleet of 900 ships that move more than 11 million tons of cargo annually.
But more importantly, whether for the European West or the Arab East, Turkey is now marketing itself as a mediator, not just politically, but also economically, starting with the establishment of the free zone mentioned above, and not ending with its involvement in the gas pipeline linkage with the Arab network to transport gas form Arab countries to Europe and vice versa. Also, with its giant water tanks on the Tigris and Euphrates, Turkey controls these rivers' flow into Syria and Iraq as a downstream country, and receives the waters of the Orontes as an upstream country. Moreover, the Baku-Tbilisi-Ceyhan oil pipeline and the Nabucco gas pipeline carry oil and gas from the Caspian Sea and Iraq through Turkey.
However, Turkey's steps towards the Arab Middle East are burdened with questions regarding the future, most notably in terms of its relations with Israel. A few days ago, Turkey proposed the following conditions for repairing the relations: “apology and compensation for the victims”.
But what if the two countries establish a ‘bilateral free zone'?


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