JEDDAH, 19 January 2004 — Turkish Prime Minister Recep Tayyip Erdogan said countries which open their doors through close economic and political interaction are winners. Those who plunge themselves into isolation are the losers. Governments should play a smaller role in economies and give the private sector room to drive them. “Today, the world has split in two: The countries that are part of the change and the ones that only watch it.”

Sketching in the background of Turkey’s progress to its current financial position, Erdogan said it was among the founding members of the World Trade Organization in 1995. Turkey has long seen itself at the crossroads of Asia and Europe and mindful of this, in 1996 it established a customs union with Europe and opened up its economy by signing free trade agreements with 16 countries. The effect, Erdogan said, was an upswing due to its economic position with the European Union and closer engagement with other countries in the region. “It has effectively helped to further political relations in Europe as well.”

Economic troubles shook Turkey in 2000-2001 as a result of the Asian and the Russian financial crises. Internally during the same period, “demand issues and recession,” IMF economic stability measures and a government stability program put the economy back on track. “The fundamental action plan,” Erdogan said, “was mainly aimed at shaping up the financial sector.”

Erdogan identified the twin track approach Turkey adopted as aimed at decreasing inflationary pressures in the short term and maintaining medium term price stability. “Maintaining the independence of the central bank is crucial to this process,” said Erdogan. “Implementing structural reforms with the maintenance of strong fiscal and monetary disciplines enhances the environment of economic confidence and decreases the economic fluctuations and unpredictability in our country.”

This strict financial discipline will create “the much needed primary surplus in our budgetary goals,” he said. Turkey achieved an expansion rate of 7.8 percent in 2002 and will realize an inflation rate of below 20 percent for the end of 2003, with single digit inflation a real possibility by 2005.

Structural reforms within Turkey, including a transparency of, and participation in, the formation of public policies, are constantly undertaken to eliminate what Erdogan described as “the negative effects of petty politics from the economy.” He saw this as a way of further preparing Turkey for integration into the global economy. Erdogan sees a future for a small but involved public sector in Turkey. Major industrial areas are to be privatized, including tobacco, electricity generation, telecommunications and the petrochemical industries — and all will be open for foreign investment. Its geographical position will contribute to making Turkey a hub for the distribution of oil, gas and energy — most especially from the Caspian Sea basin.

Foreign direct investment (FDI) in Turkey is of prime importance, and Erdogan maintained, “Turkey has one of the most streamlined and friendliest processes and environments in the Middle East.” The process has, he said, been eased to a few simple steps and today “there is no difference in law between a Turkish or foreign investor.” Tax exemptions are to be set in a drive to attract foreign investors.

Discussing relations with other Middle Eastern countries and leaning eastwards from his adopted position between Europe and Asia, Erdogan said: “There are trade barriers that are not satisfactory. We need to develop more trade relations between friends. Governments in our region should help the private sector to develop economic and trade relations,” he said.

Since he came to power in November 2002, “relations have been developing with Middle Eastern countries and historically with Iraq, Iran and Afghanistan. We feel sensitive about this subject,” he said, “and we want to increase our relationships with Arab countries.”

Erdogan drew loud applause when he concluded, “We must develop supra-values and develop a common basis so a common belief is shared in the Middle East. We have lost trust and confidence in each other — we must regain that. If we do, we will all benefit. Politics does not direct economics today; it’s the economy that directs politics.”