Foreign investors in Turkey close to finance, distant from industry
MUSTAFA SÖNMEZ - Hürriyet Daily News - March/ 09 /2015 The focus from the…
The ruling Justice and Development Party’s loss of big cities in Turkey’s local elections comes with important economic repercussions for the party, known as the AKP. The loss has stymied patronage networks that have been highly instrumental in expanding the party’s voter base, all amid an economic crisis.
No wonder the AKP has refused to concede defeat in Istanbul — the country’s economic powerhouse, which the main opposition Republican People’s Party (CHP) won by a razor-thin margin — and the capital, Ankara, forcing recounts for hundreds of ballot boxes since the March 31 vote.
The opposition’s takeover of Istanbul and Ankara would end the AKP and its predecessors’ quarter century of dominion in both cities, marking the party’s worst electoral setback since it came to power in 2002. The loss of Istanbul has had an added impact of shock since it is the city where President Recep Tayyip Erdogan began his rise to power as mayor in 1994.
In Sunday’s vote, the AKP suffered another debacle in the CHP stronghold of Izmir, the country’s third biggest city, and lost hold of Antalya, the center of Turkey’s vital tourism industry, as well as of Adana and Mersin, both major economic hubs.
Given the power balance between the central government and municipal administrations in Turkey, one may suggest that the opposition’s takeover of local dominions is not of much significance. Since last year, Erdogan has ruled the country under an executive presidency system that concentrates power not only in the central government but in his own hands. The system has eaten into the powers and financial resources of local administrations, among others.
Only 12% of Turkey’s 4.3 million public employees work for local administrations, whose funding depends heavily on the central government. As much as 60% of their revenues are tax revenues transferred from the central government budget. While central budget revenues account for 31% of the gross domestic product (GDP), the share of local administration revenues is only 5%. In sum, local administrations enjoy relatively limited means in terms of resources and spending.
Still, the loss of local administrations, especially in provinces representing the country’s main economic hubs, is akin to the AKP losing an arm.
In 2017, Istanbul alone contributed 31% of Turkey’s GDP, followed by Ankara with 9% and Izmir with 6%. Along with the tourism capital Antalya, which contributed more than 3%, those four regions account for nearly half of the GDP. The figure rises to about 60% with the addition of other commercial, agricultural and tourism centers such as Adana, Mersin, Aydin and Mugla, where CHP candidates won mayoral offices in provincial capitals. The CHP triumphed in 21 out of 81 provincial capitals, with those provinces accounting for 62% of the GDP and having some of the country’s highest incomes per capita.
While Turkey’s GDP per capita was some $10,000 in 2017, Istanbul boasted $18,000, Ankara $14,000 and Izmir about $12,000. In contrast, in provinces where the AKP retains its rule, the income per capita is well below the national average. Worst in terms of prosperity are the Kurdish-majority eastern and southeastern provinces, which contributed only 3% to the GDP and had a GDP per capita of some $5,000 in 2017. The pro-Kurdish Peoples’ Democratic Party (HDP) won eight provincial capitals in those regions.
During its more than 16 years in power, the AKP has reaped the fruits of the synergy spawned by its simultaneous hold of the central government and local administrations in economic hubs. Local dominion has enabled the party to make use of lucrative urban rents, especially in Istanbul, a sprawling metropolis of 15 million people. Istanbul has been at the heart of the government’s economic growth policy, which focused on stimulating construction and domestic demand, and, in its heyday, helped the AKP significantly expand its voter base.
Therefore, the AKP’s loss of big cities amounts to losing huge urban rents. During their 25 years of rule in Istanbul, the AKP and its main predecessor, the Welfare Party, used the city’s urban rents without stint, giving rise to reckless construction that blighted the city’s historical silhouette and damaged its cultural heritage. In the process, the AKP heavily favored business people from its own fold or close to the party, spawning significant capital accumulations.
The construction-driven patronage machine will now weaken, providing less benefits to the party apparatus and curbing the means of financing cadres and supporters. Already grappling with an economic crisis, the AKP government would be deprived of an important buttress. This explains the party’s zealous efforts to cling to Istanbul, though the recount of spoiled votes is unlikely to close the winning margin of some 20,000 votes possessed by the CHP’s Ekrem Imamoglu.
Well aware that the loss of Istanbul and other big cities would be a disaster, Erdoganhad warned ahead of the polls that voters who refuse to support the AKP would see their local administrations deprived of the central government’s financial support. Speculation is now rife that Erdogan might enact measures that would impede or effectively paralyze opposition mayors. This, however, appears a far-fetched scenario since the denial of funds and investment to urban centers generating the bulk of the GDP would hurt the economy itself and do nothing to reduce the country’s rampant unemployment, which, ultimately, would be blamed on the government and not local mayors.
The outcome of the local elections gives Turkey a “dual administration” of sorts. On the local level, the CHP is on the rise, having won the country’s economic hubs despite overall support of 30%. On the central level, the AKP holds the government but is in decline, deprived of the synergy of local administrations it had long enjoyed.
The most crucial element of this outlook is the crisis environment in which it emerges. In an alternative environment, the CHP would also have benefited from the external economies of growth, but the Turkish economy has been contracting since the second half of 2018, with lackluster prospects for 2019 and 2020 as well. Public investments are being put on hold and the central government’s tax revenues are set to decline, meaning that the funds to be transferred to local administrations will also shrink. On top of it, the municipalities the CHP will take over are heavily indebted. In short, the new CHP mayors are on an uphill track.
Still, by wrestling the local administrations of big cities from an authoritarian AKP that is hell-bent on not sharing power, the CHP has achieved a remarkable success that will give it a huge motivational boost in the democracy struggle. The local administrations of big cities — with their wide-ranging authorities and responsibilities, from public transport and water and gas supply to construction permits and urban planning — are an important position in this struggle. The main opposition now has a chance to use this position to build a model of the Turkey it envisions and to rally further popular support to challenge the central government.