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Turkey has one of the
worst track records of any country for following through economic
reform. It has signed 16 programmes with the IMF but abandoned all
but two of them halfway through. Over the past 10 years there have
been as many coalition governments - and a military intervention -
each of which has launched its own economic stabilization
programme. None amounted to anything.
But as Turkey enters the new millennium equipped with a new
IMF accord, belief is virtually universal that this time success is
within the country's grasp. For the past two months the market has
been watching with growing incredulity as prime minister Bulent
Ecevit's three-party coalition ticked off item after item on the
reform agenda.
"If we all obey the dictates of the programme, and this
includes the government and the politicians, inflation will come
down," said Ayhan Sahenk, chairman of the Dogus conglomerate,
Turkey's third largest, in a rare media appearance. "I believe that
we will reap the fruits starting from June."
Sahenk said that the targets of his companies (which include
the Garanti and Ottoman banks) have been revised to be aligned to
those of the government. Koc and Sabanci, the country's two largest
companies, have also said that they would not raise their prices
above the inflation target.
"We have the strongest and most hard working government we
have seen in 20 years," says Sibel Sanus, foreign relations manager
of the small Bank Kapital. "Unless there is political chaos, and I
don't think this is likely, the programme will succeed."
The optimism in Turkey is shared by professional Turkey
watchers. Mina Toksoz, ABN-Amro's strategist for emerging Europe,
sent an enthusiastic report to her colleagues with the note: "as
you can see, I've bought the IMF programme as well".
The programme is the most ambitious to be fielded since the
free-market reforms of 1980. Ecevit and his partners, who enjoy a
comfortable majority in the Assembly, have legislated almost all of
the structural reform programmes that had been gathering dust for
over a decade. The banking reform law was even enacted twice within
less than four months. The original law was scrapped when the Fund
did not like it and a more stringent version introduced. A sign of
increased vigilance is that the central bank recently took over
five small banks, amounting to 5% of the system, and told others to
increase their capital.
A series of tax laws were enacted to ensure that the problem
of domestic borrowing and budget deficits, the core of the economic
malaise, could be tackled. A fiscal policy of unprecedented
tightness is expected to bring down inflation to 20% to 25% by
year-end 2000. There is a $6.6 billion privatization agenda that
includes Turkish Telecom, refineries and the large petroleum
distribution company Poas.
Even foreign policy issues have been defused if not resolved
and for the first time since 1953 relations between Turkey and
Greece are basking in calm. In its Helsinki summit the EU made
Turkey an official candidate to join, ending a 33-year quest.
But given Turkey's past record, risk of slippage cannot be
ruled out. According to Akin Ongor, general manager of Garanti
Bank, the biggest risk factor of the programme is public
expenditure. "If they can restrain themselves the programme will
work."
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