Arab World's Political Instability Challenges Turkey's Economy

Article Summary
Turkey must pursue increased cooperation between the state and the private sector to expand its markets in the Arab world. While Turkish-Arab economic relations were not at desired levels before, political and economic instability in the  region is hampering the relationship, argues Hasan Ersel.

If we want to preserve or expand Turkish markets in Arab countries we have to adopt a systematic approach based on cooperation between the state and the private sector. In the past year, we witnessed considerable vitality in the Arab world labeled as the “Arab Spring,” “Arab Awakening” or “Arab Revolution,” depending on the level of optimism. Last July in a Cairo meeting I observed Arab economists and political scientists, a bit optimistically, predict that this vitality will lead to positive developments in political and economic fields. But in a similar Cairo meeting in March of this year, anxiety had replaced much of the optimism.

The original optimism, as one good Egyptian friend explained, arose from the excitement felt by the society’s decision to finally take action. However, time has shown what can and cannot be done. I am satisfied with the steps Turkey is taking to develop our economic relations with Arab countries, but nevertheless we have to accept that our benefits from such efforts will be limited, given the economic structures and problems in the Arab world.

For example, consider the export figures for the first two months of this year. Our exports to 18 Arab countries in the Middle East and northern Africa constituted 22.4 percent of our total exports. You have to remember that currently Iraq is a special case as it is very dependent on Turkey for its imports. Excluding Iraq, our exports to the other 17 Arab countries is only 15.4 percent of our total exports. In the same period 20.6 percent of our exports were to three leading European countries, despite the European economic crisis.

When looking to the future, I do not see our economic relations with Arab countries developing to desired levels, mainly for reasons particular to the region. Why?

Arab countries have gone through differing phases. Some have undergone civil wars while others have not experienced much change, other than some minor developments. Where these developments lead depends on the situation in Egypt, which is not easy to forecast. It appears that the emergence of a stable political structure will take a long time in the Arab world, where regional interaction plays a major role.

The economies of the Arab countries are also different. The problems facing sparsely populated oil-rich Gulf countries are not the same problems facing densely populated countries lacking natural resources [such as Egypt]. However, there are global economic problems that affect all of them. In one year, Egypt lost half its foreign currency reserves, its economy shrunk and unemployment soared. The same situation happened in Tunisia as well, and other countries in the region are also beginning to feel the effects of the European crisis. The entire region is likely to experience lower growth rates in 2012.

On the other hand, because of the European crisis, southern European countries are expected to increase their activities in Arab countries. We are likely to face increased competition not only in our export markets but also in our efforts to attract Arab capital. If we want to preserve or expand our markets in Arab countries we have to pursue a systematic approach based on state-private sector cooperation. This is the only way we can accumulate sufficient data to guide our efforts.

Another important point is that Turkey’s prestige in the Arab world is linked to our success in democratization and modernization. Turkey’s appropriate steps in this direction may contribute to its prestige, but any deviation from this course will definitely have negative consequences.

Found in: turkish exports to mena, turkish-arab economic relations, turkey, european economic crisis, arab spring, arab economy

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