Deputy Prime Minister Recep Akdağ has shared his thoughts on Turkey's new reform package. He said that the overhaul, which was ratified by Parliament last week, will only make the country stronger by increasing employment and facilitating investment.
In an exclusive interview with Daily Sabah, he explained that Turkey, which currently ranks 60th in the World Bank's Doing Business index, will draw in more global capital and international investments with the reforms.
Deputy Prime Minister Akdağ, who heads a committee that focuses on improving Turkey's investment environment, said that they expect Turkey to rise up the ranks next year and their target is to be among the top 20 within two years. We sat down with Akdağ to talk about various issues, ranging from the details of the new reform package to Turkey's new strategy in fighting against drugs and his experience as a lecturer at Harvard University.
■ Daily Sabah: Could you inform us about the contents and purpose of this newly-ratified reform package?
Recep Akdağ: As Justice and Development Party (AK Party) governments, we put emphasis on the sustainable growth of the economy and improving employment. Providing employment to its citizens is every government's duty. This becomes more important in a country like Turkey where a significantly young population exists.
Unlike Western European countries, we have to make more than a million jobs every year because of the youth participating in the labor force. Therefore, we have to make our economy more investment-friendly.
We have a mechanism, dubbed the Coordination Committee for the Improvement of the Investment Environment, to achieve this goal and as a deputy prime minister it falls under my jurisdiction. Along with respective ministers, this committee also collaborates with institutions like the Union of Chambers and Commodity Exchanges of Turkey (TOBB), the Turkish Exporters Assembly (TİM) and the International Investors Association (YASED); we create action plans according to the demands.
In addition to those demands and expectations of the business world and ministries, we have taken international institutions' indices into consideration, resulting in the 102-article reform package.This package implements many regulations that are to facilitate both foreign and Turkish investors' initiatives in Turkey. In this respect, while we are incentivizing foreign investments, we aim to prevent Turkish investors from pulling their investments out of Turkey.
Turkey currently ranks 60th according to World Bank's Doing Business index. With the realization of this action plan, we expect Turkey to move up the ranks in the World Bank's Ease of Doing Business 2019 report. Our target is to be among the top 20 within two years.
■ DS: Looking at the reform package's contents, we see there are certain regulations that facilitate starting a business. What do you expect from these regulations?
RA: It is one of the most important aspects of the reform package. We know that especially young entrepreneurs face certain hardships when founding their businesses. Similarly, foreign investors are also experiencing the same hardships. You could establish a new company in Turkey only after completing seven tasks. Now, we have decreased it to one; you just have to go to the commercial registry office. The whole registration process takes place at a single location now.
DS: What other important provisions does the reform package offer?
Another prominent improvement is in the processes of resolving insolvency. These were issues that went unresolved up until now. The Ministry of Justice had been working on this subject for some time; now, it is being concluded. The respective regulations will be discussed in Parliament within this month and they will be ratified. We have analyzed the best examples from all around to world to create a new salvage agreement system. We are limiting the resolving insolvency period to 23 months, which previously lasted up to six-seven years.
We have prioritized the maintenance of companies rather than their dissolution. We have also involved the creditors to this process. With the new system, companies may call for composition with creditors before declaring bankruptcy; this makes it more possible to salvage the company and protect the creditors.
In addition, we are shortening the judiciary process regarding small-scale commercial disputes by implementing a simple rule. We also aim to resolve disputes by encouraging intermediation, preventing case files heaping at courts.
Meanwhile, we are facilitating the acquisition of building permits and land deeds. With these regulations, our deed registration system will become one of the best in the world. There are 18 steps for acquiring a building permit, 12 of which are completed by various departments of municipalities. Now, we are decreasing that to five steps with the reform package.
Furthermore, five of six non-municipal steps can be done electronically. Workplace registration will be automatically created for construction sites. Social Security Institution (SGK) will send the regarding documents to municipalities electronically. Type classification will be realized automatically after acquiring an occupancy permit.Estate tax declarations will be electronically shared between municipalities and land registry offices. With the changes to Construction Inspection Law, now one signature will be sufficient instead of 18. Therefore, we are facilitating the process for investors.
It was hard to establish cellular signal towers in the rural regions due to laws about protecting pasture land. Therefore, it was hard to establish a healthy telecommunication infrastructure there. This created issues for those invested in agriculture and livestock. We have also eased this process.We are also facilitating foreign trade. Loading-unloading, storage costs and fees of customs consultants have been standardized to help investors and citizens alike.
We are uniting two different declarations regarding to employees (income tax and insurance fee decelerations) into one deceleration. This might seem like an easy task; however, we are talking about eight different ministries collaborating. There might have been differentiation in defining certain terms and there could have been disagreements on certain issues. Yet, I believe we have negated all of these possibilities with the efforts of President [Recep Tayyip] Erdoğan and Prime Minister [Binali] Yıldırım.
This action plan is not static; it's dynamic. It will address various international indices; nevertheless, we will continue to work on the action plan to keep it relevant in the following years.
DS: You have expressed that you expect these reforms to contribute to Turkey's rise on the World Bank's Ease of Doing Business rankings. How will this be realized? Will the implementation of the reform package ensure this rise or do you have a separate action plan for it?
As I have said, our main goal is to increase employment by facilitating investment. Creating employment will enrich Turkey. It would be great to rise in ranks in terms of ease of doing business, as it will attract more investors.
We know international investors take these rankings into consideration. They tend to invest in countries that they can easily do business and profit through it. Yet, rising in ranks on the indices of the World Bank or other international rankings is secondary; it's compatibility with our main objective is important.
Meanwhile, your regulations and applications should overlap with the definitions of these international institutions that assess rankings. This is possible through dialogue. For instance, these institutions believed Turkey didn't have any mechanisms that would process objections regarding deeds. However, we have two systems which function perfectly: BİMER and CİMER. When we showed these institutions that we have these mechanisms, they revised their assessments. We have many similar provisions in the action plan, which may take months to complete.
Moreover, the market has to act accordingly to the regulations you're implementing; for this reason, we will organize training sessions, conferences and meetings together with the TOBB and other occupational institutions.
Respective ministers will observe the events falling under their authority.We are enforcing an upper limit for customs consultants at ports and certain institutions that prepare documents. For this reason, we should be out in the field as ministers for a year. I will visit ports, municipalities and other public institutions to see how the reforms function in reality.
DS: How will this reform package affect Foreign Direct Investment (FDI) to Turkey? Do you have certain targets in this respect?
Of course. We expect these reforms to improve FDI to Turkey. Yet, it's like the legs of a table; every aspect of the economy should be stable. For instance, the macro-economy has to be in a good condition, incentives should work according to their purpose and such. Economic reforms should take this into consideration. Deputy Prime Minister Mehmet Şimşek is responsible for the Turkish economy. We share our opinions on these subjects. He is a prominent reformist. In this respect, President Erdoğan and Prime Minister Yıldırım's demands for reform are discussed by various ministries and developed into a package. As you have said, the reform package aiming to improve the investment environment was ratified by Parliament; yet, a financial reform package that also provides facilities to investors is currently being discussed in Parliament.
Both the Republican People's Party (CHP) and the Peoples' Democratic Party's (HDP) statements were contradictory during the discussion of the ratified reform package. On one hand, they supported the package; for this, I thank them. On the other hand, they asked why we were panicking. We're not panicking; as I have said, there is a significant young population in Turkey. We have to continue to implement reforms in every field we can. If we are able to implement further reforms regarding incentives and taxes, FDI to Turkey will definitely increase.
DS: Some are criticizing Turkey for not abiding human rights, especially for the implementation of the state of emergency. They claim that this is obstructing FDIs. As the deputy prime minister responsible of committees regarding human rights, what is your take on this subject?
I believe these criticisms are unjust. When the opposition and the Turkish media make such news, it has the risk of creating false perceptions about our country. No one is denying the existence of the state of emergency in Turkey; however, as we have said countless times, it's limited to terrorism. Citizens, investors or business owners aren't experiencing any negativity due to the state of emergency; it has no impact on everyday life. There was a time when martial law was enforced in Turkey; you would always be stopped by security forces for an ID check. This is not the case in the state of emergency.
It's meaningless to complain about the condition of the country to others like Kemal Kılıçdaroğlu does. I'm constantly meeting with foreign investors as a part of my job; they're eager to invest in Turkey, and none of them have said anything about the state of emergency.
The generation I'm a part of suffered real human rights infractions during the 1980 and 1997 coups. People were being tormented, and there were unresolved murders. Currently, we have none of these. Meanwhile, we're fighting against multiple terrorist organizations; neither the U.S. nor Europe has suffered a situation like ours in contemporary history. We're currently fighting against FETÖ, the PKK, the DHKP-C and Daesh. If you require the announcement and maintenance of the state of emergency to thwart these threats, you should do it. Moreover, the state of emergency insures both democracy and investors in Turkey. We have employed the state of emergency to eradicate terrorist elements in eastern and southeastern Anatolia. Would an investor invest in a terrorist infested region? This was the reason for the lack of investments in eastern and southeastern Anatolia. Now, they are able to make direct investments in the region. Therefore, I believe the state of emergency doesn't make Turkey unattractive in terms of investments.
DS: As companies could be seized by the state through statutory decrees during the state of emergency, some are alleging that it deters foreign investment to Turkey. How would you respond to these allegations?
As I have said, the state of emergency is employed to fight against terrorist organizations. All of the companies seized by the state had clear affiliations with terrorist organizations; a company that is not affiliated with any terrorist organization has nothing to fear. Some, like the CHP and the HDP, are trying to bolster this false perception that originated abroad. Moreover, investors know the fact that we don't seize random companies. They may have been discomforted at first, but they realized companies that aren't affiliated with terrorist organizations are left untouched by the state.
DS: Fighting against drugs also falls under your jurisdiction. An anti-drug commission was formed in Parliament recently. Could you inform us about Turkey's anti-drug policies and priorities?
Today, almost two-thirds of European countries have a holistic approach in their anti-drug policies. In this respect, you have to fight smoking and drug addictions as a whole. It's known that almost all drug addicts emerge from smoking addicts. This is also true for technology addiction and alcoholism.Usually addictions start with relatively accessible and cheap substances. Then, it evolves to more expansive substances with more dire effects. For this reason, we also have a holistic approach towards addictions. We have created a mechanism together with various public institutions and ministries to address the aforementioned addictions. We have discussed the issues thoroughly. The draft of the 2018-2023 action plan is ready. On Feb. 15, we decided to finalize this action plan within two weeks.
Then, I will submit this action plan to the president and the prime minister. After the submission, we will continue to work on specific addictions and create individual action plans for all of them until summer.We have decided to fight drugs on four fronts. The first is supply, which is about preventing drugs or components used for producing drugs passing through customs. The Ministry of the Interior, the Ministry of Justice and MASAK will focus on this. Second, decreasing the demand for drugs. Institutions like the Green Crescent, the Ministry of Family and Social Policies, the Ministry of Youth and Sports, the Ministry of National Education and the Directorate of Religious Affairs will try to decrease demand through media campaigns.
In this respect, especially the Green Crescent and the Ministry of National Education are doing excellent; they have educated 10 million students about drugs in 2 years. The target is to educate 18 million students in a year. Education will start from preschool where drugs won't be mentioned, but children will be taught to be confident about themselves and go through primary, middle and high schools. In terms of treatment, the Ministry of Family and Social Affairs along with the Green Crescent will establish rehabilitation centers in 2018-2019. Third, we will focus on communications; we will collaborate with media outlets in Turkey. It's important to convey the right messages to fight against drugs. Last, coordination. As you know, coordination is easy to say, but hard to achieve; so, we will focus on it.
We're on the verge of an epidemic. If you try to treat it right away, you may prevent it from spreading further. Otherwise, you could be in the same situation with most European countries and the U.S. They have surrendered to this epidemic and are trying to reduce risks. As we are on the verge of it, we are announcing mobilization for the next three years: 2018, 2019 and 2020.President Erdoğan has been very supportive in this respect. In terms of increasing awareness and explaining these issues to the public, leaders are crucial. We have succeeded in our fight against smoking addiction because of his support. Anybody could talk about the harms of smoking; however, when the charismatic leader of a country does the same, it yields better results.
DS: The policies during your term as the minister of health have become the subject of a case study at Harvard University. Could you elaborate on this subject?
I've served as the minister of health between 2002 and 2013. Right after my term, the dean of Harvard School of Public Health invited me. During the 2013-2014 academic year, I lectured post-graduate students.
Since 2012, we have hosted 95 ministers together with Harvard Kennedy School. A program was organized and I was among the lecturers. 65 of these ministers were ministers of health, while the remaining 30 were ministers of finance. I traveled to Boston twice every year and held courses for ministers that lasted for 70 hours, sharing our experiences.On the other hand, I was invited to more than 20 countries through the World Bank and World Health Organization. I've been to Iran, Saudi Arabia, Bahrain and Vietnam. I especially know Vietnam better in terms of its healthcare system and how it is in the rural areas.
DS: Why have your policies attracted so much attention?
The healthcare system we have created in Turkey is cheap, of high quality and accessible. We have transformed the healthcare system into a generous one with a cost of $500 per capita. It's not a surprise that Harvard presents us as a case study. Today, more than $9,000 per capita is spent in the U.S. healthcare system. Yet, many of the U.S. citizens receive inadequate services. Despite having a health insurance, if you are seriously ill, it may cost your life savings. From that point of view, Turkey can be a prominent example.
We have achieved this with the determination of President Erdoğan and by establishing an efficient system. We have developed methods that would improve the performances of healthcare professionals.
Today, an MR scan would cost you around 200-300 euros in a European country and around $1,000-$1,500 in the U.S. However, if you go to any state hospital in Ankara, it will cost you just TL 80, which is not even $20.
Even if you don't have insurance, you don't pay extra. Because of this, they wanted to know how we have set up such an efficient system. This is why they present Turkey as a case study.But every system requires revisions from time to time. Turkey's population is young and conditions are changing swiftly. When we came to power in 2002, we were facing epidemics, issues regarding mothers and their babies, nutrition and treatable illnesses. Now, we face obesity, immobility, smoking, cardiovascular diseases and diabetes. So, we need to implement reforms to address these shifts.
During our visit to Mexico, the said dean of Harvard was the country's minister of health. When I told him that we have achieved all of this in just three years, he couldn't believe. We had to, so we did.
In short, in a country like Turkey, you have to act fast, make fast decisions and implement them faster; you can't afford to act slowly.