Turkey is still on the edge of the known world. It is not inside but outside civilization.

I do not know where in the world Turkey established its system. When I look at it, I can't see it. In economic terms, what I see is that Turkey is still on the edge of the known world. It is not inside but outside civilization. Recently, an American friend described where Turkey stands in the eyes of the American business world. Let me take a departure from that point. "Countries can be grouped in two categories," he said. "Those the future of which we are sure while facing difficulty in understanding what they currently are trying to do," and "those the future of which we are not sure,  and we face difficulty in understanding what they currently are trying to do." "Turkey," he said, "seems to be closer to the second group." This is bad. Turkey's still being on the edge of the known world in the first quarter of the twenty-first century is closely associated with bad management. Turkey has to build its future on the basis of the parameters it sets and prove itself. We have to focus on changing and expressing ourselves instead of waiting to be discovered. This is the only path to prosperity.

What does Turkey's being on the edge of the known world mean? What is  to be changed? Last Tuesday I stressed two points: countries can be grouped in two categories, namely "those through which a global value chain passes" and "those through which a global value chain does not pass." Turkey is in the second group. This completely overlaps with the comments of my American friend. According to a recent study presented by the Washington-based Peterson Institute, 46 percent of US imports originate from intercompany trade. Let me draw three conclusions in the light of this.

First, an increasing proportion of the world trade stems from the trade between the headquarters and branches of multinational firms. There is no single pattern we can identify; the path is two-way. Seventy-six percent of the US imports from Ireland originate from intercompany trade caused by the transactions of the US firms in their branches in Ireland. Similarly, 74 percent of the US's imports from Japan stem from intercompany trade, namely the transactions of the Japan-based companies with their branches in the US. American firms have established branches in Ireland, which was enabled by the Irish government. Japanese firms have established branches in the US, which was enabled by the Japanese government. In the end, trade relations have improved, and both Ireland and Japan have been integrated into the known world and have avoided remaining on the edge of the known world. This is the first point to state.

The second point is related to the quality of integration. In imports of the US, the share of intercompany trade in plastic and plastic shoes is only 2 percent, whereas the share of intercompany trade in the importation of automotive, medical equipment and devices is around 70 percent. The conclusion to be drawn is as follows: the way to be able to export more sophisticated goods to more developed markets is to prepare the way for intercompany trade. This was the issue I stressed in my last commentary in the context of the "trade follows investment" phenomenon. The way to improve Turkish industry is evident. A country without a solid industrial strategy cannot have a meaningful foreign capital policy. And a country without a foreign capital policy cannot have a foreign policy. This is the exact case with Turkey.

The third point has to do with the prerequisites of intercompany trade: the domination of rules in the country to be invested. The share of intercompany trade in the total US-Japan trade is 74 percent whereas only 2 percent of the trade between Bangladesh and the US is composed of intercompany trade. Rule domination has three components: first, the rules must be definite in each field. The market is a set of institutions and rules. Second, everyone must be equal in front of the rules. Third, how to change the rules also must be tied to rules. Global value chains skip Turkey because of the lack of rule domination and the blurring of the European Union perspective. The absence of rules and norms imply bad management, from which Turkey still suffers. Let me explain the issue sector by sector after the elections.

A country which has to write its future has no option but to adhere to rules.

This commentary was published in Radikal daily on 10.06.2011