Crucial decisions have been made in Turkish economy in three major areas of finance, tourism and industry this week, revealing clues about new institutions, reforms and strategies in these key areas.
First, the Third Tourism Council started in Ankara this week. Tourism is a crucial factor in the Turkish economy, and the council will determine tourism strategy in the new period.
On the other hand, Prime Minister Binali Yıldırım's announced that the Credit Guarantee Fund (CGF) will be permanent and institutionalized in the Turkish economy, which is a gain for the banking system and the real economy. Turkey is creating a market-friendly loan mechanism like South Korea's Credit Guarantee Fund (KODIT). However, Turkey's loan guarantee system is mainly based on the banking system and the private sector, rather than the public sector, which creates a market-friendly dynamic. We can say that the CGF will gain importance as an element and dynamic of financial stability in the coming period because CGF-based loan expansion both regulates/improves the asset structure of the banking system and ensures that growth is employment-oriented and inclusive. In this sense, it supports both employment and the fight against inflation.
As noted in the Central Bank of the Republic of Turkey's (CRBT) latest Inflation Report, loan expansion, which accelerated in the second and third quarters and reached 22 percent in 2017, will gain stability at reasonable and controllable levels when the CGF is rendered sustainable and supports selective loan placement. Undoubtedly, this will be in line with the CBRT's inflation and financial stability targets and will be an optimum level to realize the growth potential of Turkey.
The CGF will first improve the capital adequacy ratios of the banking system, facilitate access to loans, raise the asset quality of banks and help the system develop new financial architecture, thus creating new sources. On the other hand, the CGF will also contribute to development of a new economy focused on competition and venture capital. So, we are stepping into a contemporary guarantee and rating system that directly transforms project risks into loan risks and finances them.
We will now be able to see on a macro level how effective loan placements in the banking system and banks are and whether banks are properly using their resources because the CGF is essentially a rating system for both the real economy and the banking system. In this respect, I would say we are entering a new banking system that supports both production and financial stability.
As I mentioned above, this week's Third Tourism Council is a summit that should be focused on. This council will undoubtedly bring new initiatives to the tourism sector, which creates economic value of $1.8 trillion in the world, and determine the tourism strategy of Turkey in coming years. Turkey is one of the top 10 countries in this major sector in the world in terms of the number of tourists, but it is not one of the top 10 countries in terms of tourism revenues. In this case, we need a new strategy and renewal. We need total renewal in this area extending from nongovernmental organizations to our companies and agencies. Turkey deserves a bigger share of the world tourism pie.
It is important that Turkey achieves record growth this year, but more importantly, we must make this growth sustainable mainly in exports and industry. The 15 percent increase in exports and its positive contribution to growth gives us hope. However, Turkey should also be ambitious in the high-tech and high value-added export league. With this purpose, a major step is being taken. This week, we also held the first meeting on Turkey's domestic automobile production and branding in this area.
I must note that domestic automobile production should be seen as a step toward the new industrial revolution rather than an effort for the traditional car market. Today, there are 150 million lines of software on an ordinary automobile. Just like unmanned aerial vehicles, unmanned car production and its software are now possible. One of the most important dynamics of the first industrial revolution was the internal-combustion engine. Now this is over, and the new industrial revolution is being built on software and data communication. Turkey is strong enough to achieve it. The domestic electric car will be a pioneer in creating a software-based ecosystem in Turkey. Good luck with this historic step.
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