Turkish industrialists and market operators hailed Monday, April 16, a new program from Economy Minister Kemal Dervis which promised a break from the past with badly-needed reforms to revitalise the economy. Dervis announced on Saturday plans to cut public spending by nine percent, decrease the state's debt burden, restructure its weak banking system and speed up privatization.
"This program is different from those which preceeded it, because instead of attacking short-term problems, it takes on structural aspects of the Turkish economy, which opens new horizons," said Tevfik Eraslan, a capital markets fund manager at Kentbank. The Istanbul stock exchange showed support for the plan, with the IMKB index rising by 438 points or 4.9 percent on Monday to close at 9,378 points.
The improvement reflected optimism over the recovery program, but political willpower to carry out the reforms as well as foreign aid and the details of monetary policies — yet to be announced — remained crucial questions, experts said. A financial crisis in February forced the government to redraw its economic plan after dropping a currency peg between the lira and dollar that underpinned an anti-inflation drive backed by the International Monetary Fund (IMF).
The lira has now fallen by 41.3 percent against the dollar, rebounding from a low of 47 percent last week. "The foreign exchange rate seems to have gained some stability. But optimism in the markets is cautious," Bulent Muhur from Tekfen Bank told the NTV news channel. "The markets will closely watch how the reforms are implemented, and if they are carried out properly, the trends will improve further," he added.
Eraslan said reforms should include clarification of economic relations. "Obscure relations between economics and politics should now be clarified, which is a good thing because the confusion that existed until now was very damaging to the economy," Eraslan added. Turkish industrialist Ishak Alaton, head of the dynamic Alarko holding group, was a bit more blunt. "We must end this communist, Stalinist system from the 1950s which has survived only in Cuba and North Korea," he told AFP.
"The only difference is that here we tolerate a private sector, which serves as a milk cow for the state." "Now there is no longer milk coming from the breasts, but blood, so it is time to move forward with liberalization." Alaton hailed Dervis' plan, saying: "There is hope now because Kemal Dervis is carrying a realistic message, for the first time."
Under the new package, Turkey revised its year-end inflation target upwards more than four-fold to 52.5 percent, and forecast that gross domestic product (GDP) would drop by 3.0 percent. Dervis said Monday in the editorials of leading Turkish newspapers: "The program that we have unveiled demonstrates that Turkey has entered into a new phase and that there is no question of going back."
But he has been criticised for failing to detail concrete prospects for foreign aid, which he estimated at $10-12 billion and said would be worked out in early May, probably with the IMF. The Fund welcomed the reform package on Monday saying: "With effective implementation and adequate international assistance this program can help Turkey recover from the crisis and lay the groundwork for future sustainable growth."
But reforms came under fire from leading trade unions for failing to address more urgent problems faced by the public such as falling purchasing power, higher unemployment and eneven income distribution. Thousands of people, mostly small businessmen and workers, have staged furious protests against Prime Minister Bulent Ecevit's embattled government in the past two weeks, demanding it take responsibility for increasing prices and layoffs and resign.
Dervis, however, said Monday he was confident that Turkey would now receive the billions of dollars of foreign aid it needs to overcome the crisis. He told daily Milliyet that what was at stake was a "structural overhaul", which would take time to bear fruit. "Transformation does not happen overnight. Nobody should expect miracles. Once the changes have taken place Turkey will become one of the most powerful countries in the region," he said.
But Alaton warned that "markets and economic actors have reserves about the attitude of other government ministers: will they follow, or continue to waste state money on populist aims through grants of completely opaque credits." Kentbank's Eraslan agreed that cooperation by politicians would determine whether or not the economic plan succeeded. "All eyes have now turned towards the parliament. If new legislation is put in place and foreign aid returns, public trust should be restored," he said. The IMF is due to study the Turkish plan by the end of April. —(AFP)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)