Economy: Will foreign capital come to Turkey and if so, when?
Turkey, which is undoubtedly the largest economy in the Middle East and its region, is going through a very challenging economic period. Many neutral experts and economists have pointed out that the current administration, especially the individual in charge, has a significant share in this unfavorable economic situation.
Turkey has misdirected its resources and has not prevented significant waste and, unfortunately, corruption. In fact, it has even used tens of billions of dollars from the Central Bank to prevent the exchange rate of the Turkish lira (TL) from exceeding a certain point. Naturally, this has only exacerbated the country’s already excessive dependency on the dollar. In the meantime, raising funds in foreign markets to obtain dollars, in other words, borrowing has come with incredibly high costs, namely interest.
IS INCREASING TAX BURDEN ON CITIZENS SUFFICIENT TO RECOVER THE ECONOMY?
Even when dollars have been obtained, it has only contributed to some temporary relief with a few precautionary measures. The real problem, i.e., the economic weakness, has persisted, and the administration has seen “increasing tax burden on the public” mainly, as the only remedy to work it out.
UNTIL DOLLAR / TL IS 35-0 AND INTEREST RATE IS 55-60 REAL FOREIGN INVESTMENT NOT LIKELY TO COME
According to experts, these measures and attempts are unlikely to solve the problem fundamentally. In fact, it does not seem like foreign capital will come to Turkey for real investments either, until the official exchange rate is around 35-40 TL per dollar and interest rates reach 55-60 levels.
Moreover, when it does come, it will most likely come not to contribute to Turkey’s productive economy but with the aim of making profits over it in the short run and taking that money out of the country again as due.
SO WHEN COULD FOREIGN CAPITAL COME TO TURKEY FOR REAL INVESTMENTS IN THIS COUNTRY?
The likelihood of foreign capital coming increases when the exchange rate and interest rate values mentioned above are achieved (according to current conditions). However, even more importantly, foreign capital for real investments will come when there is absolute confidence that justice and the rule of law truly prevail in the country. No major investor will invest billions of dollars in a country where they cannot trust the judicial system, in full – unless they have special connections with the local government.
Currently, Turkey is dependent on many imports in various sectors. However, the government keeps repeating the promise to “close the trade deficit.” The question forwarded by many experts is “How will this be achieved?” The country has even become dependent on importing basic foodstuffs, for quite a while. Therefore, this direction practiced by the administration so far, cannot be seen as the right way and Turkey has no choice but the transition to a production-based economy as soon as possible.
URGENT NEED TO SHIFT TO TECHNOLOGY-HEAVY INDUSTRY
The country urgently needs to shift to a technology-heavy industry. Naturally, this can take 5-10 years. But it’s clear that Turkey has to start somewhere and before losing anymore time. It’s evident that this problem cannot be solved by simply taking advantage of a surplus of dollars, as it may have been done 10-15 years ago. Even building roads, bridges, airports, and city hospitals won’t suffice anymore. It’s essential to shift to a productive mode, using high technology, as quickly as possible. This requires establishing productive organizations and providing substantial support to them. Otherwise, illusions like “the stock market is doing great, so our economy is doing well” or “Our GDP is growing fast” etc. will no longer help to reach a healthy economic situation with happy citizens and a truly wealthy country not desperately in need of dollars to borrow, and not having to knock on doors in global financial markets asking for help.
The sea has ended, and the land is now visible… and in fact, it has been visible for quite a while, even.
