Turkey so far has grown rapidly "with the blessing of God" and now is slowing down automatically.

On Tuesday, I said, "There is no need to worry, but it is useful to be concerned." Taking departure from that point, let's start to examine the potential outcomes of the ongoing exchange rate adjustment. Let today's topic be this: Will the exchange rate adjustment pave the way for foreign investments? Will Turkey become an important area of investment for international value chains when the adjustment is completed? Will the fate of Turkey change? To be honest, I have doubts. Let's try to figure out how the investment climate of a turbulent country will be.

Recently, the Financial Times published a short evaluation note by two Boston Consulting Group (BCG) executives. The BCG formerly had entered and then exited the Turkish market. They are now trying to restart operations in Turkey. In their assessment, Turkey does not get a fair share of international direct investments. Despite a number of favorable variables including the size and the growth performance of the economy, political stability, the share of public debt in the national income, and the increasingly expanding middle-class with changing consumption patterns, Turkey attracts relatively less foreign direct investment than its rivals. American investors in particular avoid the Turkish market. Turkey, the sixteenth biggest economy of the world, is fortieth among the countries that attract investments from the US. This was the case in both 2008 and 2010. The most interesting part of the evaluation for me was the fair share analysis. According to this, foreign direct investments to Turkey have to triple. The current amount of foreign direct investments to Turkey at US$ 6.6 billion can reach US$ 19.5 billion. This is a critical improvement for advancing Turkey's export capacity as well as for stable current account deficit finance and sustainable growth.

Does Turkey offer a suitable climate for this? Yes, it does. The issue commonly voiced during US State Minister Clinton's Istanbul visit was the establishment of partnerships between Turkish and American companies. Cooperation in third-country investments received particular focus. I remember noting this as an important change of focus during the Washington visit of TOBB President Rifat Hisarcıklıoglu. This is the first point.

And the second one: here the focal point is not only to bring foreign companies to Turkey's large domestic market. Turkey must demand from the foreign companies with which it shares its domestic market effort to support the transformation of industry into a high-tech one. It must have export targets. It must have a strategy for becoming a part of international value chains as well as for foreign capital. The foreign capital strategy cannot be built on the "Come, come again, whoever you are, come" slogan.

Now the current issue: have the exchange rate movements brought a suitable climate for foreign investors? They will as soon as the movement is completed. The depreciation of the Turkish lira (TL) is a key opportunity for foreign direct investors. In dollar terms, the cost of TL-denominated assets and labor is decreasing. But at this point, the pathetic state of the policy dialogue between the public and the private sectors and the stability of the investment climate come to the fore as impeding factors. Turkey so far has grown rapidly "with the blessing of God" and is now slowing down automatically. Here, the issue that should raise concerns is the common attitude in the economic policy circles to let the economy stew in its own juice.

The statements of the Governor of the Central Bank, Erdem Başçı, do not signal a radical change in this attitude. Hopes currently grow with the "We will find the midway" statement by Prime Minister Erdoğan. What is the deal, then? The squeaky wheel gets the grease. What this saying implies today is that you cannot get results unless you attract the attention of Prime Minister Erdoğan. I wonder what size the fluctuation should be to achieve this. With the current outlook, this is the issue to which attention needs to be paid.

This commentary was published in Radikal daily on 29.07.2011