H.E. President AbdulH.E. President Abdullah Gül's Speech at the 5th Izmir Economic Congreslah Gül’s Address at the 5th Iziır Economıc Congress

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Mr. Prime Minister,

Mr. Kim, Chairman of the World Bank,

Esteemed participants,

Ladies and Gentlemen

I am pleased to be with you on the occasion of the 5th Economic Congress held in Izmir, a city that is Turkey’s gateway to the world and that is a leading city in tourism, foreign trade and industry. I am greeting you all with my sincere feelings.

The first Izmir Economic Congress was held between February 17 and March 4, 1923 with the participation of 1135 people before the Lausanne Agreement was signed and even before the Republic was founded.

The first congress, held with the chairmanship of Gazi Mustafa Kemal, reminds us all once more through this historical characteristic that the freedom and independence of our country depend on economic survival.

When the conditions of our country and nation of those days are taken into consideration, preparing a congress with such a broad participation is an enormous event which comprises a truly great vision.

Actually, the history of nations, in a sense, is also the history of economic conditions. Nations that have guaranteed their economic survival are the only ones that have continued their existence and civilization in the course of history.Civilizations which have lost their economic vitality or which have been weakened in terms of the economy have also lost their strength in time and have been erased from history.

In this respect, for a country which had just won the war of independence and which had not even signed the peace agreement, to meet in the first Izmir Economic Congress and draw out its roadmap regarding its economic struggle demonstrates that the foundation of this country has been laid on sound and robust footing.

One should always keep this in mind: the national unity of many countries has been built on economic common fate.The most striking examples of such historical integrations are the unification of Italy, the unification of Germany and the foundation of the United States of America.

Our country, which had a population of 12 million in 1923, took a giant step with the First Congress held to plan its economic future.

Our country has achieved great successes in reaching these targets in the past 90 years since 1923.Today, the Turkish economy with its gross domestic product reaching up to 1 trillion dollars is the 16th biggest economy in the world and the 6th biggest European economy.Moreover, we are a country integrated with the global economy.

Consequently, I find it an appropriate decision to determine the theme of this congress as the “Turkish Economy in the Process of Global Restructuring” and to name this adventure of the “Izmir Economic Congress” whose 5th organization we are carrying out today as “The 90-Year-Long Journey from the National to the Global”.

Esteemed guests,

The globalization process we are going through accelerates the course of history, changes the chemistry of communities, and deeply affects the destinies of countries and continents.

To lag behind during this process or to take sides in the opposite direction of the course of history will bring forth consequences that will be difficult to compensate, not only in terms of today’s generation but also in terms of the future generations.

Despite all of these risks, globalization has entailed great opportunities with it.Access to information in this information era is very easy. Many countries that have benefited from these opportunities have taken significant leaps in the fields of economic and human development.

In the past 20-30 years during which globalization has gained momentum, the economic center of gravity of the world has shifted back to Asia after 200 years.

Moreover, the revolution experienced in the information and communication technologies and in social media has played an important role for democracy to spread towards our near geography.

Turkey is located in a critical geography in terms of both the shifting of the world’s economic center of gravity toward Asia and the expansion of democratic values toward the Middle East and North Africa.

Our country which is at the intersection point of these two basic dynamics of this century actually faces a unique historic opportunity.I believe that in all of the evaluations that will be carried out during the 5th Economic Congress and in all of the future projections, these basic dynamics need to be taken into consideration.

Mr. Prime Minister,

Esteemed participants,

We celebrated the 90th anniversary of our Republic with excitement yesterday. We opened the Marmaray Railway, the project of the century which crowned this meaningful day.Fortunately, Turkey today has become a country which has set itself ambitious goals and which has reached these goals one by one.

The legal, democratic and economic reforms carried out in the last 11 years and the political stability have a great share in obtaining these successful results.

I hereby would like to extend my thanks once more to the government and the economic institutions, which have been working with devotion in obtaining these successful results which are appreciated by the whole world.

However, we have a long journey to take in an environment where the race between nations is continuing at the global level and in which the course of history is flowing fast. Thus, it is an obligation for us to draw today the roadmap of our future with a realistic vision .

Within this context, I believe that this congress held in light of the 10th Five Year Development Plan encompassing 2014-2018 is a beneficial and timely platform in order for our country to reach its 2023 targets.

The global economic crisis that has been continuing for the last 5 years has led to the questioning of many accepted ideas. Many issues from production to consumption, foreign trade to the exchange rate policy and applications of international finance markets to the international competition and the observation, inspection and arrangement of national and international authorities are being reformed.

Balances are being re-set for many countries and continents in the atmosphere of the global economic crisis.

Actually, the international and regional conjuncture provides us with a golden opportunity in terms of closing the gap in welfare and human development between us and the developed countries.

It is crucial for us to reap the benefits of these dynamics that will consolidate our political and economic stability for the next 20 to 30 years, fortify our diplomatic acquisitions and guarantee sustainable fast growth.

This means that we should at least make use of the following “four dividends/proceeds” thoroughly:

These are the dividends of “demographics, democracy, knowledge and peace”.

First of all, it is important for us to take advantage of the demographic dividend that has been provided for us with the young and dynamic population which exceeds 75 million. We can realize this only by creating a qualified human capital and through a sound educational system.

Turkey, through the policies implemented in the last decade, has been able to establish its political stability, improve its macroeconomic equilibrium and achieve an important structural transformation by strengthening its potential for growth. However, this structural transformation is yet to be completed.

The results of the reform movements that could be named as the first generation movements have successfully been obtained.Now, we need the “second generation structural reforms” that will carry Turkey to higher levels in the world ranking.

Hence, within the scope of the second generation reforms, the primary initiative of Turkey must be to enhance its quality of education.As I have mentioned earlier, a large population which has been qualified with education and science is an enormous power.On the other hand, an unqualified population which has been deprived of education, can lead to social problems and almost become an obstacle in the way of and a burden to human development.

The greatest test for Turkey in the near future is to overcome the problem of being a middle income country.

Today, the rate of education expenditures in the countries that have been able to overcome the middle income trap is around 6% of their Gross Domestic Product (GDP).Countries that have not been able to overcome this trap allocate only 3% of their GDPs for education expenditures.

Although it is a pleasing development that in our country the education expenditures which are planned to be allocated in the 2014 budget are about 4.5% of our GDP, it is obvious that we still have a long way to go in this regard.

It is evident that another condition for benefiting properly from the “demographic dividend” is to increase the active participation rate of women, who comprise half of our population, in the labour force.

Dear Participants,

Research carried out in recent years regarding economic growth and human development shows that among the most important factors for growth are providing initiatives for individuals, removing the obstacles in the way of entrepreneurs, urging participation and strengthening democratic organizations and regulations.

The same studies also point out that countries which do not have strong democratic organizations and institutional capacities are left behind in economic competition.

For this reason, the second dividend that we need to take advantage of in the development race must be the “democracy dividend”.

Because democracy means law.Democracy means applying law and regulations to everyone equally and transparently.It also means that decisions are not taken subjectively but by depending on the objective criteria that are designated by the free will of the people.

The periods when democracy was interrupted in our political history were also the times when our country suffered from economic downturn.

Accordingly enhancing our democratic standards will consolidate the unity and solidarity of our country, increase the happiness of our people, ensure that generations who are open to innovation and entrepreneurship are raised, create a climate in which domestic and foreign capital owners can invest their savings safely, and provide an environment which guarantees the efficient use of our economic and human resources.

The economic reforms carried out in Turkey have become the natural extension of making democratization and supremacy of law dominant.

On the other hand,  the final target of economic power and welfare should be the happiness of people.It is not easy to say that people who are deprived of their basic rights and freedoms are happy, however rich they are.

As a result, it is one of the basic priorities for our country not only politically but also in terms of economic development to continue to increase its democratic standards.

Esteemed guests,

The third dividend which we need to make use of in order to reach the desired development level is the “knowledge dividend”.  After all, in the last 200 years, in other words, since the Industrial Revolution, the most important factors that account for the development differences and international power equilibrium between countries have been technological changes and innovations.This process is gradually gaining momentum today.

In the past 10 years, we have improved both our competitice strength and our investment environment.-Again in the last 10 years, we have made significant progress within the value added chain of our exports.Today, we have reached the medium value added export from the low value added export.Nonetheless, the proportion of the high value added products within the total of our exports is still very low.

Increasing this rate also is vital in solving the current account deficit problem.

So how will we accomplish this? We need to leave the “classic efficiency economy depending on the accumulation of production factors” and move on to the “economy dependent on knowledge”.We cannot continue to compete in today’s world with a production method that is dependent on cheap labor.—The reason for this is that there are countries which have an even cheaper work force.Also, we are not a country which produces high added value.

Another common characteristic of the economies that have fallen into the middle income trap is that they follow the classic productivity economy paradigm in production. Countries in this race are constantly trying to produce more efficiently and more cheaply.

However, countries of the higher income group focus on knowledge intensive technologies and innovations in product development, marketing and distribution.Actually, these countries are growing economically by making use of the knowledge dividend.

It is getting more and more difficult for countries under these circumstances that follow the accumulation of classic production factors and productivity increase to be promoted to the upper league.

For this reason, in order to avoid the middle income trap which is the most important problem, it is crucial for us to follow an economic growth strategy that concentrates on education, science, Research and Development, technology and innovation.

I’m gladly observing that realistic aims and solid strategies have been established in this direction in our 10th Five Year Development Plan.

Distinguished guests,

No matter what precaution we take within our country in order to ensure our economic growth, we are not immune to the general problems of our region and the world .The economic, political, human, and military crises that occur in a country or in the region may affect the neighbouring countries, the whole region even the whole world in such a period in which mutual dependency is so high.

Therefore, one of the basic conditions for sustainable economic growth and development is regional peace and stability.

This situation, called in short the “peace dividend”, is a notion which we experienced in western Europe after the second world war and in the eastern Europe after the end of the Cold War. The contribution of the “peace dividend” is quite high in terms of the economic growth and welfare that the European Union members have experienced in the last 60 years.

There have been developments which for years have not given Turkey the opportunity to make proper use of the “peace dividend” which occurred after the Cold War.  These negative developments unfortunately still continue in our region.

The more safety, stability and peace there is in our neighbours or region, the more commercial and economic potential they have.

The country which can most take economic advantage of such a peaceful atmosphere in our region is Turkey.

Therefore, Turkey should always try to be the locomotive of regional stability, peace and cooperation.

When the normalization and stability of the multidimensional regions surrounding our country can be achieved, this means making the understanding of cooperation and integration dominant rather than the existing culture of conflicts in these regions. Such a result will provide a great contribution to the internal peace and welfare of our country.

When our country is successful in solving its own deep-rooted problems, and in fortifying internal peace, all of our regions will swiftly enter a development process again.

On the other hand, despite all of the crises, chaos and civil wars occurring around us, it is crucial for our country not only for our safety but also in terms of our economic future to show the utmost effort in order to create a peaceful environment in the region, prevent chaos and ensure that the region settles down.

In short, a bright future in all aspects is awaiting Turkey which achieves internal peace and contributes to the establishment of the peace dividend in the geographies surrounding it.

Dear participants,

As I reiterated during my opening speech at the TBMM, the developed market economies one day will have to abandon their monetary expansion policies that they are pursuing.

For this reason, this process  should  be managed properly in order to minimize the negative effects of the abandoning of the monetary expansion policies on our economy.It should be remembered that even the passive discourse of the Chairman of the Federal Reserve Bank in May had a significant effect on capital flow, exchange rates and interest rates.

Another issue that must be resolved in the middle and long term is our low savings rate, which I have been drawing attention to for a long time, and  the current account deficit, which slows down our growth rate.

The precautions foreseen regarding this issue in the 10th Five Year Development Plan must be applied and the annual 18% savings rate foreseen for 2018 must be reached.

Likewise, other structural reform areas that need to be effectively implemented are  decreasing poverty by amending the income distribution, deepening capital markets, continuing the struggle against the grey economy, and resolving the problems of regional differences.

Actually the “brakes and equilibriums”  and “checks and balances” which we generally mention when we discuss politics and democracy, are requirements in the field of economy as well.

In this respect,  such issues as commercial and economic regulations that consolidate the feature of a functioning free market economy, the principle of transparency and bringing professionalism to the fore during the decision making process in Turkey must be carried onward.

Furthermore the necessary sensitivity must be shown in order to truly validate transparency and accountability in public expenditure.

Mr. Prime Minister,

Esteemed guests,

Ten years from now, we will be celebrating the centenary of our Republic, whose 90th anniversary we are celebrating today. Nearly half a century from now, we will mark the 1000th anniversary of our taking root in this region.

We have to use this process to “catch up” and “get ahead” in all areas.Therefore, as a nation we should protect our political stability, develop our democracy and sustain our economic growth without wasting our energy on vicious cycles and quarrels.

When we look back on our political history in the past 50 years, we must feel the pain of our lost years and we must never enter the same blind alleys again..

As I have mentioned before the course of history has accelerated.

In this age, those who do not sway about but those who run in the right direction after their targets will survive and get ahead.

I hope that the Izmir Economic Congress, the 5th meeting of which we are holding today, will help prepare the roadmap that will successfully carry the Turkish nation into the next century.

As I am ending my speech, I would like to offer my thanks to everyone who has contributed to the organization of this congress and to all of the participants who have contributed with their precious opinions and presentations.

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