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World Economic Forum in Turkey 2006


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World Economic Forum in Turkey 2006

  1. 1. WORLD ECONOMIC FORUM World Economic Forum in Turkey Connecting Regions Creating New Opportunities Istanbul, 23-24 November 2006 INSIGHTS
  2. 2. This publication is also available in electronic form on the World Economic Forum’s website at the following address: World Economic Forum in Turkey Web report: (HTML) The electronic version of this report allows access to a richer level of content from the meeting, including photographs and session summaries. The report is also available as a PDF: Other specific information on the World Economic Forum in Turkey, Istanbul, 23-24 November 2006, can be found at the following links: The views expressed in this publication do not necessarily reflect those of the World Economic Forum. World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 E-mail: © 2006 World Economic Forum All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. REF: 151206
  3. 3. Contents Preface 3 Summary: Connecting Regions – Creating New Opportunities 4 EU Accession 7 Geopolitical Role 10 Competitiveness & Business Opportunities 13 Bridging Civilizations 15 The Creative Imperative in Turkey 17 Acknowledgements 19 1 World Economic Forum in Turkey
  4. 4. Preface The timing of the World Economic Forum in Turkey could not have been better; just a few days after the publication of the European Commission’s Enlargement Strategy and Progress Report, over 400 participants from more than 45 countries gathered at the Bosphorus. The discussions included the current EU negotiations, yet they touched upon much more than that. Under the overarching topic of “Connecting Regions – Creating New Opportunities”, the Forum prompted a positive, constructive and realistic assessment of Turkey’s connecting role, both in relation to the EU and other neighbouring regions. The meeting had a major positive impact and a number of identifiable outcomes are worthy of attention. Our meeting helped define Turkey’s strategic importance. With a difficult moment in Turkey’ s EU accession negotiations as a backdrop, the meeting brought into focus the long-term strategic considerations that link the futures of Turkey and Europe and the manner in which Turkey would affect Europe in the global arena. The meeting broke taboos by addressing certain issues that traditionally remain unexplored in gatherings of this kind. The topics discussed included the EU’s evolving demands of Turkey and the situation regarding human rights and minorities in the country. The meeting also provided a platform where top policy-makers and business leaders jointly identified Turkey’s long-term comparative advantages and considered what ought to be done to further increase Turkey’s potential in order to translate this potential into reality. Yet the most important outcomes of this gathering could be measured at the individual level. Each participant, whether from business, academia, the media, politics or civil society, had a unique opportunity to exchange views with his/her peers, gain new insights regarding Turkey and the neighbouring region, and expand personal networks with leaders from all walks of life. We are confident that this gathering facilitated many contacts which will grow even stronger over the years to come. Finally, we are proud of having achieved the aim identified in one of the meeting’s 20 session titles: Branding Turkey – Changing Perceptions. When the two-day meeting ended, we all left the beautiful Ciragan Palace with a feeling of buoyancy and optimism about the country and its future in the region. The World Economic Forum would like to take this opportunity to once again thank the Co- Chairs of the meeting, who provided valuable insights and support for the programme. Likewise, we would like to express our special thanks to our Strategic Partners, Regional Partners and Supporters, as well as to the Turkish government, who supported this endeavour from the very beginning. We are now looking forward to building on this partnership with Turkey and the region. We hope that with your support, the World Economic Forum will again soon fulfil its role as a multistakeholder platform and catalyst for change in Turkey. Felix Howald Director, Head of Europe and Central Asia 3 World Economic Forum in Turkey
  5. 5. Summary: Connecting Regions – Creating New Opportunities quot;We have fulfilled whatever quot;If Turkey were not to join promises we made. We the EU, it would weaken the know there are difficulties to union. We would all lose come. But we are continuing out.quot; to move forward with great patience. The responsibility Mabel van Oranje Director, EU Affairs, Open falls more on the EU than on Society Institute, United Turkey. We are looking for Kingdom; Young Global Leader political common sense.quot; Recep Tayyip Erdogan Prime Minister of Turkey The World Economic Forum in Turkey was especially well Participants also focused on Turkey’s future as it strives, timed, coming a year after Turkey began negotiations for like all other countries, to confront the pressures of membership in the European Union and on the eve of globalization and improve its global competitiveness and Pope Benedict XVI’s landmark visit to Turkey and the business climate. Turkey’s economic, political and social crucial EU Summit in Brussels at which leaders were to reforms started before EU negotiations began, but are assess the status of the accession talks. The setting too currently inseparable from, if not entirely driven by, the was most appropriate – Istanbul’s Ciragan Palace recalling prospect of membership. The process is now irreversible, Turkey’s grand history and culture and the sight of the many participants argued. Asian shore across the Bosphorus a picturesque reminder of the country’s role as a crucial bridge across Finally, the meeting examined Turkey’s global geopolitical civilizations. position, particularly its potential as an energy corridor. This is inextricably linked to the traditional and still Over two days, more than 400 business, government and expanding part it plays as an important connection civil society leaders from more than 45 countries spanning the cultures of East and West. discussed how Turkey is “Connecting Regions – Creating New Opportunities”, the theme of the meeting, and how This is a summary of the insights and recommendations this strategically important nation is playing a critical role for action that emerged from the meeting. They are as a model of stability at the doorstep of a region that is organized under the four pillars supporting the central increasingly unstable. Despite recent strains in Turkey’s theme. relations with the EU, Turkish and European government and business leaders at the meeting urged restraint and common sense, calling on both sides to keep their eyes on the prize. Turkish Prime Minister Recep Tayyip Erdogan, who addressed participants at both the opening and closing plenaries, underscored that Turkey’s joining the EU would be an “alliance of civilizations”, a repudiation of those seeking to divide people of different faiths and cultures who nonetheless share common goals and values. 4 World Economic Forum in Turkey
  6. 6. “Turkey has to go from rent- “We would have more seeking to profit-seeking democracy in Europe and structures to increase its the world. Europe will lose competitiveness.” power without Turkey.quot; Güler Sabanci Mehmet Gürcan Daimagüler Chairperson and Managing Honorary Chairman, Liberal Director, Sabanci Holding, Turkish-German Association, Turkey; Co-Chair of the World Germany; Young Global Leader Economic Forum in Turkey EU Accession Geopolitical Role In 2005, Turkey embarked on complex negotiations to Turkey plays a unique geopolitical role as a stable, secular, join the European Union. The prospect of Turkey’s Muslim democracy literally at the strategic crossroads accession to the EU has divided the governments and between East and West. A member of NATO, it aspires to people of Europe, those with worries fearing a surge join the European Union. With its links to the Middle East in migration leading to job losses. Others are and Central Asia, it is also emerging as a key energy concerned about the implications of admitting a corridor between those energy-producing regions and predominantly Muslim country into the European club. Europe. • While Turkey and Europe are suspicious of each • A model of stability at the gateway to a region of other, they should collaborate and compromise, increasing instability, Turkey can play a moderating role focusing on the big picture. They must not let an in regional conflicts and in mitigating global risks such issue such as Cyprus deter them from realizing the as the menace of terrorism and the threats to energy mutual and multiplicative benefits of Turkey’s joining security. the EU. • Turkey should build on its relations with Europe and the • Turkey should take steps to allay European fears United States, forged during the Cold War and about the size of its population and culture by tempered through the war in Iraq and most recently the stressing that accession can help Europe address conflict in Lebanon, to bolster its role as a robust its demographic deficits, provide deeper links to a defender of peace and security in its region and large market and low-cost labour pool, and offer a elsewhere. bridge between civilizations. • By aligning its energy policies more with Europe’s, • The Turkish people should understand that EU Turkey can emerge as a trusted conduit of energy from accession will take time and require further the Middle East and Central Asia to its European economic, political and social reforms. Turkey’s partners, deriving enormous geopolitical and economic leaders should work to change its people’s benefits as a result. mindsets to appreciate the positive aspects of • Europe and the US should recognize Turkey’s accession rather than stir up nationalism. considerable geopolitical value and provide it with the • Europeans, for their part, should change their appropriate financial, strategic and moral support the perceptions of Turkey to focus not on the risks but country needs to continue necessary political and on the opportunities that Turkey clearly offers in economic reforms and realize its ambitions including EU helping Europe mitigate risks. The EU should resist membership. imposing double standards or new requirements on Turkish membership. 5 World Economic Forum in Turkey
  7. 7. quot;The alliance of civilizations is the antidote to the clash of civilizations. Turkey is not a supplicant. It is a major player in the world in which we live. We are not dealing with easy issues. Neither Europe nor Turkey will see this as a dialogue of constant remonstration but it should be a dialogue of constant reconciliation.quot; Peter D. Sutherland Chairman, Goldman Sachs International, United Kingdom; Member of the Foundation Board of the World Economic Forum; Co-Chair of the World Economic Forum in Turkey Competitiveness & Business Opportunities Bridging Civilizations Turkey has done well in recent years to improve its As a moderate Muslim democracy steeped in secularism competitiveness and business climate, climbing from 71st that maintains close links with Europe, the United States, in the World Economic Forum’s Global Competitiveness Central Asia and the Middle East, Turkey is in a unique Index in 2005 to 59th this year. Future macroeconomic position to act as a bridge across civilizations. At a time and political stability depend on Turkey’s ability to stay the when many worry about the potential of a clash of course of reform, particularly as it pursues EU civilizations, Turkey can be an important link between East membership. and West. • Despite its successes, Turkey faces many more • Turkey needs to take the lead in driving intercultural challenges. Chief among these is to improve education, dialogue. It can share with Europe its knowledge and which is necessary if Turkey is to narrow income experience in reconciling differences between cultures disparities and the gender gap and promote innovation. and faiths, as well as its unique blend of Islam and • Anomalies and dysfunctions in the economy should be secular values. addressed, including red tape, corruption and the grey • As a prospective member of the EU, Turkey can market. Rent seeking should be replaced by profit enhance its role as an ambassador for Europe as it seeking. promotes the concept of the “alliance of civilizations” in • After its success attracting foreign direct investment to direct challenge to those who seek to divide people and its banking and telecommunications sectors, Turkey threaten global peace and security. should aim to stir investor interest in other sectors. Key • Turkey’s leadership in bridging civilizations through its priorities include making it easier to exit investments participation in cross-cultural initiatives and support of and increasing the flexibility of the labour market. peacekeeping operations is crucial for regional stability. • The resilience of the Turkish economy could be tested Its moral authority and influence in the region will be by currency volatility and fluctuating investor sentiment enhanced as it pursues crucial domestic reforms over the course of the EU accession talks. Turkey including important measures to promote freedom of should keep its focus on implementing the structural expression and the advancement of women. In doing reforms necessary to address its competitive so, it will also serve to address apprehensions in shortcomings. Europe stemming from perceived discrepancies between European and Turkish cultures. 6 World Economic Forum in Turkey
  8. 8. EU Accession quot;Some reforms have not “There are mutual benefits advanced as quickly as we to being together. We share hoped. If the questions global challenges. There are linked to Cyprus are not many global risks around solved, this will affect the us. The EU needs Turkey as overall negotiations.quot; much as Turkey needs the EU.” Joaquín Almunia Commissioner, Economic and Ferit F. Sahenk Monetary Affairs, European Chairman, Dogus Group, Turkey Commission, Brussels Turkey’s application to join the European Union (EU) Yet the overwhelming logic of a partnership is typically has become the concern of the day, hovering above lost amid the debate over differences or potential all others on the nation’s agenda. It is linked to sources of friction. Turkey’s accession has divided practically every challenge confronting Turkey today governments and public opinion in Europe, with those including its global competitiveness, the rule of law, against membership worried that it will lead to a surge freedom of expression, the labour market and even in migration and then to job losses in their countries. religion. Yet EU membership is not the over-arching Others dwell on Turkey’s roots in the East and the fact question. What is really at issue is the globalization of that it is a predominantly Muslim country. Can such a Turkey and how it addresses the many pressures and place fit into the European club? risks it faces at home, in the neighbourhoods to which it belongs and in the world. “In terms of globalization, Still others focus on Turkey’s turbulent past and the the EU is the major part of the economic programme remains of those days – the role of the military, the and development of Turkey, but the rest of the world is controls on the press and freedom of expression, also very important,” said meeting Co-Chair Peter D. doubts about the rule of law, and corruption. Cyprus, Sutherland, Chairman, Goldman Sachs International, of course, is still a highly emotional issue that raises United Kingdom; Member of the Foundation Board of nationalist sentiment in Turkey, even more so now that the World Economic Forum. the Greek-controlled part of the divided island was admitted to the EU in 2004 after the Turkish side The significant geopolitical and strategic roles Turkey approved a UN-brokered solution which the Greek plays in the world, as well as its position as a bridge side rejected. “Some reforms have not advanced as between civilizations, cannot be minimized. Nor quickly as we hoped,” said Joaquín Almunia, should its growing potential as a major energy Commissioner, Economic and Monetary Affairs, corridor, a big consumer market, a large source of European Commission, Brussels. He added: “If the skilled labour and a financial services hub be questions linked to Cyprus are not solved, this will dismissed. “There are mutual benefits to being affect the overall negotiations.” together,” said Ferit F. Sahenk, Chairman, Dogus Group, Turkey. “We share global challenges. There are many global risks around us. The EU needs Turkey as much as Turkey needs the EU.” “Our people want to see Turkey as a free and prosperous partner of the free world. This is what Turkey deserves. But sometimes some wrong and unjust views from the EU have had an impact on public opinion. The EU must understand this.” Recep Tayyip Erdogan, Prime Minister of Turkey 7 World Economic Forum in Turkey
  9. 9. been the key to success.” Added Victor Halberstadt, “Turkey is going through an incredible economic, Professor of Public Economics, Leiden University, political and social Netherlands, who was also a meeting Co-Chair: “My transformation. What is impression is that all this is irreversible.” most important is that Turkey has been the owner of this transformation. For all its pains, Turkey is sending a strong signal to Ownership has been the Europe and others that democracy, secularism, Islam and key to success.quot; economic growth can co-exist, Babacan explained. These are positive factors that Turkey brings to the negotiating Ali Babacan Minister of the Economy of table. Turkey, after all, can help Europe address its Turkey; Chief Negotiator for the demographic deficits, provide deeper links to a large European Union; Young Global market and low-cost labour pool that is already in a Leader customs union with the EU, and offer a bridge between civilizations. Said Babacan: “Turkey has a young and growing population. Until recently, this was perceived as a problem, a burden that Turkey would bring to the EU. But it is in fact an asset that can help the population deficit of Participants at the World Economic Forum in Turkey the EU and the economic growth of Turkey.” appeared to be mainly pro-accession so discussion focused more on how to convince increasingly sceptical For their part, the Europeans should update their Turks – once wildly enthusiastic about membership – and perceptions of Turkey and focus not on the risks but on suspicious Europeans that Turkey’s joining the EU would the opportunities that Turkey clearly offers in helping be in their interest. The mood of both publics is Europe mitigate a range of risks. And as much as Turkey fluctuating. The move by the EU to freeze part of the should do so, they too must recognize that accession membership talks over Turkish restrictions on the access negotiations usually take years and that Turkey has of ships and planes from Cyprus to its ports and airports implemented many reforms that will take time to will inevitably deepen Turkish disappointment and implement in full. “This is a change of mentality,” Turkish encourage opponents of accession. Pope Benedict XVI’s Prime Minister Recep Tayyip Erdogan explained. “Our surprise gift of support for membership on his arrival in people want to see Turkey as a free and prosperous Ankara in November boosted Turkish spirits. partner of the free world. This is what Turkey deserves. But sometimes some wrong and unjust views from the EU The challenge for Turkey is to keep its eye on the prize have had an impact on public opinion. The EU must and resist walking away from the talks in a nationalist understand this.” pique. Turkish leaders should resist stoking such sentiment, even though it may be natural to do so in the run-up to elections. The Turkish people should Newer EU Citizens (or Candidates) More Likely to understand that EU accession will take time and require Support Turkey’s Accession further economic, political and social reforms, though they have already paid a price in accepting the structural changes that have been implemented so far. To be sure, they should appreciate their considerable achievements. “Turkey is going through an incredible economic, political and social transformation,” said Ali Babacan, Minister of the Economy of Turkey, and Chief Negotiator for the European Union. “What is most important is that Turkey has been the owner of this transformation. Ownership has Source: European Commission 8 World Economic Forum in Turkey
  10. 10. Participants exchanging insights on Turkey’s current and future privatization process, live during a CNBC debate The EU should resist imposing double standards or new requirements on Turkish membership. It has not been Who Is Investing in Turkey? unfair, EU leaders at the meeting insisted. Valdas Adamkus, President of Lithuania, called allegations of double standards “nothing but false illusions”. No prospective member has waltzed to Brussels without its share of stumbles. “We are not dealing with easy issues,” said Sutherland. “It’s a long road with bumps and difficult turns. It requires patience and an understanding of the difficulties.” Many Europeans feel threatened by Turkey’s knock on the door, he acknowledged. Some who had been among the most open-minded have suddenly become the most intolerant. Obviously, Europe too is changing, Halberstadt remarked. Perhaps then the greatest mutual benefit of Turkey’s EU accession will be the bridging of East and West that would have been impossible to contemplate only a few years ago and, in the shadow of 9/11 and the bombings in Madrid and London, might still seem improbable, even wrong to many. But it is precisely the evil motives of the perpetrators of those tragic attacks that drive the logic of Source: OECD a Turkey-EU embrace. “The alliance of civilizations is the antidote to the clash of civilizations,” Sutherland concluded. “Neither Europe nor Turkey will see this as a dialogue of constant remonstration but it should be a dialogue of constant reconciliation.” 9 World Economic Forum in Turkey
  11. 11. Geopolitical Role Indeed, Turkey is all the more remarkable because it “We are here at a moment when the region is more belongs to two distinct and exclusive groups. It is one of and more characterized by the few moderate Islamic countries in the world – instability but Turkey is Indonesia and Malaysia are two other examples – that characterized more and have embraced democratic politics and pursued free more by stability.” market policies to promote growth. And while Turkey is Klaus Schwab only a mid-sized country with a population (73 million) Founder and Executive smaller than Germany’s but larger than France’s, its 8%- Chairman, World Economic Forum plus economic growth is brisk enough to inspire some investors to bracket it with that fascinating club of dynamic emerging markets known as the BRICs – Brazil, Russia, India and China. And while economic growth and prosperity and Turkey’s pursuit of reform will further strengthen its political and social stability, it will also enhance its power and influence, whether or not it eventually joins the EU. “Turkey is not a Glance at a world map and Turkey’s unique geopolitical supplicant,” said meeting Co-Chair Peter D. Sutherland, position is obvious. Literally at the strategic crossroads Chairman, Goldman Sachs International, United Kingdom, where West collides with East, this stable, secular, and Member of the Foundation Board of the World moderate Muslim democracy straddles Europe and Asia. Economic Forum. “It is a major player in the world in A staunch member of the North Atlantic Treaty which we live.” Consider the recent conflict in Lebanon Organization (NATO), the bulwark of Western European and the decision by the Turks to join peacekeeping security during the Cold War, Turkey is in the midst of operations there. Turkey’s military, still a powerful applying for membership in the European Union (EU), the institution, is the largest armed force in Europe. most ambitious regional integration project in the world that began with Western Europe and has since absorbed countries in Central and Eastern Europe. Yet with its cultural and linguistic links that stretch to Central Asia and even as far as North Asia, and the Islamic faith which it shares with neighbours in the Middle East and North “We need a stable Turkey to help Europe tackle today’s Africa, Turkey is firmly rooted among the civilizations of challenges and risks. It is the responsibility of the EU to the East. cooperate with Turkey and to support Turkish reforms. The process needs to be finished with success.” Despite its record of three military coups, Turkey has Joaquín Almunia, Commissioner, Economic and Monetary Affairs, chosen the path of stability and democracy, uneasy as it European Commission, Brussels may be. The decision to aim for EU accession and launch into the tough negotiations required for membership underscored Turkish commitment to modernization and reform. When an Islamist government was elected in 2003, fears that Turkey’s secular foundation might crack proved unfounded. While its neighbourhood “is more and more characterized by instability, Turkey is characterized more and more by stability,” noted Klaus Schwab, Founder and Executive Chairman of the World Economic Forum. 10 World Economic Forum in Turkey
  12. 12. “Turkey has all the “Turkey’s significance does ingredients to become a not stem from its role as an global force, politically and energy supplier.” economically.” Gareth Evans President, International Crisis Ali Y. Koç Group, Belgium President, Koç Information Technology Group, Koç Holding, Turkey Turkey has clashed with the US over the Turkish While in its initial stage the pipeline will supply only 1% of parliament’s refusal to let the country be used by global demand, it is an important step in the diversification American forces as a staging ground for the Iraq war. Ties of the sources of petroleum and will make a critical with Israel have been strained over the Palestinian issue contribution to global energy security. By aligning its and the Lebanon conflict. Despite these disputes, Turkey energy policies with Europe’s, Turkey could reap has maintained its close strategic relationship with both enormous strategic and financial benefits from its energy countries. Clearly, Turkey is more forcefully asserting its initiatives. interests in its foreign policy and deepening its engagement in the region as a defender of peace and Yet in Europe, Turkey’s potential as an energy artery is still stability. “Turkey has all the ingredients to become a a matter of debate. “There is a tacit belief that energy is global force, politically and economically,” said Ali Y. Koç, not a card Turkey brings to the table,” said Sinan Ülgen, President, Koç Information Technology Group, Koç Chairman, Centre for Economic and Foreign Policy Holding, Turkey. Studies (EDAM), Turkey. Of course, it is important not to exaggerate the contribution Turkey could make to Yet outsiders particularly in Europe have not appreciated Europe’s energy security. “Turkey’s significance does not how Turkey and its geopolitics have evolved. “Perceptions stem from its role as an energy supplier,” Gareth Evans, in Europe lag ten years behind reality,” said Hugh Pope, President, International Crisis Group, Belgium, pointed former Wall Street Journal reporter and a leading Turkey out. To be sure, the reality is that Turkey is already an analyst. “Europe was uninterested in Turkey in the early integral part of the global campaign against terrorism and 1990s and gave no thought to its role in the energy a voice against militant Islamic extremism. It demonstrates sector. Now energy is the hot issue.” Indeed, Turkey is every day how Islam and secularism can co-exist in the emerging as an important nexus for oil and gas pipelines context of economic growth and increasing prosperity. from Russia’s Caspian region, Central Asia, the Middle East and North Africa to Europe. The Baku-Tbilisi-Ceyhan (BTC) oil pipeline running from Azerbaijan to Turkey’s south-eastern coast via Georgia, which was launched this year, is the second longest such conduit in the world. 11 World Economic Forum in Turkey
  13. 13. For this reason, it is crucial that Europe and the US “Perceptions in Europe lag ten years behind reality. recognize Turkey’s considerable geopolitical value and Europe was uninterested in provide it with the appropriate financial, strategic and Turkey in the early 1990s moral support the country needs to continue necessary and gave no thought to its political and economic reforms and realize its ambitions role in the energy sector. Now energy is the hot including EU accession. Concluded Joaquín Almunia, issue.” Commissioner, Economic and Monetary Affairs, European Commission, Brussels, in remarks that apply as much to Hugh Pope the rest of the world as they do to Europe: “We need a Author and Journalist, Turkey stable Turkey to help Europe tackle today’s challenges and risks. It is the responsibility of the EU to cooperate with Turkey and to support Turkish reforms. The process needs to be finished with success.” Turkey A Nexus For Pipelines Turkey’s stability, however, cannot be taken for granted. Guardians of secularism, notably the military, remain fearful of religious agendas. The economy was rocked by a financial crisis only five years ago, leading to a major plunge in the value of the currency. The Turkish lira was hit again earlier this year, dropping 29%. Interest rates rose nearly seven points. Turks head to the polls in 2007. Another smooth election will surely solidify further its democracy. But EU membership is now a more divisive issue since support for accession among Turks has fallen sharply. And anti-Europe, anti-US and anti-Israel sentiments have risen. Source: Global Insight, 2006; PricewaterhouseCoopers analysis 12 World Economic Forum in Turkey
  14. 14. Competitiveness & Business Opportunities Turkey’s competitiveness is the key to its future “Turkey’s young and growing population is a success, particularly as it deepens ties with Europe challenge, but can be an and moves towards EU accession. The country has advantage. If you don’t achieved much in recent years and now ranks 59th on create the future, the future the World Economic Forum’s Global Competitiveness will create you.” Index, up from 71st place in 2005, the biggest Feyhan Kalpaklioglu improvement of any country in the survey. “We will do Chairperson, Yasar Holding, everything to improve the business environment in Turkey Turkey,” pledged Ali Babacan, Minister of the Economy of Turkey, and Chief Negotiator for the European Union. “If the right macroeconomic process is implemented, you will see how quickly change can happen.” Summing up participants’ conclusions at the economic and business-related sessions, Güler Sabanci, Chairperson and Managing Director, Sabanci • Providing equal access to education across all Holding, Turkey, a Co-Chair of the World Economic regions and income levels, and once the children Forum in Turkey, found it encouraging that several are enrolled, providing them with the means of Turkish ministers openly admitted that some things staying in school; had not been achieved. Turkey’s potential starts and • Encouraging entrepreneurship, R&D and innovation; ends with microeconomic and political stability, two • Exploring the possibility of creating a government areas in which the country needs to continue to work. agency to directly encourage investment in small and medium-sized enterprises; Some of the concrete actions that will lead to • Moving Turkey’s economy from a rent- to a profit- opportunities include: seeking structure; • Reducing red tape and resolving bureaucratic • Easing the ability to exit investments; inefficiencies; • Enhancing labour market flexibility, including hiring • Reducing the informal economy; and firing, and financial and non-financial burdens; • Continuing to fight corruption; • Rebranding the country in order to change outside • Directing more funding towards education and perceptions and enhance the country’s image. infrastructure; • Reforming certain laws, such as the tax laws and “Education is crucial to Turkey’s future the corporate code; competitiveness,” stressed Sabanci. “Our greatest asset is our young population,” agreed Hüseyin Celik, Minister of National Education of Turkey. “Educating and training them well will serve as a competitive advantage for Turkey.” “We will do everything to improve the business environment Educational reform needs to focus on early education, in Turkey. If the right macroeconomic process is implemented, access, quality and training, preparing students for you will see how quickly change can happen.” multicultural work and, more particularly, preparing Ali Babacan, Minister of the Economy of Turkey; Chief Negotiator for skilled students to work in Europe as its workforce the European Union declines in the next 20 years. Foreign direct investment (FDI) in Turkey, largely driven by mergers and acquisitions, is also a source of competitive advantage and, more importantly, business opportunities for the country. FDI has reached US$ 12.8 billion so far this year, with nearly 85% going to the banking and telecommunications sectors. Maintaining these high levels will be a key 13 World Economic Forum in Turkey
  15. 15. challenge for the country. Turkey’s banking sector is in a the country’s competitiveness. Potential ones include a competitive position but still faces major obstacles to move towards a more conservative governing system and growth, most notably the under-capitalization of outright rejection of its membership by the EU. The institutions. Given the right mix of investment and Turkish currency’s volatility could be another. “Expect regulation, Turkey could become a regional hub for hiccups,” warned Yvan De Cock, Chief Executive Officer, financial services. Fortis Bank, Turkey, recalling how Turkey’s currency was devalued by 20% on the day after he arrived in Istanbul. The relationship between competitiveness and the gender Most members of the European Union have avoided this gap is evident in Turkey. While no country has closed the kind of price roiling by adopting a single currency. gap, those in the upper echelons of success in that area are also those that rank highest in competitiveness Other weak points that hamper competitiveness include: indices. Nordic countries top both listings. The Global • low savings rates among the general population; Gender Gap Report 2006 of the World Economic Forum • the high public debt burden; ranks Turkey 105th out of 115 countries surveyed, behind • the underdeveloped state of credit markets; most emerging economies. If Turkey improves its gender • a labour market that lacks flexibility; gap ranking, it would likely increase its competitiveness • weak compliance with the tax regime. performance significantly. Turkish Prime Minister Recep Tayyip Erdogan maintained One factor in the poor gender-gap ranking is the low that Turkey is successfully implementing a broad reform education rate among girls. But there are other factors process that will continue irrespective of the course of EU that keep women from working, and education is not accession talks. Change doesn’t happen quickly, he even the biggest of them, according to Ipek Ilkkaracan noted, but the fundamental will of the Turkish people for Ajas, Executive Board Member, Women for Women’s such change is strong and the end result will reflect this Human Rights-New Ways Foundation, Turkey. Education determination. The end result will also reflect the viability may be the highest perceived barrier, but in truth, it is a of Turkey’s competitiveness. lack of access to childcare and elderly care that keeps women out of the workforce. But education is important: when girls’ schooling Retail Deposits Taking Off increases, poverty decreases. With some 18 million people living in poverty in Turkey, increasing family welfare by educating girls is a serious opportunity. But current spending on education is not enough – it needs to be double today’s levels for the next 10 years to address the problem. Turkey will have to watch out for pitfalls that could hinder Source: Turkish Banking Association 14 World Economic Forum in Turkey
  16. 16. Bridging Civilizations “Female employment in our “It is the men that build the part of the world has glass walls around contributed more to the women.” global economy than China.” Seyhan Eksioglu President, KADER Association for Promoting Women Neelie Kroes Candidates, Turkey Commissioner, Competition, European Commission, Brussels As a Muslim nation that has embraced so-called As the Turkish Daily News reported in its “Davos in “Western” values – democracy, a free press, being a Istanbul” supplement on 23 November 2006, “women secular state, rights for women – Turkey is uniquely are both excluded from vast areas of the economy in positioned to act as a bridge between civilizations, many rural areas while leading Europe in their particularly through accession to the European Union. participation in many areas of society, including Mustafa Kemal Ataturk (1881-1938), founder of the corporate business, academia, medicine, engineering Turkish Republic and its first president, recognized the and law.” importance of these values, especially the role of women, and promoted them throughout society. But Islam can be seen as a driving force for some of these much has changed in the republic since his death. differences, in the sense that in some places, women who cover their heads are not allowed to go to From the outside, Turkey is perceived as a deeply school. This is the case at Turkish universities, as well religious state and, as such, a threat to modern as in schools in France. It is a prejudice starting with Europe. According to a 27 November 2006 article in beliefs that makes Islam a barrier to education. Time magazine on Pope Benedict XVI’s November visit to Turkey, “Islam [has] played a particular role – as Links with Europe are a major driver behind the both a threat and a model – in […] the secularization country’s current development – the domestic market of Christian Europe.” is booming, the country has seen sustained growth rates over the last five years, and reforms are ongoing, Since the 1980s, rather than deepening their role in despite the election of a moderate Islamist party. But society, Turkish women have been cut off from Turkey took on reforms long before EU membership advancement. On average throughout the country, ever came up. Populations throughout Europe and men earn twice as much as women. While 98% of within Turkey itself are increasingly sceptical of primary school girls are literate, only 11% graduate Turkey’s candidacy, but the EU and national from high school. Only 28% of women participate in government are still ploughing ahead. However, the labour force: 21% in agriculture, the other 7% rejection by the EU could damage relations between spread out between the remaining sectors. Only 4% Islam and the West. Muslims would see it as a of parliamentarians are women. rejection of their religion, values and way of life. 15 World Economic Forum in Turkey
  17. 17. multicultural teachings. The educational systems in the “We will get nowhere if we do not invest in education.” East and West need to introduce children to other cultures and religions. It is only by doing so that countries Ibrahim Betil such as Turkey or those in the EU can come to an Chairman, Community understanding of the differences and similarities that Volunteers Foundation - CVF (Toplum Gönüllüleri Vakfi), Turkey define Muslim-West relations. The real, rather than perceived, problems of dialogue must be solved by compromise and real solutions, rather than theoretical suggestions, said Khalid Abdulla-Janahi, Chairman of the Executive Committee, Shamil Bank of Bahrain, Switzerland, and Vice-Chairman of the Arab Business Council. He stressed that some of the problems of the region stem from the lack of leadership at all levels of society – political and business. As a driver of intercultural dialogue and a bridge between Abdullah Gül, Deputy Prime Minister and Minister of civilizations, Turkey needs to take the lead, most Foreign Affairs of Turkey, called for real political reform that importantly through a radical departure from decades of leads to economic success. Transparency and freedom discord. The country can easily share the knowledge it are necessary for progress in regional stability, Gül said. has gained over time regarding the differences between He singled out the nurturing of civil society as essential. East and West, and also the similarities. It can act as a beacon for the complementary nature of secular Turkey is neither European nor Arab, a position that democracy and Islam. It can promote a culture of Turkey can capitalize upon for intercultural dialogue, as an dialogue, both religious and political. island of stability and even prosperity in an increasingly unstable region. Under the right conditions, and if the right tone is set, Turkey could enhance the EU’s sphere of influence Turkish Schools Lag OECD Peers through the country’s traditional relations with others in the region. Along these lines, Prime Minister Recep Tayyip Erdogan of Turkey stressed the importance of the recently announced “Alliance of Civilizations” with Spain, which aims to be the 21st century initiative for global peace and prosperity. Hany El Banna, President, Islamic Relief, United Kingdom, called on the world to recognize the humanitarian side of Islam by focusing on people that want to “talk about and do the good, rather than sit and talk about the bad”. Any dialogue should have a beginning and an end, along with the political will to change; there is no point in engaging if change is not wanted. Dialogue can also lessen aggression. David Rosen, President, International Jewish Committee for Interreligious Relations, USA, suggested that “most hostility is a result of alienation.” Without a positive self- image, one cannot see others positively, he argued. This Source: United Nations sort of dialogue could also take place in schools, through 16 World Economic Forum in Turkey
  18. 18. The Creative Imperative in Turkey Pursuing “the creative imperative”, the theme of the World quot;It is now for the EU to sell the idea of a strong, Economic Forum Annual Meeting 2006, has been a globalized Europe not just to priority for the Forum at its regional Summits throughout the Turkish people but to the the year. In Istanbul – as in Beijing, Cape Town, New people in Paris.quot; Delhi, São Paulo, Sharm El Sheikh and Tokyo – the aim Hanzade Dogan was to capture the creative insights offered by Chief Executive Officer, Dogan participants on how to address global challenges and Newspaper Publishing, Dogan risks. These will feed the discussions and brainstorming Media Group (DYH), Turkey sessions at the next Annual Meeting and future Summits. These are examples of creative ideas and approaches proposed at the World Economic Forum in Turkey: EU Accession Among the accession myths that need to be dispelled is the notion that Turkish migration will increase sharply. Civil society and business must play a larger role in Studies indicate that the rise is likely to be limited, with fostering better understanding between Europe and migrants dissuaded by the growing opportunities at Turkey. NGOs and corporations should forge links with home. Increased foreign direct investment into Turkey will their counterparts to help correct misunderstandings and be critical to creating new jobs and moderating the allay fears on both sides. outflow of people. Newly inducted EU members from Central and Eastern The onus is not just on Turkey to sell the idea of Europe should share their experiences with Turkey to accession to Europeans. On the contrary, Europe itself improve the Turkish public’s understanding of the has to do a better job of selling Europe to the Turks as difficulties involved in negotiating accession and the well as to people in the streets of Paris, Rome or Berlin. eventual benefits of membership. Europe must communicate a more appealing vision of a dynamic, inclusive region that will capture the imagination Geopolitical Role of young people. Turkey could play a pivotal role as an intermediary between Iran and Europe over the issue of Tehran’s nuclear programme. Turkey’s emergence as an important energy corridor “Innovation has to be a top priority on our agenda.” suggests the need for a coordinated European Continental Energy Policy to ensure Europe’s energy Güler Sabanci security. Turkey’s participation in discussions would help it Chairperson and Managing Director, Sabanci Holding, Turkey; align its policies with Europe’s. Co-Chair of the World Economic Forum in Turkey Civil society engagement and closer business links are essential to promoting stability in the volatile Middle East. Turkey should take steps to secure its porous borders to enhance security and address the concerns of its strategic partners. 17 World Economic Forum in Turkey
  19. 19. Competitiveness & Business Opportunities Bridging Civilizations Education reforms should focus on providing early The Pope’s visit to Turkey, which took place days after education particularly to girls and the poor. In addition, the meeting, led to a change in perceptions on both schools should prepare students to live and work in a sides, leading to better understanding between the multicultural world. Vatican and Islam. While there were protests, they were peaceful and limited. The success of the trip By improving access to child care and care for the highlighted the crucial role Turkey can play in averting elderly, Turkey can increase the participation of the clash of civilizations. Such public diplomacy can women in the workplace. help mitigate the risk of terrorism and the risk of military conflict in the post-9/11 world. The Pope’s Turkey needs a vision; Turkey needs a brand. Turkey is own recognition of the importance Turks attach to EU many things and plays many roles. It needs to and his decision to support Turkey’s application, sharpen its image to convey a clear idea to Europeans despite previous misgivings, were a model for others and the rest of the world what Turkey is today in Europe. For its part, Turkey should relish its (modern, secular, Muslim, democratic) and what it no uniqueness as a bridge between faiths and cultures longer is (an inward-looking, military dictatorship). and step forward more to fill this role. Traditional Turkish foods could be the driving force for innovation that will invigorate Turkey’s agribusiness and food sectors. Klaus Schwab with the meeting Co-Chairs, from left to right: Güler Sabanci, Chairperson and Managing Director, Sabanci Holding, Turkey; Muhtar A. Kent, President, Coca-Cola International, USA; Klaus Schwab, Founder and Executive Chairman, World Economic Forum; Peter D. Sutherland, Chairman, Goldman Sachs International, United Kingdom; Victor Halberstadt, Professor of Public Economics, Leiden University, Netherlands 18 World Economic Forum in Turkey
  20. 20. Acknowledgements The World Economic Forum wishes to recognize the support of the following companies as Partners or Supporters of the World Economic Forum in Turkey: Strategic Partners The Coca-Cola Company Goldman Sachs JPMorgan Chase Kudelski Group Merrill Lynch PepsiCo WPP Xenel Group Regional Partners Dogan Media Group Dogus Group Roundtable Supporters Intralot Türk Telekom The World Economic Forum would also like to thank Türk Telekom for providing connectivity. 19 World Economic Forum in Turkey
  21. 21. Contributors Peter Torreele is Managing Director of the World Economic Forum. Felix Howald is Director, Head of Europe and Central Asia, at the World Economic Forum. The World Economic Forum in Turkey was under his direct responsibility. Thomas Berglund is Senior Community Relations Manager, Europe and Central Asia. Benita Sirone, Cristian Gheorghe and Constantine Marakhov are Global Leadership Fellows, Europe and Central Asia. Doris Borchardt is Event Manager and was the Meeting Coordinator. Report Writers Alejandro Reyes Danielle Carpenter Sprungli Editing and Production Kamal Kimaoui, Associate Principal, Production and Design Fabienne Stassen Fleming, Senior Editor Photographer Serkan Eldeleklioglu The World Economic Forum would like to express its appreciation to the summary writers for their work at the World Economic Forum in Turkey. Session summaries are available on our website at: The World Economic Forum would also like to recognize the support of PricewaterhouseCoopers in compiling data and statistics for this report. 20 World Economic Forum in Turkey
  22. 22. The World Economic Forum is an independent international organization committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas. Incorporated as a foundation in 1971, and based in Geneva, Switzerland, the World Economic Forum is impartial and not-for-profit; it is tied to no political, partisan or national interests. (