Break-Out Nation

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 21^st 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