TURKEY: Research trip report - Increased risk into H1 2008
19 February, 2008 03:03 AM EST
A recent research trip to Ankara and Istanbul has highlighted the following issues: 1) the headscarf issue will dominate the political agenda in the short-medium term; 2) the ruling AKP seems to have lost its drive for reforms, especially on the economic and EU fronts, while the party's key priority is the March 2009 local elections; 3) Turkish liberals and business figures are becoming increasingly disillusioned with the AKP; 4) the government is unlikely to make an early announcement concerning the future of Turkey-IMF ties, which are expected to weaken; 5) the failure to revive the EU-oriented reform process creates uncertainty over the future pace of Turkey-EU negotiations. All these points will be analyzed in depth in specific notes that will follow in the coming days.
Headscarf tussle is far from being settled.
Despite speedy parliamentary approval of the constitutional amendments aimed at easing the ban on the headscarf in universities, the issue is far from being settled. For members of the AKP and is religious-minded supporters, the lifting of the ban is a question of fundamental freedoms; for Turkish secularists it is another sign of creeping Islamization and a threat to their lifestyle. The headscarf issue is one on the main fault lines in Turkish society and, as such, is likely to dominate Turkey's political agenda for the foreseeable future, distracting the government from other reforms. The main opposition Republican People's Party (CHP) is set to challenge the constitutional amendments before the constitutional court once they have been published in the official gazette, paving the way for what could become a protracted and polarizing legal battle. Moreover, the possibility that the chief prosecutor at the Court of Appeal may decide to open a legal case for the closure of the AKP cannot be ruled out.
Meanwhile, the AKP's previous plans to introduce a new civilian constitution, meant to replace the current one written under military rule in 1982, have been sidelined. Despite the fact that a draft version of the constitution has been ready for months, it remains unclear if and when the draft will be unveiled to the public.
Reform agenda is thin and fails to tackle short-term vulnerabilities.
Somewhat puzzlingly the AKP seems to have run out of steam for further reforms, despite its large parliamentary majority. This reinforces the secularists' concerns that the AKP has greater appetite for taking issues dear to its traditional voters even if they are highly polarizing than tackling some other reforms that might reduce Turkey's economic vulnerability to external shocks and bolster its democratic institutions. Few new reforms are in the pipeline, while several long delayed reforms are now close to being approved. While these reforms will have a positive long-term impact, none of them reduces Turkey's short-term vulnerability.
Specifically, the long overdue social security reform and the new commercial code are expected to be approved over the next few weeks. The labor package currently being discussed by the cabinet is likely to include a measure to cut social security payments for employers by 5% but it remains to be seen whether this cut will take effect in 2008 or 2009. The package is also expected to ease some obligations on companies with more than 50 employees. These obligations included hiring former convicts and terror victims, as well as hiring a doctor and a workplace safety specialist. A law containing tax incentives for companies carrying out research and development activities is also set to be approved soon.
Ties with IMF likely to weaken
The ongoing standby agreement with the IMF comes to an end in May 2008 and Ankara is expected to loosen, but not cut, its ties with the IMF. Ankara's decision on its future relationship with the IMF is likely to be shaped by the domestic and global financial circumstances prevailing in the spring of 2008. The government is unlikely to make an early announcement regarding its decision on this critical matter. The risk is that political considerations, such as the March 2009 local elections, could prevail and persuade the government to break its relationship with the IMF.
The "unholy alliance" with the MHP alienates both liberals and the business elite.
In the light of its disappointing record in pursuing other democratic reforms since the beginning of its second term in office last August, the AKP's ill-timed, arrogant and clumsy handling of the divisive headscarf issue has raised concerns among those liberals and businesspeople who formerlysupported the AKP due to its pragmatism in prioritizing economic stability and EU accession. The AKP's decision to join forces with the ultra-nationalist MHP - a party known for its strong opposition to democratic and EU-oriented reforms - to ease the headscarf ban has been too hard to digest for a large number of liberals. Significantly, the relationship between the AKP and the influential Turkish Industrialists' and Businessmen's Association (TUSIAD) has deteriorated badly over the past few weeks.
Continued stalling of Turkey's bid for EU membership.
There seems to be a waning interest in Turkey's bid for EU membership within the AKP as indicated by the failure to give renewed momentum to the EU-oriented reform process. Despite strong pressure from Brussels, the government is still dragging its feet over amending the infamous article 301 of the penal code, which continues to limit freedom of expression. Moreover, the proposed (and largely cosmetic) changes by the government are unlikely to meet the EU's expectations. Similarly, the law aimed at extending the rights of non-Muslim religious foundations, currently being debated in parliament, falls short of EU's demands too.
No other significant political reforms are in the pipeline to advance Turkey's EU bid. Foreign Minister Ali Babacan has failed to make his mark as Turkey's EU chief negotiator, to the point where senior AKP officials are now discussing the idea of creating a state minister for EU affairs in the hope of restarting Turkey's stalled accession process. Under the best case scenario, Turkey should succeed in opening talks over four new policy chapters in 2008. The eventual failure to increase the pace of reforms could seriously complicate Turkey's negotiations with the EU in 2009.
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