On his way to Russia, Honorable Prime Minister of Turkey repeated the same thing: "Masallah, you are doing very very well." And like a combatant, who, to those pitying to his bruised eye at last night's fight, says 'you should see how their faces look like!' he added: 'you should see how the others are suffering.' You cannot respond, "No, we have access to the Internet. We know what goes around in the rest of the world immediately." After all, he is the Prime Minister; we do not want to get into trouble. Today, let us not waste time with this "political" (that is, incorrect) findings and address the issues that went down to the drain in the face of the global crisis. This way, we can also preserve our sanity. If you will not be depressed, please keep reading.

In one of the recent days, someone asked me "What are the binding constraints beyond Turkey's growth process?" People from international institutions love this type of growth diagnostics questions: Like "can you name three issues most important for Turkey now?" When I am faced with such questions, I like to underline economic issues. If not, it would be quite relaxing to respond as follows: "First, a government which is able to govern. Second, politicians who have a system of goals that can be rationally defined. Third, politicians who are not at the edge of a nervous breakdown." But when did we have such an opportunity in Turkey? Never. Therefore, for today, there exists no marked anomaly. Turkey enjoys its adventure on the path of "insistent mediocrity" Anyway, let me tell you how I responded to the question at the beginning.

In my opinion, the main problem of Turkey is the skill mismatch in labor markets. While rapid urbanization and structural transformation in industry alter the skills demanded from labor markets, education system does not seem aware. Scope of the education system is not expanded sufficiently. Now, please sit down and think: ratio of urban population is 75 percent. This ratio was below 25 percent in 1950s. Those migrating from rural to urban areas are not at all equipped enough to fill the new jobs. Structural transformation in the industrial sector also ignites this mismatch. What work can a wool fluffer, who cannot find any wool mattress to fluff, do in the automotive industry with his existing skill set? This is the main impediment to Turkey's rapid growth. And the solution requires strong coordination. However, despite all the big promises made, there is no concrete step in this direction. For instance, the mentality of the bureaucracy still defends that the number of classrooms painted within the last year is a performance criterion. It is sad more than it is funny. This is the first issue.

The second issue is the impediments to the access of corporate sector to finance. When access of Turkish firms to finance is considered; outlook of Sweden and Zimbabwe can be observed at the same time. A part of firms enjoy high productivity and face no trouble in accessing finance. However, as World Bank-TEPAV "Investment Climate Assessment for 2007" reveals, there also is a section operating in the informal sector with weak productivity and low access to finance. In Turkey, SME's are established; but they cannot grow as rapid as their counterparts in other countries do. This is a bad thing. Elimination of the limits to firms' access to finance implies reassignment of traditional functions to banks and struggling with informality. Otherwise, we cannot take the chains off Turkey's feet. Adapting it to the current process of survival from the crisis, this is what we should see: Firms, which are traded in the Istanbul Stock Exchange (İMKB) and which enjoy high productivity, are about to overcome the crisis. However, for the firms, which are out of this group and which have undertaken a high proportion of employment, resistance test is still the fate. Firms' access to finance is still a serious problem for Turkey. The reason for this can be informality and firms' inability of institutionalizing. However, what will switch firms into the formal sector is the inaccessible finance itself. A couple of years ago, a bank official said "Firms are not institutionalized. We are teaching them how to do business and how to manage a firm." And I responded: "So you are doing what a regular bank official does." Have you heard about "Corporate Reform Ministry"?  It is because there is nothing like that. That task must be undertaken by banks. If your Treasury is troubled, your banks will be troubled. And if your banks are troubled, your firms cannot be healthy. And this is the second issue for Turkey.

And the third one: Third issue is related with the absence of a coordination unit directed to the common good of the public. This is why, for instance, we have no mechanism in effect that will bring together the State Planning Organization, Ministry of National Education, and Higher Education Board in the context of the goal of economic growth and make them think through this issue. Similarly, there is no general connection between party program and government program; government program and ministry program; or enacted laws and common goals. As a result, neither party programs and government programs; nor ministerial programs and development plans have a meaning. The problem deepens as we move from macro to micro steps. And this third issue constitutes the main reason why Turkey cannot be governed. If there is no mechanism to apply, the foresight of the step to be taken becomes closely connected with who sees the Prime Minister first in that morning. In this sense, the third binding constraint is related with public administration reform.

Can we add energy and transportation to the list? It can be; but in my opinion, the order of importance must be as given above. Is low savings rate a binding constraint? Not it is not.

Please do not let "Ankara Tussles" shade your vision; these are the main issues on Turkey's plate and are listed in TEPAV's second generation reform report.

This commentary was published in Referans daily on 14.01.2010.