Finance Minister of the Year/ Europe: Kemal Unakitan, Finance Minister,Turkey
Following the disastrous financial crisis of 2001, Turkey managed to turn its economy around and achieve record annual growth of 7.4% in the five years from 2002-06. While the economy slowed early in 2007 it gained momentum after the elections in July, and although lower-than-trend growth is expected for 2007, the Organisation for Economic Co-operation and Development (OECD) recently forecast growth to settle at around a healthy 6% in 2008 and 2009.
Under Kemal Unakitan, finance minister since 2002, Turkey has achieved a strong economic revival and confidence in Turkey’s economic management has led to record levels of foreign direct investment (FDI), $20.1bn in 2006 and an estimated $20bn in 2007. Although inflation is still high at more than 7%, it is a considerable improvement over the crippling 70% rates through the 1980s and 1990s and a target rate of 4% has been set for 2008. Another major achievement has been reducing Turkey’s traditional high levels of debt; latest figures suggest that net debt has been halved to less than 40% of GDP in 2007, from 78.4% in 2001.
In other moves, Mr Unakitan recently introduced some sweeping tax changes, including the abolition of a 15% withholding tax on non-residents investing in shares and bonds, and a cut in corporate tax from 30% to 20%. As a candidate for the EU, Turkey wants to attract more FDI to help reduce its high current account deficit, forecast at $36.3bn in 2007, and to boost GDP per capita, put at $6500 in 2007 and targeted to reach $10,000 by 2012.
The government is also boosting tax collection methods and reforms are under way in pensions and social security. Privatisation remains a key policy, although revenues in 2007 were not expected to match those of the previous two years due to the July elections. Plans, however, are in place to privatise more electricity companies, two banks, state tobacco and alcohol company Tekel and the national lottery.
More labour flexibility is seen to be critical. Mr Unakitan notes: “Turkey has made huge progress in terms of macroeconomic reforms. Now, it’s time for micro-reforms, which will make the country more competitive. One of our priorities will be reducing the tax burden on employment.”
While Turkey faces no shortage of challenges, clear progress is being made.
