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    Diverging paths: Turkey and Indonesia

    Güven Sak, PhD03 October 2015 - Okunma Sayısı: 1623

    Turkey is no Indonesia, Standard & Poor’s declared this week. But the two countries have many things in common. Both are composed of Muslim majorities, both are listed under the MINT (Mexico, Indonesia, Nigeria and Turkey) grouping, trailing the BRICS. Both countries have received a BB+ from S&P recently. But the similarities end there, says Standard & Poor’s. In a press release, the ratings agency noted that Indonesia and Turkey are taking divergent paths. Turkey’s outlook is negative while that of Indonesia is positive. So as developing markets are being shaken up and we are waiting for the imminent decision of the Fed, Turkey is negatively discriminated while Indonesia is positively discriminated. Why?

    Last year, both Turkey and Indonesia had presidential elections. President Erdoğan was elected in Turkey, and President Joko Widodo, popularly known as Jokowi, was elected in Indonesia. The difference was that Mr. Erdoğan was an old-timer with a new title, while Jokowi was more like the Erdoğan of 2002 – a young mayor challenging the old guard of his country. President Jokowi has been a breath of fresh air, bringing political stability and a sense of economic reform to Indonesia. President Erdoğan’s election on the other hand, burdened Turkey’s system with the crushing weight of his personality. He has effectively shifted the executive branch of government from the Prime Ministry to the Presidency. He is already calling the shots, but he also wants to sign the papers. That is one of the reasons why the country suffers from the kind of economic and political uncertainty that Mr. Erdoğan’s very government had cured a decade ago.

    So the market is bearish on Turkey. But is this a systemic problem? Indonesia has a presidential system, while Turkey is a parliamentary democracy. Does that mean that presidential systems are better at bringing political stability and policy certainty? No. I think the problem has more to do with the haphazard way the system is designed in Turkey. Out of the blue, without a comprehensive constitutional reform, Turkey decided to elect its presidents through a popular vote. Yet the person who signs all the executive decisions is still the prime minister. The president is technically the commander-in-chief, yet the chief of staff still reports to the prime minister. The system is so loose that Mr. Erdoğan was able to rearrange it to his liking.

    That is the main reason why Jokowi follows the path of policy reform and Erdoğan stands still. There is no ambiguity around Indonesia’s executive, so its fresh-faced leader can get things done quickly. Turkey’s governing system has been compromised and is too preoccupied with itself to care much about policy. With no strong government at hand, the bureaucratic activity has grinded to a halt. The Turkish bureaucracy can neither design the necessary reforms, nor implement the ones rarely agreed-upon.

    Indonesia is a country set in motion. Turkey is a country in flux. Our leaders do a lot of huffing and puffing, but at the end of the day nothing really changes. That is why S&P is saying that Turkey and Indonesia’s paths are diverging.

    This commentary was published in Hürriyet Daily News on 03.10.2015

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