Changing Balances And Parameters in Asia

Interview

This is the deciphered text of his presentation, titled Changing Balances and Parameters in Asia, in the 3rd Session of the ISO 8th Industry Congress and Innovation Exhibition, moderated by Ahmet DORDUNCU, the CEO of Sabancı Holding in December 16, 2009.

"Being the last speaker is always a bit disadvantageous; however, I will try to end my speech in 20 minutes. Of course, it is not possible to go into detail in this short time. In my opinion, actually, these kind of panels are not so much right. I am going to try to express all of my macro opinions in this micro time of 20 minutes. Asia is a very important topic, because it plays a central role in the reshaping of the world’s balances after September 11, 2001. As we all know, we had had bipolar world system until the 1990’s. We had chosen the Western block and almost everyone undertook a role for themselves in accordance with what big players did, and the things that players could do, other than the big players, were so limited. After the 1990’s, we did spend a decade with the impression that America was the only super power after the collapse of the Soviet Union. However, this impression was not correct at all, and we have seen it after that day, September 11, 2001. We saw that some countries and regions knew how to take advantage during that decade; they worked actively and prepared themselves. The case of September 11 opened the curtains in front of our minds. Turkey has experienced a terrible decade after that date in which we lost lots of time in many different parameters, such as huge debts or the lack of human resources, etc.    
We have seen after the September 11 cases that a multidimensional system has been reshaping all around the world. New power balances are growing and at least five powers are standing out among the others that have similar level of technology and human resources. These are USA and EU in the traditional Western block and Russia, China and India in the East. However, there is at least ten years to come to get this system settle. For today, it is not quite possible to claim that these power balances and parameters are there for sure. Still, the data we have had up to now and the predicted signs for the future give us this impression that a quiet and deep transformation, change and a redistribution of the world’s power balances are coming.  Of course at this point, we have to mention about Latin America and Brazil, too. It is not my profession to point out but it is useful to acknowledge these countries as half global actors as well. 
There has grown up a concept within this multidimensional power systematic. This concept has been so powerful in any periods but especially in the last 10 years, it has turned out to be a very strong and strategic notion. It is a concept that interests everyone in the hall: Public diplomacy.  Today in international relations, the role of foreign ministries of states has decreased to a rate of 10%, however, this rate of 10 % is still very meaningful, and it has not lost anything from its significance. This is a rate that has still directive, determinative and decision making aspects. But the institutions that fulfill the rest of this rate are those institutions belonging to the public diplomacy. At the top of these institutions there come businessmen. I am talking about all of these things to display how important our mission is as a country. The more effective the foundations, civil society organizations, think tanks, universities; sportive and cultural organizations established by businessmen in a country are, the more implementable the political decisions taken by the foreign ministries and governments of that country become. Otherwise, many agreements that is accepted but never implemented wait in the dump of accepted laws, regulations and agreements of a country, including Turkey. 

We shall be seeing some certain facts in order to be able to integrate to this newly reshaped power systematic of the world, and to get ourselves a good place in the next century. Economists, please correct me if I am wrong, the rate of our saving to GNP is approximately 70 %. And this rate nearly makes 400 billion dollar, almost equal to the total of bank deposits. As another example, the savings rate of Germany is 370 %, and when we consider that its GDP has also very high levels, we see that it makes 13 trillion dollars. A country having 400 billion dollars of capital aggregation has to get shaped as a regional power, annually employ 500 thousands of people, create resources, create capital aggregation, invest and provide employment to the invested facilities in order to expand its exportation. Another parameter is the foreign permanent capital’s being invested in the country, and the expansion of exportation and the improvement of the capital and resources entering into the country.
What does Asia mean to us within all of these obligations? It is no doubt that we have been going through a financial crisis for the last 2 years throughout the world. It first started in the USA and spread to the rest of the world in short time. We, as Turkey, also suffered from this crisis environment and we still continue to be badly affected. Nowadays, it is observed that the effects of the crisis are getting lighter. However, I do not believe that the main axis of this crisis is only USA and the only reason of it is the risks taken boldly. Definitely, the economic mistakes are of so much important. The fact of derivative market, which is generating 150 different types of paper onto each other by one source and creating a value by them, and many other similar mistakes such as this, is a certain factor in this crisis environment. However, the sliding of the limited economic pie of the world from West to the East is the primary factor, actually. This is the basic reason. Furthermore, public administrations which are governments and states, particularly of USA, focused too much on their central budgets. The estimated budget deficit of the next year will be around 50 % in the federal budget of USA and this year, it is around 45 %. These are very huge numbers.    

Again, the numbers injected to the market with the aim to prevent the loss of employment and disappearing of current companies especially in the Western Europe and America are 10 trillion dollars. All of them are the additional numbers added to the debt burden of states. They are calculations that are carried out with the thought that everything would get better one day and that the taxes would be collected effectively and correctly. However, it does not seem quite possible at least in the short and midterm. As a result, I believe that it would be useful to expect a crisis arising from not covering the public budgets. Because, this will either reflect on the burden of debt or will be financed by the Central Banks’ issuing money when the matter becomes unreturnable, and this is actually what USA is doing at the moment. America can absorb this because approximately three out of four of the current dollar resource is out of the country. Thus, USA reflects three out of four of the inflation to the citizens in other countries holding the foreign currency in their hands and to central banks. The inflation which it reflects on its own country is quite low at the moment. Within this sense, a public administrations centered crisis will hopefully be easily overcome in the upcoming period. I think that foreseeing a new financial crisis wave would occur in the future would be helpful actually.      
When we consider Asia, we see that three countries stand out among the others. First of all, we have Russia which has imperial experience from the Soviet Union period and even earlier times. It is a country trying hard to obtain its priority in the energy and defense area and use this priority very effectively in the international relations. It is a country having market conditions peculiar to itself, focusing on extending its energy lines to Japan and China from the Pacific in addition to its pipelines in Europe and Turkey. However, one of our most important competitors closely concerning Turkey is China. China, today, has become a country exporting the annual rate of exportation of 1978 in only one day. It implements a quite aggressive marketing method. 

There is an axis sliding in the evaluations regarding Asia. There is a misapproach as comparing themselves with the average GNPs of Western European countries and stating “They have 23 or 30 years more to come to reach our level”. And the second is that these newly born powers never comply with the Europe, West centered trade rules which we have taken. They follow a very aggressive marketing method, they work with open accounts, and they make out invoices as much as you want, they accept money by hand, and if you have a reference, they give assets with the condition that you will pay it back in a year by working with open accounts. Thus, to compete with this country by the known criteria is pretty difficult. Another important factor is that these countries now do not take up any risk regarding the political administration of the world, even though Russia is shining among the others. This is also a conscious policy, because they are focused on economic growth. No one knows about the numbers of goals in their minds. 

In Russia, there is a Chinese professor having the status of a professor-in-ordinary of our country. His name is Mikhail Titerenko. We occasionally keep in touch with him. He says that “The hegemonic, force balanced policies of America that have been implemented in the last 7-8 years, before the Obama administration have annoyed even Europe. China is also on the run and will be shaped as the super powers of the world in the following years”. Then I ask him “Should we be afraid of China’s foreign policy to be implemented and the way of it to use its forces?” And he replied that he did not know the answer of this question. He said that even a person having a 50 years of experience cannot give an answer to this question. This fact may be interpreted as a nice thing in terms of a country’s being able to cover and hide its values and display a common attitude on the total, but in another perspective, it is a little scary and dreadful. It is not known for sure what kind of a path China will follow in its international relations. The activities of it in the trade business are very offending and destroying because it does not depend on any rules.

Esteemed President of our country Abdullah Gül had a visit to China when he was serving as the minister of the Foreign Ministry. I was there in the committee, too. There were negotiations with the Trade Minister and China first took the word as the host. The Trade Minister of China seemed to memorize the words of our ministers beforehand, since all the ministers coming from different parts of the world had stated same things before: The operations are not transparent, our brands are being imitated, the process are open accounted. He gave answers to all of these parameters which you are quite familiar to, even before the Turkish party mentioned about them. 
Can anything be done in terms of the macro negativenesses of China and the abnormal deficit of Turkey (13-14 million dollars) in the trade volume between Turkey and China? Of course, the most important element of trading with China is to take there a technology that they do not have or to possess a brand that they are not familiar with. There is no other chance to compete with them. We have been saying for many years that Turkey should establish strategic relations with China, not only in trade but also in defense sector, taking into consideration that its potential world balance in the upcoming period. As you know, Israel is a city state in the Middle East; however, it acts in cooperation with the USA.  This is actually a prediction but it is not too imaginary to believe that Israel will be in alliance with China as well as USA. Within this sense, I think it is useful to foresee some certain facts.

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There are many serious integration initiatives in Asia. These are getting shaped secretly. There are various regional and security organizations. For example, while the Shanghai Cooperation Organization was an organization established to find a solution to the border controversies, it turned out to be called as the NATO of Asia. There is a pretty new development, with the break down of the liberal party government of 54 years in the Eastern Asia; the Prime Minister of Japan started a new process: dynamizing the East Asia Community and getting it more active. However, as you know, Japan does not have a serious defense power as a result of the limitations derived from the World War II. It is not a nuclear power, but the North Korea and China have nuclear powers. Japan is in the middle of these powers and trying to implement this initiative under the nuclear umbrella of America. Today China does not oppose to this blocking, it looks like it is a part of it, but how far America can provide options to Japan, which is acting within its nuclear umbrella, is a matter of uncertainty, yet.   
There is a constant subject debated in the Asia, with the leadership of China: Davos has Bao meetings, as Asian alternative. These meetings are held every year in April and the leading scientists, experts, artists, statesmen of Asia attend to these meetings. What is aimed with these meetings is to establish an Asian Union, similar to EU, in the long and midterm. 

I find it useful to determine a fact about China. There are great similarities between Germany’s entering into the developed countries markets in the 1870’s and China’s entering into the world market after the 1990’s. Therefore, it is beneficial to observe that Germany’s loosing this success of it with the mistakes it made during the World War I would give an impression that China would also go through similar processes and loose what it has.

I believe that there is a thing allied by the strategists working on Asia and trying to read its international relations systematic: 19th century was the century of Europe, 20th century was that of America and now it is possible to claim that the 21st century will be shaped as the century of Asia, when we consider it as a whole. The things to be done in the first 20 years of the 21st century by countries, companies, institutions and individuals will determine the things to be done in the rest of the century. We have left behind the 9 years of this century, thus the things we will do, and the choices and investments we will make in the next 10 years will be determinative about at what level we will be in the rest of the century.
 
There is a project, completely strategic, in Asia: Traceca project. EU is also supporting it. The main parameter of this project is: With the same train from Paris to Pekin. This is its slogan. It is at least the slogan generated by our Foreign Ministry. Before the crisis, especially in the ports of China, there used to be processes of at least three months before ships could enter those ports. There are break points in the processing of the Traceca project, an alternative railway project developed for the port issues that used to be a problem all the time, and the first of these breaks is related to Turkey. It is the sub-sea tunnel project that will pass under the Bosporus of Marmara Sea. I think it will be ended in 2012. The other one is the repairing of the Kars-Ahılkale-Tiflis line and remaking a part of it. And this will be ended in 2012, too. When both of them will be over, a wagon train to depart from any part of Europe will be able to arrive to any part of Asia – this project covers 32 countries-.   It is useful to see that our country can be a common point in the transportation sector both between Europe, Africa and Asia.
 
When we consider Asia as a whole in terms of other things, we see that it is a continent of serious contradictions. For example, there are very rich countries, getting huge amounts of exportations, while at the same time, there are very poor countries which does not even possess 10 % of the energy that will be sufficient for them. As there are countries having the average of GNP of European countries, there are also countries that have the average of African countries. Therefore, it consists of many contradictions. It seems that 80 % of the % 50 of the economic growth of the world will be undertaken by Asia. If we are to say something about the main problems of Asia, we can mention about the four basic spots focused in the Asian continent. One of them is to form alliance, the second is to provide the continental balance, the third is to improve the market share, and the fourth is the struggle to get more share from the energy and mineral resources.

Of course there are six basic points that Asia has to resolve before achieving these four goals. One of them is the problem to overcoming the barrage of the history. Throughout the history, there have occurred many problems in Asian countries, like in other parts of the world; however, the continuing of the problems still in the 21st century has made them insuperable. Especially many problems inherited from the history such those between South Korea and North Korea, North Korea and Japan, China and Taiwan, Pakhstan and India or the Duran line between Pakhstan and Afganhstan are about to burst out again in terms of the corruption of macro balances. The second is the problem of exaggerating nationalism and destabilizing countries by using them as political materials. It is nothing wrong to mention the name of the country, there is a Chinese centered hegemony threat nowadays. We think that this also should be shared among similar powers and this way, the potential tension and hostility would be erased.  One of the most basic points is the issue of how to create common norms and values. Because the history of Asia, with 2000 years, is much weaker than Europe in terms of taking lessons from the old sufferings of the past. So, it seems that it will take too long to create common norms and values. Another problem is the problem of developing regional geopolitics. The economic relations between Asian countries, today, are pretty good and developing even better with each passing day. However, the economic relations are necessary for the development of economic geopolitics but it is not enough. Insuffiency of energy is one of the most important problems complication the Asian geopolitics. The sixth of these problems is providing security in transportation and communication.

What can Turkey do at a position that is central to all of the new power balances of Asia? Turkey is trying to follow up a multidimensional foreign policy, in accordance with this multidimensional power systematic. I can never associate this with an ideological concept. People may ideologically be satisfied with this but this is a real politic obligation after all, because following a one-dimensional or even bipolar policy in the newly shaped power systematic may mean committing a suicide in the long or midterm for countries located at a region like that of Turkey. There is an expression that I associate with Germans: Be everywhere, don’t be in anywhere. This is the concept they did acquire after the World War II. I think we talk too much; this is also a threat for providing the peace and security environment inside our borders and for the stability our economy and development.
Turkey is getting shaped as a regional power, but it is not quite possible to claim that it is a full regional power. It is not a global power at all. I find it quite useful to state that we have seven parameters to complete. And when we fulfill all these seven parameters, we will not need to announce anyone as the leader:
With the condition to stand out as a new power,
1.Not having current deficit,
2.Drawing back our external debts, particularly our public debts, below 25 %,
3.Our central administration’s state budget’s not having deficit,
4.Approaching to the developed world average of GNP and equal distribution of it,
5.Possessing high technology product scale, we are now a country producing middle technology products,
6.Possessing nuclear technology for peaceful aims, which is energy,
7.Being sufficient to itself in the defense sector and if possible, being able to export it.
The stronger we are in these seven parameters, the more powerful we will be at the regional level. The more deficit we have in terms of these parameters, the longer it is the way that we have to overcome. Within this perspective, I believe that Asia will be a good opportunity area for the world and Turkey in next years.
I could not go into detail because of the time limit. Thank you all ".

AHMET DÖRDÜNCÜ
We truly thank Mr. Süleyman for his detailed speech. Our esteemed panelists really expanded our horizon within very limited times. They took us to far away geographies and shared with us their experiences about what we can do up there.  I am very grateful to them, thank you all very much.
Mr. Süleyman, I will direct the first two questions to you. One of them is asked by Mehmet Koçak from the Chamber of Industry of Konya. “If China is our biggest competitor, is it useful to invest there or what would you recommend about it?”

SÜLEYMAN ŞENSOY
Investing in China is very important and necessary. As far as I know, the number of permanent investments between China and Turkey is quite low. Ours is bigger than China’s. A few years ago, the permanent investments of China in Turkey were around 1, 5 million dollars, and Turkey’s investment amount was around 400 million dollars. I do not know about the new numbers. China is a country that is hard to control: it has a population of 1 billion 400 million of people, its values are quite different; its imitation ability is pretty high. Everyone has his/her own experiences; you cooperate for a while, and then they imitate your product identically and your chance to follow these operations and sue and get your results is very weak. However, despite all of these things, I trust in Turkish entrepreneurship. China is a very important country for us. After a while, China will be have to decrease this economic saturating point rapidly and have a more stable and dignified market. So I believe that investing in this country will be a very appropriate decision to make.
AHMET DÖRDÜNCÜ
There is one more question. I think it is headed for Mr. Süleyman. It is asked by Oktay Alnıaktan from Bahçeşehir University. “The speakers have different professions; they are successful at areas apart from their professions. They said cooperation between public diplomacy and state diplomacy is very important and beneficial. What if there will not be any agreement between the parties? How do you evaluate the political risk of competition? What is your secret in your success in the public diplomacy platform?

SÜLEYMAN ŞENSOY
I know Professor Oktay in person, he is also a retired pasha. The only way for the public diplomacy to be successful is, in my opinion, to be able to share a common mission. The basic condition for productivity is not following the old directive, centralized understanding but everyone’s playing their role in what needs to be done and protecting the honorable line between government, state and other institutions.  I think that is what it takes. TASAM has been working with this perspective in four different continents: Asia, Africa, Latin America and Caribbean, Europe If we don’t count Australia, these are four continents dominant all around the world. In the public diplomacy understanding, everyone, including individuals and institutions, has their own roles not only in international relations but also in the efforts to provide inside prosperity and comfort in the society. I believe that what is important here is first of all, having efficiency in terms of equipment and human resources, and secondly, maintaining the honorable line between other institutions.

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AHMET DÖRDÜNCÜ
Another question comes from Mehmet Kumbaracı. “Shall we expect social explosions such as Uyghur cases or Tibet cases?” I guess Mr. Mehmet is interested as an investor.

SÜLEYMAN ŞENSOY
The Tibet and Uyghur cases are constantly attracting the bad attention of the world and especially that of America. I am not saying this because I find the Chinese party right, however, the only country daring to deal with this issue is America. There radio broadcastings made for that region, there are different activities. I think that our reactions to the recent cases occurred in the Uyghur region. We may have caused more people to get hurt there because the sociology and punishing systems of China are different. The court was ended and in 15 days, people were executed. Which country has a judicial system that needs only 15 days to give the decision of execution? We first have to be informed about the sociologic attitude, judicial approach and the process of the authority understanding of the state there. Because, while we say “we shall defend, protect, stay with those who are suffering”, we may be causing them get more damage. There will occasionally be some issues such as China-Taiwan. But for at least the next 10 years, I do not think that there will be big events taking place to affect the stability of China. 

AHMET DÖRDÜNCÜ
The last question comes from Ahmet Tepiroğlu from Sarkuysan A.Ş. to Mr Süleyman. “You have mentioned about the public financing crisis. When do you think that this possibility would come true depending on your experiences?” I guess you will have to mention about some predictions.

SÜLEYMAN ŞENSOY
If we examine Turkey, the financial crisis started in October 2008. But our central budget was taken to the Assembly and was negotiated until December. As the elections were held in March, this budget could not be revised at all, even though it could have been for several times. I guess there was a deduction of last minute of 3 billion TL. The beginning of the problem in terms of Turkey dates back to 2009, because it was estimated that the positive escalation of 6-7 years could be continues and as a result a public center budget way too over the inflation rate was made. And the deficit was around 63 billion TL in 2009. Then a new central budget of 286 billion liras was made based on the 2009 budget. And its open target is 50 billion. The total of 2 years is 113 billion liras. As we cannot finance this by issuing money, we have to automatically add the numbers apart from the inflation to this burden of debt. Moreover, we are one of those countries taking the least risks in accordance with the economic growth of themselves among every country affected by the crisis. However, it does not seem quite possible for other developed countries to convert and maintain this debt. This is my personal opinion, I may be wrong. This fact will bring about an inevitable inflation. You can associate the increase in the value of gold to this fact. 5 years ago, when the ounce of gold was 276 dollars, I announced 2500-3500 dollars at a meeting. Everyone did laugh at it.  There is such a risk. If the public resources will be available only if the taxes are collected, otherwise, there won’t be any. The taxes will be collected directly or indirectly and this way, the public services will be financed. When moneys are issued, it will be a route not possible to turn back. We will see the signs of these at a short time, starting from Greece and Dubai. Even though Dubai is actually a company, the city state is already governed as a company. I guess it wont be too early to say that this will be seen in other countries, too.

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