Erdoğan’s Victory in Turkey

The start of Executive Presidency and its implications

On Monday, 09 July, Recep Tayyip Erdoğan was sworn in as president of Turkey after securing a resounding victory in June 24 election. With his swearing-in, Turkey has officially moved from a parliamentary system to a presidential system with the president wielding powers that no democratically elected leader of Turkey has ever had. In other words, President Erdoğan has made history by becoming Turkey’s first executive president and leading his party to an unprecedented number of general election victories. He will now lead the country with a clear mandate for the next five years – until the Republic’s centennial in 2023. Under the new system, 64-year-old Erdoğan will lead the state’s executive branch and have the right to appoint and remove vice-presidents, a newly introduced position, as well as ministers, high-level officials and senior judges – without parliamentary approval. The president will also have the power to dissolve parliament, issue executive decrees and impose a state of emergency. The office of the prime minister will not exist in the new system.

Delivering his speech outside the presidential palace in Ankara, and marking the introduction of a new, executive presidency with sweeping powers, Erdoğan said Turkey is embarking on a journey toward a stronger government and country. He was sworn in for a second term on July 09, wielding hefty new constitutional powers. With his swearing-in, a new system of government has begun in Turkey. Here is a brief look at the new system:

The system in summary

With the approval of constitutional changes in April 2017 referendum that redesigned: 1) duties and powers of the executive with allowing of executive order; 2) relations between the legislative, executive and judiciary branches; 3) regulations addressing the judiciary; 4) the investigation and trial procedures for the President and the Cabinet; 5) the budget approval process and; 6) elections process, Turkey laid the ground for Executive Presidency in which President Erdoğan is both the head of state and head of government of Turkey and does not need parliament to form the government.

The new system of government that eliminated the key positions in the previous administrative system i.e. undersecretaries, deputy undersecretaries and many deputy general managers is mainly based on the Cabinet, Councils and Offices to function.

The cabinet

It will be heading the bureaucracy and in charge of the execution with 16 ministries, down from 26 ministries previously. Accordingly, in the new structure, some ministries are united under a single portfolio: 1) Foreign Ministry with European Union Ministry; 2) Ministry of Finance and Treasury (merger of Ministry of Finance and Under Secretariat of Treasury); 3) Ministry of Trade (merger of Ministries of Customs & Trade and Economy); 4) Ministry of Industry and Technology (formerly Ministry of Science, Industry and Technology); 5) Ministry of Labour, Social Services and Family (merger of Ministries of Labour & Social Security and Family & Social Policy) and 6) Ministry of Agriculture and Forest Management (merger of Ministries of Food, Agriculture & Livestock and Forest & Water Management).

Councils

Nine councils within the Presidency, focusing on policy design with a focus on key areas i.e. economy, local governments, social issues, health, culture, security, education, science and legal issues. In other words, a total of 65 existing boards, commissions and committees established with laws and other regulations are merged under nine entities, according to some analysts. These councils, each headed by the President, will develop, supervise and coordinate relevant policy suggestions. They will be formed by at least three members, to be directly appointed by the President. Specifically, the Council for Economic Policies is tasked to provide analysis and policy recommendations on investments, trade policies, and systemic risks as well as to closely watch economic developments and global financial issues.

Offices

Reporting directly to the Presidency, four new offices on 1) human resources (supervise the state’s human resources); 2) finance (in charge of monitoring financial markets and banking system domestically and abroad); 3) investment; and 4) digital transformation (institute the state’s digital transformation so as to adapt to the digital age) are established to improve governance process. Being special budgetary institutions, these offices are to work with a focus on long-term strategies for key themes. The new structure shows that Councils and Offices will determine the policy framework under the participation and supervision of the President, while the Cabinet will be in charge of the execution of the policies.

Transition still in progress

In the first phase, Turkey held its first dual parliamentary and presidential elections on 24 June, earlier than the originally scheduled date, despite insistence from the government that the general elections would take place on the scheduled time. Erdoğan has been re-elected as the country’s first president under the new presidential system. After the elections, the Justice and Development Party (AKP) government issued a series of harmonisation decrees with so as to integrating the new system into the existing legislation.

In the second phase, President Erdoğan was sworn in on 09 July and then two extensive decrees, changing the structural organisation of the state as well as redefining the hierarchical scheme were issued. Including professionals from the business community, experts from fields such as education and health, and politicians in President Erdogan’s close circle, the new cabinet was also announced on the same day.

The names those in charge of the economy are:

i. Minister of Finance and Treasury: Berat Albayrak, former Minister of Energy and Natural Resources and President Erdogan’s son-in-law

ii. Minister of Trade: Ruhsar Pekcan, a businesswoman serving as vice chair of the Council of Female Entrepreneurs at the Union of Chambers and Commodity Exchanges of Turkey (TOBB)

iii. Ministry of Industry and Technology: Mustafa Varank, a former Chief Advisor to President Erdogan

According to President Erdogan, policy council appointments and the remaining high-level appointments would be completed in the coming days. Given that not only the cabinet members but also key economic appointments to Councils and Offices are important for policy direction, markets will remain alert on names to get a signal for a continuation of market-friendly policies given a backdrop of increasing economic concerns due to high inflation, high external imbalances, rising borrowing costs and a volatile currency with a less supportive global environment.

Policy mix under focus

As part of a transition to the new system, the CBT law is revised. In addition to technical (wording) adjustments following the shift to the executive presidency, the revisions change:

i. Appointment: The Governor, Deputy Governors and MPC members will directly be appointed by the President, while Deputy Governors were appointed by a joint decision on the recommendation of the Governor before the revision.

ii. Qualifications: Less strict requirements on education and work experience

iii. Serving period: Set as four years for the Governor, Deputy Governors and MPC members, down from five previously.

No impact is expected on the CBT’s current management team and the MPC in the near term as all were appointed in 2016 and thereafter.

The Turkish Central Bank

The revised legislation allows the President to determine the compensation of the CBT management team (the Cabinet previously), though bars him from removing the CBT governor (unchanged in both versions). In addition to the CBT governance, the policy outlook in the aftermath of elections matters for the markets given current macro vulnerabilities and the economy being on course for a slowdown.

Accordingly, macro and financial actions by the new government addressing short-term vulnerabilities with a focus on tight monetary policy and a commitment to fiscal prudence would be key for the markets, while reviving the reform agenda in social, economic and political areas would also be crucial in taking Turkey to a recovery path. In fact, we see increasing warnings from credit rating agencies that there should be more policies that could take the Turkish economy to a sustainable growth, protect the government’s fiscal strength and re-establish price stability.

In the election declaration, ruling party, AKP, stated to:

(1) decisively maintain macroeconomic and financial stability; and

(2) improve efficiency in public expenditure and revenues for fiscal discipline.

Turning the plan(s) to policy action on the fiscal front will help reduce risk anticipation about the Turkish economy. Also, in the near term, the CBT actions would be key for the stabilisation of the markets. June inflation data showed further worsening in the price dynamics driven by cost factors, while elevated levels of inflation and an ongoing deterioration in inflationary expectations continue to pose further risks to the pricing behaviour. Accordingly, addressing the deterioration in the inflation outlook would be key for the CBT to rebuild credibility.

Sustainable improvements as far as uncertainty is concerned, with more clarity about the government system and detailed statements on future policy actions, will help reduce ongoing volatility.

Foreign policy in the New System

In the international arena, Erdoğan has called for political and systemic reforms. He represents power in domestic politics and symbolizes one of the main oppositions to the current global order.

However, the more Erdoğan emphasizes political changes in the current international order, the more the global powers alienate and “otherize” Turkey. They have mobilized every possible instrument to overthrow Erdoğan’s government. Despite the Western world’s bias and other obstacles, Erdoğan has managed to win yet another election. In this context, most observers now expect Turkey to adjust its foreign policy. For Western observers, it means the normalization of the country; for others, it is time Turkey accentuated its cultural identity in its foreign policy. For some, on the other hand, the new Erdoğan government seems likely to continue on its previous foreign policy path.

Turkey will continue to take initiatives in its neighbouring regions, namely the Balkans, Central Asia, the Middle East and the Eastern Mediterranean. It will try to establish regional stability axes. Therefore, Ankara will continue to challenge the contradictive and divisive political discourse of Israel, Iran and Saudi Arabia and will not allow any possible fait accompli against its national interests.

Moreover, Turkey has learned to compartmentalize its foreign policy, meaning that it does not approach its foreign policy with a “wholesale” mentality. For example, even though it opposes Iran on many regional issues, it is against the additional embargo imposed by US President Donald Trump’s administration. Similarly, Turkey has opposed the involvement of global powers in many regional issues, which in many cases have resulted in further instability, but concurrently, it calls for combined efforts to solve the regional problems.

Turkey will continue to maintain its alliance and strategic cooperation with the Western world and at the same time, it will continue to be an active member of NATO, the Council of Europe and other Western organizations.

As Erdoğan has said many times, Turkey will not stop its journey toward EU membership, even in the face of a strong anti-Turkish sentiment in the bloc. Both sides are aware that every passing day makes the possibility of a full membership even more difficult – if not impossible. However, interdependence between the two sides requires the expansion of their relations.

Turkey will continue to improve its relations with non-Western countries, Muslim and African countries as well. Erdoğan’s Turkey divides the world into two main political categories: Old Ottoman lands and beyond. Within this perspective, regions such as the Balkans, Central Asia and Africa are of crucial importance. Thus, Turkey has invested heavily and is financing many projects in these regions. As a result, it has increased its hard and soft power. Considering the fast-changing structure of the transitory global politics, balances of power, the consolidation of Turkey’s domestic politics and its economic structure, the country will resist and struggle against massive Western economic and political pressure.

Ankara will most probably continue to challenge the waves of international and transnational threats against it. It will also continue to pursue a multidimensional, diversified, interdependent and Ankara-centred foreign policy. Changing international conjuncture, regional environments and increasing economic and political capacity necessitates Turkey to take the initiative in regional and international crises.