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Does the AKP’s Plan for 2023 ensure 8.48 percent annual growth? 19/04/2011 - Viewed 3245 times

The Justice and Development Party (AKP) announced its election manifesto last Saturday. The ruling party, on the eve of the third general elections in which it will take part, aims to increase the GDP to US$ 1 trillion by 2015 and to US$ 2 trillion by 2023. A simple calculation suggests that to achieve this target, an annual growth at 8.48 percent must be attained until 2023. In other words, it assumes that Turkey's growth rate until 2023 will double the historical 4 percent growth average attained in the last three decades. This was exactly an assertion I wanted to see on Turkey's agenda.

I was curious whether the manifesto defined the steps to be taken to realize the assertion, that is, to double the growth rate, so I assessed the manifesto accordingly. After all, a manifesto that lacks a much more innovative approach compared to the earlier documents, two-times more efficient institutional structure and two-times better policy framework implies groundless assertions.

The most favorable aspect of the manifesto is that a debate with a perspective for 2023 has been brought forward on the popular agenda for the first time. We can conclude that the manifesto serves  good purposes if we approach it with only this aspect. We have been stressing for a long time (since 2006, more precisely!) that Turkey's problem is that it does not have a long-term growth story. So, we had better assess the manifestos of the political parties of the last 12 years from this perspective before the 100^th anniversary of the Republic.

Below are my interpretations and opinions of  the AKP's election manifesto in 10 points

1. Reform perspective. The manifesto aims to make Turkey one of the 10 biggest economies in the world by 2023. However, it does not discuss how the necessary productivity gains will be enabled, how the human development level will be improved, how the institutional infrastructure will be advanced or how the required second generation reforms will be carried out. For instance, the manifesto neither pinpoints that a comprehensive tax reform is needed, nor demonstrates a perspective to reduce the share of indirect taxes in total budget revenues. It would be a huge success if Turkey could become one of the 10 biggest economies of the world with a third-world tax system. Furthermore, I believe it is quite worrisome that the European Union negotiation process and the reforms in this context are passed off with a few sentences (in the foreign policy chapter!).
2. Growth and sources. It is interesting that the 156-page manifesto, apart from stating the target for the US$ 2 billion economy, does not talk much about the growth estimates, which is actually one of the subjects politicians love to talk about most. Beyond this, the document does not address what the sources of growth will be, how the corporate sector will achieve a technological leap or how labor productivity will be improved. Similarly, it is left to the curiosity of the reader to identify how the savings gap, one of the major structural problems hindering Turkey's growth, will be closed.
3. Infrastructure of a high-income economy. The manifesto aims to increase per capita income to US$ 14 thousand by 2015 and to US$ 25 thousand by 2023. This implies an attempt at a shift from a middle- to a high-income economy. It is quite thrilling in this sense. It anticipates that we will "somehow" overcome the middle-income trap, the problem stemming from the inability to achieve the European Union's level of productivity on the one hand and the failure to compete with the low costs of the East Asian producers on the other hand. However, it does not specify the "how" part. The emphasis put on R&D and the life quality in urban areas can be read as positive aspects in this respect. But the shortcomings in the sub-titles below do not raise hopes.
4. Industrial strategy and the shift to high technology. The manifesto emphasizes that the industrial strategy will be materialized and Turkey will become the production base of Eurasia for medium and high technology products. It is a positive thing to see that the ruling party embraces this target. On the other hand, the document involves an assertive target to increase the share of R&D expenditures to 3 percent of the GDP. Nonetheless, it does not foresee any institutional innovation in the R&D field. This implies that the AKP is content with the performance of the Scientific and Technical Research Institution of Turkey (TUBITAK), which I think is a rather doubtful supposition. Also, it is not clear to what the cooperation with the Middle East and North Africa (MENA) countries in the R&D field refers. The production capacity of Turkey in medium and high technology products is defined with de facto statements such as "strategies will be prepared and implemented" and lacks any assertion or plan. And it appears that if the plan is implemented as it is, the weight of low technology sectors will increase because the manifesto generally stresses the construction activities to be carried out by the public sector, which I guess will affect the steel-iron and cement sectors positively. Also, I think it is worrisome that the document does not touch upon or make any commitment about the "incentive system," the first instrument that comes to mind regarding industrial strategy in Turkey.
5. Defense industry and public procurements. I believe that the emphasis put on the defense industry in both the Prime Minister's introductory presentation and the general framework of the manifesto is a correct one in regard to the development of high technology industries. However, I think the document is insufficient in learning lessons from the experience of the Undersecretariat of Defense Industry (UDI), which undertakes the most critical roles in the development of the defense industry in Turkey. The efforts of the UDI to improve domestic production and enable a technologic leap are to be transferred to the Ministry of Industry and Trade, the Undersecretariat of Foreign Trade, the Ministry of Transportation, municipalities and other relevant institutions. For instance, the document focuses on a number of attempts in the field of transportation; however, I would expect this to be accompanied by a vision directed at the improvement of the domestic capacity for the production of the wagons, buses and other equipment that the public sector will purchase to this end. The commitment to launch a plant to produce commercial aircraft for regional travel is exciting provided that it contributes to the local technological capacity and reduces Turkey's current account deficit.
6. Regional development. During its term in office, the most innovative and thrilling step the AKP has taken in terms of economic development has been the opening of the Regional Development Agencies (RDAs). However, it appears that the AKP does not sufficiently realize the importance of the RDAs, which promise a huge potential for planning and materializing development at the local level. The election manifesto touches upon the RDAs with only one sentence and does not cast any role for them among the 2023 commitments. This actually evokes in minds the question of whether this huge step was just coincidental.
7. Employment policies and female labor force participation. The focus the election manifesto puts on the active labor market policies is pleasing. The most exciting measure it proposes, in my view, is the "child care and education incentive for women who send their children to daycare centers." This is a policy measure that has been demanded by experts for a long time and it has a huge potential to increase women's employment. In this sense, it is pleasing that this proposal will be materialized. The document targets to increase female labor force participation rate from 27 percent to 35 percent by 2023. I think this is a modest target for a document that makes a number of assertive commitments. A country which seeks to become one of the 10 biggest economies of the world should target a higher female labor force participation rate. Currently, the female labor force participation rate in the largest 10 economies of the world varies around 55-65 percent. This raises a contradiction with respect to the aspirations to become one of the 10 biggest economies of the world.
8. Commitments about Istanbul, Ankara and Izmir. The plans for Istanbul have been the most debated aspect of the manifesto in the media. Accompanying these, the manifesto includes a perspective for the two other largest cities, Ankara and Izmir. The AKP is well aware that the economic growth implies the growth of cities, partly due to the experiences of the party cadres in municipal work. Although the focus on the efforts for the growth of cities and for regional transformation plans is positive, some questions arise. How will the "crazy" Istanbul project to be announced in April 27 contribute to Turkey's economic growth and more importantly to Turkey's becoming a high-technology and high-income country? Will Istanbul remain the only center of growth or will we have other growth centers? On what frame will the relations between the central government and the local administrations be built? Unfortunately, the manifesto does not make a strong assertion for a local administration reform. Therefore, the plans for Izmir and Ankara, for instance, seem to be a local rather than a general election manifesto. For instance, the AKP manifesto does not give place to the technologic attempts that will serve for the development axes involved in the Regional Plan of the Izmir Development Agency. If I were in their shoes, I would design a crazy project to create a university ecosystem in Izmir meeting the quality of Stanford University, the heart of the Silicon Valley, instead of making commitments about municipal activities and services. I believe that otherwise it will be a dream to make Izmir a high-technology center. I have a lot to say about the commitments for Ankara, where I have been living for more than 6 years; but I will leave that for another commentary. All I will say is that, I hope the AKP's 2023 vision and the urban transformation plans will not be like that in Ankara, Çukurambar district, where unaesthetic 5+1 and 6+1 flats reach to the sky.
9. Realism and the lack of action plans. It is a good thing to be assertive in targets, but if you set targets that cannot be met under any conditions severely harms the credibility of the plan. For instance, I believe that the target to be among the first 10 in the OECD PISA evaluation is unrealistic. Given the current education reform perspective of Turkey it is not easy to become one of the 10 most successful countries in education unless the Ministry of Education is not planning to launch PISA training courses and if the OECD is not given access to the exam code algorithm (if any). Furthermore, the manifesto has neither an introduction nor a conclusion. It would be much better if the document constituted of separate sections was supported with a consistent action plan that synthesized those sections. Without such a plan, it is unlikely that the document is more than a wish list.
10. The problem of becoming operational. The weak connection between political parties' election manifestos, government programs and ministerial strategic plans is one of the major problems in the public administration system in Turkey. That the AKP has yet to solve this problem at the end of 8 years as the singe-party in power is one of the biggest challenges for the 2023 plan to become operational. In addition, detailed action plans for some sub-sections against obscure statements for some others weaken the overall consistency of the document and raise questions about the steps to be taken.

Consequently, it is a positive aspect that the AKP's election manifesto offers a more comprehensive and assertive framework than the Medium-Term Program (MTP) dated October 2010, which I criticized for being insincere and timid.^1] The timidity observed in the MTP is absent in the program of the ruling party on the eve of elections, as can be expected. The extent to which the courage reflected in the manifesto is translated into the new MTP will test the sincerity and the reality of this document.

TEPAV Economic Policy Analyst Esen Çağlar, http://www.tepav.org.tr/en/ekibimiz/s/1025/Esen+Caglar

[1] http://www.tepav.org.tr/en/kose-yazisi-tepav/s/2087