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Global Economic Symposium
“Intergenerational Dialogue: Resolutions for the Major
Global Challenges”
September 11, 2009
Speech by Mr. Mehmet Şimşek, Minister of Finance,
Turkey
Distinguished Guests,
In these days when the global economy has been going
through a significant period, the economic crisis has become
the most important issue of the world agenda. In addition, other
problems that the world faces such as global warming, poverty,
pollution and increasing energy demand remain on the agenda.
Therefore, I believe that this panel is very beneficial in
terms of producing solutions for other important global problems
as well as the economic crisis still experienced. With these in
mind, I would like to avail of this opportunity to thank those who
contributed to and organized this symposium.
Distinguished Guests,
The global imbalances have been the focal point of the
economic debates for the last two years. During this process,
the financial crisis that emerged in the housing market in the US
has turned into a global crisis.
The confidence problem in the markets resulted in a
disruption of stability and thus, liquidity decreased. The
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problems that started in the financial markets penetrated the
real sector via trade and credit channels throughout the world.
Production, consumption and investment decreased in the
world while unemployment increased. The global trade volume
diminished. The most developed countries of the world entered
into recession.
As a result of these recent developments in the world
economy, the need for change and transformation in the global
economic
order
emerged.
Nowadays,
a
significant
transformation is being experienced in business world, in legal
system, institutional structure and even in point of views.
The developments have put forward some issues in terms
of the joint steps to be taken against the crisis.
These
developments
mainly
include
achieving
transparency and improvements in regulatory standards,
cooperation between regulatory and supervisory agencies and
reformation of the international financial institutions.
This crisis revealed the necessity to revise the financial
order.
Furthermore, the issues of fostering global cooperation
and establishing balance between the state and the market
became important.
On the other hand, the crisis increased the significance of
production as well. Particularly, the physical and human capital
supported by the high savings rates of developing countries
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became more important since it is very difficult to improve the
activities in the economy and to ensure welfare and sustainable
development without producing and enhancing productivity.
This issue has gained prominence in terms of the next
generations.
The measures taken for establishing this new world order
and minimizing impacts of the crisis will constitute more sound
economic structures in the future.
Furthermore, new supervision standards and economic
and fiscal rules will ensure a more stable global economy. Thus,
economic structures that produce more and create more
employment opportunities will be achieved. In this sense,
unemployment and poverty will decrease, and growth and
welfare will increase.
Distinguished Guests,
The Turkish economy integrated into the world economy
has been affected by this global crisis.
The crisis adversely affected financing opportunities and
external demand and caused a pronounced slowdown in the
economic activities.
Based on the unfavorable credit conditions, private sector
investments decreased and domestic final consumption which
is the driving force of growth has decreased since the 2001
crisis.
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The effects of the crisis have been also felt in the industrial
production index, capacity utilization rate in the manufacturing
industry and other production indicators.
Foreign trade volume began to diminish together with the
global crisis as of the last quarter of 2008.
Unemployment rate increased particularly in the exportoriented manufacturing sectors.
While taking steps for containing effects of the crisis, we
are implementing expansionary fiscal policies. Therefore our
budget deficit is increasing in the short term.
However I would like to say that increase in the
expenditures are resulted from
productive
areas. More
appropriations were allocated to the health, education and
infrastructure. More importance is placed on the investments
and fields that will enhance dynamism of the private sector. As
for the policies aiming to increase revenues, implementations
restricting the economic growth were avoided.
Furthermore I would like to emphasize that increase in the
budget deficit is not exclusive to Turkey. Many developed and
developing countries experience an increase in their budget
deficits as a result of the global crisis.
Although an increase occurred in the budget deficit in the
short term, I would like to underline that fiscal discipline is our
fundamental principle in the medium term.
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Fiscal discipline is a precondition for the macroeconomic
stability. Furthermore it enables sustainable growth. Because
high public debt burden and negative debt dynamics adversely
affect the private sector by diminishing access to the financing
resources and increasing costs of those resources.
In Turkey, growth is achieved under the leadership of the
private sector. If we cannot ensure fiscal discipline, cost of the
resources to be used by the private sector will increase while
their quantity will decrease. If we can provide a convenient
environment for the private sector, then Turkey will continue to
grow.
No matter how much we increase public expenditures, its
effect on the growth becomes limited. But contribution of the
private sector expenditures to the growth is considerable.
From this point of view, many arrangements were made in
Turkey on the basis of both fiscal discipline and improvement in
the budget, and institutional infrastructure in the last years.
Recently budget opportunities have been used for increasing
competitiveness.
Along with ensuring fiscal discipline, many structural
reforms were made for improving quality of the fiscal discipline.
Turkey took important steps in this field.
As it has been the case up to now, we will continue to
follow the developments closely and take the necessary steps
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by making no concessions to the fiscal discipline and structural
reforms in the upcoming period.
I want to emphasize that measures that will decrease
public deficit, risk premiums and pressures on the private sector
funds are very important. In the upcoming period, we aim to
realize many reforms such as the fiscal discipline in the local
administrations through the fiscal rule, an effective attitude for
fighting against the informal economy, an effective structure in
the revenue administration and a change in the management
structure of the SOE system.
Distinguished Guests,
Another important issue that occupied the global economy
in the recent periods was the food crisis.
A considerable increase was seen in the food prices as a
result of the unfavorable agricultural conditions triggered by the
global warming as well as utilization of agricultural products
such as wheat, maize and sugar beet in bio-fuel production.
Increasing protein consumption in some countries also
stimulated the increase in food prices. Basic food prices
increased so much that they began to put pressure on the life
standards.
As a result, increased food prices caused a food crisis all
over the world. Increases in the food prices resulted in protests
and rebellions in some countries.
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Energy problem is one of the most important problems that
face the global economy. Global population growth and level of
welfare result in an increasingly rising energy consumption. This
high energy consumption leads to both energy supply problems
and pollution during energy production.
In addition to all of these, hundreds of millions of people
face the threat of being without water because of unbalanced
distribution of water supplies in the world, population growth
and drought.
It is predicted that 3 billion people will be without water as
of 2025 and this figure will be close to 4 billion in 2050. It is
expected that this figure will be equal to 40 percent of the world
population in 2050.
The situation can deteriorate due to the climate change
resulting from global warming and drought.
Distinguished Guests,
World population grows by more than 200 thousand
persons per day. The world population is expected to increase
from 6.7 billion today to 8 billion in 2025. One third of this
population growth of 1.3 billion is coming from China and India.
While annual meat consumption of a Chinese person was
20 kg 20 years ago, this figure is 50 kg today. This figure is
expected to reach to about 80 kg in 2025. Similarly, annual
meat consumption of an Indian person was about 10 kg 20
years ago while it is expected to reach 20 kg in 2025.
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Exponential growth of population and consumption uses
up natural resources. Countries will have to allocate more
resources to fight against droughts, floods, storms, infectious
diseases and pollution which became more serious during this
period of change.
I think we should spend more time to think about
increasing life quality and welfare of the next generations once
we overcome the global crisis. We should develop new policies
to this end. There are lots of important steps to be taken.
Above all, world countries should use water in a more
efficient way. Possible droughts will reduce agricultural output
and trigger forest fires. We should expand forest areas and take
measures against fires.
In addition, I believe that renewable energy investments
should be accelerated. Innovations and R&D investments in this
area are mandatory to protect next generations from energy
crises. Countries that do not invest in renewable energy today
are going to face serious problems in the future.
In order to mitigate risks in energy production, countries
including Turkey should invest in wind, solar, water, waste and
geothermal energy.
Decline in the energy prices provided savings of more than
10 billion dollar in expenditures of Turkey for meeting energy
need in the last year. I think that transforming even only 1 billion
dollar of this figure into an investment in renewable energy
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production will be an important step against a possible future
energy challenge.
We make a great effort to get over the energy shortage. As
you know, we signed the Nabucco Project agreement which will
transport natural gas from Asia to Europe, and in which Turkey
constitute the most important part of the pipeline. This project is
a significant example of cooperation in the global field.
Nabucco is a historic project carried out in the field of
energy in terms of both our country and other partner countries.
This project will make a great contribution to meeting the
increasing energy needs. With this project, we aim at
transporting Caspian and Middle Eastern natural gas to
Bulgaria, Romania, Hungary and Austria by passing through
Turkey.
Apart from these, it is also necessary to encourage the
sustainable economic development containing high quality
production, clean energy, and recycling. Countries should be
organized to reduce the emissions. New technologies should be
developed to increase efficiency in water and energy use and to
use waste instead of cereal in animal feed and bio-fuel
production.
In addition, agriculture is an important area for the next
generations. Per capita food-cereal consumption has been
decreasing for years and food-cereal stocks have been
diminishing due to the increase in meat consumption of the
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crowded populations and in the share of bio-fuels and animal
feed in agricultural production.
Rising cereal prices have pushed poor countries into
hunger. To feed the growing world population, food production
should be increased whereas it is expected to decrease due to
temperature increase.
Therefore, the number of gene banks should be increased
to protect diversity of the agricultural species resistant to
different conditions; and local species should be started to be
re-planted.
However, countries alone cannot overcome these global
problems. As it is the case in the global crisis, the cooperation
and joint action is of great importance in the fight against these
global problems.
International cooperation is very important to reduce
poverty, to settle the disputes and to create an effective
framework
against
climate
change.
In
this
framework,
international organizations should undertake more responsibility
in combating global problems.
In addition, it should be remembered that global problems
such as global warming, poverty, infectious disease are
connected with each other. Therefore, without prioritization, all
of these issues should be handled with the same sensitivity.
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Distinguished guests,
These global problems not only affect us, but also the next
generations.
We, as the all world countries, must act together to leave a
more livable world for future generations.
Therefore, I think such activities which strengthen the
communication between countries are very important.
I would like to thank you for your attention and extend my
best regards.
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