No doubt that Turkey, the fastest growing economy in Europe, values its seat at the forum of the G-20, the major economies that represent 85 percent of world’s economy and two-thirds of the world population. After all, the G-20 shapes the agenda for drawing up the world’s financial and economic rules. Yet it frustrates Turkish officials that the G-20 is in such disarray on some critical issues and, therefore, unable to come up with much-needed resolutions to address the pressing economic challenges facing the world economy, especially for the most vulnerable countries categorized as the Least Developed Countries (LDCs).
For example, during the last G-20 meeting in Cannes in November, G-20 leaders debated the Greek crisis for no less than long four hours, leaving less time for the many issues that matter most in the world. In the last couple of years, Turkey has been quietly positioning itself as an “outreach” actor for the non-G-20 countries, using different global venues such as LDCs, for which it hosted the Fourth United Nations Conference on the Least Developed Countries in May 2011, or regional ones like the South-East Europe Cooperation Process (SEECP) it chaired in 2010. Turkey also organized ad-hoc meetings like the one in September for the Conference on Commodity Price Volatility, which covered such issues as fossil fuels, agricultural price volatility and commodity markets as part of the G-20 agenda.
It was no coincidence that this year’s G-20 summit came right after Turkey launched a massive humanitarian aid campaign following a visit to drought-stricken Somalia by Turkish Prime Minister Recep Tayyip Erdoğan in August, the first visit by a head of government to Mogadishu in decades. The nation raised more than $300 million for Somalia in fundraising campaigns that began during the Muslim holy month of Ramadan, exceeding the amount of aid pledged by the 57-member Organization for Islamic Cooperation (OIC). Public and private Turkish aid and development agencies have been involved in infrastructural developments in field of healthcare, infrastructure and utilities in Somalia. Turkey brought the country to the attention and the agenda of the G-20, saying that food insecurity and commodity price volatility have placed millions at risk of malnutrition and hunger.
While so many urgent issues needed world leaders’ attention, Turkey was understandably not pleased to see the G-20 agenda hijacked by the debt crisis in Europe. So much so that Turkey’s economy tsar and Deputy Prime Minister Ali Babacan at the G-20 table whispered in the prime minister’s ear: “If each of the G-20 members put up $5 billion for the rescue of Greece, it would keep the Greek economy afloat for six months. Greece represents only 0.3 percent of world economy. Why spend so much time on that. We should rather concentrate on more pressing problems in the world like trade imbalances, current account problems and liquidity reserves.”
Babacan was right. France’s presidency of the G-20 was dominated by Europe’s debt crisis, leaving developing countries like China, Brazil, South Africa, India and Turkey out in the cold. Creating jobs, maintaining growth, volatility of commodity prices and stimulating trade and investment are far more important than bailing out the small Greek economy despite the much-hyped possible contagion effect. Turkey very much hopes that Mexico, the country that took over the G-20 presidency this year, will focus on employment and the needs of poorer countries. If not, Ankara plans to push these issues to the top of the agenda when it will chair the G-20 in 2015 after Australia.
Let’s recap the Turkish position on the G-20 platform. First, Turkey wants a fair and adequate representation of emerging economies in the Basel-based Financial Stability Board (FSB) institutions, including the powerful Steering Committee, Plenary and other committees and sub-groups. Provided that emerging countries get a bigger say in the International Monetary Fund (IMF), reflected in their quota shares in the fund, Turkey is willing to contribute more to the IMF’s rescue funds. Second, Turkey has some objections with regard to the designation of 29 banks as “global systemically important financial institutions” (SIFIs) by the FSB, which was acting on behalf of the G-20. Banks that made the list in November will be required to hold more capital. But they will also benefit from being labelled as “banks that are effectively too big to fail.” That puts smaller rivals at a disadvantage. Though Ankara welcomes the regulation at the global level, it argues that the national regulators must lead designation of SIFIs at a local level.
Third, Turkey wants the G-20 to put more emphasis on robust macro-prudential oversight tools to reinforce financial stability. Turkey successfully employed tools such as required reserve ratios, liquidity management of the Central Bank of Turkey, capital and liquidity adequacy ratios, tax collection and fiscal discipline to put the country ahead of many EU member states when looking at macro economic indicators. All these tools are incorporated in Turkey’s Medium-Term Economic Programs (OVP) for the 2012-2014 period, which was also included in the final communiqué issued by the G-20 at Cannes. The Turkish experiment proves that growth can go hand-in-hand with the adoption of fiscal discipline, and Ankara called on other G-20 members to announce their OVPs.
I will further discuss Turkey’s position on G-20 in my next column to be published on Tuesday.