Turkish investment climate, not just presidency, a priority: finance minister

ANKARA (Reuters) - A presidential system in Turkey will make it easier for the government to take decisions and boost the economy, Finance Minister Naci Agbal told Reuters, saying the new cabinet is as focused on the investment climate as on changing the constitution.

A street vendor sells national flags at Mahmutpasa street, a middle-class shopping area, in Istanbul, Turkey, May 25, 2016. REUTERS/Murad Sezer

In an interview hours after being reappointed to the new cabinet late on Tuesday, Agbal said the government would take “swift and bold” economic decisions this year and promised reforms - which many investors say are overdue - to boost exports and employment.

Investors are concerned that reform momentum will slow under new Prime Minister Binali Yildirim, a close ally of President Tayyip Erdogan who has promised to introduce the executive presidential system that Erdogan wants.

Agbal dismissed such worries, saying a reform package on financial markets and the real economy would be presented to the cabinet soon, adding that he would do “whatever it takes” to attract foreign investors.

“Improving the investment and production environment is as important to us as making a new constitution and introducing the presidential system,” he said in an interview at his office in Ankara. “We will especially work on attracting foreign investors to Turkey ... we will do whatever it takes legally to attract them within this year.”

The reappointment of Agbal and of Deputy Prime Minister Mehmet Simsek, an anchor of investor confidence who has been in charge of economic policy, has helped to reassure financial markets, boosting the lira after a recent sell-off.

Still, the new administration’s focus on winning popular support for the presidential system is seen as an obstacle to progress on economic reforms. Investors want measures to boost the savings rate, liberalize the labor market and develop a higher-value manufacturing sector to reduce reliance on imports.

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But some of those reforms could prove unpopular in the short term, economists say, making a government bent on winning votes less likely to push them through.


The main opposition CHP party says promises of reform from the ruling AK Party have been unfulfilled for years, and that nothing is likely to change now.

“The current economic system is what feeds the AKP’s existence, so I see no incentive for them to change,” said Selin Sayek Boke, the vice-president for the economy at the CHP.

Speaking on the sidelines of a Financial Times summit conference in Istanbul, she criticized the dominance of Erdogan. “Turkey is unable to speak of any issue beyond this single person’s authoritarian will, and the current government seems to be more okay than ever to make that the priority,”

Turkey also needs to lure foreign investment to plug a yawning current account deficit and finance its heavily indebted companies.

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Agbal said there would be no need to downgrade the government’s forecast of 4.5 percent economic growth this year. However, the World Bank expects growth at 3.5 percent this year, citing slowing exports and weak private investment.

He also said discipline in the budget would be maintained. Recent central bank interest rate cuts would also help the economy, he said.

Erdogan, who favors consumption-led growth, has repeatedly said high interest rates cause inflation, a stance at odds with orthodox economics.

“The central bank is cutting rates as inflation falls. This is positive news for investment and production,” Agbal said

Turkey’s central bank cut rates for a third month running on Tuesday, lowering its overnight lending rate - the highest of the multiple rates it uses to set policy - by 50 basis points.

Agbal also expressed confidence that the government may finally be able to privatize the national lottery after two failed attempts last year. The sale had been expected to bring in $2.76 billion for the government.

“The national lottery tender has become feasible, we are getting positive signals, local and foreign companies are interested,” he said.

Writing by Nick Tattersall; Editing by David Dolan and David Stamp