Purchasing Policy from Turkish government to support domestic production
A recent statement made by a leading minister in the Justice and Development Party (AK Party) government on the use of public purchases to support domestic production has received support from experts who say such an emphasis on the power of public demand at a time when Turkey faces a widening current account deficit (CAD) may prove helpful in reducing that gap. Minister of Science, Industry and Technology Nihat Ergün, stressing the significance of domestic production in reducing the CAD, recalled that the state would remain a powerful purchaser of domestically produced goods during this process. Speaking to Sunday’s Zaman, experts and analysts noted that it is possible to support and promote domestic production without undermining international rules and regulations.
Professor Ahmet Yereli, dean of the faculty of economic and administrative sciences at Hacettepe University in Ankara, drew attention to the importance of Turkey’s TL 70 billion annual purchasing power. “The determination of the state to purchase in response to potential fear of stagnation is really important. It is an important reminder that should cheer the internal markets,” he said.
Professor Ersan Bocutoğlu, chair of the department of economics at the Black Sea Technical University (KTÜ) in Trabzon, underscored the possibility of a double dip following the 2008 crisis. Noting that the government has taken proper measures to address probable repercussions of the unstable global economy, Bocutoğlu said: “There were three major problems in our economy: unemployment, income distribution and CAD. Measures taken to combat unemployment have worked out. Achieving of a just distribution of income requires more time. And important analyses were made with regard to the CAD. Steps and measures to promote domestic production are really important as inexpensive intermediate goods play important role in dealing with that gap. This also improves employment figures. All big countries do the same; they provide substantial incentives to promote domestic production.”
Confirming that local production is sponsored and supported in almost all countries in the world, Professor Rıdvan Karluk, dean of the faculty of economic and Administrative Sciences at Anadolu University in Eskişehir, said that states rely on different methods for conforming to international norms. Karluk stressed that Turkey can take measures to provide incentives for certain sectors in an attempt to narrow the gaps in development between West and East.
Noting that it is necessary to keep the markets vibrant in the face of a risk of stagnation stemming from the psychological impact of fears of a crisis, Yereli said: “For the continuation of production and preservation of the balance, demand should not diminish. Constructive steps have been taken thus far. Unemployment figures represent a visible improvement. This is pretty good. It also indicates that domestic production is on the rise as well. Internal demand should come from either the markets or the state. The demand from the market could be affected by speculations on a crisis. The government seeks to keep the economy dynamic by declaring that the state is still willing to purchase.”
Stressing that the state may make political rather than economic choices in an attempt to address the gap in developmental between the regions, Yereli said there would be no objection against incentives for the promotion of local production in underdeveloped areas. Recalling that the public purchasing option can be used to promote local production in identified areas even if it is more expensive than importing, Yereli also said: “Nobody would oppose such a policy. As part of the deals with the EU we have to remove the barriers before the private sectors to make sure that market actors can move freely. Public policies are mostly political rather than economic. The major motivation in the private sector is profit. However, the political decision-making mechanism is decisive in the public sector. If the situation so dictates, you may rely on the more expensive and costly option of the political decision-making mechanism. Determination and declaration that the state would keep the demand dynamic should cheer the markets.”
Mercantilist subconscious
Stressing that the Western economies have resorted to mercantilism again, Bocutoğlu said: “There are substantial incentives for local production in almost all big economies. All advanced economies including the US are going back to mercantilism. This mercantilist subconscious visibly reappears in times of crises. And this inevitably breeds extreme nationalism, which makes it a real threat for the entire world. As a consequence, violent fascist movements gain in strength.”
Noting that Turkey has not relied on its public purchasing power so far, Bocutoğlu also said: “It is a political decision to choose a local product over an imported item even if it is more expensive by up to 15 percent. It is a matter of deciding whether or not to support domestic production. So far, Turkey has not relied on its public purchasing power. It now does so because the 2008 crisis still makes its influence felt.
The Western model is for the good days. In times of crisis, no model remains; the economies land themselves in extreme positions, including the adoption of a fascist approach. Those developed economies see no problem in violating their principles. The fact that government has decided to use public purchasing power as a device to remove the interregional developmental gap in accordance with international norms is an important step.”
21 August 2011
SOURCE: TODAYS ZAMAN
