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Capital Markets

Turkey treads water

Over-reliant on foreign investment to balance its books, Turkey is facing an investor retreat in the face of political instability. The long-term solution is a big expansion of domestic investment of untapped savings, but the instability is slowing this too.

Turkey’s worst-ever mining disaster, which last month killed over 300 people trapped underground by an explosion, has shaken more than the community in the western city of Soma where it happened. 

Followed by street protests in large cities, it has served as a stark reminder that the government, generally praised for its stellar performance over the past decade, still has a lot of work to do to put the country on a solid development path. 

Faced first with local elections in March, then with a presidential vote in August and, next year, with parliamentary polls, prime minister Recep Tayyip Erdogan has become more and more populist, to the rising concern of foreign investors.

It started a year ago with the brutal crackdown on protesters in Istanbul’s Gezi Park, in which five people were killed and around 8,000 injured. Then, following a corruption investigation into members of Erdogan’s ruling Justice and Development Party (AKP) late last year, the government moved from their posts thousands of police officers and hundreds of prosecutors. 

Mining Turkey Soma envelope
A relative of a miner who was killed or injured in a mine explosion reacts as rescuers work in Soma

In February, the Turkish parliament passed legislation enabling the blocking of any website without the need for a court order and forcing internet providers to store data on users for two years and share it with the government upon request.

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