Break-Out Nation?
Ruchir Sharma is the Head of Emerging Markets and Chief Global Strategist
Research at Morgan Stanley Investment Management at New York. He has traveled
the globe many times over for identifying investment opportunities for the
funds he manages. He is also a prolific writer who has over the years penned
his thoughts on economic conditions in various countries and the
trajectories these countries are likely
to follow in near and medium term. His book “The Break-out Nations” (2012) has been an international best seller
not only because it has been sired by someone who is in charge of allocating
billions of dollars across the globe but for the clarity of his thinking and
willingness to look beyond the superficial.
In 2001, Jim O’Neil of Goldman
Sachs had coined the acronym BRIC (to include Brazil, Russia, India, China - South
Africa was taken on board later in 2006) identifying the economies which are likely to
do well in 21st century. A decade of turmoil later the BRICS seem to
be losing their steam and probably would not be able to live up to the hype
that was built in anticipation of their performance. But the investment
fraternity, not unlike nature, abhors vacuum and is already moving on trying to
identify new (potential) winners.
The Break-out Nations analyzes a
number of candidates who may outsprint their peers in near future and surge
ahead in The Game…….the only game that really matters - to achieve a sustained
growth in GDP in pursuit of betterment of its citizens. Turkey is one such
candidate country that Ruchir Sharma has identified. Turkey is a very
interesting model of economy for a number of reasons and we Indians,
especially, will find a few points to ponder vis-à-vis our own
politico-economical model.
I present the “facts” as presented by Ruchir Sharma and leave it to the
reader to figure out relevance and applicability of these inputs to the Indian
scenario in his or her own “image and perception of India”.
Republic of Turkey, a country
bridging both Asia and Europe was formed in 1923 and has a rich cultural history spanning more
than a thousand years. For first six decades of existence of modern Turkey, it
has been under a quasi-statist policies with government laying down planning
and various developmental goals. The economy was opened up in 80’s. (Think
India!)
Its constitution defines Turkey as
a secular country and it had been dominated by secular parties although more
than 99% population is Muslim and the political theatre has always had a strong
presence of Muslim fundamentalist parties.
The secular parties drawn from the urban
elite dominated the economy and occupied all the important positions in
military, judicial and executive arms. The secular parties made sure that the
fundamentalist parties were effectively kept away from power at all costs but
unfortunately were not able to provide a stable government to the country
resulting in a succession of unsuccessful short-lived coalitions. (Does this
sound familiar? We hve been fairly lucky that coalitions have not been too short-lived but the damage arising from coalition politics is well understood)
Recep Tayyip Erdogan, who is the
current President is the founder of the ruling party, Justice and Development
Party (AKP) has been in charge of the country since 2002. Erdogan was a
semi-professional footballer with an Istanbul club and became the Mayor of the
city (in the nineties) as a member of a fundamentalist party and then formed his
own party. The administrative capabilities he showed in his earlier assignment as
the Mayor of Istanbul propelled him and his party to power in 2002 and
successive elections thereafter. (A sense of déjà vu? Humble beginnings … conscientious
work …. Disillusionment of voters with existing order…… )
AKP is very much a Muslim party but
not a fundamentalist one. Erdogan has successfully kept the fundamentalists in
check and concentrated on economic development. (Is there any other viable
alternative?)
Erdogan has had to take tough
stance against the fundamentalists and has frequently cracked down upon his
detractors giving him an image of a dictator and a tyrant. He has been accused
of developing his own native region and favouring industrialists from his
region. (Again the same sense of déjà vu?)
On the other hand, the economy has
shown a remarkable upswing. The GDP per capita has increased from USD 3,500 in
1980’s to USD 11,000 (2015) Turkey being a resource - poor country has had to
depend upon manufacturing, export and tourism to drive its growth and has been
able to achieve this. (Ah, what wouldn’t one give to be even halfway there? 2017
Indian GDP estimate at less than USD 2,000!)
Today Turkey is among the 3 top
nations (with China and South Korea) dominating the international construction
market. Being a part of the EU Customs Union has given it access to a large
market and the Turkish companies have successfully created their own brands in
the EU market thus graduating upwards from being mere assemblers of finished
products.
The social scene in Turkey is a vibrant one with none of the
restrictions that other Muslim nations have. The discos and bars are open
almost all night, liquor is not a taboo and hijabs are prominent by their
absence. (Do we hear cries of “Hey Bhagwan” and “Tobah, tobah”?)
This nation, of about
80 million, today is one of the youngest with an average age of population
being less than 25 years. It has been able to generate sufficient jobs for the
new generation entering the job market and is one of the very few countries
which can boast of reaping the much hyped “demographic dividend”. (The holy
grail of development which can very well mutate into a “demographic millstone”
around our national neck unless we shed our complacency and not take our karma
for granted).
Ultimately as Bill Clinton - POTUS42 - famously remarked “It’s
the economy stupid”. Break-out nation or a break-down nation, the choice is solely ours.
LazyBee
25th March 2017
