World Economic Forum on Europe and Central Asia2008

1,685 views

Published on

Published in: Technology, Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,685
On SlideShare
0
From Embeds
0
Number of Embeds
6
Actions
Shares
0
Downloads
19
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

World Economic Forum on Europe and Central Asia2008

  1. 1. World Economic Forum on Europe and Central Asia Confronting Challenges in Defining a Collaborative Future Istanbul, Turkey 30 October – 1 November 2008 Report
  2. 2. 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: contact@weforum.org www.weforum.org © 2008 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: 241108
  3. 3. Contents Page 3 Executive Summary Page 8 Business: Seizing Opportunities Page 10 Geopolitical Moves Page 12 Re-emergence of Central Asia Page 14 Securing Energy and Resources Page 16 Turkey: Taking the Lead Page 19 Acknowledgements
  4. 4. 2 | World Economic Forum on Europe and Central Asia
  5. 5. Executive Summary “We have to work together on a regional and global future if we want to build a better world. We need to restore confidence and to highlight the necessity for corporate global citizenship. Now when companies are under so much pressure we must show that they have, despite everything, a deep social responsibility.” Klaus Schwab, Founder and Executive Chairman, World Economic Forum The first World Economic Forum on Europe and Central the form of economic nationalism and protectionism in Asia was both timely and relevant in the wake of the the near future. Financial models have clearly been global financial crisis. Strategically located as a bridge disrupted, but national governments and central banks between East and West, Turkey as an established have succeeded in working together rather than democracy is well positioned in today’s charged individually, and they have moved swiftly and effectively to geopolitical environment to serve as an anchor for trade coordinate their efforts in dealing with the problem. and investment, and as a peace broker across the region and beyond. Thomas Mirow, President of the European Bank for Reconstruction and Development (EBRD), noted that The global financial meltdown loomed over the meeting. Turkey is “well placed” to weather the storm and that Participants remained “cautiously optimistic” about the emerging market economies that have developed their future of the region, despite the clouds of chaos and own financial systems are likely to resist better than those uncertainty gathering at its borders. There was general that depend heavily on external financing. He noted that acknowledgement that the financial crisis will have an the crisis is likely to foster greater regional cooperation impact on emerging markets as it is difficult to decouple between emerging market economies – and perhaps from the seismic global events of the past months. economic integration. Indeed, the decoupling theory of the financial markets is failing to withstand the test of a real worldwide crisis and Many political and business leaders were surprisingly it has proven impossible to remain isolated from the upbeat about the region’s economic future and pointed global financial turmoil. out that within a crisis there is always opportunity –for deeper collaboration, stronger economic cooperation Nevertheless, the enormous growth potential of Turkey and, in some cases, reconciliation. For example, Ali and its surrounding regions is likely to soften the impact Babacan, Minister of Foreign Affairs and Chief Negotiator considerably. Developing countries that had been less of Turkey, described an era of “new relations” between integrated in the global financial architecture may be less Azerbaijan and Armenia, and Armenia and Turkey, affected and may even draw some benefits from the ushering in huge opportunities in communications, crisis. transport and energy. “This meeting has taken place in unusually challenging Turkey is also assuming the role of regional peace broker. times [as we are] facing unusually challenging issues. The conflict in Georgia in August 2008 spurred efforts by There was no panic about the global economy or about Turkey to create a Caucasus Stability and Cooperation geopolitical matters. It was a cool review of facts and Platform to bring countries in the region together to opportunities,” observed Victor Halberstadt, Professor of discuss economic, political and security issues. This is an Public Economics, Leiden University, Netherlands, at the important platform as many countries in Central Asia and closing plenary. the Caucasus still have “dysfunctional” relationships with their neighbours. Both regions are resource-rich and One strong message that emerged during the strategically located. As a result, countries in both are discussions was that the financial meltdown has resulted being courted by the US, India, Russia, Europe and in dislocation but has not led to fragmentation of the China. At the same time, the world is grappling with the world economy. It remains a major challenge and meaning of a more assertive Russia. responsibility of both governments and businesses to curb tendencies towards fragmentation, which could take 3 | World Economic Forum on Europe and Central Asia
  6. 6. “A new world order is likely to emerge from the current economic crisis, but it is important that it be inclusive rather than exclusive and that it favours dialogue between nations in the region.” Recep Tayyip Erdogan, Prime Minister of Turkey Turkey is determinedly pursuing its candidacy for the EU, market plunging and the declining oil and commodity while at the same time strengthening its ties with other prices depressing investors’ confidence in Russian regional groups, including the African Union, the Gulf assets. Nevertheless, prospects for the future growth of Cooperation Council and the League of Arab States. It the Russian economy are still strong; several regions has also expressed an interest in becoming a member of such as Tatarstan have embarked on ambitious the Shanghai Cooperation Council. Turkey will be able to infrastructure projects that will guarantee significant exercise more regional clout after having won the bid for stimulus for the economy over the coming years. Russia a place on the UN Security Council. There were positive is also striving for international recognition of the signals from both the Turkish government and the Turkish legitimacy of its actions and interests in the Caucasus, business community about EU accession, a view that and asserting leverage over its “near abroad” (term used was echoed by EU officials. in Russia to describe non-Russian states that were once part of the USSR). It is working in concert with other Improvements in transportation networks, regional powers to cement a Nagorno-Karabakh solution telecommunications and regional cooperation are and become a guarantor of peace between Armenia and powerful incentives that are expected to spur new Azerbaijan. investment. Turkey – singled out as having very large and untapped potential, in part due to the strong growth of a Several business and political leaders called for a “new dynamic middle class and a young population – is world order”. Klaus Schwab, Founder and Executive increasingly being looked at to galvanize economic Chairman of the World Economic Forum, called for “a development across the region and beyond. Now is the new business ethos” and told participants that in an time for emerging markets to “develop and improve increasingly interdependent and interconnected world, domestic capital markets,” advised Jean Lemierre, Senior there is a need to find new ways for global cooperation. Adviser to the Chairman, BNP Paribas Group, France. It “It remains to be seen whether we will be able to create a is also time for countries to create enabling environments world community that will find the right balance between for foreign direct investment (FDI). necessary regulation and maintaining entrepreneurial dynamism. It is now more important than ever not to The spectre of corruption still hovers over the region and choke off the engine of the real economy,” he said. must be dealt with if Central Asia is to attract quality FDI. One of the biggest opportunities of this financial crisis is This first World Economic Forum on Europe and Central that it will cease to be business as usual. The taxpayers Asia took place in the eye of the maelstrom. The who bailed out the system will increasingly demand more meeting’s theme – Confronting Challenges in Defining a accountability and transparency. There is a lack of Collaborative Future – is the task of world leaders today consumer and investor trust, which has left a sizeable as they look for solutions for tomorrow. The meeting vacuum. Going forward, transparency is going to be even defined challenges, identified opportunities and laid the more important to restore the trust and confidence to groundwork for the World Economic Forum Annual make the markets work. Transparency, oversight and Meeting 2009 to be held in Davos-Klosters, Switzerland good governance widen the scope for global corporate on 28 January – 1 February, under the theme Shaping citizenship and deeper social responsibility. the Post-Crisis World. At the Annual Meeting 2009, governments and business will sit together and focus on While the impact of the global financial crisis had initially an agenda designed to tackle the key issues facing the been relatively muted in Russia, the situation has world and how best to restore sustained economic deteriorated over the last few months with the stock growth. 4 | World Economic Forum on Europe and Central Asia
  7. 7. “Taxpayers saved the day by bailing out the system to save the economy and ultimately their jobs. Taxpayers won’t accept business as usual. They will ask for measures to correct the system.” Jean Lemierre, Senior Adviser to the Chairman, BNP Paribas Group, France “Enlargement is even more relevant now. The Turkish business community is practically integrated into Europe. But we would like to have higher transparency and more international norms in our business. In times like these, this is even more important. The reforms we are expecting will affect our government structures. We need this.” Güler Sabanci, Chairman and Managing Director, Haci Ömer Sabanci Holding, Turkey This report on the World Economic Forum on Europe and • There is tremendous potential across the Caucasus Central Asia is centred on five essays linked to the and Central Asia, which is expected to be unleashed programme’s themes: Business: Seizing Opportunities; through strengthened economic cooperation. However, Geopolitical Moves; Re-emergence of Central Asia; economic diversification is key, despite the vast energy Securing Energy and Resources; and Turkey: Taking the resources in some of the region’s oil-rich countries – Lead. 70% of the world’s fossil fuels are produced south and southeast of Turkey. Business: Seizing Opportunities Geopolitical Moves Assessing the effects of the current financial turmoil and economic slowdown on the region and identifying Reassessing recent geopolitical developments across the business opportunities stemming from the crisis will help Eurasian continent and rebuilding confidence in political determine the path towards rebuilding consumer and cooperation is critical in today’s charged – and changing investor confidence. – environment. • No one country is immune to the effects of the global • Still-shifting power equations – especially the financial meltdown, but Turkey is well positioned to resurgence of Russia on the world stage – impinge on weather the storm. It is viewed as a strategic anchor an array of issues including the enlargement of the that is expected to energize the integration of the European Union and the expansion of the North Caucasus and Central Asian regions into the world Atlantic Treaty Organization (NATO), the extent of economy. Turkey has a well-balanced economy with regional cooperation among countries in Central Asia growth supported by domestic consumption and and the Caucasus, and even Turkey’s critical role as an exports. aspiring EU member and a bridge between East and West. • Emerging market economies that have developed their own financial systems are likely to fare better than • “Frozen conflicts” across the region include lingering those that depend heavily on external financing. There ethnic divides and territorial disputes that could quickly are unique investment opportunities across the region, widen, particularly if extremists take to terrorism. Iran’s particularly in energy infrastructure and transportation greater assertiveness in the Middle East and the US- networks. led invasion of Iraq and the ongoing war there, as well as in Afghanistan, have stirred up concerns and • The information technology and communications simmering resentment. The conflict that erupted sector (ICT) holds out a beacon of hope as it will not between Russia and Georgia this August over the be affected to the extent of other areas of the economy status of South Ossetia suggests that long-standing by the global slowdown. This is because the crisis enmities and rivalries in Central Asia and the Caucasus offers new business opportunities as businesses in all die hard. sectors look to technology to raise productivity and improve efficiency. • Conflict resolution efforts are critical. New regional cooperation based on common security frameworks, political dialogue, economic interdependency and multicultural coexistence could be a way forward. 5 | World Economic Forum on Europe and Central Asia
  8. 8. “The new attitude should be that instead of just reacting to crises we should have a vision of order. Instead of waiting for the storm, we should act …. We will create a new vision of order and everybody will win.” Ahmet Davudoglu, Chief Adviser to the Prime Minister, Turkey “The EU’s long-term vision is to create an integrated market that includes neighbouring countries, a market of more than one billion people. In the world of tomorrow, integrated structures will be the best model for success.” Günter Verheugen, Vice-President and Commissioner, Enterprise and Industry, European Commission, Brussels • Turkey’s deft diplomacy during the Russian incursion • The market potential is huge, particularly if it stretches into Georgia in August 2008 highlighted its potential as out to the Middle East, where economic activity a crucial bridge between East and West, between continues apace and exports to Central Asia are rising. Europe and Central Asia and the rest of Asia, and Exports from Central Asia to the Middle East have risen between Western and Eastern Europe including by more than tenfold from 1997 to 2006. The Gulf Russia. Turkish leaders have underscored this unique countries are important investors in Central Asia. At the role as a key reason for Turkey to join the EU. Europe same time, fears of a brain drain from the region could needs Turkey as much as Turkey needs Europe. materialize as talent is attracted to the wealth of the Gulf. Re-emergence of Central Asia Securing Energy and Resources Understanding the economic and political integration processes underway in Central Asia and the region’s The state of energy and resource security across the emerging role in global political, economic and security continent depends on identifying, managing and finding structures is complex, but necessary to identify solutions for geopolitical, economic, social, technological, opportunities and avoid pitfalls in the post-crisis world. ecological and even geological risks. • The geopolitics of Central Asia are becoming more • Central Asia, Russia and the Middle East may have complex and contested. Countries in Central Asia and abundant supplies of energy, but the logistics of getting the Caucasus are fragile and still in shock following the them to European markets are fraught with August 2008 conflict in Georgia. Russia’s action not complexities and hazards. only highlighted the vulnerability of pro-Western nations in the Caucasus, but also the vulnerability of oil and • The security of supply is a major concern for Europe gas pipeline routes from Central Asia that run through and Turkey, while Russia and other producers in Georgia and bypass Russia. At the same time, both Central Asia and the Middle East want to be sure that regions are being courted by the US, India, Russia, demand from Europe and Turkey is strong. All sides Europe and China – as they compete either for have an interest in keeping transport routes open and resources or influence, or both. establishing new reliable ones. • Turkey is the linchpin of the Central Asian region, a • Infrastructure deficiencies are a pressing problem. crossroad for Europe, the Caucasus, Asia and the Stronger partnerships among developers, consumers Middle East. There is a potential “new Silk Road”, both and host governments, along with more leadership real and virtual. from these governments, will be necessary to set a framework for future infrastructure development. • There is a need for deeper cooperation across the region and beyond. Energy is likely to be the currency • Turkey is likely to be a critical bridge in helping to bring of a new Silk Road, but there are opportunities for new sources of oil and gas to European markets. cooperation in regional development across a range of Turkey could also play a crucial role in addressing the economic sectors – industry, agriculture and services – water stress problems of Central Asia. The ongoing and good prospects for attracting extra-regional capital debate on the impact that the use of water for biofuels to help finance them. has on food production and the prices of staples such as corn and rice has underscored how big the problem of water stress is across regions. 6 | World Economic Forum on Europe and Central Asia
  9. 9. Turkey: Taking the Lead • Turkey is in a strategic position for international companies that use it as a base for running operations in up to 90 other countries. Within a radius of four There are high expectations for Turkey’s economic growth hours by plane, there is a market of 1.3 billion and presence in the region, as well as its leadership role consumers. Foreign direct investment in Turkey has in easing tensions relating to energy security. The country skyrocketed from around US$ 1 billion until 2005 to is also expected to play an important role in promoting more than US$ 20 billion in 2007. And there is further multicultural and multi-religious societies. scope for investment both in Turkey and across the region. • In October 2008, Turkey won a non-permanent seat on the United Nations Security Council for two years, winning 151 votes out of a total 192 UN members. That Turkey mustered such widespread support is a reflection of the country’s increasing weight in international politics and the growing confidence of the international community. • Turkey’s proactive diplomacy to diffuse the Russia- Georgia conflict, in concert with the EU’s efforts, demonstrated both the special influence that Turkey would bring to Europe and the convergence of Turkish and European geopolitical and economic interests. Both sides need each other. EU membership would further open up European markets to Turkish companies and open Turkey to even more investment from Europe. • Turkey’s labour force is not cheap, but it is highly qualified and very productive. There is a pool of qualified management talent, and Turkey is positioned at the centre of a market that represents roughly 1.2 billion people. Promising growth sectors include energy, infrastructure, transport, the automotive industry, consumer products, agriculture, mobile telephony and information communication technology (ICT). 7 | World Economic Forum on Europe and Central Asia
  10. 10. Business: Seizing Opportunities “There are a lot of opportunities in the “Diversification of our economy is Middle East and Central Asian aimed at developing its real sectors, countries. But bureaucracies are increasing market-oriented reforms and unbelievable …. We need to wake up promoting small and medium and be more business-oriented.” businesses.” Khalid Abdulla-Janahi, Chairman, Ithmaar Bank, Bahrain Khojamyrat Geldimyradov, Deputy Prime Minister of Turkmenistan No one country is immune to the effects of the global financial meltdown, but Turkey’s position at the the Caspian Sea needs an anchor and Turkey will crossroads of East and West, makes it a strategic become that “anchor for trade and investment.” anchor that is expected to energize the integration of surrounding regions into the world economy. Ahmet Ashaboglu, Chief Financial Officer, Koç Prospects for Turkey and Central Asia as a region are Holding, Turkey, reminded participants that although good, but there will be an inevitable slowdown. Turkey’s labour force is not cheap, it is highly qualified Nevertheless, most business leaders are more than and very productive. There is a pool of qualified cautiously optimistic – they are upbeat about the management talent, and Turkey is positioned at the future. centre of a vast market that represents roughly 1.2 billion people. Promising growth sectors include “Turkey has a lot to offer in the long run despite the energy, infrastructure, transport, the automotive current doom and gloom,” Mehmet Simsek, Minister industry, consumer products, agriculture, mobile of Economy of Turkey, told participants. “Turkey will telephony and IT. remain attractive simply because of the sheer size of its domestic market. It is the second most populous Khojamyrat Geldimyradov, Deputy Prime Minister of country in Europe, and it has one of the most Turkmenistan, said his country is developing its attractive demographics.” Turkey is going through a international gas pipeline network beyond Russia and major transformation in its business practice, legal Kazakhstan with a new link to China soon to go into system, institutional set-up and even in terms of its operation and another planned to Afghanistan, mindset. “This transformation means that you invest in Pakistan and India. Turkmenistan has embarked on a Turkey as an emerging country offering high-growth programme of economic reform aimed at attracting potential but at a relatively lower risk in the long run,” outside capital not only in exploiting its vast oil and he said. gas reserves, but also in new sectors such as tourism, textiles, energy derivatives and food processing. Jean Lemierre, former EBRD president and currently Senior Adviser to the Chairman, BNP Paribas Group, Thomas Mirow, President of the European Bank for said that Turkey has been “a very competitive market Reconstruction and Development (EBRD), pointed out and is even more so today.” According to Lemierre, 8 | World Economic Forum on Europe and Central Asia
  11. 11. “ICT can play a fundamental role in helping companies in all sectors face the crisis by facilitating cost-cutting, productivity gains and enabling businesses to get closer to their customers. It is a time to come up with new and better things because the world needs new technology.” Ali Faramawy, President, Microsoft Middle East and Africa, and Vice-President, Microsoft International, Microsoft, Turkey “There is going to be less investment to cover deficits in the United States. The US will not be so attractive any more. This region [the Middle East and Central Asia] will prove to be a great attraction.” Mohamed Nahavandian, President, Iran Chamber of Commerce, Industries and Mines (ICCIM), Islamic Republic of Iran that emerging market economies which have should be paid to developing sustainable alternatives developed their own financial systems are likely to fare to hydrocarbons, especially wind power which could better than those that depend heavily on external be an especially promising source of energy in some financing. The question on the minds of many people Central Asian countries. is whether emerging economies can survive, despite the financial maelstrom churning up markets and Bolat Akchulakov, Vice-Minister of Energy and Mineral eroding consumer confidence beyond its borders. The Resources of Kazakhstan, called for the development consensus is “yes”. Participants agreed that the of common rules and regulations for biofuel tremendous economic potential within Turkey, Central development, which would allow them to be traded as Asia and the Caucasus would be unleashed through a commodity like oil. He pointed out that advances in strengthened regional cooperation. biofuel development and use are happening in parallel to his country’s extensive oil and gas development. The information communication technology (ICT) sector holds out a beacon of hope: it will be affected Notably, 70% of the world’s fossil fuels are produced by the global slowdown, but not to the extent of other south and southeast of Turkey. Economic areas of the economy. In fact, the financial crisis offers diversification – including focusing on energy and new business opportunities as businesses in all natural resources in Central Asia – is key, despite the sectors look to technology to raise productivity, vast energy resources in some of the region’s oil-rich improve efficiency and get closer to their customers. countries. Infrastructure remains a major challenge This resilience – and potential – stems from the fact across Central Asia and the Caucasus, but within this that the industry is structurally different and healthy challenge is an opportunity for investment, particularly because of its debt-equity ratio. in infrastructure and transportation networks. Connectivity spells promise – connectivity in IT, energy, In emerging markets, demand is still there and overall transport, markets and financial systems. penetration still low. Milko van Duijl, President, Lenovo EMEA, France, is also upbeat about the future. The Foreign Direct Investment in Europe and Central Asia sheer size of emerging markets is growing along with Growth rate of inward FDI stock in Russia have fallen below EU27 growth rates purchasing power. For example, Turkey currently has a 80% population of 71 million and PC market penetration that is roughly 10%. In three years, the market is Annual change in inward FDI stocks 60 Turkey expected to double and experience 20% PC Russia penetration. 40 Central Asia 20 Alper Akdeniz, Managing Partner, Central Asia and EU27 Caucasus, PricewaterhouseCoopers, Kazakhstan, 0 saw no immediate prospect for regional economic integration, but a strong outlook for increasing -20 2001 2002 2003 2004 2005 2006 cooperation in health, education, energy and mining. He suggested that in the energy sector attention Source: UNCTAD 9 | World Economic Forum on Europe and Central Asia
  12. 12. Geopolitical Moves “There are frozen conflicts across the “There will be no real domestic region. If they are not addressed in a reconciliation in all countries without timely manner through diplomacy and regional reconciliation because our dialogue, this can turn into real demography is so heterogeneous. difficulties …. By using its special Turkey has played and can continue to position in the region, Turkey is play the role of a very good regional contributing more and more to stability broker. Regional brokers are a healthy and peace in the region and further supplement, but they are absolutely no away.” substitute for international organizations such as the UN.” Ali Babacan, Minister of Foreign Affairs and Chief Negotiator of Turkey Mowaffak Al Rubaie, National Security Adviser, National Security Council, Iraq Nearly two decades since the collapse of the Soviet Union, the disintegration of the cold war order is still Yet Iran’s greater assertiveness in the Middle East as well having an impact on the geopolitics of Europe and as the US-led invasion of Iraq and the ongoing war there, Central Asia. Still-shifting power equations, especially the as well as in Afghanistan, have stirred up concerns and resurgence of Russia on the world stage, impinge on an simmering resentment. The conflict that erupted between array of issues including the enlargement of the European Russia and Georgia this August over the status of South Union and the expansion of the North Atlantic Treaty Ossetia suggests that long-standing enmities and rivalries Organization (NATO), the extent of regional cooperation in Central Asia and the Caucasus die hard. “The biggest among countries in Central Asia and the Caucasus, and diplomatic and economic problem these fragile even Turkey’s critical role as an aspiring EU member and developing states [in Central Asia] have is that their a bridge between East and West. friends don’t talk to each other and they haven’t worked out their differences,” reckoned S. Frederick Starr, Of particular concern is what Turkish Foreign Affairs Chairman, Central Asia-Caucasus Institute at Johns Minister Ali Babacan called the “frozen conflicts” across Hopkins University. the region. They include lingering ethnic divides and territorial disputes that could quickly widen, particularly if Participants agreed that conflict resolution efforts are extremists take to terrorism. “If they are not addressed in critical. “We need a new regional framework for all these a timely manner through diplomacy and dialogue, these frozen conflicts based on common security frameworks, can turn into real difficulties,” Babacan warned. “Our political dialogue, economic interdependency and world does not need new cold or hot wars, but multicultural coexistence,” argued Ahmet Davudoglu, constructive peace,” said Turkish Prime Minister Recep Tayyip Erdogan. 10 | World Economic Forum on Europe and Central Asia
  13. 13. “This is the first Georgian crisis in which the EU took charge. It was the French presidency of the EU that stopped the tanks moving into Tbilisi.” Pierre Morel, EU Special Representative for Central Asia, Council of the European Union, Brussels “We need to reach out and get the Russia-NATO dialogue back on track.” Espen B. Eide, Deputy Minister of Defence of Norway Chief Adviser to the Prime Minister of Turkey. “There will Western and Eastern Europe including Russia. Turkey’s be no real domestic reconciliation in all countries without leaders have underscored this unique role as a key regional reconciliation because our demography is so reason for the country to join the EU. Europe needs heterogeneous,” said Mowaffak Al Rubaie, National Turkey as much as Turkey needs Europe. “[EU] Security Adviser on Iraq’s National Security Council. enlargement [to include Turkey] is even more relevant Concluded Iranian Foreign Affairs Minister Manouchehr now,” said Güler Sabanci, Chairman of Turkish group Mottaki: “There must be greater consultation and Sabanci Holding. “For us in the business community, convergence among countries in the region.” accession to Europe is a civilization project.” The conflict in Georgia clearly highlighted the need for It would also be a key step in enhancing Turkey’s regional Europe and the US to come to terms with a resurgent and global stature as it leverages its good relations with and more assertive Russia. At the meeting, the Georgian its neighbours including Iran and Israel, and with strategic Foreign Minister Ekaterine Tkeshelashvili claimed that partners such as the US, to take on a more active role in Russia’s incursion into her country was aimed at the international community. Turkey’s membership in the changing the government in Tbilisi. Moscow, she insisted, EU would enhance the security of Europe. is concerned about Georgia’s success as an independent state that is developing its democratic system and the “Enlargement and an open door policy is providing a rule of law, liberalizing its economy and becoming “part of buffer zone of safety for the EU,” said Babacan. “Turkey’s an expanded Europe in political terms.” Russia, added role is very important. When Turkey is an EU member, Robert Simmons, NATO Deputy Assistant Secretary- other regions will feel the EU coming closer to them.” General and Special Representative to the Caucasus and That alone would be a significant contribution to peace Central Asia, “acted disproportionately. What Russia did and stability in Europe, Central Asia and the Caucasus – was directed against all three countries in the Caucasus.” and, of course, the rest of the world. Norwegian Deputy Minister of Defence Espen B. Eide told participants: “We need to reach out and get the Russia- NATO dialogue back on track.” Turkey's Trade Partners Trade with China and Russia rose from 5.8% of Turkey's trade in 1999 to 15.1% in 2007 The EU and Turkey played critical roles in defusing the conflict in Georgia. “This is the first Georgian crisis in 100% Share of total imports and exports with Turkey which the EU took charge. It was the French presidency Rest of world of the EU that stopped the tanks moving into Tbilisi,” 75 China explained Pierre Morel, EU Special Representative for Russia Central Asia. While supporting the EU’s efforts, Turkey Middle East 50 US was spurred to propose the creation of a Caucasus EU Stability and Cooperation Platform that would bring 25 together countries in the region including Russia to discuss economic, political and security issues. 0 1999 2003 2007* Turkey’s deft diplomacy highlighted its potential as a * through three quarters crucial bridge between East and West, between Europe Source: IMF and Central Asia and the rest of Asia, and between 11 | World Economic Forum on Europe and Central Asia
  14. 14. Re-emergence of Central Asia “The transportation Silk Road is “The new Silk Road is developing and is embodied by a new cross-continental both physical and virtual. But there are railway, as well as numerous pipelines. impediments such as restrictions on the The resources Silk Road has at its core movement of people and goods as well approximately 50% of the world’s as weaknesses within the educational people, and a significant amount of the system. But these impediments are on world’s natural resources. Each of these their way out. They will not be there in roads provides unique investment 20 years. I am confident that today’s opportunities that can be converged youth are more imaginative in solving into a win-win situation for everyone.” problems than previous generations.” Bulent Bulgurlu, Chief Executive Officer of Koç Holding, Turkey Hamid Karzai, President of Afghanistan For thousands of years, the ancient Silk Road was a countries have “dysfunctional” relationships with their crossroad for the flow of people, goods and ideas neighbours, while both resource-rich regions are being between European, Western Asia, South Asia and courted by many suitors – the US, India, Russia, East Asia. Today, Turkey is the lynchpin of the Central Europe and China – as they compete either for Asian region, a crossroad for Europe, the Caucasus, resources or influence, or both. Asia and the Middle East. The region’s history has been shaped by both climate and geography. Its Numerous participants pointed to the potential of a aridness traditionally made agriculture difficult and it “new Silk Road”, both real and virtual. The foundation was cut off from vital trade routes by its distance from for a new Silk Road is strengthened regional the sea. Today, countries of the region are close to cooperation and, perhaps, eventual economic political hot spots such as Iraq and Afghanistan, integration – even more important now in light of the increasing their strategic influence. But Central Asian global financial crisis. However, several participants countries are no strangers to conflict – their history pointed out that fostering such cooperation is much has been marked by conflict. easier said than done. S. Frederick Starr, Chairman, Central Asia-Caucasus Institute, Johns Hopkins The geopolitics of Central Asia are becoming more University, said that that the region is “smothered” with complex and contested. Countries in Central Asia and organizations but that they do not speak to each other the Caucasus are fragile and still in shock following or solve problems for the countries themselves. Starr the August 2008 conflict in Georgia. Russia’s action described the Central Asian region as fragile states highlighted the vulnerability of pro-Western nations in surrounded by nuclear neighbours, adding that as the Caucasus, but also the vulnerability of oil and gas post-colonial states they are defensive about their pipeline routes from Central Asia that run through sovereignty and cautious when dealing with Georgia and bypass Russia. At the same time, many neighbours. 12 | World Economic Forum on Europe and Central Asia
  15. 15. “The countries within Central Asia should cooperate and give more development of their institutions, for example by creating a Central Asian Union. There are many obstacles at the moment, but the future – and progress – lies in this direction. How can Kazakhstan be prosperous when our neighbours are weak or poor?” Yerbol Orynbayev, Deputy Prime Minister of Kazakhstan “The biggest diplomatic and economic problem these fragile developing states have is that their friends don’t talk to each other and they haven’t worked out their differences.” S. Frederick Starr, Chairman, Central Asia-Caucasus Institute, Johns Hopkins University, USA Ali Babacan, Minister of Foreign Affairs and Chief so low that hydroelectric power is becoming Negotiator of Turkey, underscored the special unreliable. Cotton crops in Tajikistan may not receive relationship and cooperation Turkey has with Central the irrigation they need. Kazakhstan, he said, has just Asia based on the fact that the origins of many Turkish signed an agreement with neighbouring countries to people come from that area. “I strongly believe a lot provide energy resources in exchange for water more can be done to strengthen relationships in the resources during the summer months. In addition, region. They have a lot of common interests and have there is a greater level of cooperation between a lot to gain by cooperating.” Babacan also described Kazakhstan and Europe through a framework agreed the importance of oil and gas pipelines and a railway to in a 2005 memorandum of understanding. Several that would connect Central Asia to Europe via Turkey. participants emphasized the importance of resolving “This will be important to make Central Asian the status of the Caspian Sea; without such resolution countries more connected to the Western world.” future developments will be impaired. Mohamed Nahavandian, President, Iran Chamber of Deputy Prime Minister Khojamyrat Geldimyradov of Commerce, Industries and Mines (ICCIM), Islamic Turkmenistan said his country has embarked on a Republic of Iran, confirmed: “There are very real programme of economic reform aimed at attracting reasons to have more cooperation in the region.” The outside capital not only to exploit its vast oil and gas bursting of the financial bubble in the US means reserves, but also to initiate reform in new sectors “global capital will want to have more destinations.” such as tourism, textiles, energy derivatives and food Growing doubts about globalization as a result of the processing. crisis will mean more attention is paid to regional cooperation. “In our region, there are a lot of giant The market potential is huge, particularly if it stretches projects that could be invested in if everyone joins out to the Middle East, where economic activity hands,” he said. continues apace and exports to Central Asia are rising. Exports from Central Asia to the Middle East Many political leaders called for deeper cooperation have risen by more than tenfold from 1997 to 2006. across the region and beyond. Energy is likely to be The countries of the Gulf are important investors in the currency of a new Silk Road, but there are Central Asia. At the same time, fears of a brain drain opportunities for cooperation in regional development from the region could materialize as talent is attracted across a range of economic sectors – industry, to the wealth of the Gulf. agriculture and services – and good prospects for attracting extra-regional capital to help finance them. Markets depend on infrastructure. China is already There is also a strong outlook for increasing recreating the Silk Road eastward, with its investment cooperation in health, education, energy and mining. of US$ 100 billion in building roads and railways to Although the region is oil and gas rich, economic open up remote Central Asia and Turkey to the rest of diversification is vital – and small markets hinder the world. More than 20,000 kilometres of rail track diversification. will be built in the coming decade to bring Chinese goods into Central Asia and carry oil and metals to The groundwork has been laid for such cooperation. China. Yerbol Ornybayev, Deputy Prime Minister of Kazakhstan, noted that water levels in Kyrgyzstan are 13 | World Economic Forum on Europe and Central Asia
  16. 16. Securing Energy and Resources Energy and resource security hinges on managing Geopolitics have long been a wild card. “The energy geopolitical, economic, social, technological, policies that we have are deeply embedded in ecological and even geological risks. Central Asia, geopolitics,” reckoned Ethan B. Kapstein, Paul Russia and the Middle East may have abundant Dubrule Professor of Sustainable Development, supplies but the logistics of getting them to European INSEAD, France. As Poland, a major producer of coal, markets are fraught with complexities and hazards. was locked behind the Iron Curtain during the Post- “The resources are massive,” said Jay Johnson, World War II reconstruction of Europe under the Managing Director of Chevron Europe, Eurasia and Marshall Plan, the US hooked the continent on Middle Middle East Exploration and Production, Eurasia SBU, Eastern oil in alignment with its own geopolitical referring to untapped opportunities in Kazakhstan interests. With the collapse of the Soviet Union and where he is based. “But the technological difficulties the end of the cold war, “today, we are in a very associated with them, combined with the remoteness, different geopolitical framework,” Kapstein explained. make for a very difficult environment to bring them to “We really are in a multipolar world.” market.” As a result, new sources of energy have opened up; According to Katherine Hardin, Senior Director and demand from fast-growing economies in Asia such as Head, Russian and Caspian Energy, Cambridge China, and in Europe, particularly in Eastern Europe Energy Research Associates (CERA), USA, to achieve and Turkey, has increased sharply. While Russia has real energy security involves ensuring supply, demand become a key supplier of oil and gas, its use of the and delivery. The security of supply is a major concern pipeline spigot as a foreign policy tool and its conflict for Europe and Turkey, while Russia and other with Georgia in August have raised concerns about producers in Central Asia and the Middle East want to energy security in the international community, most be sure that the demand from Europe and Turkey is acutely in Europe. Georgian Foreign Affairs Minister strong. All sides have an interest in keeping transport Ekaterine Tkeshelashvili suggested that Georgia’s routes open and establishing new reliable ones. emergence as a rival conduit for oil to Western Europe was a factor in Russia’s incursion in her country. Infrastructure deficiencies are a pressing problem. Chevron, for example, is using thousands of railway On energy matters, the interdependence between tankers to transport Kazakh crude oil because Europe, Russia and Central Asia has clearly pipelines are at maximum capacity. Building new deepened. Kazakhstan’s Vice-Minister of Energy and conduits will take decades, huge investment and Mineral Resources Bolat Akchulakov told participants cooperative agreements that will require lengthy and that Central Asia is ready to be an energy source for tricky negotiations. “We are going to need stronger both East and West, cooperating not only in oil and partnerships among developers, consumers and host gas but in other areas including nuclear power. Like governments, and probably more leadership from suppliers in the Middle East, Central Asian players are these governments in setting a framework for future eager to diversify beyond petroleum. According to developments,” Johnson explained. Akchulakov, Kazakhstan has 20% of the world’s uranium reserves. 14 | World Economic Forum on Europe and Central Asia
  17. 17. “The goal of reliable, affordable energy is becoming increasingly difficult to achieve.” Jay Johnson, Managing Director, Chevron Europe, Eurasia and Middle East Exploration and Production, Eurasia SBU, Kazakhstan “When we look at technology, we find new ways to discuss energy security.” Waldemar Pawlak, Deputy Prime Minister and Minister of Economy of Poland “The energy policies that we have are Turkey, meanwhile, is likely to be a critical bridge, an integral player in helping to bring new sources of oil deeply embedded in geopolitics.” and gas to European markets. Because of its strategic position and its own energy needs and capacity, Ethan B. Kapstein, Paul Dubrule Professor of Sustainable Turkey may emerge as a major source of hydroelectric Development, INSEAD, France power for Europe. “This could be of enormous potential, especially if the grid is connected to Europe,” said Ahment C. Dördüncü, Chief Executive On the demand side, diversification of supply sources Officer of Haci Ömer Sabanci Holding. is also essential. Europe should strengthen its internal energy position, said Fatih Birol, Chief Economist at Turkey could also play a crucial role in addressing the the International Energy Agency. The continent should water stress problems of Central Asia. The ongoing diversify the technologies driving electricity generation debate on the impact that the use of water for biofuels and sources of natural gas, partly through the has on food production and the prices of staples such expanded use of liquified natural gas (LNG). Europe as corn and rice has underscored how great the needs to address its energy relationship with Russia. problem of water stress is across regions. “We cannot replace Russia,” Birol acknowledged. “But we should create competitors to Russia, and within Russia.” Russia, he argued, should be encouraged to Oil and Gas in Europe and Central Asia diversify its economy to mitigate the risks it faces from a sharp decline in oil and gas prices and, in turn, The region's energy needs are larger than its reserves address its own concerns about the security of energy Share of world proved reserves/consumption, 2007 40% demand. Other Europe and Eurasia EU15 30 Norway The world, Birol concluded, needs to continue Central Asia investing across the energy value chain – in oil, gas Russia 20 and alternative energy. Lower oil prices, however, discourage investment, while concerns over climate 10 change have taken a back seat since the financial crisis broke, possibly tempering zeal for investment in 0 renewable energy sources. It is essential that Oil reserves Oil consumption Gas reserves Gas consumption producers, transporters and consumers engage each other to overcome geopolitical tensions in their mutual Source: BP Statistical Review of World Energy 2008 interest, said Georgian Energy Minister Alexander Khetaguri. Consumer countries, in particular, have to be more active in building bridges with producers and transporters. China is a good example. Eager to secure its energy and commodity needs to fuel growth, the Chinese have become closely engaged in Central Asia, Africa and Latin America. 15 | World Economic Forum on Europe and Central Asia
  18. 18. Turkey: Taking the Lead During the meeting, many participants called on “It is time for East and West to develop Turkey to provide a much-needed anchor – mitigating a new way of looking at each other.” the risks of security, energy and demography in both Europe and Central Asia. Turkey is expected to Recep Tayyip Erdogan, Prime Minister of Turkey galvanize economic activity in the region. The country is certainly reaching out to its neighbours and beyond, making both political and economic overtures. Events have converged in 2008 to ballast the country’s Turkey’s proactive diplomacy to diffuse the Russia- position as a broker. Georgia conflict in concert with the EU’s efforts demonstrated both the special influence that Turkey Even while it pursues its candidacy for the EU, Turkey would bring to Europe and the convergence of Turkish has been successfully strengthening its ties with other and European geopolitical and economic interests. regional groups. In October 2008, Turkey became a Both sides need each other. EU membership would of member of the UN Security Council for two years, course open up European markets further to Turkish winning 151 votes out of a total 192 UN members. companies and open Turkey to even more investment That Turkey mustered such widespread support is a from Europe. It would integrate Turkey and its 72 reflection of the country’s increasing weight in million people into a Europe that is growing rapidly in international politics and the growing confidence of the global influence. international community. It is an active member of the Organization of Islamic Conferences and the Ad Hoc But Turkey will not be held for ransom over the EU’s Liaison Committee. Turkey also recently strengthened membership criteria and argues that the EU has as ties with the African Union, the Gulf Cooperation much, if not more, to gain from Turkish accession. Council and the League of Arab States. Further, Turkey’s proposal for a Caucasus Stability and Cooperation Platform to bring countries in the region Indeed, Turkey has become an important bridge together to discuss economic, political and security between East and West, between developed and issues showed that, while it supported and developing economies, between Europe and Central complemented EU efforts to resolve the Georgia crisis, Asia and the Middle East, between Europe and Turkey is taking its own leading role in the Central Russia. Over the years, Turkey has built up a track Asian and Caucasus regions. Of particular significance record as an honest broker in the several regions it is its contribution to the Middle East peace process by straddles. It pivots easily from maintaining long- leveraging its long-standing relationship with Israel and standing links with Israel to cultivating connections in its ties with the Arab world. the Middle East, including with Iran, and from sustaining an important strategic relationship with the United States to building ties with Russia and China. It is literally and figuratively at Europe’s doorstep, a geographic gateway and a country aspiring to become a member of the European Union. 16 | World Economic Forum on Europe and Central Asia
  19. 19. “Imagine a region in which you have “The GCC [the Gulf Cooperation totally new relations between Council] is looking at Turkey very Azerbaijan and Armenia, and Armenia positively. This is the time when you can and Turkey. The consequences for attract foreign direct investment from trade, for communications, for the GCC.” transport, for energy – and the Ibrahim S. Dabdoub, Group Chief Executive Officer, National opportunities are huge – so we will do Bank of Kuwait, Kuwait, and Chair of the Arab Business Council our best to normalize the situation as soon as possible.” Ali Babacan, Minister of Foreign Affairs and Chief Negotiator of Turkey's Trade Partners Turkey Trade with China and Russia rose from 5.8% of Turkey's trade in 1999 to 15.1% in 2007 100% Share of total imports and exports with Turkey Rest of world “By using its special position in the region, Turkey is 75 China contributing more and more to stability and peace in Russia the region and further away,” said Turkish Foreign Middle East 50 US Affairs Minister Ali Babacan. As Turkey takes its EU position on the UN Security Council, “our theme is 25 ‘security for all’ by using peaceful methods and diplomacy to solve problems,” he added. 0 1999 2003 2007* * through three quarters While it suffered through a financial crisis a few years ago, Turkey has managed to put its economic house Source: IMF in better order. Turkish government and business Turkey is highly unlikely to become an economic leaders, as well as many foreign investors, were burden for the EU. Rather, it has the potential to confident that Turkey would weather the gathering become a regional economic powerhouse. Jean global financial storm well. “As a strongly emerging Lemierre, former EBRD president who is currently economy, Turkey will strengthen the European Union,” Senior Adviser to the Chairman, BNP Paribas Group, declared Günter Verheugen, Vice-President and said Turkey has been “a very competitive market and Commissioner, Enterprise and Industry, in the is even more so today.” BNP Paribas is engaged in a European Commission. “It will not be an economic “real partnership” with Turkey and is expanding its burden for us.” 17 | World Economic Forum on Europe and Central Asia
  20. 20. “Turkey has played and can continue to play the role of a very good regional broker. Regional brokers are a healthy supplement, but they are absolutely not a substitution for international organizations such as the UN.” Mowaffak Al Rubaie, National Security Adviser, National Security Council, Iraq “Turkey has all the ingredients to be a regional powerhouse. It has shown that it is willing to be a broker of peace in the region. The biggest challenge will be to see who will win the tug of war for influence and resources in this country. In the past we have leaned towards the West, but today we have a lot more alternatives.” Ali Y. Koç, President, Koç Information Technology Group, Koç Holding, Turkey; Young Global Leader business. “We have a very good reform of the banking Turkey is also in a strategic position for corporations. system. It is a well-balanced economy with growth Alparslan Korkmaz, President, Investment Support supported by domestic consumption and exports.” and Promotion Agency of Turkey, pointed out that international companies use Turkey as a base for Ahmet Ashaboglu, Chief Financial Officer, Koç running operations in up to 90 other countries. Holding, Turkey, reminded participants that although Microsoft, for example, manages its operations in 80 Turkey’s labour force is not cheap, it is highly qualified other countries out of Turkey. Within a radius of four and very productive. There is a pool of qualified hours by plane, there is a market of 1.3 billion management talent, and Turkey is positioned at the consumers. centre of a market that represents roughly 1.2 billion people. Foreign direct investment in Turkey has skyrocketed from around US$ 1 billion until 2005 to more than Promising growth sectors include energy, US$ 20 billion in 2007. There is a lot more space for infrastructure, transport, the automotive industry, investment both in Turkey and across the region. As consumer products, agriculture, mobile telephony and one participant noted, there is a need for “urgent information communication technology (ICT). Speaking investment” in infrastructure and transportation as a major player in industry, Ashaboglu noted that the networks. potential to develop the automotive market remains very high. Central Asia's Trade with the Middle East For many, Turkey remains an attractive country in Imports have risen sharply since 2003, while exports accelerated in 1999 which to do business. Feyhan Yasar Kalpaklioglu, $4,000 Chairperson of Yasar Holding, Turkey, a large food and beverage company, noted that despite the financial Central Asia exports/imports to/from 3,000 Middle East (US$, millions) crisis “there is still a strong export potential” in the Exports consumer products sector. Ali Y. Koc, President of the Koc Information Technology Group, and a Young 2,000 Global Leader, shared her optimism. “Our natural Imports resource is food. We can distribute fresh food to a 1,000 market of 600 million; we have the water and we have the climate,” he said. 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: IMF 18 | World Economic Forum on Europe and Central Asia
  21. 21. Acknowledgements The World Economic Forum would like to thank Prime Minister Recep Tayyip Erdogan of Turkey and his government for their generous support in co-hosting the World Economic Forum on Europe and Central Asia. The World Economic Forum wishes to recognize the support of the following companies as Partners or Supporters of the World Economic Forum on Europe and Central Asia: Strategic Partners Audi Chevron Corporation The Coca-Cola Company Credit Suisse Dogus Group KPMG Lenovo Group Microsoft Morgan Stanley PricewaterhouseCoopers Satyam Computer Services Xenel Group Regional Partners Ithmaar Bank Koç Holding Sabanci Holding Meeting Supporters Abraaj Capital Gulf Finance House International Finance Corporation 19 | World Economic Forum on Europe and Central Asia
  22. 22. Contributors Børge Brende is Managing Director, in charge of Governments, Regional Activities and Constituents at the World Economic Forum. Christophe Weber is Head of Europe and Central Asia at the Forum. The World Economic Forum on Europe and Central Asia was under his direct responsibility, with Benita Sirone, Associate Director, Europe and Central Asia, Programme Development; Chantal Adamson, Senior Specialist Events and Meeting Coordinator; and Thomas Berglund, Senior Community Relations Manager, Europe and Central Asia. The report writers, Alejandro Reyes and Dianna Rienstra, worked with Nancy Tranchet to produce the report. The World Economic Forum would like to express its appreciation to the summary writers for their work at the meeting. Session summaries are available on the World Economic Forum website (www.weforum.org). Associate Director, Editing: Nancy Tranchet Design and Layout: Kamal Kimaoui, Associate Director, Production and Design Photographs: Serkan Eldeleklioglu, Ozan Atasoy, Bora Omerogullari 20 | World Economic Forum on Europe and Central Asia
  23. 23. This publication is also available in electronic form on the World Economic Forum website at the following address: World Economic Forum on Europe and Central Asia report: http://www.weforum.org/pdf/summitreports/europecentralasia2008 (HTML) The electronic version of this report allows access to a richer level of content from the meeting, including photographs, session summaries and videos of selected sessions. The report is also available as a PDF: http://www.weforum.org/pdf/summitreports/europecentralasia.pdf (PDF) Other specific information on the World Economic Forum on Europe and Central Asia, Istanbul, Turkey 30 October – 1 November can be found on the following links: KnowledgeConcierge http://www.weforum.org/europecentralasia2008/knowledgeconcierge Programme http://www.weforum.org/europecentralasia2008/programme Session summaries http://www.weforum.org/europecentralasia2008/summaries Interviews with participants http://www.weforum.org/europecentralasia2008s/interviews Webcasts http://www.weforum.org/europecentralasia2008/webcasts Members’ area http://www.weforum.org/europecentralasia2008/members Photos http:// http://www.weforum.org/europecentralasia2008/photos
  24. 24. 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. (www.weforum.org)

×