Trouble in Turkey

Recep Tayyip Erdogan's careful stewardship of the Turkish economy may well be torpedoed by what has been seen as a ham-fisted approach to the protests

It’s 11am, and on the immaculately groomed lawns of the Grand Hyatt Istanbul, young protestors are resting in lines, sleeping off a late night’s work in Taksim Square. Next to them, bemused businessmen emerge from taxis that have negotiated the makeshift barriers thrown up on the roads leading to Istanbul’s main square. None of the hotel staff make any effort to move the protestors on, and it’s obvious why; with the police having pulled back to the shores of the Bosphorus, any attempt to shift the sleeping masses could well result in the roads being closed completely again.

On the short stretch of road between the Grand Hyatt and Taksim Square, the remnants of six public buses lie across the street. Vandalised and covered in graffiti, some protestors are even using the vehicles as dormitories.

In Taksim Square itself, the crowds who have camped out in Gezi Park – which has become the tinderbox for protests against long-serving prime minister Recep Tayyip Erdogan that have swept nearly every major Turkish city – are slowly waking to a deafening rendition of Pink Floyd’s ‘The Wall’. It’s more ‘summer of love’ than ‘Arab Spring’.

If that was the scene in Istanbul last weekend, events took a rapid turn for the worse during the course of last week, with riot police pouring into Taksim Square on Tuesday and Wednesday. By Wednesday morning, at around the time that Arabian Business was going to press, the square had been cleared, although protestors remained in Gezi Park itself.

All this has put has put a large dent in the carefully cultivated image of Turkey as the model of moderate Islamic government, the darling of the West and one of the world’s fastest-growing economies.

This is a country into which foreign direct investment – particularly from the Middle East and North Africa (MENA) region – has been flowing in ever greater portions. The region’s inflows into Turkey combined to provide only 2 percent of FDI in 2001; that figure rose to 9 percent in 2011. In addition, the UAE has been the biggest contributor in recent years. From nothing in 2001, the UAE had invested $7.2bn in Turkey by end-2011, dwarfing the next biggest contributor from MENA, Saudi Arabia’s $1.9bn.

Erdogan’s period in charge of the Turkish economy has produced an even more startling change with regard to the country’s exports. In 2000, 56 percent of Turkish outgoing trade ended up in the European Union (EU), with just 13 percent going to MENA. Twelve years later, the MENA region took 34 percent of Turkish exports, with the EU receiving 39 percent. While much of this trade was related to gold, Turkish trade with the Middle East still rose by 18.9 percent in 2012, year-on-year.

The figures for the year so far are not quite so encouraging. According to HSBC, net FDI flows reached $1.4bn in the first quarter, down from $2.3bn during the same period last year.

“We expect around $10bn of net FDI this year,” says Melis Metiner, an economist at the bank. “Hopefully, Turkey will continue to draw more investment from MENA and Asia, reducing its reliance on Europe. So far, we have only seen an inflow of around $80m from the MENA region in the first quarter.”

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