Most international observers were not surprised by the announcement that Turkey would be chairing the B20, the powerful business leaders forum which operates under the G20 umbrella, in 2015. They took it as something expected. However, just one small decade ago, such news would have would have raised more than an eyebrow or two. Things have changed.
What the world did not know back then is that the Turkish economy would become one of the greatest of rising stars of the new century. Since 2010, its GDP has grown at a rate of 6% per year, matched only by China and a handful of oil producing economies. This growth has been the catalyst for a major leap forward in terms of employment. In its last Article IV consultation, the IMF praised the country’s economic and political class, but also warned against several imbalances, such as the inflation rate and a large external deficit. However, these imbalances only show that the economy could grow faster and bigger should they be corrected.
Turkey has successfully shifted from being a security-focused nation, which emphasized military prowess and power, to one that focused on the role of economic interdependence in foreign policy. The country’s adoption of an export-oriented growth strategy, its increasing trade and investment volumes, and the rise of the “Anatolian tigers” (the small- and mid-sized yet dynamic companies of the trading cities of inner Anatolia) have led to the emergence of a trading state.
Integration in the European Union has long been a main goal of Turkish leadership, however, it has not ignored its growing trade neighbours in the Middle East nor global giant, China. Since the early 2000s, Turkey has taken concrete and systematic steps to boost political and economic relations with the Arab States and China – two distinct sets of relations with unparalleled resolve for both the government and its private sector. As a trading nation, Turkey cannot overlook the future economic opportunities these two regions represent, and it has realized that it has a unique position to capitalize on them.
The Middle East, which never represented more than 10% of Turkey’s trade volumes throughout the 90s, now accounts for 25%. In the last 10 years, exports have risen to the tune of 200 %reach $27bn. Foreign direct investment in the MENA region has recently jumped to $7bn while MENA visitors now represent 30% of all tourism arrivals in Turkey.
Reflecting a long-term strategy, Turkey’s government has set a goal of $100 billion of annual trade with the GCC by 2023. The motivation is clear: Turkey is the only major manufacturing economy in the region. Manufactured goods accounted for more than 90 % of the country’s total exports and the Gulf represents an obvious market for its growing slate of products.
At the same time, Turkey is a major energy importer, consuming $57 billion of oil and gas imports a year, which accounts for two-thirds of the current-account deficit. Consequently, there is a compelling need for the country to export more to its neighbours. Supporting projects aimed at energy security, such as the proposed oil and gas export pipelines from Iraqi Kurdistan, has become a central policy plank. All this reinforces the need for closer trade ties with Turkey’s Middle Eastern neighbours.