Turkey, a new reality

A few years back I was responsible for a fund that invested substantially in Turkey. It may seem odd, but back then, the country had arguably the most technologically advanced banking and telecommunications sectors in Europe. A workforce with the lowest average age contributed to the optimism.

Unfortunately, last Friday’s thwarted coup was the latest mishap in a long series of political events that have shifted the endgame for this country. Attempts at authoritarian rule, deterioration of human rights, vilification of minorities and an increase in religious zeal have plagued the country in recent years.

The miscalculated coup attempt has only provided the government with an excuse to accelerate its policies. Journalists estimate that Turkey has detained, suspended, fired or stripped the professional accreditation of around 60,000 people.

Whatever the political and social motives for these purges, the potential economic implications will be substantial. These events will be wiping out an entire strata of political, religious and social thought in the country. While the current government may find solace in the hope of being uncontested for a few years, Turkey will be poorer in ideas, innovation and social cohesion for a few generations.

People will be afraid to speak freely and the political landscape will probably be tinged with a darker shade of religion. Women and minorities will probably once more be relegated to a slightly inferior class. The banner of Democracy will fly high, but the choice will be limited to one side and colour.

The major long-term impact will be the stalling of innovation and youthful energy that was so prevalent in the recent past. The freedoms necessary to guarantee an intellectual class no longer exist restricting checks and balances. Freedom of speech is probably the most underrated principle underlying economic prosperity in developed economies.

What does this mean for the investor still interested in the country? I expect asset prices to slowly adjust to the new reality. The increase in risk will lead capital flight. Over time market inefficiencies will creep in as the government increases its influence on market institutions weakening potential returns from investments.

This article was issued by Antoine Briffa, Investment Manager at Calamatta Cuschieri. For more information visit, The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.

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