Is Turkey going back to square one after 40 years?

Turkey has transformed itself into a dynamic industrial country from a sleepy agrarian society. Much of the transformation is owed to Turgut Özal’s reforms in the 1980s. Then the Customs Union with the EU in 1996 turned Turkey into a mid-tech industrial country.

Turkey’s economic transformation used to be a success story in terms of improving the competitiveness of the country at the international level. Not anymore.

As of 2016, Turkey’s competitiveness has declined to lower than the global average. Why? Allow me to elaborate.

I remember Asian Development Bank President Takehiko talking about “eight key actions for economic development” in 2015. These were lessons learned from the Asian experience.

“The government must have a credible vision for a brighter future and set a strategy to achieve it,” Mr. Nakao said. Economic development was about having a shared vision for all and a credible strategy to mobilize society. Turkey’s recent past is the proof of the pudding, if you ask me.

Turkey has lost its shared vision for a brighter future, which has long been the EU process. Starting in 2007, Turkey’s bid for European membership started to fade.

I see three reasons for this. First, Turkey entered into a prolonged political transformation process when President Ahmet Necdet Sezer’s term ended in 2007. There is no end to this process in sight.

Second, an early populist, Nicholas Sarkozy, became president of France, ready to stall Turkey’s EU bid at all costs.

Third, the ECHR’s declaration that a headscarf ban in Turkey did not contravene the European Human Rights Convention severely confused the new ruling elite of the country. The vision of accession, it seemed, belonged to the old elite, and the new, more conservative elite had to look elsewhere.

From 2007 onwards, the crack in the shared vision has widened. From a court case to close the ruling party to sham trials, purges in the military and the judiciary, and a failed coup in 2016, Turkey has entered a critical period of “state of emergency a la Turca.” Turkey, as a country with weak institutions, has found it extremely difficult to control the process of political transformation.

Turkey’s global competitiveness increased rapidly from 2002 to 2007. Those were the days of the shared EU vision. Then politics spoiled the story. A study on the sophistication of Turkey’s export basket shows serious damage. Turkey’s competitiveness stalled in 2007 and started to decline from 2012 onwards. In 2016, the global competitiveness of the country declined to levels below the global average. Turkey was here in 1980, when its economic transformation process began.

So can we say that Turkey is back to square one after 40 years of economic transformation? Yes and no. Yes, we are back to where we were, at the relative global average export sophistication level. Yes, the average in 2016 is much higher than what it was in 1980, with global production moving to the east and to developing countries. More countries are now exporting goods that were once only in the export basket of developed countries. The world’s export baskets have become more sophisticated overall.

Yet it is time for Turkey and our European friends to realize what is happening: Getting out of the middle income trap has become more difficult for Turkey. The state of emergency a la Turca is too costly. Turkey needs its shared vision back. As a recent survey shows, about 80 percent of Turks are still sharing the ideal of Europeanization for Turkey. Rational decision makers should take note.