Distributed profits
Fatih Özatay, PhD
24 April 2012
The level of distributed profits, which stood below $500 million before 2003 averages at $3 billion since 2008. Foreign direct investments (FDI) are the most desired form of foreign capital inflows. FDI includes foreign capital investments to buy a resident company, real estate or establish a new business. Some brings advanced-technology while some others work on medium-technology. Leaving real estate investments aside, Turkey’s FDI performance appear to have shown a leap after 2005, against the poor performance before then.
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Incentives, kidney bean and summer snowflake
Fatih Özatay, PhD
21 April 2012
When designing the new incentive system, it is crucial to devise a framework that improves productivity and technological advancement and promotes innovativeness. The incentive system issue can be addressed with a different perspective: Assume that you are to make an investment. The maximum cost of the product you will produce in your new facility should be no higher than the cost of rival products, under the assumption that there is no incentive mechanism in place. Otherwise, your new facility can survive only with artificial ventilation. The incentive system must not turn into an artificial ventilation device. It is evident that there is no economic benefit in artificially trying to create a competitive production process out of one that is originally uncompetitive. Useful in two aspec
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Why do the Turks just not save?
Güven Sak, PhD
21 April 2012
A stronger domestic savings base requires a coherent urbanization strategy. What’s the main difference between Turkey and China? Simple. China is a high-growth country with high savings. Turkey is a high-growth country with low savings. The numbers are very clear on this issue. The result: China’s growth produces a high current account surplus. Turkey’s growth widens the current account deficit, currently at historic levels. The topic of a recent World Bank report on Turkey is just this: Why do the Turks just not save?
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If you spend recklessly, you will end up giving the shirt off your back.
Güven Sak, PhD
20 April 2012
The irresponsible actions of the administration that put healthcare professionals in front of patients cost Dr. Ersin Aslan his life. Any practice of populism leads to a disaster. This is the case for the health sector as for any other. I believe that the uncontrolled widening of the spectrum of services in the Turkish health sector is a sort of populism. The assault that led to the death of doctor Ersin Aslan in Gaziantep is evidence that the populism in the health sector has overstepped the limit. Let me tell you why.
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From Libyan to Syrian military intervention?
Nihat Ali Özcan, PhD
19 April 2012
In Libya, many countries were involved in different ways soon after the anti-Gaddafi uprising started. The uprising managed to topple the regime fairly swiftly, with the powerful support of western countries. Had the strong air strikes, military equipment and training support not existed, things may not have come to an end in such a short time. Recently, a similar uprising has been experienced in Syria. The al-Assad regime treated the developments seriously at the very beginning and attacked the rebels. When examining the developments, without the support of Western countries the rebels do not have a chance of increasing their capacity and achieving success. But we also see that countries which mobilized for Syria are not going with the grain of the rebels.In my opinion, there are five fun
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The ‘real policy rate’ will exceed 7 percent more frequently
Fatih Özatay, PhD
19 April 2012
As it is declared that additional monetary tightening might be implemented more frequently, ‘the real policy rate’ might exceed 7 percent. The Monetary Policy Committee (MPC) had a routine meeting yesterday. Here is the first important thing to quote from the decision: “...the MPC has decided to keep the short term interest rates constant at the following levels: a) One-week repo rate (the policy rate) at 5.75 percent...” All MPC decisions cite the one-week repo rate as the policy rate. The rate has been standing at 5.75 percent since 4 August 2011. In other key documents, the inflation report for instance, the Central Bank (CBT) stresses that the monetary policy has been tightened significantly since October. Given the rate that the CBT considers as the policy rate is constant since 4 Aug
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Can this incentive system create a Samsung?
Güven Sak, PhD
17 April 2012
We are designing our public policies not for the sake of future generations as the Koreans do, but for the sake of the upcoming elections. Last week I argued that the new incentives bill did not have a spirit. Let me carry on from there. To what do I refer when saying "the spirit of the bill"? If you are interested, please read on.
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Who is to blame for the confusion?
Fatih Özatay, PhD
17 April 2012
It doesn’t matter if the CBT increases the one-week repo rate, which it calls the “policy rate” but actually is not. Central Bank’s Monetary Policy Committee (CBT - MPC) will hold a routine meeting tomorrow. The release issued after the MPC meetings refer to an interest rate called the “policy rate.” This corresponds to the interest on CBT lending to banks via one-week repo auctions. The rate has been standing at 5.75 percent since 4 August 2011. For some time now, there has been going around a meaningless discussion on whether or not the CBT should raise the rate.
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Is the system more transparent now?
Fatih Özatay, PhD
14 April 2012
The rate regarded by markets currently as the policy rate is the funding cost, not the one that the CBT calls as the policy rate. Before 29 November 2012, the Central Bank of Turkey (CBT) used to decide the bank lending rate during Monetary Policy Committee meetings. The rate was kept constant between two Committee meetings and if the Committee decided to preserve the rate, banks were able to enjoy the same interest rate on borrowing for a long period of time. This borrowing rate was the one regarded by markets and therefore was called the “policy rate.” For example, between 10 May 2010 and 28 November 2011, the policy rate equaled the one-week repo auctions rate. I said this was the case until 28 November 2011, but according to the CBT, this still is the policy rate.
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The Syrian turmoil is bad for business
Güven Sak, PhD
14 April 2012
In a world of non-market economies, you have to be in good terms with foreign capitals to penetrate their markets. Turkey was one of the earliest countries to abide by the economic sanctions against Syria, and the country’s only neighbor to do so. Jordan, Iraq and Lebanon chose to stay neutral. These three are important trading partners of Syria, but then again, so is Turkey. Therein lies the basis of the local discontent with the Erdoğan government’s decision to implement sanctions: many provinces in Turkey exporting to Syria feel serious economic pain. Gaziantep and Hatay are the two most affected. Are sanctions against Syria bad for the Syrian economy? Yes. But they are also bad for Turkey’s economy. So it is not only the strength of the Syrian economy on a stress test here, but
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