It is difficult to write a finance column in times of great tragedy and so I would like to preface with some thoughts on the attack that took place on New Year’s Day.
Giving in to fears or altering our lives because of the actions of terrorists would only embolden would-be murderers, therefore, I won’t. We do not yet know much about the attack, only that a Daesh terrorist killed dozens of people at a New Year’s Eve celebration early Sunday morning. We do know that those who were killed or wounded were nationals of nearly 20 different countries. Such diversity is not only a testament to the richness of the culture of Istanbul but to those who lost their lives that night. Despite having suffered a year of tragedy, these people were still drawn to Turkey and in doing so continue to be the biggest threat to terror. We will not live in fear. We will be united.
Turkish financial markets largely ignored the terror attack Monday morning as both the equity market and currency market were down less than a quarter-point at noon. Global investors have accepted that Turkey is in the final throes of a multi-front war on terror and appear to be sticking with their investments. With the inauguration of Donald Trump, the war on Daesh and more broadly, the Syrian war, will soon come to an end. In the absence of turmoil, terror groups like Daesh will find themselves isolated and are relegated to shrivel and die. So too will other terror groups like the PKK who have banked on Turkey’s preoccupation with Daesh. The PKK took responsibility for the previous major attack in Istanbul in an act of desperation as normalcy returns to eastern Turkey. This attack by Daesh reeks of the same desperation.
The presence of Daesh and its continued role in the region is less a question of politics than of money. Daesh was able to underwrite its expansion through the illicit sale of oil. Formed by the remnants of the Iraqi Baath party, its founders are ironically secular, only using a perverted interpretation of religion as a marketing tool for the desperate and ignorant. Only through cutting off their ability to convert oil into cash will Daesh be neutralized. The PKK’s ability to extort money from business people in Turkey’s east has been nearly completely cut-off and thus their current state of panic. If the same is done to Daesh, its ability to continue fighting will be impeded making the final battles in Mosul and Raqqa easier to prosecute.
With the threat of terror neutralized, the region will prosper. Cross-border commerce between Turkey, Syria and northern Iraq will flourish. Whether the Obama administration’s lifting of sanctions against Iran will last a few hours into the Trump presidency or not is yet to be seen. Should the sanctions be reinstated, Iran will be desperate to sell its oil to make up for its inability to trade freely. Countries ignoring the economic sanctions will purchase their oil on the black market from Iran. This will push oil prices down. Should the sanctions continue to be loosened, all of Turkey’s Middle Eastern neighbors will look to it to help rebuild their nations, crippled by years of war and economic sanctions. In this respect, the future for Turkey is bright. Economic activity will return to Turkey at a time when its largest trading partner, the EU, is itself hurting.
With economic malaise in the West a major concern for Turkey, the biggest economic threat of 2017 may come from the East. For the first time since liberalization, China will have suffered a decrease in growth. Chinese policy makers certainly knew this day would come, the question is, is China prepared for this slowdown? If domestic demand is great enough to sustain the manufacturing behemoth that China has become, then a decrease in global demand for Chinese goods will not be an existential threat. If the Chinese economy however, has not grown large enough to make the domestic market central to growth, then China is in trouble. If China is in trouble, the world economy is in trouble. Turkey benefits from its proximity to mature markets and its competitive cost structure in manufacturing. Should the Trump administration be proactive in helping to finish off Daesh, the entire region will benefit.
With continued liberalization of the economy and investments in technology, Turkey should be able to successfully weather the economic storms of 2017.
*TAHA MELI ARVAS is a Turkish entrepreneur and columnist. He writes for Daily Sabah Turkish newspaper.
(Published in Daily Sabah newspaper on Tuesday, Jan. 3, 2017)