Turkey booming

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Fiscal constraint and prudent management of funds have been key to the remarkable growth of Istanbul. Here’s how successful the Turkish city has been in the past couple of years. The Brookings Institution analyzed the economies of 150 of the world’s major metropolitan areas. It then rank-ordered them in terms of how each had recovered from the economic downturn of 2008. Istanbul held down the top spot.

By Matthew Brunwasser

Istanbul is getting a lot of attention around the world these days for its broadening cultural life, growing international confidence and not least: brisk economic growth. To understand why, Hasan Ersal, a former Turkish central banker, suggests visiting the stylish and glossy high-end shopping mall Kanyon.

The fountains, walkways and walls are all part of a high concept design. The place really looks like a river canyon. It’s nothing like the historic kapali carsi, or covered market, famous to Istanbul’s visitors. Less than 20 years ago, Turkey had a closed, state-controlled economy, based on low-end manufacturing and trade. Since it opened itself, Ersal says Turkey has dived straight in to the global economy and quickly transformed into a consumer society.

Ersal said, “Turkey was able to shift its labor force from low productivity sectors to high productivity sectors and you can see it in istanbul very easily. This mall was not here a few years ago, it was unthinkable to have such a modern place in Istanbul 10 years ago.”

Istanbul’s popuation has almost doubled in the past 20 years to some 13 million. While this former capital of three empires has been a center of international trade for centuries, the great majority of Istanbul’s residents are now first or second generation migrants from all over Turkey.

“Migrants are dyanamic people,” says Ersal. “Courageous enough to leave where they used to live, so that brings a dynamism to the city.”

Istanbul is the commercial capital of a very young population. Half of Turks are under 28 years old, compared to a median age of 44 for somewhere like, say, Germany. Ersal says that youth also fuels economic growth.

One of the authors of the Brookings study is economist Alan Berube. He says Turkey has fared better in part because it has diversified its export markets, not trading with the west alone but “increasingly with other middle eastern countries, and far east, china and India, etc.,” Berube says.

“Those places were much less affected over all; demand was stronger and rebounded more strongly and by extension led to demand for the things Turkey is producing.”

Things like textiles and cars. Turkey is also stronger now because of its own economic meltdown in 2000-2001.The country tightened its financial regulations and Turkish companies have been more cautious over the past decade than their western peers. So Istanbul, like other financial centers accustomed to rough times, remained stable.
“Basically, these are treated as a safe place for capital during a crisis,” Berube says.

At the bottom of the Brookings Institute list, is Dublin. Richard Curran, the deputy editor of the Sunday business post in Dublin said: “We went through the credit boom like many other countries, but we went through it in such an aggressive manner that when things went wrong, a number of things went not uniquely wrong, but more wrong or in a more pronounced way.”

Irish exports are still doing OK, Curran says – high end products like software and pharmaceuticals. But the burst property and construction bubble has kept the domestic Dublin economy in a pit. Curran says Irelands fall could have been avoided.
“In a way it was more straight-forward, obvious, and more idiotic than some of the banking crisis in other countries,” Curran said. “It wasn’t even based on fancy financial instruments, this was just complete excess, out of control lending that our regulators failed to stop and the government didn’t do anything about.”

Istanbul’s prospects for 2011 contrast starkly with those facing Dublin. Ireland is taking a 110 billion dollar bailout from the EU and IMF and a severe austerity budget. Its banking system continues to unravel. Irish people don’t expect any improvements in the next 12 months. But at least, Curran says, they don’t expect things to get worse.Download MP3