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Country Forecast: Turkey, Erdogan and Where Policy Leads

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With its 81 provinces and a population of nearly 80 million inhabitants, Turkey continues its state of emergency imposed under President Tayyip Recep Erdoğan after a planned coup in July, 2016. The attempted overthrow of Mr. Erdogan, by a faction of the Turkish Army, was said to be blamed for the putsch.  Though failed, the violence predetermined how Turkey would proceed via Erdogan in the future to prevent further upheavals seen that July. Today, the outcomes of governmental acts have long-term consequences to democratic principles particularly freedom to protest and protect speech, basic tenets of a freely elected and democratic society. Using its emergency powers does question the country’s leadership role in the eastern region of Europe and global image to the outside world. Its stability as a NATO member as well as its prospects joining the EU too comes into question. In addition, extending a state of emergency has a parallel affect regarding foreign investments within an unstable environment, i.e. companies and or countries pulling out from Turkey.

While Erdoğan insists he remains committed to the goal of eventual membership in the EU, he has made clear that he does not intend to let that objective interfere with other priorities, namely, the pursuit of expanded political power at home and what he deems to be Turkey’s national interests abroad. Erdogan feels the state of emergency is needed to deal with ongoing security threats; and, while the President doesn’t seem bothered image wise by a potential extension, this type of instability may negatively impact foreign capital inflows further fracturing new investment opportunities from the outside.

Erdogan’s government re-structure through a referendum back in June, 2017 will change the constitution from a parliamentary style to a presidential form of government consolidating more power to this president in 2018. It abolishes the office of the prime minister while decreasing the powers of Turkey’s parliament. These moves coupled with a more authoritarian disposition from Mr. Erdogan has fractured the nationalistic bloc causing consternation amongst political parties ultimately setting up Meral Aksenar, former interior minister, to challenge the AKP/Erdogan in the 2019 elections(now there’s a chance snap elections will take place this summer). This may have more implications to new investment strategies, and; yes, political instability will continue to develop and unfortunately flourish due to Erdogan’s attempt to reign in critics.

A potential extension of state of emergency for the seventh time erodes government transparency and confidence, and the Turkish government’s rule of law. Since an extension will soon be discussed in Ankara, the question of political stability and policy initiatives promoting economic growth invariably are linked to upticks of foreign investments and portfolios to the nation. While stability versus instability is a main topic of discussion, Turkey’s GDP has grown over 7 per cent in 2017 making the nation an attractive investment center. Not bad for a country with all the volatility described.

Policies Relevant to Investing Strategies and Market Opportunities

Political instability can dampen the attractiveness for direct investment while the need for enhanced security, the issue of domestic uncertainty, and populist spending measures, too, may generate financial market volatility affecting capital inflows. Yet, Turkey, with its strong domestic market and growing economy, remains an attractive point to foreign investors. For instance, over the past year, FDI increased over 50 per cent where both European, Asian and Middle Eastern countries have become key to Turkey’s success as an investment hub.

These successes may be attributed to central government policies. One in particular is The Turkish Commercialization Code(TCC). Enacted in 2012, the code enables foreign investors to decide whether to partner or not to partner with Turkish businesses with respect to new ventures in the country.Also of interest to those companies and countries viewing Turkey as an investment center is the opportunity to obtain Turkish citizenship and its combined benefits, such as the access to all Schengen Zone countries. On that note, Turkey has signed bilateral agreements with other countries for the protection of foreign investments.  One in particular is Japan, which in recent years has invested over $200,000,000 in Turkey in the automotive, consumer electronics, energy and food sectors. As an aside, compared with other countries, Japan did not withdraw or disinvest from Turkey after the attempted coup nor did they remove funding regarding risks related to terror, open borders, and Erdogan’s crack down on dissidents.  Despite the risks involved, Turkey remains attractive to countries wanting to tap into its market of nearly 80 million people. In addition, along with household spending, the country’s economy has grown giving fodder to Japan’s foresight to remain a player in investing and commercial development, job and wage creation.

Bilateral agreements steady the course in future investment opportunities. Japan is a perfect example to how and why these agreements help sow new commercial relations where both countries benefit from these activities.

Tax incentives to entice new business development, both externally and internally, include generous tax breaks, tax reductions and exemptions from import duties to Turkish businesses. These initiatives, for instance, have helped incentivize domestic defense projects within the country which is trying to increase home-grown defense programs such as building unmanned aerial drones, a defense linchpin that many in the Turkish military and civilian leadership see as essential in fighting asymmetric battles against countries like Syria or Iraq.

Regarding economic relations, Free Trade Agreements (FTAs) mark poignant milestones between Turkey and other nations looking to develop new markets in each other’s countries. For example, both the Erdogan regime and nations like Singapore, Algeria, and Serbia to name a few, have benefited through mutual investments. In Algeria, for instance, both countries signed a number of agreements particularly related to the petrochemical sector. Algeria’s state-owned energy company SONATRACH and Turkey’s Rönesans and Bayegan energy firms agreed on a $1 billion investment. Cooperation on agriculture too was signed between the agriculture ministers of the two countries to continue the notion of bilateral investments.

Economic Conditions

Turkey’s economy will be influenced by consumers being a bit more cautious than the previous several years. Compared to last year, consumer credit slowdowns are expected to determine Turkey’s economic outlook for 2018-2020.  2017 saw debt fueled spending. Ensuing years not so much buying via credit; in addition to a slow down credit wise, account deficits and inflation pose downside risks to growth. Yet, Turkey remains one of the world’s top 20 economies due to steady growth and pragmatic fiscal policies.

Yet a dichotomy exists: political risk and monetary policies have impeded the Turkish economy particularly in reference to high inflation rates which hover close to 10.50 per cent. As of January, 2018, inflation did not come down to single digits and remained at 10.2 percent.

Central governments budget balance last year saw TL 47.4 BN or $13BN+ deficit projection. With respect to GDP growth, it is expected to be .80 percent end of Q2/18. In general GDP growth is projected to trend around 1.00 percent in ensuing years.

While business investments will help the country develop new markets for its people, unemployment is still projected to be between 9.9 percent to 10.2 percent in 2018. Gaining the upper hand to overcome high unemployment will take a continuing recovery and new measures to lower the unemployed and create new jobs. Job growth in the country will be driven by the industrial, services and construction sectors.

The Turkish lira, which has struggled in recent months on political concerns as well as worrying inflation has lost over five percent of its value against the dollar since January. This may portend to what Turkey and Erdogan, specifically, are facing in the future.

Dean Klovens, Managing Director, Strategic Intelligence Research and Resourcing. Dean has extensive experience in research & writing for business and public policy projects in areas of strategic intelligence to benefit leadership’s decision making. He earned his Master’s in Public Administration and Policy at DePaul University with a BA in Political Science at the University of Illinois-Chicago.

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The May 27 Coup: An Attempt to Analyze Politics in Gramscian Terms

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On 27 May in 1960, Turkey witnessed its first full-fledged military coup. The coup was of a non-hierarchical nature in the sense that it was not carried out by generals but by other military officers belonging to lower status such as colonels. What paved the way for the coup can be seen as multi-dimensional. What I will try to do in this piece is not to put forward the reasons why that military intervention occurred or the impact it had upon society and politics in Turkey. My main concern is to analyze Turkish politics in Gramscian terms between the years 1960–1961.

The Democrat Party which was overthrown in 1960 can be viewed as a party which was supported by the masses who are critical of the single-party era. The strict state interpretation of secularism was undermined to some degree during the DP rule and this was welcomed by the masses in Turkey. Moreover, the economic backwardness of the rural areas was undermined to some extent, this development can also be seen as an important source of relief for the masses during that period. However, as Acton states “power corrupts”, the DP in the course of time had adopted some autocratic policies that discomforted the state establishment, most notably the military elites. Moreover, the state establishment thought that the DP had undermined the Kemalist principles especially in terms of challenging the secular character of Turkey.

Apart from political reasons, the structure of the military played a key role in the emergence of the 1960 coup d’état. As known, in 1952, Turkey became a part of the NATO, and this membership made the military personnel become more aware of the economic and technological backwardness of the army. Briefly, it can be said that those years were times of change: the military staff had become much more aware of the armies of other NATO members and as noted above, this paved the way for making them realize how backward they were both in technological and financial terms. On the other hand, there was a significant transformation of the Turkish society as domestic migration to cities was witnessed. Also the victory of the DP rule and then its tendencies towards a more authoritarian line played a central role in destabilizing the country.

What I attempt to do in this piece is to employ three of Gramsci’s terms / conceptualizations in analyzing Turkish politics before and after the 1960’s coup d’état. These concepts are hegemony, organic intellectuals and historical bloc. The term hegemony can simply be defined as the following: A society cannot be ruled through sole coercion and oppression; non-material instruments are needed, such as consent and persuasion, as well. Organic intellectuals can be defined as the intellectuals who are different from conventional intellectuals. Organic intellectuals have a significant role in society, they play a key role in the reproduction of the dominant ideology (hegemonic discourses) and they try to integrate the masses into the dominant ideology.

Historical bloc refers to a particular period of time with a particular type of power configuration shaped both by economic and political factors. The establishment of a historical bloc can be regarded as the end of the ideological dominance of a certain group while being the start of the dominance / ideological hegemony of another group.

First of all, the term ‘hegemony’ can be a good starting point in analyzing Turkish politics just before the military intervention. As noted, societies cannot be ruled by coercion only; there is also a strong need for consent. As known, the policies of the DP after the mid-1950s had begun to have an authoritarian character.

The DP rule chose not to negotiate with the opposing forces in the parliament, by contrast, the DP leaders chose to establish special investigative committees (tahkikat komisyonu) in order to cope with the opposing forces. These committees can be regarded as an instrument of coercion. In addition, freedom of speech had been under threat as the DP rule adopted strict censorship policies. These developments weakened the relative power of consent that was evident in the first years of the DP rule. In other words, it can be stated that, the hegemony of the political elites (the DP) had begun to be questioned right before the coup.

Secondly, the term ‘historical bloc’ can be employed in order to understand what had happened after the coup.As known, the military intervention put an end to the DP rule and party leaders while some other important political figures were sent to trial. Some of them were hanged later on. After the coup, transitional governments were established. These governments can be formulized as follows: Army + Republican People’s Party (RPP) = Political Power. It can be said that, the end of the DP rule can be seen as the end of a certain historical bloc. The historical bloc of the DP rule and its social/electoral basis had collapsed and another historical bloc, that of the RPP and the military came into-being.

Thirdly, a look at the new constitution drafting process will help us while evaluating the role of the ‘organic intellectuals’ in analyzing Turkish politics of that time period. After the coup, the military officers had asked some law professors to make a brand new constitution for Turkey. The nature of the 1961 constitution is not under investigation here, so only the role of the professors will be analyzed. The law professors were of Kemalist ideology and were determined to make a constitution in line with the ideology of the military. It is obvious that the professors played some sort of an organic intellectual role in making the new regime’s ideology dominant in the society. By drafting a new constitution, they aimed at justifying the coup as well as producing the ideology of the new regime. In addition, it can be stated that, the new constitution was seen as a tool for building up the new hegemony after the coup. The new laws paved the way for the diversification of the political arena letting new political actors emerge.

To put it in a nutshell it can be said that the events preceding and following the 1960 coup can be a good case study for applying Gramscian terms/conceptualizations in analyzing Turkish politics.

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India-UAE tourism and education linkages

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In spite of the continued uncertainty with regard to the trajectory of the covid19 pandemic, globally, countries are trying to return to normalcy. Significantly, the performance of United Arab Emirates (UAE’s) tourism sector in the first quarter of 2022 was not just back to pre-covid levels, but actually managed to do better.

H.E. Dr. Ahmad Belhoul Al Falasi, Minister of State for Entrepreneurship and Small and Medium Enterprises and Chairman of the UAE Tourism Council highlighted these point while providing tourism figures for Q1 2022.Hotels received an estimated six million visitors in the first quarter of the year – a rise of 10% from 2019. Revenues for the first quarter of 2022, were AED (United Arab Emirates Dinar) 11 billion or USD 3 billion (2.9 billion) which was a jump of 20% from the first quarter of 2019.

The stellar performance of UAE’s tourism sector in the first quarter of 2022 is being attributed to a number of factors including two major events — the Dubai Expo 2020 and the World’s Coolest winter campaign.

In order to attract more visitors to the Dubai Expo 2020, UAE had also relaxed conditions for international travellers. The Emirate has also introduced new visitor visa categories with an eye on giving a boost to tourism. What is remarkable is that during the first quarter of 2022, average occupancy increased 25% from 3 nights to 4 nights and witnessed an 80% growth (no other country had such high occupancy rates)

The total number of tourists received was 4 million, and not surprisingly, Indian nationals along with tourists from UK, US and Russia accounted for a significant percentage of tourists to UAE. While other countries like Singapore have also opened their borders to international tourists, including Indians, and removed restrictions, the biggest advantage the UAE has is its geographical location – especially for tourists from the South Asian region. Given that the travelling time is less, even short breaks are possible.

Apart from this, getting a UAE visa is relatively easier than one for the west and even ASEAN countries. UAE also has enough to offer for families in terms of shopping, recreation etc. There is also a wide variety of options, as far as hotels are concerned.  Since a significant number of Indians have business links or even offices in Dubai, in many cases holidays are coupled up with business trips. The fact that UAE hosts important cricketing events – in 2021 it hosted the Indian Premier League (IPL) 2021 and T20 world cup – will help it in attracting more Indian tourists in the future.

UAE is not only likely to continue to remain as a favoured tourist destination, but in the near future, it is also likely to attract more international students, especially from India. Apart from its geographical location, and the fact that it is home to a substantial population of South Asian expats, it is also home to a number of campuses of UK and US universities.

Most importantly with an eye on attracting qualified professionals and researchers, UAE has introduced a long term residency visa, dubbed as Golden Visa for  researchers, medical professionals and those within the scientific and knowledge fields, and remarkable students. Here it would be pertinent to point out that UAE-India Comprehensive Economic Partnership Agreement (CEPA) which came into effect earlier this month permits easier access for Indian engineers, IT professionals, accountancy professionals and nurses. The introduction of short term work visas will also help in attracting professionals from India.

  In the past, one of the reasons why UAE lost out to other countries, in attracting professionals and students from South Asia (though the number of Indian professionals in UAE has been increasing in recent years), who preferred the West, Australia or Singapore, was the fact that UAE did not provide long term residency.

With the introduction of long-term visas, it is not only professionals, but even students who otherwise may have sought to pursue education in the west who will now look towards the UAE. One of the options, which students from India could go for is the dual degree program, which has been introduced by many UK universities, where they spend some time in UAE and the rest in UK. Here it would be pertinent to point out, that UAE universities are also offering scholarships with an eye on attracting international students. One of the provisions of the India-UAE Foreign Trade Agreement (FTA) which both countries signed earlier this year is that India will set up an IIT in Abu Dhabi.

The UAE has been seeking to re-invent for some years. A good example of this is the UAE Vision 2021, Dubai Vision 2030 and Abu Dhabi Vision 2030. The Gulf nation has been able not only to handle covid19 successfully, but with its innovative and visionary thinking it has been able to do remarkably well in attracting tourists. Its ability to think out of the box will enable it to emerge as an important economic hub. UAE is likely to not just remain a favoured tourist destination, but also could emerge as a top preference for Indian nationals to study and work.

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Saudi Crown Prince Mohammed bin Salman’s heady days

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These are heady days for Saudi Crown Prince Mohammed bin Salman.

With King Salman home after a week in hospital during which he had a colonoscopy, rumours are rife that succession in the kingdom may not be far off.

Speculation is not limited to a possible succession. Media reports suggest that US President Joe Biden may visit Saudi Arabia next month for a first meeting with the crown prince.

Mr. Biden called Saudi Arabia a pariah state during his presidential election campaign. He has since effectively boycotted Mr. Bin Salman because of the crown prince’s alleged involvement in the 2018 killing of journalist Jamal Khashoggi in the Saudi consulate in Istanbul.

Mr. Bin Salman has denied any involvement but said he accepted responsibility for the killing as Saudi Arabia’s de facto ruler.

Mr. Bin Salman waited for his 86-year-old father to return from the hospital before travelling to Abu Dhabi to offer his condolences for the death of United Arab Emirates President Khaled bin Zayed and congratulations to his successor, Mohamed bin Zayed, the crown prince’s one-time mentor.

Mr. Bin Salman used the composition of his delegation to underline his grip on Saudi Arabia’s ruling family. In doing so, he was messaging the international community at large, and particularly Mr. Biden, that he is in control of the kingdom no matter what happens.

The delegation was made up of representatives of different branches of the ruling Al Saud family, including Prince Abdulaziz bin Ahmed, the eldest son of Prince Ahmed bin Abdulaziz, the detained brother of King Salman.

Even though he holds no official post, Mr. Abdulaziz’s name topped the Saudi state media’s list of delegates accompanying Mr. Bin Salman.

His father, Mr. Ahmed, was one of three members of the Allegiance Council not to support Mr. Bin Salman’s appointment as crown prince in 2017. The 34-member Council, populated by parts of the Al-Saud family, was established by King Abdullah in 2009 to determine succession to the throne in Saudi Arabia.

Mr. Bin Salman has detained Mr. Ahmed as well as Prince Mohamed Bin Nayef, the two men he considers his foremost rivals, partly because they are popular among US officials.

Mr. Ahmed was detained in 2020 but never charged, while Mr. Bin Nayef stands accused of corruption. Mr. Ahmed returned to the kingdomn in 2018 from London, where he told protesters against the war in Yemen to address those responsible, the king and the crown prince.

Mr. Abdulaziz’s inclusion in the Abu Dhabi delegation fits a pattern of Mr. Bin Salman appointing to office younger relatives of people detained since his rise in 2015. Many were arrested in a mass anti-corruption campaign that often seemed to camouflage a power grab that replaced consultative government among members of the ruling family with one-man rule.

Mr. Bin Salman likely takes pleasure in driving the point home as Mr. Biden mulls a pilgrimage to Riyadh to persuade the crown prince to drop his opposition to increasing the kingdom’s oil production and convince him that the United States remains committed to regional security.

The crown prince not only rejected US requests to help lower oil prices and assist Europe in reducing its dependency on Russian oil as part of the campaign to force Moscow to end its invasion of Ukraine but also refused to take a phone call from Mr. Biden.

Asked a month later whether Mr. Biden may have misunderstood him, Mr. Bin Salman told an interviewer: “Simply, I do not care.”

Striking a less belligerent tone, Mohammed Khalid Alyahya, a Hudson Institute visiting fellow and former editor-in-chief of Saudi-owned Al Arabiya English, noted this month that “Saudi Arabia laments what it sees as America’s wilful dismantling of an international order that it established and led for the better part of a century.”

Mr. Alyahya quoted a senior Saudi official as saying: “A strong, dependable America is the greatest friend Saudi Arabia can have. It stands to reason, then, that US weakness and confusion is a grave threat not just to America, but to us as well.”

The United States has signalled that it is shifting its focus away from the Middle East to Asia even though it has not rolled back its significant military presence.

Nonetheless, Middle Eastern states read a reduced US commitment to their security into a US failure to respond robustly to attacks by Iran and Iranian-backed Arab militias against targets in Saudi Arabia and the UAE and the Biden administration’s efforts to revive a moribund 2015 international nuclear agreement with Iran.

Several senior US officials, including National Security Advisor Jake Sullivan and CIA director Bill Burns, met with the crown prince during trips to the kingdom last year. Separately, Defense Secretary Lloyd Austin called the crown prince.

In one instance, Mr. Bin Salman reportedly shouted at Mr. Sullivan after he raised Mr. Khashoggi’s killing. The crown prince was said to have told the US official that he never wanted to discuss the matter again and that the US could forget about its request to boost Saudi oil production.

Even so, leverage in the US-Saudi relationship goes both ways.

Mr. Biden may need Saudi Arabia’s oil to break Russia’s economic back. By the same token, Saudi Arabia, despite massive weapon acquisitions from the United States and Europe as well as arms from China that the United States is reluctant to sell, needs the US as its security guarantor.

Mr. Bin Salman knows that he has nowhere else to go. Russia has written itself out of the equation, and China is neither capable nor willing to step into the United States’ shoes any time soon.

Critics of Mr. Biden’s apparent willingness to bury the hatchet with Mr. Bin Salman argue that in the battle with Russia and China over a new 21st-century world order, the United States needs to talk the principled talk and walk the principled walk.

In an editorial, The Washington Post, for whom Mr. Khashoggi was a columnist, noted that “the contrast between professed US principles and US policy would be stark and undeniable” if Mr. Biden reengages with Saudi Arabia.

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