The High Advisory Council of the Turkish Industry and Business Association (TÜSİAD) convened in Istanbul on July 11, 2024. The High Advisory Council is a biannual deliberative conference where the business world takes stock of domestic and global political and economic developments and offers suggestions to policy makers from a business perspective.
The Minister of Treasury and Finance Mehmet Şimşek delivered keynote remarks on the economic outlook.
Orhan Turan, President of the Board of Directors, and Ömer Aras, President of the High Advisory Council, delivered opening remarks at the event.
During his opening remarks Ömer Aras highlighted four distinct areas of rapid global change in climate, demographics, geopolitics, and technology, and summarized steps Türkiye needed to take to stay ahead of the curve:
“What must we do to ensure that we do not miss out on these changes?
“To build a strong and resilient economy, society, and country, I can summarize the steps we need to take under four main categories:
- Rule of law,
- Education and merit,
- Generating technology and innovation,
- Economic growth model based on productivity and export.
On Rule of Law:
“TÜSİAD has persistently stated that we must build strong and resilient institutions and provide for their independence. For this, a consistent and reliable rule of law is needed first and foremost. In a country where the rule of law is ensured, rules and predictability prevail.”
“The rule of law ensures predictability in every aspect of political, social, and economic life. Where there is no predictability and effective mechanisms against arbitrary practices, the rule of law becomes null, even if it is enshrined in the constitution and oaths for office.”
“The rule of law is the foundation of checks and balances that prevent the abuse of power by the legislative, executive, and judicial branches. If this mechanism does not work, it means that the principle of separation of powers prescribed in the constitution is not implemented. The principle of the rule of law is established in constitutions to prevent arbitrary actions of the authorities.”
“All citizens and investors who want to invest in our country must have full confidence in the impartiality and independence of the judiciary.”
On Education:
“The second issue where we need to do things differently is education and merit.”
“TÜSİAD, views education as the most important issue. Many of our members present in this hall have been making significant contributions to education for years.”
“We know that for Turkish industry and services sectors to compete globally, we need a workforce educated not based on political views and faith, but on science and knowledge, equipped with skills suitable for the modern era. Because only people educated based on science and knowledge become individuals that are sought by businesses. Our education system should not produce unskilled university graduates but should nurture young people with the skills demanded by the business world.”
“From this perspective, we do not see the new education model announced in May as adequate to prepare our country for the future. The new model has failed to seek input from relevant institutions.”
“Another crucial point is implementing the principles of meritocracy. We must educate our youth well so that they can be placed in positions they deserve. The widespread belief that appointments are not made based on merit damages the social structure, harms values, and leads to corruption. The current hiring system based on interviews, as it is widely debated in the public, should be abolished, and a well-designed merit-based system should be implemented instead. Only with competent and honest personnel appointed based on merit can we compete with the world.”
On Technology and Innovation:
“Türkiye has been lagging in technological advancements. It has been a country that is user of technology, not a producer. Countries like South Korea have succeeded in producing technology and elevating themselves to the league of developed countries due to their focus on education and R&D. In contrast, we have always remained in the second tier.”
“Let’s implement an education model based on science and skills. Let’s make merit-based appointments. Let’s increase the resources allocated to R&D in both public and private sectors. Let’s make our country attractive to young minds. Let’s support young entrepreneurs. Let’s encourage institutional entrepreneurship. Let us increase women’s participation in the workforce and ensure that women participate in all aspects of life on an equal footing with men. In summary, let’s become a country that produces technology and sells high-value-added products and services that are developed using new technologies to the world.”
On the Economy and Productivity:
“All the factors I mentioned above affect our economic performance. Countries that cannot sell high-value-added products and services to the world cannot increase their economic power and resilience.”
“The dilemma of the century that is “current account deficits and inflation” can only be solved by creating an economy that is high in productivity, competitive, and export oriented.”
“In economic management, we have made significant progress towards macroeconomic stability since the change in June following the appointment of our Minister Şimşek. As we have always emphasized, inflation is the most important economic and social problem.
Despite all the warnings, policies that deviated from a rational basis resulted in a heavy price in the form of high inflation.”
“High inflation diminished the people’s purchasing power, increased income inequality, and undermined market ethics. Tackling inflation with determination and compensating for these damages are required.”
“Austerity measures are necessary; however, the social dimension of the policies implemented is also crucial and we must ensure that the burden does not fall on those with low-income levels.”
“An important observation regarding wage levels is that if employers are complaining about high wages and employees are complaining about inadequate wages, this indicated a productivity problem.”
“Highly productive companies can increase wages for employees. As the number of high-productivity companies increases, the number of people working for minimum wage decreases. Türkiye must transition to a growth model based on productivity.”
“While anchoring monetary policy on a sound basis, fiscal policy must support the disinflation process. We must enhance the effectiveness of combating the informal economy, increase tax audits, and collections.”
“Undoubtedly, tight monetary and fiscal policies are necessary to reduce inflation, but they are not sufficient. Structural reforms also need to be seriously considered.”
“Updating the Customs Union Agreement with the EU to include green and digital transformation policies will serve as a crucial anchor for the structural reform agenda we need to create a competitive, rule-based, reliable, and predictable economy. It will bring about legislative convergence between Türkiye and the EU and enhance Türkiye’s competitiveness.”
“By ensuring the rule of law and judicial independence, embracing education focused on science and skills, prioritizing innovative technology, creating a high-efficiency economy with competitive advantages, generating high value-added products and services for the world, updating the Customs Union with the EU, advancing with an integration perspective in EU relations, we can create a country that our citizens and the whole world will trust.”
The President of the Board of Directors of TÜSİAD Orhan Turhan echoed these remarks and reiterated the Turkish business world’s calls for reforms:
The very difficult period that we have experienced over the last several years has exhausted us all. The pandemic, wars in our region, and a major earthquake came in quick succession. We are overcoming a very difficult period in economic terms as well. Political polarization and tension impacted our elections. We now have an opportunity to overcome this difficult period. However, this period of lost time has also reminded us of the importance of:
- Preserving the independence of our institutions,
- Prioritizing the rule of law,
- Rejecting the decline in the quality of our governance,
- Not compromising on freedoms and pluralism,
- and insisting on generally accepted, data-verified economic policies.
On the Economy:
“In order for the fight against inflation to be successful, there needs to be consensus across all segments of society on this issue. This process will inevitably result in costs for the real economy. The business community also needs to take on its share of these costs in order to resolve Türkiye’s ongoing economic problems and transition to a more balanced, sustainable growth path.”
“It is important to note that TÜSİAD has always prioritized the country’s interests since its establishment and would never say others should bear the burden of this fight against inflation; we are ready to take on our share.”
“Within this framework, tax regulations should aim to achieve an effective tax system that maintains confidence in the implementation of laws, while distributing the tax burden fairly. We believe that these regulations should aim to broaden the tax base, be fair, predictable, and comply with international standards. Additionally, we consider it crucial that these regulations be prepared through consultation, considering the views and evaluations of relevant civil society organizations.”
“Without comprehensive steps in these areas, we believe that merely increasing the taxes on registered taxpayers, whom already shoulder a significant portion of the burden, will undermine the success of this endeavor. We believe that focusing on the fight against the unregistered economy is essential for tax systems to achieve their objectives.”
Türkiye’s Potential:
“In recent months, we have had a series of contacts both domestically and abroad. In these meetings, I once again had the opportunity to see how rich our country’s potential is. It is possible for Türkiye to strengthen its position as global value chains are being restructured.
“However, there will be certain conditions for this. Foremost among these conditions is economic stability. We support the process of combating inflation. We believe that monetary policy should be supported by fiscal discipline.”
“To achieve macroeconomic stability and predictability and to permanently reduce inflation, reforms in several areas must also be implemented. In this context, we again emphasize the effective functioning of the rule of law, with all its institutions and rules, the autonomy of regulatory institutions, the importance of a pluralistic democracy, freedom of expression, education reform, gender equality, and investments in technology and innovation. Because development, economic structural transformation, improvement of income equality on individual and regional levels requires a framework that goes beyond mere economic policies.”
On Education:
“Education has been one of TÜSİAD’s focuses since its establishment in 1971 and is included in our association’s Charter.”
“As an organization that has emphasized the importance of education for 50 years, we have been reviewing the recent changes in the curriculum. This change has sparked significant reactions in society. As we have stated before, we believe that a curriculum that is implemented without addressing criticisms regarding its adherence to values of the Turkish Republic, scientific principles, and contemporary educational norms will not contribute to our children’s future and our development goals. When it comes to education, which concerns the entire society, regulations and changes should be crafted and made in a participatory manner, receiving the support of all sides of society.”
“If Türkiye is to be one of the world’s top 10 economies, the quality of our education system should also rank in the top 10 worldwide. However, according to the PISA results, Türkiye ranks 36th in reading, 39th in mathematics, and 34th in science.”
Role of Women in Leadership:
“The Board of Directors of TÜSİAD has intensely focused on strengthening the role of women in management and leadership.”
“TÜSİAD has called for increasing the ratio of women in management, starting with our own members. We received a very positive response to this call. We expect our members to increasingly respond this call and to see more women in management of our companies.”
“On the one hand, there was a remarkable increase in the number of female mayors in the last local elections.”
“On the other hand, withdrawing from the Istanbul Convention has not served the prevention of violence against women. Moreover, we believe that the proposal regarding “Women’s surname” in the 9th Judicial Package is not compatible with the aim of strengthening women’s social status.”
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