World Economic Forum on East Asia 2006

WORLD ECONOMIC FORUM

World Economic Forum
in Turkey

Connecting Regions
Creating New Opportunities

Istanbul, 23-24 November 2006
INSIGHTS

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REF: 151206

Contents

Preface 3

Summary: Connecting Regions – Creating New Opportunities 4

EU Accession 7

Geopolitical Role 10

Competitiveness & Business Opportunities 13

Bridging Civilizations 15

The Creative Imperative in Turkey 17

Acknowledgements 19

1
World Economic Forum in Turkey

Preface

The timing of the World Economic Forum in Turkey could not have been better; just a few
days after the publication of the European Commission’s Enlargement Strategy and Progress
Report, over 400 participants from more than 45 countries gathered at the Bosphorus. The
discussions included the current EU negotiations, yet they touched upon much more than
that. Under the overarching topic of “Connecting Regions – Creating New Opportunities”, the
Forum prompted a positive, constructive and realistic assessment of Turkey’s connecting role,
both in relation to the EU and other neighbouring regions. The meeting had a major positive
impact and a number of identifiable outcomes are worthy of attention.

Our meeting helped define Turkey’s strategic importance. With a difficult moment in Turkey’ s
EU accession negotiations as a backdrop, the meeting brought into focus the long-term
strategic considerations that link the futures of Turkey and Europe and the manner in which
Turkey would affect Europe in the global arena.

The meeting broke taboos by addressing certain issues that traditionally remain unexplored in
gatherings of this kind. The topics discussed included the EU’s evolving demands of Turkey
and the situation regarding human rights and minorities in the country.

The meeting also provided a platform where top policy-makers and business leaders jointly
identified Turkey’s long-term comparative advantages and considered what ought to be done
to further increase Turkey’s potential in order to translate this potential into reality.

Yet the most important outcomes of this gathering could be measured at the individual level.
Each participant, whether from business, academia, the media, politics or civil society, had a
unique opportunity to exchange views with his/her peers, gain new insights regarding Turkey
and the neighbouring region, and expand personal networks with leaders from all walks of life.
We are confident that this gathering facilitated many contacts which will grow even stronger
over the years to come.

Finally, we are proud of having achieved the aim identified in one of the meeting’s 20 session
titles: Branding Turkey – Changing Perceptions. When the two-day meeting ended, we all left
the beautiful Ciragan Palace with a feeling of buoyancy and optimism about the country and
its future in the region.

The World Economic Forum would like to take this opportunity to once again thank the Co-
Chairs of the meeting, who provided valuable insights and support for the programme.
Likewise, we would like to express our special thanks to our Strategic Partners, Regional
Partners and Supporters, as well as to the Turkish government, who supported this
endeavour from the very beginning.

We are now looking forward to building on this partnership with Turkey and the region. We
hope that with your support, the World Economic Forum will again soon fulfil its role as a
multistakeholder platform and catalyst for change in Turkey.

Felix Howald
Director, Head of Europe and Central Asia

3

Summary: Connecting Regions – Creating
New Opportunities

quot;We have fulfilled whatever quot;If Turkey were not to join
promises we made. We the EU, it would weaken the
know there are difficulties to union. We would all lose
come. But we are continuing out.quot;
to move forward with great
patience. The responsibility Mabel van Oranje
Director, EU Affairs, Open
falls more on the EU than on
Society Institute, United
Turkey. We are looking for
Kingdom; Young Global Leader
political common sense.quot;

Recep Tayyip Erdogan
Prime Minister of Turkey

The World Economic Forum in Turkey was especially well Participants also focused on Turkey’s future as it strives,
timed, coming a year after Turkey began negotiations for like all other countries, to confront the pressures of
membership in the European Union and on the eve of globalization and improve its global competitiveness and
Pope Benedict XVI’s landmark visit to Turkey and the business climate. Turkey’s economic, political and social
crucial EU Summit in Brussels at which leaders were to reforms started before EU negotiations began, but are
assess the status of the accession talks. The setting too currently inseparable from, if not entirely driven by, the
was most appropriate – Istanbul’s Ciragan Palace recalling prospect of membership. The process is now irreversible,
Turkey’s grand history and culture and the sight of the many participants argued.
Asian shore across the Bosphorus a picturesque reminder
of the country’s role as a crucial bridge across Finally, the meeting examined Turkey’s global geopolitical
civilizations. position, particularly its potential as an energy corridor.
This is inextricably linked to the traditional and still
Over two days, more than 400 business, government and expanding part it plays as an important connection
civil society leaders from more than 45 countries spanning the cultures of East and West.
discussed how Turkey is “Connecting Regions – Creating
New Opportunities”, the theme of the meeting, and how This is a summary of the insights and recommendations
this strategically important nation is playing a critical role for action that emerged from the meeting. They are
as a model of stability at the doorstep of a region that is organized under the four pillars supporting the central
increasingly unstable. Despite recent strains in Turkey’s theme.
relations with the EU, Turkish and European government
and business leaders at the meeting urged restraint and
common sense, calling on both sides to keep their eyes
on the prize. Turkish Prime Minister Recep Tayyip
Erdogan, who addressed participants at both the opening
and closing plenaries, underscored that Turkey’s joining
the EU would be an “alliance of civilizations”, a repudiation
of those seeking to divide people of different faiths and
cultures who nonetheless share common goals and
values.

4

“Turkey has to go from rent-
“We would have more
seeking to profit-seeking
democracy in Europe and
structures to increase its
the world. Europe will lose
competitiveness.”
power without Turkey.quot;

Güler Sabanci
Mehmet Gürcan Daimagüler
Chairperson and Managing
Honorary Chairman, Liberal
Director, Sabanci Holding,
Turkish-German Association,
Turkey; Co-Chair of the World
Germany; Young Global Leader
Economic Forum in Turkey

EU Accession Geopolitical Role

In 2005, Turkey embarked on complex negotiations to Turkey plays a unique geopolitical role as a stable, secular,
join the European Union. The prospect of Turkey’s Muslim democracy literally at the strategic crossroads
accession to the EU has divided the governments and between East and West. A member of NATO, it aspires to
people of Europe, those with worries fearing a surge join the European Union. With its links to the Middle East
in migration leading to job losses. Others are and Central Asia, it is also emerging as a key energy
concerned about the implications of admitting a corridor between those energy-producing regions and
predominantly Muslim country into the European club. Europe.
• While Turkey and Europe are suspicious of each • A model of stability at the gateway to a region of
other, they should collaborate and compromise, increasing instability, Turkey can play a moderating role
focusing on the big picture. They must not let an in regional conflicts and in mitigating global risks such
issue such as Cyprus deter them from realizing the as the menace of terrorism and the threats to energy
mutual and multiplicative benefits of Turkey’s joining security.
the EU. • Turkey should build on its relations with Europe and the
• Turkey should take steps to allay European fears United States, forged during the Cold War and
about the size of its population and culture by tempered through the war in Iraq and most recently the
stressing that accession can help Europe address conflict in Lebanon, to bolster its role as a robust
its demographic deficits, provide deeper links to a defender of peace and security in its region and
large market and low-cost labour pool, and offer a elsewhere.
bridge between civilizations. • By aligning its energy policies more with Europe’s,
• The Turkish people should understand that EU Turkey can emerge as a trusted conduit of energy from
accession will take time and require further the Middle East and Central Asia to its European
economic, political and social reforms. Turkey’s partners, deriving enormous geopolitical and economic
leaders should work to change its people’s benefits as a result.
mindsets to appreciate the positive aspects of • Europe and the US should recognize Turkey’s
accession rather than stir up nationalism. considerable geopolitical value and provide it with the
• Europeans, for their part, should change their appropriate financial, strategic and moral support the
perceptions of Turkey to focus not on the risks but country needs to continue necessary political and
on the opportunities that Turkey clearly offers in economic reforms and realize its ambitions including EU
helping Europe mitigate risks. The EU should resist membership.
imposing double standards or new requirements on
Turkish membership.

5

quot;The alliance of civilizations is the
antidote to the clash of civilizations.
Turkey is not a supplicant. It is a major
player in the world in which we live. We
are not dealing with easy issues. Neither
Europe nor Turkey will see this as a
dialogue of constant remonstration but it
should be a dialogue of constant
reconciliation.quot;

Peter D. Sutherland
Chairman, Goldman Sachs International,
United Kingdom; Member of the Foundation
Board of the World Economic Forum; Co-Chair
of the World Economic Forum in Turkey

Competitiveness & Business Opportunities Bridging Civilizations

Turkey has done well in recent years to improve its As a moderate Muslim democracy steeped in secularism
competitiveness and business climate, climbing from 71st that maintains close links with Europe, the United States,
in the World Economic Forum’s Global Competitiveness Central Asia and the Middle East, Turkey is in a unique
Index in 2005 to 59th this year. Future macroeconomic position to act as a bridge across civilizations. At a time
and political stability depend on Turkey’s ability to stay the when many worry about the potential of a clash of
course of reform, particularly as it pursues EU civilizations, Turkey can be an important link between East
membership. and West.
• Despite its successes, Turkey faces many more • Turkey needs to take the lead in driving intercultural
challenges. Chief among these is to improve education, dialogue. It can share with Europe its knowledge and
which is necessary if Turkey is to narrow income experience in reconciling differences between cultures
disparities and the gender gap and promote innovation. and faiths, as well as its unique blend of Islam and
• Anomalies and dysfunctions in the economy should be secular values.
addressed, including red tape, corruption and the grey • As a prospective member of the EU, Turkey can
market. Rent seeking should be replaced by profit enhance its role as an ambassador for Europe as it
seeking. promotes the concept of the “alliance of civilizations” in
• After its success attracting foreign direct investment to direct challenge to those who seek to divide people and
its banking and telecommunications sectors, Turkey threaten global peace and security.
should aim to stir investor interest in other sectors. Key • Turkey’s leadership in bridging civilizations through its
priorities include making it easier to exit investments participation in cross-cultural initiatives and support of
and increasing the flexibility of the labour market. peacekeeping operations is crucial for regional stability.
• The resilience of the Turkish economy could be tested Its moral authority and influence in the region will be
by currency volatility and fluctuating investor sentiment enhanced as it pursues crucial domestic reforms
over the course of the EU accession talks. Turkey including important measures to promote freedom of
should keep its focus on implementing the structural expression and the advancement of women. In doing
reforms necessary to address its competitive so, it will also serve to address apprehensions in
shortcomings. Europe stemming from perceived discrepancies
between European and Turkish cultures.

6

EU Accession

quot;Some reforms have not
“There are mutual benefits
advanced as quickly as we
to being together. We share
hoped. If the questions
global challenges. There are
linked to Cyprus are not
many global risks around
solved, this will affect the
us. The EU needs Turkey as
overall negotiations.quot;
much as Turkey needs the
EU.”
Joaquín Almunia
Commissioner, Economic and
Ferit F. Sahenk
Monetary Affairs, European
Chairman, Dogus Group, Turkey
Commission, Brussels

Turkey’s application to join the European Union (EU) Yet the overwhelming logic of a partnership is typically
has become the concern of the day, hovering above lost amid the debate over differences or potential
all others on the nation’s agenda. It is linked to sources of friction. Turkey’s accession has divided
practically every challenge confronting Turkey today governments and public opinion in Europe, with those
including its global competitiveness, the rule of law, against membership worried that it will lead to a surge
freedom of expression, the labour market and even in migration and then to job losses in their countries.
religion. Yet EU membership is not the over-arching Others dwell on Turkey’s roots in the East and the fact
question. What is really at issue is the globalization of that it is a predominantly Muslim country. Can such a
Turkey and how it addresses the many pressures and place fit into the European club?
risks it faces at home, in the neighbourhoods to which
it belongs and in the world. “In terms of globalization, Still others focus on Turkey’s turbulent past and the
the EU is the major part of the economic programme remains of those days – the role of the military, the
and development of Turkey, but the rest of the world is controls on the press and freedom of expression,
also very important,” said meeting Co-Chair Peter D. doubts about the rule of law, and corruption. Cyprus,
Sutherland, Chairman, Goldman Sachs International, of course, is still a highly emotional issue that raises
United Kingdom; Member of the Foundation Board of nationalist sentiment in Turkey, even more so now that
the World Economic Forum. the Greek-controlled part of the divided island was
admitted to the EU in 2004 after the Turkish side
The significant geopolitical and strategic roles Turkey approved a UN-brokered solution which the Greek
plays in the world, as well as its position as a bridge side rejected. “Some reforms have not advanced as
between civilizations, cannot be minimized. Nor quickly as we hoped,” said Joaquín Almunia,
should its growing potential as a major energy Commissioner, Economic and Monetary Affairs,
corridor, a big consumer market, a large source of European Commission, Brussels. He added: “If the
skilled labour and a financial services hub be questions linked to Cyprus are not solved, this will
dismissed. “There are mutual benefits to being affect the overall negotiations.”
together,” said Ferit F. Sahenk, Chairman, Dogus
Group, Turkey. “We share global challenges. There are
many global risks around us. The EU needs Turkey as
much as Turkey needs the EU.”
“Our people want to see Turkey as a free and prosperous
partner of the free world. This is what Turkey deserves. But
sometimes some wrong and unjust views from the EU have
had an impact on public opinion. The EU must understand
this.”

Recep Tayyip Erdogan, Prime Minister of Turkey

7

been the key to success.” Added Victor Halberstadt,
“Turkey is going through an
incredible economic, Professor of Public Economics, Leiden University,
political and social Netherlands, who was also a meeting Co-Chair: “My
transformation. What is
impression is that all this is irreversible.”
most important is that
Turkey has been the owner
of this transformation. For all its pains, Turkey is sending a strong signal to
Ownership has been the Europe and others that democracy, secularism, Islam and
key to success.quot;
economic growth can co-exist, Babacan explained. These
are positive factors that Turkey brings to the negotiating
Ali Babacan
Minister of the Economy of table. Turkey, after all, can help Europe address its
Turkey; Chief Negotiator for the
demographic deficits, provide deeper links to a large
European Union; Young Global
market and low-cost labour pool that is already in a
Leader
customs union with the EU, and offer a bridge between
civilizations. Said Babacan: “Turkey has a young and
growing population. Until recently, this was perceived as a
problem, a burden that Turkey would bring to the EU. But
it is in fact an asset that can help the population deficit of
Participants at the World Economic Forum in Turkey
the EU and the economic growth of Turkey.”
appeared to be mainly pro-accession so discussion
focused more on how to convince increasingly sceptical
For their part, the Europeans should update their
Turks – once wildly enthusiastic about membership – and
perceptions of Turkey and focus not on the risks but on
suspicious Europeans that Turkey’s joining the EU would
the opportunities that Turkey clearly offers in helping
be in their interest. The mood of both publics is
Europe mitigate a range of risks. And as much as Turkey
fluctuating. The move by the EU to freeze part of the
should do so, they too must recognize that accession
membership talks over Turkish restrictions on the access
negotiations usually take years and that Turkey has
of ships and planes from Cyprus to its ports and airports
implemented many reforms that will take time to
will inevitably deepen Turkish disappointment and
implement in full. “This is a change of mentality,” Turkish
encourage opponents of accession. Pope Benedict XVI’s
Prime Minister Recep Tayyip Erdogan explained. “Our
surprise gift of support for membership on his arrival in
people want to see Turkey as a free and prosperous
Ankara in November boosted Turkish spirits.
partner of the free world. This is what Turkey deserves.
But sometimes some wrong and unjust views from the EU
The challenge for Turkey is to keep its eye on the prize
have had an impact on public opinion. The EU must
and resist walking away from the talks in a nationalist
understand this.”
pique. Turkish leaders should resist stoking such
sentiment, even though it may be natural to do so in the
run-up to elections. The Turkish people should
Newer EU Citizens (or Candidates) More Likely to
understand that EU accession will take time and require
Support Turkey’s Accession
further economic, political and social reforms, though they
have already paid a price in accepting the structural
changes that have been implemented so far. To be sure,
they should appreciate their considerable achievements.
“Turkey is going through an incredible economic, political
and social transformation,” said Ali Babacan, Minister of
the Economy of Turkey, and Chief Negotiator for the
European Union. “What is most important is that Turkey
has been the owner of this transformation. Ownership has

Source: European Commission

8

Participants exchanging insights on Turkey’s current and future privatization process, live during a CNBC debate

The EU should resist imposing double standards or new
requirements on Turkish membership. It has not been
Who Is Investing in Turkey?
unfair, EU leaders at the meeting insisted. Valdas
Adamkus, President of Lithuania, called allegations of
double standards “nothing but false illusions”. No
prospective member has waltzed to Brussels without its
share of stumbles. “We are not dealing with easy issues,”
said Sutherland. “It’s a long road with bumps and difficult
turns. It requires patience and an understanding of the
difficulties.” Many Europeans feel threatened by Turkey’s
knock on the door, he acknowledged. Some who had
been among the most open-minded have suddenly
become the most intolerant. Obviously, Europe too is
changing, Halberstadt remarked.

Perhaps then the greatest mutual benefit of Turkey’s EU
accession will be the bridging of East and West that
would have been impossible to contemplate only a few
years ago and, in the shadow of 9/11 and the bombings
in Madrid and London, might still seem improbable, even
wrong to many. But it is precisely the evil motives of the
perpetrators of those tragic attacks that drive the logic of
Source: OECD
a Turkey-EU embrace. “The alliance of civilizations is the
antidote to the clash of civilizations,” Sutherland
concluded. “Neither Europe nor Turkey will see this as a
dialogue of constant remonstration but it should be a
dialogue of constant reconciliation.”

9

Geopolitical Role

Indeed, Turkey is all the more remarkable because it
“We are here at a moment
when the region is more belongs to two distinct and exclusive groups. It is one of
and more characterized by the few moderate Islamic countries in the world –
instability but Turkey is
Indonesia and Malaysia are two other examples – that
characterized more and
have embraced democratic politics and pursued free
more by stability.”
market policies to promote growth. And while Turkey is
Klaus Schwab
only a mid-sized country with a population (73 million)
Founder and Executive
smaller than Germany’s but larger than France’s, its 8%-
Chairman, World Economic
Forum plus economic growth is brisk enough to inspire some
investors to bracket it with that fascinating club of
dynamic emerging markets known as the BRICs – Brazil,
Russia, India and China.

And while economic growth and prosperity and Turkey’s
pursuit of reform will further strengthen its political and
social stability, it will also enhance its power and influence,
whether or not it eventually joins the EU. “Turkey is not a
Glance at a world map and Turkey’s unique geopolitical
supplicant,” said meeting Co-Chair Peter D. Sutherland,
position is obvious. Literally at the strategic crossroads
Chairman, Goldman Sachs International, United Kingdom,
where West collides with East, this stable, secular,
and Member of the Foundation Board of the World
moderate Muslim democracy straddles Europe and Asia.
Economic Forum. “It is a major player in the world in
A staunch member of the North Atlantic Treaty
which we live.” Consider the recent conflict in Lebanon
Organization (NATO), the bulwark of Western European
and the decision by the Turks to join peacekeeping
security during the Cold War, Turkey is in the midst of
operations there. Turkey’s military, still a powerful
applying for membership in the European Union (EU), the
institution, is the largest armed force in Europe.
most ambitious regional integration project in the world
that began with Western Europe and has since absorbed
countries in Central and Eastern Europe. Yet with its
cultural and linguistic links that stretch to Central Asia and
even as far as North Asia, and the Islamic faith which it
shares with neighbours in the Middle East and North
“We need a stable Turkey to help Europe tackle today’s
Africa, Turkey is firmly rooted among the civilizations of
challenges and risks. It is the responsibility of the EU to
the East.
cooperate with Turkey and to support Turkish reforms. The
process needs to be finished with success.”
Despite its record of three military coups, Turkey has
Joaquín Almunia, Commissioner, Economic and Monetary Affairs,
chosen the path of stability and democracy, uneasy as it
European Commission, Brussels
may be. The decision to aim for EU accession and launch
into the tough negotiations required for membership
underscored Turkish commitment to modernization and
reform. When an Islamist government was elected in
2003, fears that Turkey’s secular foundation might crack
proved unfounded. While its neighbourhood “is more and
more characterized by instability, Turkey is characterized
more and more by stability,” noted Klaus Schwab,
Founder and Executive Chairman of the World Economic
Forum.

10

“Turkey has all the “Turkey’s significance does
ingredients to become a not stem from its role as an
global force, politically and energy supplier.”
economically.”
Gareth Evans
President, International Crisis
Ali Y. Koç
Group, Belgium
President, Koç Information
Technology Group, Koç Holding,
Turkey

Turkey has clashed with the US over the Turkish While in its initial stage the pipeline will supply only 1% of
parliament’s refusal to let the country be used by global demand, it is an important step in the diversification
American forces as a staging ground for the Iraq war. Ties of the sources of petroleum and will make a critical
with Israel have been strained over the Palestinian issue contribution to global energy security. By aligning its
and the Lebanon conflict. Despite these disputes, Turkey energy policies with Europe’s, Turkey could reap
has maintained its close strategic relationship with both enormous strategic and financial benefits from its energy
countries. Clearly, Turkey is more forcefully asserting its initiatives.
interests in its foreign policy and deepening its
engagement in the region as a defender of peace and Yet in Europe, Turkey’s potential as an energy artery is still
stability. “Turkey has all the ingredients to become a a matter of debate. “There is a tacit belief that energy is
global force, politically and economically,” said Ali Y. Koç, not a card Turkey brings to the table,” said Sinan Ülgen,
President, Koç Information Technology Group, Koç Chairman, Centre for Economic and Foreign Policy
Holding, Turkey. Studies (EDAM), Turkey. Of course, it is important not to
exaggerate the contribution Turkey could make to
Yet outsiders particularly in Europe have not appreciated Europe’s energy security. “Turkey’s significance does not
how Turkey and its geopolitics have evolved. “Perceptions stem from its role as an energy supplier,” Gareth Evans,
in Europe lag ten years behind reality,” said Hugh Pope, President, International Crisis Group, Belgium, pointed
former Wall Street Journal reporter and a leading Turkey out. To be sure, the reality is that Turkey is already an
analyst. “Europe was uninterested in Turkey in the early integral part of the global campaign against terrorism and
1990s and gave no thought to its role in the energy a voice against militant Islamic extremism. It demonstrates
sector. Now energy is the hot issue.” Indeed, Turkey is every day how Islam and secularism can co-exist in the
emerging as an important nexus for oil and gas pipelines context of economic growth and increasing prosperity.
from Russia’s Caspian region, Central Asia, the Middle
East and North Africa to Europe. The Baku-Tbilisi-Ceyhan
(BTC) oil pipeline running from Azerbaijan to Turkey’s
south-eastern coast via Georgia, which was launched this
year, is the second longest such conduit in the world.

11

For this reason, it is crucial that Europe and the US
“Perceptions in Europe lag
ten years behind reality. recognize Turkey’s considerable geopolitical value and
Europe was uninterested in provide it with the appropriate financial, strategic and
Turkey in the early 1990s
moral support the country needs to continue necessary
and gave no thought to its
political and economic reforms and realize its ambitions
role in the energy sector.
Now energy is the hot including EU accession. Concluded Joaquín Almunia,
issue.” Commissioner, Economic and Monetary Affairs, European
Commission, Brussels, in remarks that apply as much to
Hugh Pope
the rest of the world as they do to Europe: “We need a
Author and Journalist, Turkey
stable Turkey to help Europe tackle today’s challenges
and risks. It is the responsibility of the EU to cooperate
with Turkey and to support Turkish reforms. The process
needs to be finished with success.”

Turkey A Nexus For Pipelines
Turkey’s stability, however, cannot be taken for granted.
Guardians of secularism, notably the military, remain
fearful of religious agendas. The economy was rocked by
a financial crisis only five years ago, leading to a major
plunge in the value of the currency. The Turkish lira was
hit again earlier this year, dropping 29%. Interest rates
rose nearly seven points. Turks head to the polls in 2007.
Another smooth election will surely solidify further its
democracy. But EU membership is now a more divisive
issue since support for accession among Turks has fallen
sharply. And anti-Europe, anti-US and anti-Israel
sentiments have risen.

Source: Global Insight, 2006; PricewaterhouseCoopers analysis

12

Competitiveness & Business
Opportunities

Turkey’s competitiveness is the key to its future “Turkey’s young and
growing population is a
success, particularly as it deepens ties with Europe
challenge, but can be an
and moves towards EU accession. The country has
advantage. If you don’t
achieved much in recent years and now ranks 59th on create the future, the future
the World Economic Forum’s Global Competitiveness will create you.”
Index, up from 71st place in 2005, the biggest
Feyhan Kalpaklioglu
improvement of any country in the survey. “We will do
Chairperson, Yasar Holding,
everything to improve the business environment in Turkey
Turkey,” pledged Ali Babacan, Minister of the
Economy of Turkey, and Chief Negotiator for the
European Union. “If the right macroeconomic process
is implemented, you will see how quickly change can
happen.”

Summing up participants’ conclusions at the
economic and business-related sessions, Güler
Sabanci, Chairperson and Managing Director, Sabanci • Providing equal access to education across all
Holding, Turkey, a Co-Chair of the World Economic regions and income levels, and once the children
Forum in Turkey, found it encouraging that several are enrolled, providing them with the means of
Turkish ministers openly admitted that some things staying in school;
had not been achieved. Turkey’s potential starts and • Encouraging entrepreneurship, R&D and innovation;
ends with microeconomic and political stability, two • Exploring the possibility of creating a government
areas in which the country needs to continue to work. agency to directly encourage investment in small
and medium-sized enterprises;
Some of the concrete actions that will lead to • Moving Turkey’s economy from a rent- to a profit-
opportunities include: seeking structure;
• Reducing red tape and resolving bureaucratic • Easing the ability to exit investments;
inefficiencies; • Enhancing labour market flexibility, including hiring
• Reducing the informal economy; and firing, and financial and non-financial burdens;
• Continuing to fight corruption; • Rebranding the country in order to change outside
• Directing more funding towards education and perceptions and enhance the country’s image.
infrastructure;
• Reforming certain laws, such as the tax laws and “Education is crucial to Turkey’s future
the corporate code; competitiveness,” stressed Sabanci. “Our greatest
asset is our young population,” agreed Hüseyin Celik,
Minister of National Education of Turkey. “Educating
and training them well will serve as a competitive
advantage for Turkey.”
“We will do everything to improve the business environment
Educational reform needs to focus on early education,
in Turkey. If the right macroeconomic process is implemented,
access, quality and training, preparing students for
you will see how quickly change can happen.”
multicultural work and, more particularly, preparing
Ali Babacan, Minister of the Economy of Turkey; Chief Negotiator for
skilled students to work in Europe as its workforce
the European Union
declines in the next 20 years.

Foreign direct investment (FDI) in Turkey, largely driven
by mergers and acquisitions, is also a source of
competitive advantage and, more importantly,
business opportunities for the country. FDI has
reached US$ 12.8 billion so far this year, with nearly
85% going to the banking and telecommunications
sectors. Maintaining these high levels will be a key

13

challenge for the country. Turkey’s banking sector is in a the country’s competitiveness. Potential ones include a
competitive position but still faces major obstacles to move towards a more conservative governing system and
growth, most notably the under-capitalization of outright rejection of its membership by the EU. The
institutions. Given the right mix of investment and Turkish currency’s volatility could be another. “Expect
regulation, Turkey could become a regional hub for hiccups,” warned Yvan De Cock, Chief Executive Officer,
financial services. Fortis Bank, Turkey, recalling how Turkey’s currency was
devalued by 20% on the day after he arrived in Istanbul.
The relationship between competitiveness and the gender Most members of the European Union have avoided this
gap is evident in Turkey. While no country has closed the kind of price roiling by adopting a single currency.
gap, those in the upper echelons of success in that area
are also those that rank highest in competitiveness Other weak points that hamper competitiveness include:
indices. Nordic countries top both listings. The Global • low savings rates among the general population;
Gender Gap Report 2006 of the World Economic Forum • the high public debt burden;
ranks Turkey 105th out of 115 countries surveyed, behind • the underdeveloped state of credit markets;
most emerging economies. If Turkey improves its gender • a labour market that lacks flexibility;
gap ranking, it would likely increase its competitiveness • weak compliance with the tax regime.
performance significantly.
Turkish Prime Minister Recep Tayyip Erdogan maintained
One factor in the poor gender-gap ranking is the low that Turkey is successfully implementing a broad reform
education rate among girls. But there are other factors process that will continue irrespective of the course of EU
that keep women from working, and education is not accession talks. Change doesn’t happen quickly, he
even the biggest of them, according to Ipek Ilkkaracan noted, but the fundamental will of the Turkish people for
Ajas, Executive Board Member, Women for Women’s such change is strong and the end result will reflect this
Human Rights-New Ways Foundation, Turkey. Education determination. The end result will also reflect the viability
may be the highest perceived barrier, but in truth, it is a of Turkey’s competitiveness.
lack of access to childcare and elderly care that keeps
women out of the workforce.

But education is important: when girls’ schooling
Retail Deposits Taking Off
increases, poverty decreases. With some 18 million
people living in poverty in Turkey, increasing family welfare
by educating girls is a serious opportunity. But current
spending on education is not enough – it needs to be
double today’s levels for the next 10 years to address the
problem.
Turkey will have to watch out for pitfalls that could hinder

Source: Turkish Banking Association

14

Bridging Civilizations

“Female employment in our “It is the men that build the
part of the world has glass walls around
contributed more to the women.”
global economy than
China.” Seyhan Eksioglu
President, KADER Association
for Promoting Women
Neelie Kroes
Candidates, Turkey
Commissioner, Competition,
European Commission, Brussels

As a Muslim nation that has embraced so-called As the Turkish Daily News reported in its “Davos in
“Western” values – democracy, a free press, being a Istanbul” supplement on 23 November 2006, “women
secular state, rights for women – Turkey is uniquely are both excluded from vast areas of the economy in
positioned to act as a bridge between civilizations, many rural areas while leading Europe in their
particularly through accession to the European Union. participation in many areas of society, including
Mustafa Kemal Ataturk (1881-1938), founder of the corporate business, academia, medicine, engineering
Turkish Republic and its first president, recognized the and law.”
importance of these values, especially the role of
women, and promoted them throughout society. But Islam can be seen as a driving force for some of these
much has changed in the republic since his death. differences, in the sense that in some places, women
who cover their heads are not allowed to go to
From the outside, Turkey is perceived as a deeply school. This is the case at Turkish universities, as well
religious state and, as such, a threat to modern as in schools in France. It is a prejudice starting with
Europe. According to a 27 November 2006 article in beliefs that makes Islam a barrier to education.
Time magazine on Pope Benedict XVI’s November
visit to Turkey, “Islam [has] played a particular role – as Links with Europe are a major driver behind the
both a threat and a model – in […] the secularization country’s current development – the domestic market
of Christian Europe.” is booming, the country has seen sustained growth
rates over the last five years, and reforms are ongoing,
Since the 1980s, rather than deepening their role in despite the election of a moderate Islamist party. But
society, Turkish women have been cut off from Turkey took on reforms long before EU membership
advancement. On average throughout the country, ever came up. Populations throughout Europe and
men earn twice as much as women. While 98% of within Turkey itself are increasingly sceptical of
primary school girls are literate, only 11% graduate Turkey’s candidacy, but the EU and national
from high school. Only 28% of women participate in government are still ploughing ahead. However,
the labour force: 21% in agriculture, the other 7% rejection by the EU could damage relations between
spread out between the remaining sectors. Only 4% Islam and the West. Muslims would see it as a
of parliamentarians are women. rejection of their religion, values and way of life.

15

multicultural teachings. The educational systems in the
“We will get nowhere if we
do not invest in education.” East and West need to introduce children to other
cultures and religions. It is only by doing so that countries
Ibrahim Betil
such as Turkey or those in the EU can come to an
Chairman, Community
understanding of the differences and similarities that
Volunteers Foundation - CVF
(Toplum Gönüllüleri Vakfi), Turkey define Muslim-West relations.

The real, rather than perceived, problems of dialogue
must be solved by compromise and real solutions, rather
than theoretical suggestions, said Khalid Abdulla-Janahi,
Chairman of the Executive Committee, Shamil Bank of
Bahrain, Switzerland, and Vice-Chairman of the Arab
Business Council. He stressed that some of the problems
of the region stem from the lack of leadership at all levels
of society – political and business.

As a driver of intercultural dialogue and a bridge between Abdullah Gül, Deputy Prime Minister and Minister of
civilizations, Turkey needs to take the lead, most Foreign Affairs of Turkey, called for real political reform that
importantly through a radical departure from decades of leads to economic success. Transparency and freedom
discord. The country can easily share the knowledge it are necessary for progress in regional stability, Gül said.
has gained over time regarding the differences between He singled out the nurturing of civil society as essential.
East and West, and also the similarities. It can act as a
beacon for the complementary nature of secular Turkey is neither European nor Arab, a position that
democracy and Islam. It can promote a culture of Turkey can capitalize upon for intercultural dialogue, as an
dialogue, both religious and political. island of stability and even prosperity in an increasingly
unstable region.
Under the right conditions, and if the right tone is set,
Turkey could enhance the EU’s sphere of influence
Turkish Schools Lag OECD Peers
through the country’s traditional relations with others in
the region. Along these lines, Prime Minister Recep Tayyip
Erdogan of Turkey stressed the importance of the recently
announced “Alliance of Civilizations” with Spain, which
aims to be the 21st century initiative for global peace and
prosperity.

Hany El Banna, President, Islamic Relief, United Kingdom,
called on the world to recognize the humanitarian side of
Islam by focusing on people that want to “talk about and
do the good, rather than sit and talk about the bad”. Any
dialogue should have a beginning and an end, along with
the political will to change; there is no point in engaging if
change is not wanted.

Dialogue can also lessen aggression. David Rosen,
President, International Jewish Committee for
Interreligious Relations, USA, suggested that “most
hostility is a result of alienation.” Without a positive self-
image, one cannot see others positively, he argued. This
Source: United Nations
sort of dialogue could also take place in schools, through

16

The Creative Imperative in Turkey

Pursuing “the creative imperative”, the theme of the World quot;It is now for the EU to sell
the idea of a strong,
Economic Forum Annual Meeting 2006, has been a
globalized Europe not just to
priority for the Forum at its regional Summits throughout
the Turkish people but to the
the year. In Istanbul – as in Beijing, Cape Town, New people in Paris.quot;
Delhi, São Paulo, Sharm El Sheikh and Tokyo – the aim
Hanzade Dogan
was to capture the creative insights offered by
Chief Executive Officer, Dogan
participants on how to address global challenges and
Newspaper Publishing, Dogan
risks. These will feed the discussions and brainstorming Media Group (DYH), Turkey
sessions at the next Annual Meeting and future Summits.

These are examples of creative ideas and approaches
proposed at the World Economic Forum in Turkey:

EU Accession

Among the accession myths that need to be dispelled is
the notion that Turkish migration will increase sharply. Civil society and business must play a larger role in
Studies indicate that the rise is likely to be limited, with fostering better understanding between Europe and
migrants dissuaded by the growing opportunities at Turkey. NGOs and corporations should forge links with
home. Increased foreign direct investment into Turkey will their counterparts to help correct misunderstandings and
be critical to creating new jobs and moderating the allay fears on both sides.
outflow of people.
Newly inducted EU members from Central and Eastern
The onus is not just on Turkey to sell the idea of Europe should share their experiences with Turkey to
accession to Europeans. On the contrary, Europe itself improve the Turkish public’s understanding of the
has to do a better job of selling Europe to the Turks as difficulties involved in negotiating accession and the
well as to people in the streets of Paris, Rome or Berlin. eventual benefits of membership.
Europe must communicate a more appealing vision of a
dynamic, inclusive region that will capture the imagination Geopolitical Role
of young people.
Turkey could play a pivotal role as an intermediary
between Iran and Europe over the issue of Tehran’s
nuclear programme.

Turkey’s emergence as an important energy corridor
“Innovation has to be a top priority on our agenda.” suggests the need for a coordinated European
Continental Energy Policy to ensure Europe’s energy
Güler Sabanci
security. Turkey’s participation in discussions would help it
Chairperson and Managing Director, Sabanci Holding, Turkey;
align its policies with Europe’s.
Co-Chair of the World Economic Forum in Turkey

Civil society engagement and closer business links are
essential to promoting stability in the volatile Middle East.

Turkey should take steps to secure its porous borders to
enhance security and address the concerns of its
strategic partners.

17

Competitiveness & Business Opportunities Bridging Civilizations

Education reforms should focus on providing early The Pope’s visit to Turkey, which took place days after
education particularly to girls and the poor. In addition, the meeting, led to a change in perceptions on both
schools should prepare students to live and work in a sides, leading to better understanding between the
multicultural world. Vatican and Islam. While there were protests, they
were peaceful and limited. The success of the trip
By improving access to child care and care for the highlighted the crucial role Turkey can play in averting
elderly, Turkey can increase the participation of the clash of civilizations. Such public diplomacy can
women in the workplace. help mitigate the risk of terrorism and the risk of
military conflict in the post-9/11 world. The Pope’s
Turkey needs a vision; Turkey needs a brand. Turkey is own recognition of the importance Turks attach to EU
many things and plays many roles. It needs to and his decision to support Turkey’s application,
sharpen its image to convey a clear idea to Europeans despite previous misgivings, were a model for others
and the rest of the world what Turkey is today in Europe. For its part, Turkey should relish its
(modern, secular, Muslim, democratic) and what it no uniqueness as a bridge between faiths and cultures
longer is (an inward-looking, military dictatorship). and step forward more to fill this role.

Traditional Turkish foods could be the driving force for
innovation that will invigorate Turkey’s agribusiness
and food sectors.

Klaus Schwab with the meeting Co-Chairs, from left to right: Güler Sabanci, Chairperson and Managing Director, Sabanci Holding, Turkey;
Muhtar A. Kent, President, Coca-Cola International, USA; Klaus Schwab, Founder and Executive Chairman, World Economic Forum; Peter D.
Sutherland, Chairman, Goldman Sachs International, United Kingdom; Victor Halberstadt, Professor of Public Economics, Leiden University,
Netherlands

18

Acknowledgements

The World Economic Forum wishes to recognize the support of the following companies as Partners or Supporters
of the World Economic Forum in Turkey:

Strategic Partners

The Coca-Cola Company
Goldman Sachs
JPMorgan Chase
Kudelski Group
Merrill Lynch
PepsiCo
WPP
Xenel Group

Regional Partners

Dogan Media Group
Dogus Group

Roundtable Supporters

Intralot
Türk Telekom

The World Economic Forum would also like to thank Türk Telekom for providing connectivity.

19

Contributors

Peter Torreele is Managing Director of the World Economic Forum. Felix Howald is Director, Head of Europe and Central Asia,
at the World Economic Forum. The World Economic Forum in Turkey was under his direct responsibility. Thomas Berglund is
Senior Community Relations Manager, Europe and Central Asia. Benita Sirone, Cristian Gheorghe and Constantine Marakhov
are Global Leadership Fellows, Europe and Central Asia. Doris Borchardt is Event Manager and was the Meeting Coordinator.

Report Writers
Alejandro Reyes
Danielle Carpenter Sprungli

Editing and Production
Kamal Kimaoui, Associate Principal, Production and Design
Fabienne Stassen Fleming, Senior Editor

Photographer
Serkan Eldeleklioglu

The World Economic Forum would like to express its appreciation to the summary writers for their work at the World
Economic Forum in Turkey. Session summaries are available on our website at: www.weforum.org/turkey/summaries2006

The World Economic Forum would also like to recognize the support of PricewaterhouseCoopers in compiling data and
statistics for this report.

20

The World Economic Forum is an independent
international organization committed to improving
the state of the world by engaging leaders in
partnerships to shape global, regional and
industry agendas.

Incorporated as a foundation in 1971, and based
in Geneva, Switzerland, the World Economic
Forum is impartial and not-for-profit; it is tied to
no political, partisan or national interests.
(www.weforum.org)

World Economic Forum on East Asia 2006

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