Capacity of Turkey and the World Bank

In a meeting with representatives of civil society organizations during his first official visit to Turkey, World Bank President Jim Yong Kim raised the question of healthcare in Turkey and asked how the Turkish government performs in that respect. Even the most ardent critics of the ruling Justice and Development Party (AK Party) government at the meeting had to acknowledge that the government had successfully transformed the country’s beleaguered healthcare system by turning it into an affordable and accessible universal healthcare system with real improvements in the quality of care. Kim then turned around and said, “Do you know how rare it is to see that in other countries in the world?”

The point Kim, a physician by profession, was trying to make was that he was very impressed by the government’s capacity to implement and deliver reforms. As the World Bank has partially funded this overhaul in Turkish healthcare, he must be particularly proud that the World Bank has earned some credit for itself as a partner in a success story in one of the world’s emerging economies. In fact, Turkey was highlighted in a World Bank training course on healthcare reform as a case study in how to achieve universal healthcare coverage. He is definitely passionate about the issue, and he lamented the fact that most people see investment in healthcare as a simple expenditure, while it actually brings gross domestic product (GDP) growth. If people quit smoking as a result of an anti-smoking campaign, the government would save millions of dollars it would otherwise have spent on treating cancer patients.

During the interview I had with him on Wednesday, he even said that Turkey should choose healthcare transformation as one of the themes for its presidency of the G-20 when it takes the rotating spot in 2015. Each and every member of the G-20 should learn from the Turkish experience, he said, stressing that Turkey is very good at what he called the “science of delivery.” We are too focused on the finance and policy side when we should be focusing more on the implementation phase, Kim underlined, drawing on his experience with failed development projects that looked very good on paper over his 25 years in the field.

Kim’s visit to Turkey highlighted the working relationship between Turkey and the World Bank, which can be touted as a success story over the last decade. Turkey has evolved from a loan recipient into a major partner for the bank, not only as an important contributor to the bank’s coffers but also as a model country whose best practices for structural reforms can be used as an example for other developing and less-developed countries. Turkey’s economy czar, Deputy Prime Minister Ali Babacan, has personally established a strong relationship with the bank’s management, and Babacan’s economic team does not shy away from consulting closely with the bank on a number of issues in the Turkish economy. This valuable relationship has contributed to Turkey’s elevated status as upper-middle income country with a GDP of $786 billion, making it the 18th largest economy in the world.

As the World Bank set the ambitious goals of ending extreme poverty by 2030 and boosting shared prosperity for the bottom 40 percent in developing countries, Turkey has emerged as a country of interest for many looking to tap into its best experiences in different areas. Since Turkey was able to lower its poverty from 23 percent of the population in 2003 to 8.7 percent in 2011 and is now very active in promoting development in the World Trade Organization (WTO) as the chair of the Fourth United Nations Conference on the Least Developed Countries (LDC-IV), it can be a good partner to help the World Bank achieve its goals. In fact, the World Bank has already launched a project with Turkey in which the nation will share its development lessons with policymakers around the world. “Already, our teams are bringing delegations from various countries to Turkey for knowledge exchanges,” Kim said, stressing that the bank’s İstanbul office, its largest outside Washington, would be handling this traffic. Malaysia and Kosovo are already interested in the health sector, Iraq in the social security system and Mauritania in the use of information technology.

On Thursday, the World Bank, in cooperation with Turkish banks and the Borsa İstanbul, launched the Islamic Finance Center in İstanbul, a move that will make Turkey what Kim describes as a “knowledge hub” that will generate and disseminate expertise on how to make Islamic finance more relevant for growth and development. Turkey will be able to better tap into $1.5 trillion worth of Islamic financial assets around the world, which will be an additional boost to financing infrastructure projects and small and medium-sized enterprises (SMEs). According to World Bank reports, Turkey also stands out among developing countries for its robust regulatory framework in energy, where it continues to attract billions of dollars, especially in renewable energies. The country did away with fuel subsidies without much brouhaha in the political arena. A highly regulated and well-capitalized banking system as well as sound fiscal and monetary policies that were not sacrificed for populist policies during election cycles credit Turkey as a responsible economy.

The World Bank president is frank when it comes to pointing out Turkey’s economic weaknesses and shortcomings and vowed to help Turkey address these challenges. During a panel discussion with Babacan at the 5th İzmir Economic Conference, he mentioned challenges ranging from improving the participation of women in the labor force to increasing the skill sets of young people, from raising low domestic savings to attracting more foreign direct investment. In an interview, I asked Kim about his take on the May-June Gezi Park protests; he said that Turkey, like other developing economies, is facing a flourishing middle class that wants more from the government.

Recalling that Brazil also faced protests around the same time, he said: “The most remarkable thing about those protests is that they happened in two countries that made the most progress in ending poverty.” His message was that “the middle class will demand more. That is just the reality in this world. Everybody has access to Facebook and Twitter. Revolutions can start in any place in the world.” In his official address, Kim did not mention protests explicitly but hinted at them when he said that it is important for citizens to feel they have a voice and a stake in their country’s development. “To be sustainable, economic prosperity has to provide opportunities for all. This is an objective I know we share with Turkey’s citizens and policymakers,” he said.

In an October snapshot report on Turkey, the World Bank warned that Turkey needs more reforms to escape the “middle-income trap,” citing the use of innovation to boost productivity growth, especially among SMEs, which account for nearly 80 percent of Turkey’s jobs. In our conversation, Kim reaffirmed the bank’s commitment to working with SMEs in Turkey, but said it is now time to transform some of these into bigger enterprises through innovation and branding. “Turkey has not yet developed big brands that everyone recognizes,” he said, adding, “We need to get high value-added industries that will take Turkey to the next level.” He sounded upbeat, however, when he said that “our hope is that all the investment we have made in SMEs is going to lead to the next leap forward to the kind of business that will make Turkey a household name.”

The World Bank President also praised Turkey’s involvement in developing efforts in Somalia and in taking care of some 600,000 Syrian refugees, saying that the bank would look for additional ways to coordinate and cooperate with Turkey on these issues. He said the presence of Somali President Hassan Sheikh Mahmoud at the official opening ceremony of the Marmaray, the rail tunnel linking the European and Asian sides of İstanbul, on Oct. 29, sent a significant message (the ceremony was also attended by Turkish President Abdullah Gül, Prime Minister Recep Tayyip Erdoğan, Japanese Prime Minister Shinzo Abe and Romanian Prime Minister Victor Ponta). “Somalia needs a tremendous amount of help. We are grateful for the Turkish involvement,” Kim said.

In a nutshell, Kim depicted the future relationship between the World Bank and Turkey as an “evolving partnership” in which Turkey, with its history, capacity and accumulated knowledge, will play a large role as a “development partner and donor country.” The fact that Turkey was the fourth largest donor of humanitarian assisance according to an annual report by Global Humanitarian Assistance says a lot about the shape of future relations between Turkey and the World Bank, where developing countries’ voting powers were increased in recent years. Kim pledged to extend a helping hand to Turkey in bringing the best local solutions from other countries to solve Turkey’s problems in challenging areas.

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