24
WORLD ECONOMIC FORUM INSIGHTS World Economic Forum in Turkey Connecting Regions Creating New Opportunities Istanbul, 23-24 November 2006

World Economic Forum in Turkey 2006

Embed Size (px)

DESCRIPTION

 

Citation preview

Page 1: World Economic Forum in Turkey 2006

WO

RL

D

EC

ON

OM

IC

FO

RU

M

INS

IGH

TS

World Economic Forumin Turkey

Connecting Regions

Creating New Opportunities

Istanbul, 23-24 November 2006

Page 2: World Economic Forum in Turkey 2006

The views expressed in this publication do notnecessarily reflect those of the World EconomicForum.

World Economic Forum91-93 route de la CapiteCH-1223 Cologny/GenevaSwitzerlandTel.: +41 (0)22 869 1212Fax: +41 (0)22 786 2744E-mail: [email protected]

© 2006 World Economic ForumAll rights reserved.No part of this publication may be reproduced or transmitted inany form or by any means, including photocopying and recording,or by any information storage and retrieval system.

REF: 151206

This publication is also available in electronic form on the World Economic Forum’swebsite at the following address:

World Economic Forum in Turkey Web report:www.weforum.org/summitreports/turkey2006 (HTML)

The electronic version of this report allows access to a richer level of content from themeeting, including photographs and session summaries.

The report is also available as a PDF:www.weforum.org/pdf/summitreports/turkey2006.pdf

Other specific information on the World Economic Forum in Turkey, Istanbul,23-24 November 2006, can be found at the following links:

www.weforum.org/turkeywww.weforum.org/turkey/programmewww.weforum.org/turkey/summaries2006www.weforum.org/turkey/indepthwww.weforum.org/turkey/partnerswww.pbase.com/forumweb/turkey

Page 3: World Economic Forum in Turkey 2006

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

Contents

World Economic Forum in Turkey

Page 4: World Economic Forum in Turkey 2006
Page 5: World Economic Forum in Turkey 2006

3

Preface

World Economic Forum in Turkey

The timing of the World Economic Forum in Turkey could not have been better; just a fewdays after the publication of the European Commission’s Enlargement Strategy and ProgressReport, over 400 participants from more than 45 countries gathered at the Bosphorus. Thediscussions included the current EU negotiations, yet they touched upon much more thanthat. Under the overarching topic of “Connecting Regions – Creating New Opportunities”, theForum 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 positiveimpact and a number of identifiable outcomes are worthy of attention.

Our meeting helped define Turkey’s strategic importance. With a difficult moment in Turkey’ sEU accession negotiations as a backdrop, the meeting brought into focus the long-termstrategic considerations that link the futures of Turkey and Europe and the manner in whichTurkey would affect Europe in the global arena.

The meeting broke taboos by addressing certain issues that traditionally remain unexplored ingatherings of this kind. The topics discussed included the EU’s evolving demands of Turkeyand the situation regarding human rights and minorities in the country.

The meeting also provided a platform where top policy-makers and business leaders jointlyidentified Turkey’s long-term comparative advantages and considered what ought to be doneto 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 aunique opportunity to exchange views with his/her peers, gain new insights regarding Turkeyand 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 strongerover the years to come.

Finally, we are proud of having achieved the aim identified in one of the meeting’s 20 sessiontitles: Branding Turkey – Changing Perceptions. When the two-day meeting ended, we all leftthe beautiful Ciragan Palace with a feeling of buoyancy and optimism about the country andits 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, RegionalPartners and Supporters, as well as to the Turkish government, who supported thisendeavour from the very beginning.

We are now looking forward to building on this partnership with Turkey and the region. Wehope that with your support, the World Economic Forum will again soon fulfil its role as amultistakeholder platform and catalyst for change in Turkey.

Felix HowaldDirector, Head of Europe and Central Asia

Page 6: World Economic Forum in Turkey 2006

The World Economic Forum in Turkey was especially welltimed, coming a year after Turkey began negotiations formembership in the European Union and on the eve ofPope Benedict XVI’s landmark visit to Turkey and thecrucial EU Summit in Brussels at which leaders were toassess the status of the accession talks. The setting toowas most appropriate – Istanbul’s Ciragan Palace recallingTurkey’s grand history and culture and the sight of theAsian shore across the Bosphorus a picturesque reminderof the country’s role as a crucial bridge acrosscivilizations.

Over two days, more than 400 business, government andcivil society leaders from more than 45 countriesdiscussed how Turkey is “Connecting Regions – CreatingNew Opportunities”, the theme of the meeting, and howthis strategically important nation is playing a critical roleas a model of stability at the doorstep of a region that isincreasingly unstable. Despite recent strains in Turkey’srelations with the EU, Turkish and European governmentand business leaders at the meeting urged restraint andcommon sense, calling on both sides to keep their eyeson the prize. Turkish Prime Minister Recep TayyipErdogan, who addressed participants at both the openingand closing plenaries, underscored that Turkey’s joiningthe EU would be an “alliance of civilizations”, a repudiationof those seeking to divide people of different faiths andcultures who nonetheless share common goals andvalues.

Participants also focused on Turkey’s future as it strives,like all other countries, to confront the pressures ofglobalization and improve its global competitiveness andbusiness climate. Turkey’s economic, political and socialreforms started before EU negotiations began, but arecurrently inseparable from, if not entirely driven by, theprospect of membership. The process is now irreversible,many participants argued.

Finally, the meeting examined Turkey’s global geopoliticalposition, particularly its potential as an energy corridor.This is inextricably linked to the traditional and stillexpanding part it plays as an important connectionspanning the cultures of East and West.

This is a summary of the insights and recommendationsfor action that emerged from the meeting. They areorganized under the four pillars supporting the centraltheme.

4

Summary: Connecting Regions – Creating New Opportunities

World Economic Forum in Turkey

"If Turkey were not to jointhe EU, it would weaken theunion. We would all loseout."

Mabel van OranjeDirector, EU Affairs, OpenSociety Institute, UnitedKingdom; Young Global Leader

"We have fulfilled whateverpromises we made. Weknow there are difficulties tocome. But we are continuingto move forward with greatpatience. The responsibilityfalls more on the EU than onTurkey. We are looking forpolitical common sense."

Recep Tayyip ErdoganPrime Minister of Turkey

Page 7: World Economic Forum in Turkey 2006

World Economic Forum in Turkey

Geopolitical Role

Turkey plays a unique geopolitical role as a stable, secular,Muslim democracy literally at the strategic crossroadsbetween East and West. A member of NATO, it aspires tojoin the European Union. With its links to the Middle Eastand Central Asia, it is also emerging as a key energycorridor between those energy-producing regions andEurope. • A model of stability at the gateway to a region of

increasing instability, Turkey can play a moderating rolein regional conflicts and in mitigating global risks suchas the menace of terrorism and the threats to energysecurity.

• Turkey should build on its relations with Europe and theUnited States, forged during the Cold War andtempered through the war in Iraq and most recently theconflict in Lebanon, to bolster its role as a robustdefender of peace and security in its region andelsewhere.

• By aligning its energy policies more with Europe’s,Turkey can emerge as a trusted conduit of energy fromthe Middle East and Central Asia to its Europeanpartners, deriving enormous geopolitical and economicbenefits as a result.

• Europe and the US should recognize Turkey’sconsiderable geopolitical value and provide it with theappropriate financial, strategic and moral support thecountry needs to continue necessary political andeconomic reforms and realize its ambitions including EUmembership.

EU Accession

In 2005, Turkey embarked on complex negotiations tojoin the European Union. The prospect of Turkey’saccession to the EU has divided the governments andpeople of Europe, those with worries fearing a surgein migration leading to job losses. Others areconcerned about the implications of admitting apredominantly Muslim country into the European club.• While Turkey and Europe are suspicious of each

other, they should collaborate and compromise,focusing on the big picture. They must not let anissue such as Cyprus deter them from realizing themutual and multiplicative benefits of Turkey’s joiningthe EU.

• Turkey should take steps to allay European fearsabout the size of its population and culture bystressing that accession can help Europe addressits demographic deficits, provide deeper links to alarge market and low-cost labour pool, and offer abridge between civilizations.

• The Turkish people should understand that EUaccession will take time and require furthereconomic, political and social reforms. Turkey’sleaders should work to change its people’smindsets to appreciate the positive aspects ofaccession rather than stir up nationalism.

• Europeans, for their part, should change theirperceptions of Turkey to focus not on the risks buton the opportunities that Turkey clearly offers inhelping Europe mitigate risks. The EU should resistimposing double standards or new requirements onTurkish membership.

“We would have moredemocracy in Europe andthe world. Europe will losepower without Turkey."

Mehmet Gürcan DaimagülerHonorary Chairman, LiberalTurkish-German Association,Germany; Young Global Leader

5

“Turkey has to go from rent-seeking to profit-seekingstructures to increase itscompetitiveness.”

Güler SabanciChairperson and ManagingDirector, Sabanci Holding,Turkey; Co-Chair of the WorldEconomic Forum in Turkey

Page 8: World Economic Forum in Turkey 2006

Competitiveness & Business Opportunities

Turkey has done well in recent years to improve itscompetitiveness and business climate, climbing from 71stin the World Economic Forum’s Global CompetitivenessIndex in 2005 to 59th this year. Future macroeconomicand political stability depend on Turkey’s ability to stay thecourse of reform, particularly as it pursues EUmembership.• Despite its successes, Turkey faces many more

challenges. Chief among these is to improve education,which is necessary if Turkey is to narrow incomedisparities and the gender gap and promote innovation.

• Anomalies and dysfunctions in the economy should beaddressed, including red tape, corruption and the greymarket. Rent seeking should be replaced by profitseeking.

• After its success attracting foreign direct investment toits banking and telecommunications sectors, Turkeyshould aim to stir investor interest in other sectors. Keypriorities include making it easier to exit investmentsand increasing the flexibility of the labour market.

• The resilience of the Turkish economy could be testedby currency volatility and fluctuating investor sentimentover the course of the EU accession talks. Turkeyshould keep its focus on implementing the structuralreforms necessary to address its competitiveshortcomings.

Bridging Civilizations

As a moderate Muslim democracy steeped in secularismthat maintains close links with Europe, the United States,Central Asia and the Middle East, Turkey is in a uniqueposition to act as a bridge across civilizations. At a timewhen many worry about the potential of a clash ofcivilizations, Turkey can be an important link between Eastand West.• Turkey needs to take the lead in driving intercultural

dialogue. It can share with Europe its knowledge andexperience in reconciling differences between culturesand faiths, as well as its unique blend of Islam andsecular values.

• As a prospective member of the EU, Turkey canenhance its role as an ambassador for Europe as itpromotes the concept of the “alliance of civilizations” indirect challenge to those who seek to divide people andthreaten global peace and security.

• Turkey’s leadership in bridging civilizations through itsparticipation in cross-cultural initiatives and support ofpeacekeeping operations is crucial for regional stability.Its moral authority and influence in the region will beenhanced as it pursues crucial domestic reformsincluding important measures to promote freedom ofexpression and the advancement of women. In doingso, it will also serve to address apprehensions inEurope stemming from perceived discrepanciesbetween European and Turkish cultures.

6World Economic Forum in Turkey

"The alliance of civilizations is theantidote to the clash of civilizations.Turkey is not a supplicant. It is a majorplayer in the world in which we live. Weare not dealing with easy issues. NeitherEurope nor Turkey will see this as adialogue of constant remonstration but itshould be a dialogue of constantreconciliation."

Peter D. SutherlandChairman, Goldman Sachs International,United Kingdom; Member of the FoundationBoard of the World Economic Forum; Co-Chairof the World Economic Forum in Turkey

Page 9: World Economic Forum in Turkey 2006

Turkey’s application to join the European Union (EU)has become the concern of the day, hovering aboveall others on the nation’s agenda. It is linked topractically every challenge confronting Turkey todayincluding its global competitiveness, the rule of law,freedom of expression, the labour market and evenreligion. Yet EU membership is not the over-archingquestion. What is really at issue is the globalization ofTurkey and how it addresses the many pressures andrisks it faces at home, in the neighbourhoods to whichit belongs and in the world. “In terms of globalization,the EU is the major part of the economic programmeand development of Turkey, but the rest of the world isalso very important,” said meeting Co-Chair Peter D.Sutherland, Chairman, Goldman Sachs International,United Kingdom; Member of the Foundation Board ofthe World Economic Forum.

The significant geopolitical and strategic roles Turkeyplays in the world, as well as its position as a bridgebetween civilizations, cannot be minimized. Norshould its growing potential as a major energycorridor, a big consumer market, a large source ofskilled labour and a financial services hub bedismissed. “There are mutual benefits to beingtogether,” said Ferit F. Sahenk, Chairman, DogusGroup, Turkey. “We share global challenges. There aremany global risks around us. The EU needs Turkey asmuch as Turkey needs the EU.”

Yet the overwhelming logic of a partnership is typicallylost amid the debate over differences or potentialsources of friction. Turkey’s accession has dividedgovernments and public opinion in Europe, with thoseagainst membership worried that it will lead to a surgein migration and then to job losses in their countries.Others dwell on Turkey’s roots in the East and the factthat it is a predominantly Muslim country. Can such aplace fit into the European club?

Still others focus on Turkey’s turbulent past and theremains of those days – the role of the military, thecontrols on the press and freedom of expression,doubts about the rule of law, and corruption. Cyprus,of course, is still a highly emotional issue that raisesnationalist sentiment in Turkey, even more so now thatthe Greek-controlled part of the divided island wasadmitted to the EU in 2004 after the Turkish sideapproved a UN-brokered solution which the Greekside rejected. “Some reforms have not advanced asquickly as we hoped,” said Joaquín Almunia,Commissioner, Economic and Monetary Affairs,European Commission, Brussels. He added: “If thequestions linked to Cyprus are not solved, this willaffect the overall negotiations.”

7

EU Accession

World Economic Forum in Turkey

“Our people want to see Turkey as a free and prosperouspartner of the free world. This is what Turkey deserves. Butsometimes some wrong and unjust views from the EU havehad an impact on public opinion. The EU must understandthis.”

Recep Tayyip Erdogan, Prime Minister of Turkey

“There are mutual benefitsto being together. We shareglobal challenges. There aremany global risks aroundus. The EU needs Turkey asmuch as Turkey needs theEU.”

Ferit F. SahenkChairman, Dogus Group, Turkey

"Some reforms have notadvanced as quickly as wehoped. If the questionslinked to Cyprus are notsolved, this will affect theoverall negotiations."

Joaquín AlmuniaCommissioner, Economic andMonetary Affairs, EuropeanCommission, Brussels

Page 10: World Economic Forum in Turkey 2006

Participants at the World Economic Forum in Turkeyappeared to be mainly pro-accession so discussionfocused more on how to convince increasingly scepticalTurks – once wildly enthusiastic about membership – andsuspicious Europeans that Turkey’s joining the EU wouldbe in their interest. The mood of both publics isfluctuating. The move by the EU to freeze part of themembership talks over Turkish restrictions on the accessof ships and planes from Cyprus to its ports and airportswill inevitably deepen Turkish disappointment andencourage opponents of accession. Pope Benedict XVI’ssurprise gift of support for membership on his arrival inAnkara in November boosted Turkish spirits.

The challenge for Turkey is to keep its eye on the prizeand resist walking away from the talks in a nationalistpique. Turkish leaders should resist stoking suchsentiment, even though it may be natural to do so in therun-up to elections. The Turkish people shouldunderstand that EU accession will take time and requirefurther economic, political and social reforms, though theyhave already paid a price in accepting the structuralchanges that have been implemented so far. To be sure,they should appreciate their considerable achievements.“Turkey is going through an incredible economic, politicaland social transformation,” said Ali Babacan, Minister ofthe Economy of Turkey, and Chief Negotiator for theEuropean Union. “What is most important is that Turkeyhas been the owner of this transformation. Ownership has

been the key to success.” Added Victor Halberstadt,Professor of Public Economics, Leiden University,Netherlands, who was also a meeting Co-Chair: “Myimpression is that all this is irreversible.”

For all its pains, Turkey is sending a strong signal toEurope and others that democracy, secularism, Islam andeconomic growth can co-exist, Babacan explained. Theseare positive factors that Turkey brings to the negotiatingtable. Turkey, after all, can help Europe address itsdemographic deficits, provide deeper links to a largemarket and low-cost labour pool that is already in acustoms union with the EU, and offer a bridge betweencivilizations. Said Babacan: “Turkey has a young andgrowing population. Until recently, this was perceived as aproblem, a burden that Turkey would bring to the EU. Butit is in fact an asset that can help the population deficit ofthe EU and the economic growth of Turkey.”

For their part, the Europeans should update theirperceptions of Turkey and focus not on the risks but onthe opportunities that Turkey clearly offers in helpingEurope mitigate a range of risks. And as much as Turkeyshould do so, they too must recognize that accessionnegotiations usually take years and that Turkey hasimplemented many reforms that will take time toimplement in full. “This is a change of mentality,” TurkishPrime Minister Recep Tayyip Erdogan explained. “Ourpeople want to see Turkey as a free and prosperouspartner of the free world. This is what Turkey deserves.But sometimes some wrong and unjust views from the EUhave had an impact on public opinion. The EU mustunderstand this.”

8World Economic Forum in Turkey

“Turkey is going through anincredible economic,political and socialtransformation. What ismost important is thatTurkey has been the ownerof this transformation.Ownership has been thekey to success."

Ali BabacanMinister of the Economy ofTurkey; Chief Negotiator for theEuropean Union; Young GlobalLeader

Newer EU Citizens (or Candidates) More Likely toSupport Turkey’s Accession

Source: European Commission

Page 11: World Economic Forum in Turkey 2006

9World Economic Forum in Turkey

The EU should resist imposing double standards or newrequirements on Turkish membership. It has not beenunfair, EU leaders at the meeting insisted. ValdasAdamkus, President of Lithuania, called allegations ofdouble standards “nothing but false illusions”. Noprospective member has waltzed to Brussels without itsshare of stumbles. “We are not dealing with easy issues,”said Sutherland. “It’s a long road with bumps and difficultturns. It requires patience and an understanding of thedifficulties.” Many Europeans feel threatened by Turkey’sknock on the door, he acknowledged. Some who hadbeen among the most open-minded have suddenlybecome the most intolerant. Obviously, Europe too ischanging, Halberstadt remarked.

Perhaps then the greatest mutual benefit of Turkey’s EUaccession will be the bridging of East and West thatwould have been impossible to contemplate only a fewyears ago and, in the shadow of 9/11 and the bombingsin Madrid and London, might still seem improbable, evenwrong to many. But it is precisely the evil motives of theperpetrators of those tragic attacks that drive the logic ofa Turkey-EU embrace. “The alliance of civilizations is theantidote to the clash of civilizations,” Sutherlandconcluded. “Neither Europe nor Turkey will see this as adialogue of constant remonstration but it should be adialogue of constant reconciliation.”

Who Is Investing in Turkey?

Source: OECD

Participants exchanging insights on Turkey’s current and future privatization process, live during a CNBC debate

Page 12: World Economic Forum in Turkey 2006

10

Geopolitical Role

World Economic Forum in Turkey

Glance at a world map and Turkey’s unique geopoliticalposition is obvious. Literally at the strategic crossroadswhere West collides with East, this stable, secular,moderate Muslim democracy straddles Europe and Asia.A staunch member of the North Atlantic TreatyOrganization (NATO), the bulwark of Western Europeansecurity during the Cold War, Turkey is in the midst ofapplying for membership in the European Union (EU), themost ambitious regional integration project in the worldthat began with Western Europe and has since absorbedcountries in Central and Eastern Europe. Yet with itscultural and linguistic links that stretch to Central Asia andeven as far as North Asia, and the Islamic faith which itshares with neighbours in the Middle East and NorthAfrica, Turkey is firmly rooted among the civilizations ofthe East.

Despite its record of three military coups, Turkey haschosen the path of stability and democracy, uneasy as itmay be. The decision to aim for EU accession and launchinto the tough negotiations required for membershipunderscored Turkish commitment to modernization andreform. When an Islamist government was elected in2003, fears that Turkey’s secular foundation might crackproved unfounded. While its neighbourhood “is more andmore characterized by instability, Turkey is characterizedmore and more by stability,” noted Klaus Schwab,Founder and Executive Chairman of the World EconomicForum.

Indeed, Turkey is all the more remarkable because itbelongs to two distinct and exclusive groups. It is one ofthe few moderate Islamic countries in the world –Indonesia and Malaysia are two other examples – thathave embraced democratic politics and pursued freemarket policies to promote growth. And while Turkey isonly a mid-sized country with a population (73 million)smaller than Germany’s but larger than France’s, its 8%-plus economic growth is brisk enough to inspire someinvestors to bracket it with that fascinating club ofdynamic emerging markets known as the BRICs – Brazil,Russia, India and China.

And while economic growth and prosperity and Turkey’spursuit of reform will further strengthen its political andsocial stability, it will also enhance its power and influence,whether or not it eventually joins the EU. “Turkey is not asupplicant,” said meeting Co-Chair Peter D. Sutherland,Chairman, Goldman Sachs International, United Kingdom,and Member of the Foundation Board of the WorldEconomic Forum. “It is a major player in the world inwhich we live.” Consider the recent conflict in Lebanonand the decision by the Turks to join peacekeepingoperations there. Turkey’s military, still a powerfulinstitution, is the largest armed force in Europe.

“We are here at a momentwhen the region is moreand more characterized byinstability but Turkey ischaracterized more andmore by stability.”

Klaus SchwabFounder and ExecutiveChairman, World EconomicForum

“We need a stable Turkey to help Europe tackle today’schallenges and risks. It is the responsibility of the EU tocooperate with Turkey and to support Turkish reforms. Theprocess needs to be finished with success.”

Joaquín Almunia, Commissioner, Economic and Monetary Affairs,European Commission, Brussels

Page 13: World Economic Forum in Turkey 2006

World Economic Forum in Turkey

“Turkey has all theingredients to become aglobal force, politically andeconomically.”

Ali Y. KoçPresident, Koç InformationTechnology Group, Koç Holding,Turkey

“Turkey’s significance doesnot stem from its role as anenergy supplier.”

Gareth EvansPresident, International CrisisGroup, Belgium

Turkey has clashed with the US over the Turkishparliament’s refusal to let the country be used byAmerican forces as a staging ground for the Iraq war. Tieswith Israel have been strained over the Palestinian issueand the Lebanon conflict. Despite these disputes, Turkeyhas maintained its close strategic relationship with bothcountries. Clearly, Turkey is more forcefully asserting itsinterests in its foreign policy and deepening itsengagement in the region as a defender of peace andstability. “Turkey has all the ingredients to become aglobal force, politically and economically,” said Ali Y. Koç,President, Koç Information Technology Group, KoçHolding, Turkey.

Yet outsiders particularly in Europe have not appreciatedhow Turkey and its geopolitics have evolved. “Perceptionsin Europe lag ten years behind reality,” said Hugh Pope,former Wall Street Journal reporter and a leading Turkeyanalyst. “Europe was uninterested in Turkey in the early1990s and gave no thought to its role in the energysector. Now energy is the hot issue.” Indeed, Turkey isemerging as an important nexus for oil and gas pipelinesfrom Russia’s Caspian region, Central Asia, the MiddleEast and North Africa to Europe. The Baku-Tbilisi-Ceyhan(BTC) oil pipeline running from Azerbaijan to Turkey’ssouth-eastern coast via Georgia, which was launched thisyear, is the second longest such conduit in the world.

While in its initial stage the pipeline will supply only 1% ofglobal demand, it is an important step in the diversificationof the sources of petroleum and will make a criticalcontribution to global energy security. By aligning itsenergy policies with Europe’s, Turkey could reapenormous strategic and financial benefits from its energyinitiatives.

Yet in Europe, Turkey’s potential as an energy artery is stilla matter of debate. “There is a tacit belief that energy isnot a card Turkey brings to the table,” said Sinan Ülgen,Chairman, Centre for Economic and Foreign PolicyStudies (EDAM), Turkey. Of course, it is important not toexaggerate the contribution Turkey could make toEurope’s energy security. “Turkey’s significance does notstem from its role as an energy supplier,” Gareth Evans,President, International Crisis Group, Belgium, pointedout. To be sure, the reality is that Turkey is already anintegral part of the global campaign against terrorism anda voice against militant Islamic extremism. It demonstratesevery day how Islam and secularism can co-exist in thecontext of economic growth and increasing prosperity.

11

Page 14: World Economic Forum in Turkey 2006

Turkey’s stability, however, cannot be taken for granted. Guardians of secularism, notably the military, remainfearful of religious agendas. The economy was rocked bya financial crisis only five years ago, leading to a majorplunge in the value of the currency. The Turkish lira washit again earlier this year, dropping 29%. Interest ratesrose nearly seven points. Turks head to the polls in 2007.Another smooth election will surely solidify further itsdemocracy. But EU membership is now a more divisiveissue since support for accession among Turks has fallensharply. And anti-Europe, anti-US and anti-Israelsentiments have risen.

For this reason, it is crucial that Europe and the USrecognize Turkey’s considerable geopolitical value andprovide it with the appropriate financial, strategic andmoral support the country needs to continue necessarypolitical and economic reforms and realize its ambitionsincluding EU accession. Concluded Joaquín Almunia,Commissioner, Economic and Monetary Affairs, EuropeanCommission, Brussels, in remarks that apply as much tothe rest of the world as they do to Europe: “We need astable Turkey to help Europe tackle today’s challengesand risks. It is the responsibility of the EU to cooperatewith Turkey and to support Turkish reforms. The processneeds to be finished with success.”

12World Economic Forum in Turkey

“Perceptions in Europe lagten years behind reality.Europe was uninterested inTurkey in the early 1990sand gave no thought to itsrole in the energy sector.Now energy is the hotissue.”

Hugh PopeAuthor and Journalist, Turkey

Turkey A Nexus For Pipelines

Source: Global Insight, 2006; PricewaterhouseCoopers analysis

Page 15: World Economic Forum in Turkey 2006

Turkey’s competitiveness is the key to its futuresuccess, particularly as it deepens ties with Europeand moves towards EU accession. The country hasachieved much in recent years and now ranks 59th onthe World Economic Forum’s Global CompetitivenessIndex, up from 71st place in 2005, the biggestimprovement of any country in the survey. “We will doeverything to improve the business environment inTurkey,” pledged Ali Babacan, Minister of theEconomy of Turkey, and Chief Negotiator for theEuropean Union. “If the right macroeconomic processis implemented, you will see how quickly change canhappen.”

Summing up participants’ conclusions at theeconomic and business-related sessions, GülerSabanci, Chairperson and Managing Director, SabanciHolding, Turkey, a Co-Chair of the World EconomicForum in Turkey, found it encouraging that severalTurkish ministers openly admitted that some thingshad not been achieved. Turkey’s potential starts andends with microeconomic and political stability, twoareas in which the country needs to continue to work.

Some of the concrete actions that will lead toopportunities include:• Reducing red tape and resolving bureaucratic

inefficiencies;• Reducing the informal economy;• Continuing to fight corruption;• Directing more funding towards education and

infrastructure;• Reforming certain laws, such as the tax laws and

the corporate code;

• Providing equal access to education across allregions and income levels, and once the childrenare enrolled, providing them with the means ofstaying in school;

• Encouraging entrepreneurship, R&D and innovation;• Exploring the possibility of creating a government

agency to directly encourage investment in smalland medium-sized enterprises;

• Moving Turkey’s economy from a rent- to a profit-seeking structure;

• Easing the ability to exit investments;• Enhancing labour market flexibility, including hiring

and firing, and financial and non-financial burdens;• Rebranding the country in order to change outside

perceptions and enhance the country’s image.

“Education is crucial to Turkey’s futurecompetitiveness,” stressed Sabanci. “Our greatestasset is our young population,” agreed Hüseyin Celik,Minister of National Education of Turkey. “Educatingand training them well will serve as a competitiveadvantage for Turkey.”

Educational reform needs to focus on early education,access, quality and training, preparing students formulticultural work and, more particularly, preparingskilled students to work in Europe as its workforcedeclines in the next 20 years.

Foreign direct investment (FDI) in Turkey, largely drivenby mergers and acquisitions, is also a source ofcompetitive advantage and, more importantly,business opportunities for the country. FDI hasreached US$ 12.8 billion so far this year, with nearly85% going to the banking and telecommunicationssectors. Maintaining these high levels will be a key

13

Competitiveness & BusinessOpportunities

World Economic Forum in Turkey

“Turkey’s young andgrowing population is achallenge, but can be anadvantage. If you don’tcreate the future, the futurewill create you.”

Feyhan KalpakliogluChairperson, Yasar Holding,Turkey

“We will do everything to improve the business environmentin Turkey. If the right macroeconomic process is implemented,you will see how quickly change can happen.”

Ali Babacan, Minister of the Economy of Turkey; Chief Negotiator forthe European Union

Page 16: World Economic Forum in Turkey 2006

challenge for the country. Turkey’s banking sector is in acompetitive position but still faces major obstacles togrowth, most notably the under-capitalization ofinstitutions. Given the right mix of investment andregulation, Turkey could become a regional hub forfinancial services.

The relationship between competitiveness and the gendergap is evident in Turkey. While no country has closed thegap, those in the upper echelons of success in that areaare also those that rank highest in competitivenessindices. Nordic countries top both listings. The GlobalGender Gap Report 2006 of the World Economic Forumranks Turkey 105th out of 115 countries surveyed, behindmost emerging economies. If Turkey improves its gendergap ranking, it would likely increase its competitivenessperformance significantly.

One factor in the poor gender-gap ranking is the loweducation rate among girls. But there are other factorsthat keep women from working, and education is noteven the biggest of them, according to Ipek IlkkaracanAjas, Executive Board Member, Women for Women’sHuman Rights-New Ways Foundation, Turkey. Educationmay be the highest perceived barrier, but in truth, it is alack of access to childcare and elderly care that keepswomen out of the workforce.

But education is important: when girls’ schoolingincreases, poverty decreases. With some 18 millionpeople living in poverty in Turkey, increasing family welfareby educating girls is a serious opportunity. But currentspending on education is not enough – it needs to bedouble today’s levels for the next 10 years to address theproblem.Turkey will have to watch out for pitfalls that could hinder

the country’s competitiveness. Potential ones include amove towards a more conservative governing system andoutright rejection of its membership by the EU. TheTurkish currency’s volatility could be another. “Expecthiccups,” warned Yvan De Cock, Chief Executive Officer,Fortis Bank, Turkey, recalling how Turkey’s currency wasdevalued by 20% on the day after he arrived in Istanbul.Most members of the European Union have avoided thiskind of price roiling by adopting a single currency.

Other weak points that hamper competitiveness include: • low savings rates among the general population;• the high public debt burden;• the underdeveloped state of credit markets;• a labour market that lacks flexibility;• weak compliance with the tax regime.

Turkish Prime Minister Recep Tayyip Erdogan maintainedthat Turkey is successfully implementing a broad reformprocess that will continue irrespective of the course of EUaccession talks. Change doesn’t happen quickly, henoted, but the fundamental will of the Turkish people forsuch change is strong and the end result will reflect thisdetermination. The end result will also reflect the viabilityof Turkey’s competitiveness.

14World Economic Forum in Turkey

Retail Deposits Taking Off

Source: Turkish Banking Association

Page 17: World Economic Forum in Turkey 2006

As a Muslim nation that has embraced so-called“Western” values – democracy, a free press, being asecular state, rights for women – Turkey is uniquelypositioned to act as a bridge between civilizations,particularly through accession to the European Union.Mustafa Kemal Ataturk (1881-1938), founder of theTurkish Republic and its first president, recognized theimportance of these values, especially the role ofwomen, and promoted them throughout society. Butmuch has changed in the republic since his death.

From the outside, Turkey is perceived as a deeplyreligious state and, as such, a threat to modernEurope. According to a 27 November 2006 article inTime magazine on Pope Benedict XVI’s Novembervisit to Turkey, “Islam [has] played a particular role – asboth a threat and a model – in […] the secularizationof Christian Europe.”

Since the 1980s, rather than deepening their role insociety, Turkish women have been cut off fromadvancement. On average throughout the country,men earn twice as much as women. While 98% ofprimary school girls are literate, only 11% graduatefrom high school. Only 28% of women participate inthe labour force: 21% in agriculture, the other 7%spread out between the remaining sectors. Only 4%of parliamentarians are women.

As the Turkish Daily News reported in its “Davos inIstanbul” supplement on 23 November 2006, “womenare both excluded from vast areas of the economy inmany rural areas while leading Europe in theirparticipation in many areas of society, includingcorporate business, academia, medicine, engineeringand law.”

Islam can be seen as a driving force for some of thesedifferences, in the sense that in some places, womenwho cover their heads are not allowed to go toschool. This is the case at Turkish universities, as wellas in schools in France. It is a prejudice starting withbeliefs that makes Islam a barrier to education.

Links with Europe are a major driver behind thecountry’s current development – the domestic marketis booming, the country has seen sustained growthrates over the last five years, and reforms are ongoing,despite the election of a moderate Islamist party. ButTurkey took on reforms long before EU membershipever came up. Populations throughout Europe andwithin Turkey itself are increasingly sceptical ofTurkey’s candidacy, but the EU and nationalgovernment are still ploughing ahead. However,rejection by the EU could damage relations betweenIslam and the West. Muslims would see it as arejection of their religion, values and way of life.

15

Bridging Civilizations

World Economic Forum in Turkey

“It is the men that build theglass walls aroundwomen.”

Seyhan EksiogluPresident, KADER Associationfor Promoting WomenCandidates, Turkey

“Female employment in ourpart of the world hascontributed more to theglobal economy thanChina.”

Neelie KroesCommissioner, Competition,European Commission, Brussels

Page 18: World Economic Forum in Turkey 2006

As a driver of intercultural dialogue and a bridge betweencivilizations, Turkey needs to take the lead, mostimportantly through a radical departure from decades ofdiscord. The country can easily share the knowledge ithas gained over time regarding the differences betweenEast and West, and also the similarities. It can act as abeacon for the complementary nature of seculardemocracy and Islam. It can promote a culture ofdialogue, both religious and political.

Under the right conditions, and if the right tone is set,Turkey could enhance the EU’s sphere of influencethrough the country’s traditional relations with others inthe region. Along these lines, Prime Minister Recep TayyipErdogan of Turkey stressed the importance of the recentlyannounced “Alliance of Civilizations” with Spain, whichaims to be the 21st century initiative for global peace andprosperity.

Hany El Banna, President, Islamic Relief, United Kingdom,called on the world to recognize the humanitarian side ofIslam by focusing on people that want to “talk about anddo the good, rather than sit and talk about the bad”. Anydialogue should have a beginning and an end, along withthe political will to change; there is no point in engaging ifchange is not wanted.

Dialogue can also lessen aggression. David Rosen,President, International Jewish Committee forInterreligious Relations, USA, suggested that “mosthostility is a result of alienation.” Without a positive self-image, one cannot see others positively, he argued. Thissort of dialogue could also take place in schools, through

multicultural teachings. The educational systems in theEast and West need to introduce children to othercultures and religions. It is only by doing so that countriessuch as Turkey or those in the EU can come to anunderstanding of the differences and similarities thatdefine Muslim-West relations.

The real, rather than perceived, problems of dialoguemust be solved by compromise and real solutions, ratherthan theoretical suggestions, said Khalid Abdulla-Janahi,Chairman of the Executive Committee, Shamil Bank ofBahrain, Switzerland, and Vice-Chairman of the ArabBusiness Council. He stressed that some of the problemsof the region stem from the lack of leadership at all levelsof society – political and business.

Abdullah Gül, Deputy Prime Minister and Minister ofForeign Affairs of Turkey, called for real political reform thatleads to economic success. Transparency and freedomare necessary for progress in regional stability, Gül said.He singled out the nurturing of civil society as essential.

Turkey is neither European nor Arab, a position thatTurkey can capitalize upon for intercultural dialogue, as anisland of stability and even prosperity in an increasinglyunstable region.

16World Economic Forum in Turkey

“We will get nowhere if wedo not invest in education.”

Ibrahim BetilChairman, CommunityVolunteers Foundation - CVF(Toplum Gönüllüleri Vakfi), Turkey

Turkish Schools Lag OECD Peers

Source: United Nations

Page 19: World Economic Forum in Turkey 2006

17World Economic Forum in Turkey

Pursuing “the creative imperative”, the theme of the WorldEconomic Forum Annual Meeting 2006, has been apriority for the Forum at its regional Summits throughoutthe year. In Istanbul – as in Beijing, Cape Town, NewDelhi, São Paulo, Sharm El Sheikh and Tokyo – the aimwas to capture the creative insights offered byparticipants on how to address global challenges andrisks. These will feed the discussions and brainstormingsessions at the next Annual Meeting and future Summits.

These are examples of creative ideas and approachesproposed at the World Economic Forum in Turkey:

EU Accession

Among the accession myths that need to be dispelled isthe notion that Turkish migration will increase sharply.Studies indicate that the rise is likely to be limited, withmigrants dissuaded by the growing opportunities athome. Increased foreign direct investment into Turkey willbe critical to creating new jobs and moderating theoutflow of people.

The onus is not just on Turkey to sell the idea ofaccession to Europeans. On the contrary, Europe itselfhas to do a better job of selling Europe to the Turks aswell as to people in the streets of Paris, Rome or Berlin.Europe must communicate a more appealing vision of adynamic, inclusive region that will capture the imaginationof young people.

Civil society and business must play a larger role infostering better understanding between Europe andTurkey. NGOs and corporations should forge links withtheir counterparts to help correct misunderstandings andallay fears on both sides.

Newly inducted EU members from Central and EasternEurope should share their experiences with Turkey toimprove the Turkish public’s understanding of thedifficulties involved in negotiating accession and theeventual benefits of membership.

Geopolitical Role

Turkey could play a pivotal role as an intermediarybetween Iran and Europe over the issue of Tehran’snuclear programme.

Turkey’s emergence as an important energy corridorsuggests the need for a coordinated EuropeanContinental Energy Policy to ensure Europe’s energysecurity. Turkey’s participation in discussions would help italign its policies with Europe’s.

Civil society engagement and closer business links areessential to promoting stability in the volatile Middle East.

Turkey should take steps to secure its porous borders toenhance security and address the concerns of itsstrategic partners.

The Creative Imperative in Turkey

"It is now for the EU to sellthe idea of a strong,globalized Europe not just tothe Turkish people but to thepeople in Paris."

Hanzade DoganChief Executive Officer, DoganNewspaper Publishing, DoganMedia Group (DYH), Turkey

“Innovation has to be a top priority on our agenda.”

Güler SabanciChairperson and Managing Director, Sabanci Holding, Turkey;

Co-Chair of the World Economic Forum in Turkey

Page 20: World Economic Forum in Turkey 2006

18World Economic Forum in Turkey

Competitiveness & Business Opportunities

Education reforms should focus on providing earlyeducation particularly to girls and the poor. In addition,schools should prepare students to live and work in amulticultural world.

By improving access to child care and care for theelderly, Turkey can increase the participation ofwomen in the workplace.

Turkey needs a vision; Turkey needs a brand. Turkey ismany things and plays many roles. It needs tosharpen its image to convey a clear idea to Europeansand the rest of the world what Turkey is today(modern, secular, Muslim, democratic) and what it nolonger is (an inward-looking, military dictatorship).

Traditional Turkish foods could be the driving force forinnovation that will invigorate Turkey’s agribusinessand food sectors.

Bridging Civilizations

The Pope’s visit to Turkey, which took place days afterthe meeting, led to a change in perceptions on bothsides, leading to better understanding between theVatican and Islam. While there were protests, theywere peaceful and limited. The success of the triphighlighted the crucial role Turkey can play in avertingthe clash of civilizations. Such public diplomacy canhelp mitigate the risk of terrorism and the risk ofmilitary conflict in the post-9/11 world. The Pope’sown recognition of the importance Turks attach to EUand his decision to support Turkey’s application,despite previous misgivings, were a model for othersin Europe. For its part, Turkey should relish itsuniqueness as a bridge between faiths and culturesand step forward more to fill this role.

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

Page 21: World Economic Forum in Turkey 2006

19World Economic Forum in Turkey

The World Economic Forum wishes to recognize the support of the following companies as Partners or Supportersof the World Economic Forum in Turkey:

Strategic Partners

The Coca-Cola CompanyGoldman SachsJPMorgan Chase Kudelski GroupMerrill LynchPepsiCoWPPXenel Group

Regional Partners

Dogan Media GroupDogus Group

Roundtable Supporters

IntralotTürk Telekom

The World Economic Forum would also like to thank Türk Telekom for providing connectivity.

Acknowledgements

Page 22: World Economic Forum in Turkey 2006

20World Economic Forum in Turkey

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 isSenior Community Relations Manager, Europe and Central Asia. Benita Sirone, Cristian Gheorghe and Constantine Marakhovare Global Leadership Fellows, Europe and Central Asia. Doris Borchardt is Event Manager and was the Meeting Coordinator.

Report WritersAlejandro ReyesDanielle Carpenter Sprungli

Editing and ProductionKamal Kimaoui, Associate Principal, Production and DesignFabienne Stassen Fleming, Senior Editor

PhotographerSerkan Eldeleklioglu

The World Economic Forum would like to express its appreciation to the summary writers for their work at the WorldEconomic Forum in Turkey. Session summaries are available on our website at: www.weforum.org/turkey/summaries2006

The World Economic Forum would also like to recognize the support of PricewaterhouseCoopers in compiling data andstatistics for this report.

Contributors

Page 23: World Economic Forum in Turkey 2006
Page 24: World Economic Forum in Turkey 2006

The World Economic Forum is an independentinternational organization committed to improvingthe state of the world by engaging leaders inpartnerships to shape global, regional andindustry agendas.

Incorporated as a foundation in 1971, and basedin Geneva, Switzerland, the World EconomicForum is impartial and not-for-profit; it is tied tono political, partisan or national interests.(www.weforum.org)