Global financial crisis is opening out the door of a process of transformation. Those that fail to acknowledge the transformation cannot manage it. What was the motto? Either we will manage the crisis or it will manage us. Either we will try to perceive and manipulate the global transformation dynamics or the transformation process initiated by the global crisis will eventually change us regardless of our desire. Either we will benefit from the transformed aspect and better control the cost of the crisis, or the crisis will thrust through us while we sit and wonder what goes on. We believe that what goes around in the world is not closely monitored in Turkey. For instance, that the IMF is currently working on a social conditionality geared to protect the poor from the impacts of the crisis does not have any repercussions here in Turkey. The reasons behind this initiation are not ever discussed. As we said before, we believe that what goes around in the world is not closely monitored here in Turkey and the mystery of opportunity windows is not acknowledged.  Let us see why.

Global crisis started as a financial crisis. Nowadays and day by day, everyone is attaining a better perception about how financial sector and real sector are highly connected with each other and the relation of the issue with poverty and unemployment. As you might remember, we learned this lesson the hard way in our 2000-2001 adventure. Nowadays, it is not possible to finance corporate sectors in the world via financial markets as we were used to. It also appears that this mechanism will not be working again in a short while. Here, short while refers to 2009. Remember that, at the end of 2008, we told you "Forget 2009 and focus on 2010". If some more time is wasted, we will say "Forget 2010 and focus on 2011". It is quite close!

Do you wonder why? It is quite simple: It appears that we will wait for a bit longer to see financial markets financing corporate sector through private channels as is used to do in the past. There are several reasons behind this. First is that the balance sheet damage in the banking system is neither put forth clearly nor fixed.  This process has not yet been completed in the USA. Just as we used to say last year, "fat woman got on the stage", but she somehow has not started singing yet. And there is no doubt that we are extremely bored. The point we stated here before still applies: We have learned that determination and fixation of the damages in balance sheets of banks is a highly political issue necessitating a strong administration. It is not easy to take a look at the indebted companies list of the banks and decide what will happen to each company. Everyone has its own lobby and political support. In this context, bankruptcy of Chrysler is not bad but good. Nonetheless, this is only one reason behind the delay in the solution of the issue.

The second reason that will further delay the solution directly stems from the way of operation of American financial system. In the US, corporate sector is financed through capital market instruments as much as - maybe even more - it is financed by the banking sector. Stock and equity markets are quite important. Decisions are made directly by individual and institutional investors; they decide which project through which channels they will support. It seems that capital market investors are highly disturbed by the fact that Washington took precedence over New York regarding resource allocation decisions during the global financial crisis and its aftermaths. That in the discussions constructed around the context of Bank of America (BofA) general board the names of FED Chair Bernanke and Minister of Treasury Paulson occupied the agenda in the context of direct intervention in BofA's own resource allocation decisions must be assessed as an issue that will delay the stepping in by stocks investors over the upcoming period. Now, assume you are a stocks investor: You evaluate the project and decide to invest on one of the stocks. Then, someone from Washington calls you and forces the company CEO to make a decision that will waste your resources on an instrument you never thought to invest on without your notice. What kind of a practice is this? In that case, would you purchase stocks unless the weather is completely cooled and things started to evolve in the way they used to? You hardly do so. Thus, we believe that in such an environment capital market investors cannot easily step in. This is the second point.

Let us state the third reason. We believe that, channels that transfer funds to countries like Turkey can start to step in only after the first two channels are fixed. So, what is that we say? If the system is let alone on its own feet, resource inflow toward countries like Turkey cannot be observed for another three to four years.

Then, what happens in that case? Let us make a generalization. This is what is going to happen: each government will collect the resources at the hands of investors in the national market and will transfer the resources to the corporate sector alone. Today, Turkey is one among the small group of countries that has not reached this phase. At the international level, IMF, on behalf of all of us, will collect resources from investors and transfer those toward countries like Turkey. This is in fact the urgent agenda of the world. This is why everyone comes together aside one another. We invite those who wonder "What is this new role of IMF all about?" to review the presentation IMF Managing Director made. Among the conclusions that can be driven from the mentioned presentation is that the reason for this fund flow is to prevent poor from becoming poorer. That the IMF is talking about a "social conditionality" for fund transfers though the idea is not yet solidified must be taken into consideration.

So, what is that we say? The importance of signing an agreement with IMF as soon as possible does not stem from building credibility at the eyes of those to transfer funds to Turkey. Why not? Because there will be a few number of investors to transfer funds via that channel. So what is the important thing? It is necessary to agree with the IMF as soon as possible to substitute fund flows with funds to be transferred through the IMF "from one state to another" as it is the only way to ensure the inflow of foreign savings in the short term. Note that this is a change specific for the current period: IMF now stands by the poor. This is the new duty of the IMF.

Kindly submitted to whom this might concern.

This commentary was published in Referans daily on 05.05.2009