What started out as a group of activists gathered on May 28th to protect a park in Istanbul from being demolished for the construction of a shopping mall, has turned into a widespread--at times violent--series of political protests across Turkey’s largest cities. While the use of force against Gezi Park demonstrators has been mentioned as the impetus for this uprising, Turkey’s Prime Minister Erdogan publicly stated that the reasons were ideological and not environmental. In truth, the protests are drawing a diverse group of people together who cite many reasons for such action including frustrations with the increasing numbers of construction projects, recent changes in regulations which limit alcohol distribution and advertisements, general misgivings against the government, and violent actions by the government during the first days of the protests.
Throughout the events, Mr. Erdogan’s Deputy Bulent Arinc and President Abdullah Gül expressed their understanding of the cause and made an effort to calm the streets of Istanbul. Erdogan’s remarks were focused on the ongoing vandalism and illegal groups participating in the protests, and his public comments and positioning have generated criticisms among middle-class, secular Turks. Consequently, Erdogan attempted to use a more constructive approach. Erdogan and Governor of Istanbul Hüseyin Avni Mutlu separately met with representatives from the protesting groups. After these meetings, spokespeople announced that the construction project, which triggered the protests, would not start until the final court verdict. Many groups defined this outcome as a successful finale of the past two weeks.
Economic Implications of the Recent Events
Borsa Istanbul’s BIST 100 index lost more than 15 percent last week after it became apparent that the protests would not stop after the first three days. Although official data is not yet available, it is widely accepted that the protests affected international investors’ risk perceptions of Turkey, and the decline in the market was a result of an exit started by these foreign investors.
In addition to BIST, Turkey’s tourism sector seems to have been affected as well. Travel agencies are reporting that travel cancellations by foreign tourists are pouring in, and experts expect this season will continue to be hurt by Turkey’s internal tensions. However, it seems that domestic investors and business owners are not too worried about the incidents, and in general, they do not foresee any serious effects.
Nonetheless, public apologies from Mutlu and Arinc have not helped restore investor confidence in the past few days, and whether this confidence can be quickly restored is yet to be seen. It is also worth noting that Turkey’s public finances are in good shape and the fundamentals of the Turkish economy are performing rather well. Thus, short-term changes in investor sentiment or fluctuations in international money flows are not likely to change planned government sponsored initiatives. Government officials also note that the Turkish economy is past the point of being highly affected by short-term changes in investor confidence and money flows, hence they do not foresee any long-term implications from these events. However, it is reasonable to expect that mid-to-long term risk perceptions about Turkey’s political stability will change as a result of these widespread political protests, potentially impacting foreign direct investment.
Encouragingly, domestic investors and companies have not particularly changed their behavior as a result of the protests as they have no reason to believe that it would further affect the course of their everyday business. They are however worried about the damages done to the image of Turkey, and the possibility for limited trade. If these perception changes are managed properly by Prime Minister Erdogan and his team, economic implications will be limited to few industries in the short-term, and the long-term economic future of Turkey will remain just as bright as before the protests. Hopefully, there will be a resolution soon, and Turkey will embark on a new journey towards an even better future.
Zeynep Dereli is managing director for APCO Worldwide in Turkey.
Photo: Gregg Carlstrom (cc).
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Business Implications of Istanbul's Gezi Park Protests
June 21, 2013
What started out as a group of activists gathered on May 28th to protect a park in Istanbul from being demolished for the construction of a shopping mall, has turned into a widespread--at times violent--series of political protests across Turkey’s largest cities. While the use of force against Gezi Park demonstrators has been mentioned as the impetus for this uprising, Turkey’s Prime Minister Erdogan publicly stated that the reasons were ideological and not environmental. In truth, the protests are drawing a diverse group of people together who cite many reasons for such action including frustrations with the increasing numbers of construction projects, recent changes in regulations which limit alcohol distribution and advertisements, general misgivings against the government, and violent actions by the government during the first days of the protests.
Throughout the events, Mr. Erdogan’s Deputy Bulent Arinc and President Abdullah Gül expressed their understanding of the cause and made an effort to calm the streets of Istanbul. Erdogan’s remarks were focused on the ongoing vandalism and illegal groups participating in the protests, and his public comments and positioning have generated criticisms among middle-class, secular Turks. Consequently, Erdogan attempted to use a more constructive approach. Erdogan and Governor of Istanbul Hüseyin Avni Mutlu separately met with representatives from the protesting groups. After these meetings, spokespeople announced that the construction project, which triggered the protests, would not start until the final court verdict. Many groups defined this outcome as a successful finale of the past two weeks.
Economic Implications of the Recent Events
Borsa Istanbul’s BIST 100 index lost more than 15 percent last week after it became apparent that the protests would not stop after the first three days. Although official data is not yet available, it is widely accepted that the protests affected international investors’ risk perceptions of Turkey, and the decline in the market was a result of an exit started by these foreign investors.
In addition to BIST, Turkey’s tourism sector seems to have been affected as well. Travel agencies are reporting that travel cancellations by foreign tourists are pouring in, and experts expect this season will continue to be hurt by Turkey’s internal tensions. However, it seems that domestic investors and business owners are not too worried about the incidents, and in general, they do not foresee any serious effects.
Nonetheless, public apologies from Mutlu and Arinc have not helped restore investor confidence in the past few days, and whether this confidence can be quickly restored is yet to be seen. It is also worth noting that Turkey’s public finances are in good shape and the fundamentals of the Turkish economy are performing rather well. Thus, short-term changes in investor sentiment or fluctuations in international money flows are not likely to change planned government sponsored initiatives. Government officials also note that the Turkish economy is past the point of being highly affected by short-term changes in investor confidence and money flows, hence they do not foresee any long-term implications from these events. However, it is reasonable to expect that mid-to-long term risk perceptions about Turkey’s political stability will change as a result of these widespread political protests, potentially impacting foreign direct investment.
Encouragingly, domestic investors and companies have not particularly changed their behavior as a result of the protests as they have no reason to believe that it would further affect the course of their everyday business. They are however worried about the damages done to the image of Turkey, and the possibility for limited trade. If these perception changes are managed properly by Prime Minister Erdogan and his team, economic implications will be limited to few industries in the short-term, and the long-term economic future of Turkey will remain just as bright as before the protests. Hopefully, there will be a resolution soon, and Turkey will embark on a new journey towards an even better future.
Zeynep Dereli is managing director for APCO Worldwide in Turkey.
Photo: Gregg Carlstrom (cc).
