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Western EuropeMay 2 2004

A part to play in Europe

Prime minister Recep Tayyip Erdogan talks to The Banker about Turkey’s role in Europe and other strategic policies.
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Q What are the advantages for the EU and for Turkey in Turkey joining the EU?

A The opening of accession negotiations with Turkey will demonstrate that the EU is determined to refrain from creating new dividing lines within the new Europe. This is an historical mission for both the EU and Turkey.

I believe that Turkey’s membership will be an asset and an advantage for the EU, especially in terms of foreign, defence and security policy due to our strategic geography. Turkey’s accession will propel the EU to the forefront of global geopolitics and endow it with a genuine strategic concept and policy. The EU will transform from an inward regional organisation, whose strategic depth ends at its borders, to an active influential global power.

Once we become a member, we will assist the EU’s efforts in providing a contribution beyond the eastern Mediterranean, to securing peace, stability, security and welfare in the Middle East, Caucasia and central Asia.

Also, EU access to markets in our region will be facilitated. The completion of the Baku-Tblisi-Ceyhan pipeline will ensure the secure transportation of petroleum and the natural gas of Caucasia and central Asia to western markets. Thus, in terms of energy supply diversification, our membership will be good news for the EU.

In addition, as a democratic and secular Muslim state that has espoused contemporary European values, Turkey’s EU membership will demonstrate to the world that Islam and modernity can co-exist. It will show that Christians and Muslims can live peacefully under the roof of the EU on the basis of common values and interests. And it will positively influence the way in which the Christian and Muslim worlds identify with each other and strengthen the grounds for dialogue and co-operation.

The advantages that our economic potential would bring to the EU should not be overlooked. Our gross national product (GNP) is expected to approach $250bn in the coming years. With single digit inflation, we will have a stronger economy with robust growth rates. In 2003, we made giant strides in terms of increasing our exports reaching a cumulative figure of $47.9bn. Our imports amounted to $66.9bn. Thus our total trade volume reached record heights of $115bn in the past year. We expect our exports and imports to grow significantly in the coming years, which will translate into large increases in our overall trade volume with the EU.

EU accession is one of the Turkish Republic’s historical aims. It is part of a great reform movement that will bring universal standards and practices to all areas of daily life, from production to consumption, from health to education, from agriculture to industry, from energy to environment, and from justice to security.

Q How do you see the current prospects of open accessions talks to join the EU beginning next year?

A Turkey’s objective has always been full membership of the EU, as was stated in the 1963 Ankara Agreement and in our application for full membership in 1987. My government’ s strategic goal is Turkey’s membership to the union in a reasonable period of time. We are aiming, therefore, to secure a European Council decision in December 2004 to open accession negotiations without delay.

With the sense of responsibility that this process entails, Turkey has taken comprehensive steps and realised reforms of historical importance. We have undergone a substantive restructuring process in a wide range of areas, ranging from freedom of expression to right of association and peaceful assembly; from cultural to religious rights; from eliminating torture and ill-treatment to the right to retrial on the basis of the European Court of Human Rights decisions. Between February 2002 and August 2003, in just 18 months, seven harmonisation packages have been enacted. In short, we have achieved a critical mass in complying with the Copenhagen political criteria as regards legislation.

Our reform efforts testify to the collective aspirations and political will of the Turkish people and the political establishment in Turkey to pursue its reform efforts resolutely. They show our strong commitment to become a part of the EU.

In December, the European Council will take a crucial decision. I believe that Europe will take due account of the significant reforms we have made. I am confident that the union will act with the responsibility of being a global actor, composed of a strategic vision that foresees the future.

Q How is the government proceeding on enforcement of political criteria for EU membership?

A Since it was officially declared as an EU candidate in the 1999 Helsinki European Council, Turkey has been undergoing a historic period of reform and transformation. Since then, one third of the constitution has been amended, a new civil code has been adopted and ground-breaking reforms have been introduced in the fields of freedom of expression, opinion, association and religion. The death penalty has been abolished. Turkish citizens have been given the right to learn and broadcast in languages and dialects that they speak traditionally in everyday life.

With implementation of the last two reform packages, in terms of civilian and military relations, the duties and competences of the Secretariat General of the National Security Council have been aligned with the consultative nature of the council and with the needs of a democratic executive. We have extended parliamentary scrutiny to cover the use of public assets and public expenditure in the areas outside the budget, including military expenditure.

Such steps are a clear indication of our efforts to fully enforce the political criteria for EU membership.

We are closely monitoring the implementation of these reforms: a reform monitoring group was set up in September 2003 with a view to ensuring their effective implementation. The group assesses the implementation steps taken, discusses specific issues that require further attention and takes decisions to ensure rapid and effective enforcement.

Implementation of the reforms also continues to be a permanent item on the Council of Ministers’ agenda.

Furthermore, our government will immediately start the necessary deliberations for a new legislative process that will comprise constitutional and legislative changes to address the EU’s priorities set out in the 2003 Strategy Paper and the Presidency Conclusions of the December 2003 Brussels European Council Summit.

Q With real GDP growing 5.4 % year-on-year in the first three quarters of last year and dramatic disinflation, how do you view the prospects for the economy and attracting increased foreign investment?

A The GNP growth rate was 8% at the end of 2002. This is more than double the original programme target of 3% and well above the revised 6.5% target. In 2002, Turkey was the second fastest growing developing economy after China. The economy has continued to be one of the fastest growing among the members of the Organisation for Economic Co-operation and Development. In 2003, the year-end estimate of 5% was achieved and the growth target for 2004 is also planned as 5%.

We also reached the primary surplus target in budgetary terms and inflation decreased to less than the 20% year-end target, breaking a record as the lowest level registered in the past 25 years. Our success in the struggle against inflation is an indicator of the coherent implementation of the economic programme. For 2004, the year-end target for inflation is set at 12%. The rate is expected to decrease to single digits in 2005 and reach EU standards.

The steady upward trend in the growth rate and the successful struggle against inflation will continue. The key factor in achieving favourable economic indicators is the confidence. While the public sector is downsizing its expenditures and increasing revenues to maintain a primary surplus target of 6.5% of GNP, private economic activity is also recovering quite quickly. Also, the fast decrease in the debt ratio to national income will continue, and the Maastricht criteria, which stand for the economic criteria of the EU, will be attained.

Economic achievements in spite of the Iraqi crisis, which occurred in a sensitive period for Turkey, show that the economy is developing on a robust basis.

Apart from mobilising Turkey’s own resources, the attraction of foreign investments to our country is important for sustainable development. Certain elements, such as tax incentives, free zones and deregulation in bureaucratic procedures, are facilitating factors for the easy access of foreign capital. The major determinant factor is the presence of a dynamic market with economic and political stability. The picture since the November 3, 2002 elections augurs well for a suitable atmosphere in Turkey to fulfil these conditions.

We are informing foreign investors both in Turkey and abroad about our economic programme and successful reforms. Our work on attracting foreign investment to the country has been consolidated with legislation. For example, the Foreign Direct Investment Law, enacted in June 2003, minimises the bureaucratic process and aims to inject confidence in foreign investors. Another dimension of our studies on attracting foreign investment is the work being undertaken on the establishment of the Investment Promotion Agency.

The High Level Investor Advisory Council was convened on March 15, 2004 in Istanbul. It brought together the CEOs of the world’s leading companies. Our aim was to outline the deficiencies in our foreign capital strategy from the viewpoint of the actors involved in this sector, to listen to their expectations and receive their recommendations. Consequently, the necessary additional measures will be taken by the end of this year.

Q What do you see as the key features of your government’s economic strategy and how well are they being implemented, especially in regard to privatisation and reform of the banking sector?

A In the past two decades, Turkey has undergone an economic transformation. Combined with an outward oriented trade policy, the economy has been pursuing progressive growth in most sectors. In spite of certain difficulties, there is more resilience to external and domestic shocks.

The government’s economic programme is aimed at addressing the fundamental weaknesses of our economy that manifest themselves in times of crisis. The new programme focuses on restructuring the financial sector at large and removing the obstacles for private-sector-led growth.

We are injecting confidence into the markets through keeping the programme on track and ensuring that there will be no more deviations that might distort the consistency of our policies. The government is determined to carry on with the programme and will keep on delivering its commitments.

The economic programme is an indispensable part of Turkey’s agenda to transform into a sound and modern market economy while steering the country towards the EU. I believe that our strong efforts to keep the programme on track and vigorously pursue structural reforms deserve the support of the international community.

The government places a particular emphasis on structural reform efforts. Starting with the financial sector, and with the accelerated privatisation process, the government will go ahead with sweeping reforms to agriculture and social security, energy and telecommunications. It has focused on the reform of the public sector, putting into action a number of policies concerning public financial management, transparency and good governance.

Recent amendments to the banking law might help to boost the effectiveness of the Banking Regulation and Supervision Agency. The government will take further steps to speed up banking reform, including restructuring and privatising the state banks, resolving the intervention in banks and enhancing the quality of supervision.

Our privatisation efforts have gained significant momentum recently. Major state economic enterprises, such as Tüpras, Tekel, Türk Telekom, Turkish Airlines (THY) and sugar factories, are the leading the way. The success of the recent Tüpras tender clearly shows that our efforts will pay off.

All these enterprises are attractive for foreign investors. I believe that foreign investors will benefit from these opportunities, especially with the new legislation in place.

Turkey’s message to the outside world is clear: a resolute implementation of the adjustment policies and structural economic measures is the best way to usher in a new period of prosperity with social benefits and compensations.

Q What is Turkey’s role in the reconstruction of Iraq and what are the potential benefits and pitfalls of increased involvement?

A The international community has embarked on rebuilding a more prosperous Iraq, where the country’s natural resources should belong to all its people. Turkey adheres to this objective and is taking part in the reconstruction drive. Turkey’s unique location as a gateway to Iraq facilitates relief efforts and we are considering expanding and diversifying our multi-faceted assistance to Iraq.

Turkey’s extensive knowledge of socio-economic, human and institutional aspects of Iraq offers an added value in the mobilisation of relief and reconstruction. Having operated successfully in Iraq already, Turkish businessmen and contractors accumulated invaluable experience and possess an outstanding track record on the completion of large projects.

Turkey’s contribution to reconstruction efforts in Iraq, mostly on bilateral projects, will be $50m over the next four years. Our aid plans are being shaped up progressively according to requirements on the ground. We can offer Iraq infrastructural repair, know-how, construction feasibility studies, technical assistance, technology transfer, vocational training and co-operation in areas such as education, banking, customs, health, telecommunications and media. Our active and increased involvement in the reconstruction effort will benefit the Turkish private sector, especially construction contractors.

Q In view of the increasing risk of terrorism and the damage done around the world, including in Turkey with the bombs in Istanbul last November, what role can your government play in combatting terrorism?

A Terrorism remains a major threat to humanity. The recent attacks in Madrid and in Istanbul are sobering reminders of the resilience of terrorism. Turkey, which has suffered from various kinds of terrorism for more than four decades, has always been at the forefront in the fight against terrorism in every fora and will remain so.

In the aftermath of 9/11, Turkey joined in the international coalition against terrorism and gave its full support to Operation Enduring Freedom in Afghanistan. Later, it demonstrated its determination to fight against terrorism by undertaking the leadership of international stability force in Afghanistan (ISAF) in the second half of 2002.

As a country that has long suffered from terrorism, Turkey is well equipped with internal legal instruments to fight against this universal scourge. Turkey is unusual in having had an anti-terror law with a definition of terrorism prior to 9/11. Before then, we also promoted the idea that the fight against terrorism could not be successful without international co-operation. With this in mind, it concluded bilateral agreements with about 45 countries to facilitate better co-operation in combating terrorism and organised crime, including drugs trafficking.

Turkey tries to establish and strengthen international co-operation, through bilateral and multilateral arrangements. We regard the UN as the main forum for arranging the framework of international co-operation in this fight.

We have supported the international initiatives introduced after 9/11. In the absence of a global convention on the fight against terrorism, we have welcomed the adoption of the Security Council resolution 1373 that we think constitutes a solid and comprehensive basis for combatting terrorism on a universal scale. This resolution provides a clear road map for the steps that need to be taken. Encouraging increased co-operation among UN member states, it includes operative paragraphs that correspond to what Turkey had advocated for many years in international fora: calling on the international community for the prevention and suppression of direct or indirect financing of terrorist acts, for refraining from providing active and passive support to terrorist groups and denying safe haven to terrorists.

However, the task of creating a universal legal instrument is yet to be fulfilled. The discussions in the UN on the “comprehensive convention on terrorism” have been stalled for a long time due to differences in the definition of terrorism. Nothing should condone or sanction terrorism: the problem of definition must be overcome.

We are co-operating closely with the Counter-Terrorism Committee (CTC) that has been formed by resolution 1373 within the UN Security Council. We have so far submitted four reports to the CTC.

We are among the first countries to have adopted all the 12 UN international conventions on combatting terrorism.

For quite a long time now, Turkey has been contributing voluntarily to the budget of the Terrorism Prevention Branch of the UN Office for Drug Control and Crime Prevention as recommended by the policy working group on UN and terrorism. This contribution started before 9/11.

To redress contradicting approaches towards terrorism, it is also incumbent on the international community to adopt a uniform approach to identifying, defining, condemning, isolating and bringing before justice those who are responsible, including countries that sponsor and harbour them. This need can only be addressed by a sincere and unwavering solidarity among nations.

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