A report published by the SETA Foundation draws a roadmap towards a new economy under the new presidential system in Turkey.

The report, “New System New Economy: A Detailed Roadmap” concentrates on the fields of industrial, agricultural, fiscal, and monetary policies and on institutional systems and the bureaucracy in accelerating the developments in Turkey’s economy. While the key points emphasized in the report are nativity and the efficient collaboration between various institutions, the authors also encourage long-term development and progress.

Although there has been concrete development in the Turkish economy, the report suggests that if the new system is established in the right way, Turkey is likely to reach its true potential – and even surpass it – in a short period of time. Effective and inclusive economic reforms are required in order to achieve this success.

The suggestions made in the report, covering the five different areas, are listed below.

Industrial policy

The report suggests for there to be set performance goals in the industry sector and for incentives to be given to companies in this field. The amount of incentives that companies will receive should be determined according to some specific performance criteria, such as the nativity rate of production, the amount of exports, and the number of patents applied.

If the performance targets cannot be met, the precautions that can be taken within the lines of the market economy must be predetermined and feasible. In addition, public procurement should be used more effectively, contributing to the development of domestic technology.

One further suggestion in this field is to put in place patient capital-style financial models, ready to take risks and avoid high financial returns if necessary, in order to enable companies to introduce breakthrough technologies and/or create new markets where they will be able to provide long-term funding on the terms appropriate to them.

Agricultural policy

Despite the fact that the proportion of support and incentives in the agricultural sector have increased during the AK Party governments, there are still significant structural problems in the sector.

Suggestions are made as to how to develop policies that aim to balance the import-export equation in the agricultural sector. Among these are the establishment of more functional agricultural banks, the utilization of technological developments, follow up of R&D and innovation activities in order to increase agricultural efficiency.

The report states that these efforts ought to be supported in an integrated manner with social infrastructure and rural development projects. In a country where the average age of farmers is increasing, young entrepreneurs should be encouraged and motivated so to keep them in this sector.

Fiscal policy

According to the report, Turkey’s budgetary discipline since 2002 has contributed to the national economy in various dimensions. Within IMF listings, Turkey is among the countries with the least public debt in the world.

Reducing the indirect tax burden on energy will seriously benefit Turkey, since energy prices on economic development issues are of great importance.

The report also states how Turkey’s expenditure on social protection has been increasing since 2002. It is emphasized that this increase should be maintained in order to increase social protection expenditures and to expand welfare state implementations in accordance with state facilities.

Money politics

According to the report, monetary policy should be removed from being a topic only within the context of the Central Bank of Turkey (CBRT). All institutions and organizations on financial markets (Banking Regulation and Supervision Agency, Saving Deposit Insurance Fund, Capital Market Boards…) should have a more active and constructive role in supporting monetary policy.

Public banks should aim for “value-added maximization,” and not for “profit maximization,” and should also support Turkey’s development in this field.

More, the CBRT should abandon its understanding that it has no other role to play other than stabilizing prices in the course of economic development. Rather, it should take into consideration the fact that the strict monetary policy applied has long-term damage to the real economy and economic development.

Institutions and bureaucracy

For more efficient ministries and committees, Turkey needs to direct experienced individuals to work in the field of bureaucracy.

The line management of newly established boards should not only consist of those from the field of bureaucracy and academia but also with individuals who have experience in the private sector.

In order to facilitate the daily life of citizens and companies, the report suggests to remove all unnecessary bureaucratic stationery operations as soon as possible, and suggests to develop a balanced reward-punishment mechanism in order to increase the job motivation and satisfaction of bureaucrats.

*Written by Suna Nur Sarihan.

In my previous column, I tried to show that good governance does not mean pursuing a fiscal policy as disciplined as possible or a monetary policy as tight as possible. Rather, good governance means trying to reach a policy mix that yields the highest possible benefit level to society and the country.

Take fiscal policy. We should note that fiscal policy is not to minimize government debt. Or, we cannot say in any sense that the lower the public debt, the better. Life is not linear in that way. Fiscal policy has several dimensions and a government’s performance regarding fiscal policy can truly be understood along the lines of these dimensions separately. The most conspicuous and maybe the most important dimension in that regard is public debt level.

Unfortunately, one of the defining features of the 1990s in Turkey was very high (government) budget deficits. The reason behind this was political incapacity, which resulted from political and economic turmoil lived through in most of the 1990s. In this period, on the one hand, budget deficits resulted in monetization, i.e. financing government debt via newly printed money, which in turn fostered inflation to a great extent. On the other hand, budget deficits prompted government to borrow money heavily, which resulted in increasingly cumbersome interest burden. These two factors -high inflation and high debt burden- emanated from rising public debt caused public debt to rise further. In the end, a vicious circle had come into being.

The government can lower the public debt level and make room for looser fiscal policy to be “used” in bad times.

One of the basic elements of this vicious circle -monetization- was eradicated in 1997, with an agreement reached between the Turkish treasury and Turkish Central Bank as to not print money to finance the government.

On the other hand, fiscal profligacy has come to an end after the 2000-01 financial crisis and with the introduction of successive one-party governments in the 2000s. There were very important lessons to be learnt from the dismal 1990s and the 2000-01 financial crisis itself on that regard.

So, the vicious circle was eradicated in the early 2000s. Inflation rate plummeted, interest burden decreased dramatically, and public debt to GDP ratio fell significantly from over 70 percent to only 28 percent as of today. We should underscore that Turkey is one of the least-indebted governments in the world. This ratio is 85 percent for the U.K., 105 percent for the U.S., 132 percent for Italy and 253 percent for Japan.

Turkey is one of the least-indebted governments in the world. This ratio is 85 percent for the U.K., 105 percent for the U.S., 132 percent for Italy and 253 percent for Japan.

However, we should not forget that, as I stressed before, public debt is not to minimize and eradicate “altogether,” but to manage and “optimize.” 28 percent of public debt has important upsides, yes. But we should not overlook the concept of “opportunity cost,” i.e. the cost of “not pursuing” somewhat looser fiscal policy. So, we should take into account the “downsides” of this level of fiscal prudence.

An excessive focus on fiscal discipline could harm the real economy, particularly when the real economy has past its boom period and is slowing down. When the private sector starts to curb its spending, following suit on the part of the government in order to “make ends meet” will only deepen the stagnation the country faces. So, in general terms, the government should pursue counter-cyclical fiscal policy in the Keynesian sense, in order to smooth out the business cycle. In good times, the government can lower the public debt level and make room for looser fiscal policy to be “used” in bad times.

The public debt level of the Turkish government is in very low levels that means that the government has an ample room to increase its spending level in an effort to boost the real economy.

And, after impressive growth rates for the last five to six quarters around 7 percent from 2017 to the first-second quarter(s) of 2018, the Turkish economy has been showing real signs of slowing down for some time. And that the public debt level of the government is in very low levels means that the government has an ample room to increase its spending level in an effort to boost the real economy. The government can do this without hurting fiscal discipline in any sense. Two or three quarters of somewhat looser fiscal policy could be enough. With good “forward guidance” and good communication on the part of the government with the public and the investors, the government can dampen and shorten the lower part of the business cycle we are now facing.

The Turkish economy grew by 7.4 percent year-on-year in the first quarter of 2018. Thanks to this spectacular performance, Turkey ranked second fastest growing economy in the G20, only behind India (7.7 percent) and ahead of China (6.8 percent) and Indonesia (5.1 percent). The average growth rate for the Euro area is only 2.5 percent. The U.S. is marginally better with 2.8 percent. Moreover, this performance of Turkey came at a time when other emerging countries in the G20 club have performed poorly. The growth rates of Mexico and Brazil are just 1.3 and 1.2 percent in the first quarter of 2018, respectively.

One should note that Turkish investment expenditures, arguably the most important sub-category of GDP (Gross Domestic Product), increased by 9.7 percent in this period, which gives an important sign regarding the health of the Turkish economy and her future direction.

Turkey has a very good track record of sustaining a significant level of average long-term growth rate (4.8 percent) for the last 7 decades. While the world economy grew substantially in the aftermath of the World War II (WWII) into the 1970s in general, only some (developing) countries including Turkey managed to sustain their growth performance more or less intact well after the 1970s and even until today. For example, the growth performance of Western Europe was quite bright with a 4.8 percent average growth rate annually in the 1950-1973 period as they were recovering from the tumultuous years between the two world wars and the WWII itself. However, their average growth rate was rather disappointing with around only 2 percent in the post-1973 period. The same pattern held for Eastern Europe, Latin America and the US, albeit with varying degrees.

Thanks to having a relatively high level of long-term average growth rate, the Turkish economy transformed tremendously after WWII. Prior to the war, Turkey had mostly been a rural country with an economy based mostly on agriculture. After the war Turkey began to industrialize with a growing urban population base. The share of urban population increased from less than 20 to over 85 percent and the share of agriculture in GDP plummeted from over 40 percent to around only 6 percent as of 2017.

While this performance has not sufficed for Turkey to become a fully developed country, it never the less made great strides from a very low base to become an upper-middle income country. With this performance, Turkey fared tremendously better than industrialized countries as well as numerous developing countries, beating the world average significantly.

Thanks to this performance, the Turkish economy grew more than 20-fold since WWII, as the Turkish population increased from around 20 to 81 million and GDP per capita more than quadrupled to over 10.000 dollars. In the period between 1950-1980, the Turkish economy had been inward looking and import-substitution growth strategy had been in place. With the adoption of export-oriented growth strategy, Turkey has increasingly become a globally open economy. The volume of external trade of Turkey has tremendously expanded since then, from less than 10 to over 50 percent of GDP.

Moreover, between 2002-2017, the average annual economic growth rate has been 5.7 percent, a tremendous performance, which is somewhat higher than the long-term average and far higher than industrialized countries, and better than most of the developing countries.

Surely, the Turkish economy has her own problems such as current account deficit, as other economies have their own. However, the Turkish economy has showed her resilience and potential time and again in the last 7 decades and particularly in the 2000s. Provided that smart economic/industrial policies implemented, Turkey can sustain her growth performance and become an industrialized and rich country by 2040 or 2050, as future projections indicate.

In the last week of April, heralding the coming of spring, the North Korean and South Korean leaders held a historic summit. Although apparently intimate meetings between the two leaders were described as a positive step towards stabilizing the region, there is much effort to be made. Besides, there are too many questions waiting to be answered. Is North Korea really sincere or trying to save time? How will China react to North Korea’s potential departure from its axis if relations improve? Will South Korean individuals shoulder potential economic burdens, as West Germans did in the past? How long will the Trump administration continue to be dovish against North Korea? Since I am not a political scientist or an international relations expert, I am glad that I don’t have to look for answers to these tough questions. The topic that I want to focus on here is quite different.

Turkish President Recep Tayyip Erdogan made an important visit to South Korea at a time when the 38^th parallel had experienced a dramatic event for global stability and peace.  President Erdogan and his counterpart Moon Jae-in signed four bilateral agreements on cooperation in higher education; information, telecommunication, space and satellite technologies; industry and energy; and health and medical science.  Prime Minister Binali Yildirim and his delegation also made an official visit to South Korea a few months ago. Turkey aims to strengthen its relations with East Asia, both commercially and financially, because the center of gravity of the world economy has gradually been shifting to Asia.

South Korea is a social laboratory for development economists, enabling them to understand how the state-led development strategy could be implemented successfully. South Korea is one of the few countries that have caught up with the developed world by experiencing a technological big leap with a strong industrialization push. Today, South Korea is the world’s leading spender on R&D as a percentage of GDP, innovating path-breaking technologies, and has global giant companies in different sectors.  In fact, South Korea had a similar level of development, in terms of GDP per capita, with Turkey in the early 1960s.

Turkey implemented a state-led industrialization strategy during the Cold War, just as South Korea did. However, while Turkey failed in this regard, South Korea took off. Smart industrial policies, strong bureaucratic capacity, an export-oriented approach, and a vibrant private sector have facilitated South Korea to climb up the development ladder.

South Korea has given priority to the manufacturing industry while giving incentives and making investments. Why? Compared with agriculture and services, in the manufacturing industry, productivity and spillover effects are higher. The manufacturing industry also offers special opportunities for capital accumulation and economies of scale.

Smart industrial policies are needed to avoid pre-mature a deindustrialization process and the middle income trap. Instead of giving incentives to all firms and industries, developing countries should pick the most promising firms and industries and support them. When giving support, South Korean governments set targets for firms and industries, and monitored them closely.

South Korea not only gave incentives to firms and industries, but also used disciplinary measures (e.g., withdrawal of subsidies and preventing the companies from participating in a public procurement). The carrot-and-stick approach was one of the most important reasons that made East Asian countries, such as South Korea, more successful than Latin American and Middle East countries.

Government supports and incentives were conditioned on performance, and especially on export performance. South Korea shaped its production structure by targeting mainly global markets, instead of its own market. The South Korean economy has risen with its tremendous export success.

To reap maximum benefit from state support and incentives, South Korean governments have taken into account upstream and downstream industries when designing industrial policies over the years.  Governments gave more support to industries with high backward and forward linkages. By doing so, South Korea increased its productivity level, minimized its dependency on imported high-tech intermediate goods, and offered more jobs to its citizens.

Since industrial policies are multidimensional, ministries and government agencies should work in a coordinated fashion to ensure that policies are implemented properly and efficiently. This is the working principle of the South Korean state. Strong bureaucracy has played a pivotal role in implementing all these policies featly.

In South Korea there is an entrepreneurial spirit that has a global vision and puts production success ahead of monetary success. Entrepreneurs wanted to prove to the whole world that South Koreans could produce as high quality and diverse products as Westerners. It was not enough for them to be an ordinary part of the global production chain, although this is an easy way of making good money with taking little risk. They wanted to be the special one. And they (e.g., Samsung, Hyundai, LG and Kia) did.

Over the last few years Turkey has started to give more importance to the manufacturing industry in order to reverse its pre-mature deindustrialization process, create more jobs and to escape the middle income trap. The Turkish government has been giving economic incentives to encourage more investment in key areas, such as automobile, defense industry, railway systems, renewable energy technologies, petro chemical industry, medical devices and so on. We need to investigate the South Korean development experience more carefully in order to raise efficiency of these incentives and investments.

In my previous column, I touched upon how neoliberalism and the financialization of the globe have rendered countries around the world susceptible to the caprices of the financial industry. Because of the pervasive influence of the financial industry, many developing countries including Turkey have found themselves in the last two to four decades unable to pursue a growth – and development – conducive monetary policy regime, which features a low policy interest rate and an undervalued exchange rate.

Two main developments, namely global liquidity abundance and unnecessarily strict monetary policy on the part of the Turkish Central Bank (TCMB), have accentuated wrong type of monetary policy in Turkey, which features a high policy interest rate and overvalued exchange rate regime in the 2000s. Between 2002 and 2008, the real interest rate hovered well above a staggering 10 percent for the most part. Only with the onset of the global financial crisis, TCMB lowered policy interest rate, albeit very slowly, and hence eased its monetary policy stance. However, the nature of the monetary policy regime did not change and once Turkey recovered from the crisis amid fears of the overheating of the Turkish economy in the 2010-2011 period, TCMB tightened its monetary policy stance too fast and too much, though resulting in not as pronounced a tight monetary policy as before the crisis, one should note.

Since then, TCMB has pursued a (somewhat) strict monetary policy as before purportedly with a view to decreasing the inflation rate, which has already been in moderate levels, but to no avail. This should not come as a surprise, because the Turkish inflation rate experience between 2004-2018 has shown that policy interest rate and real interest rate have had no (negative) discernable effect on the inflation rate. For example, when the real interest rate was 11.8 percent on average between May 2006 and November 2008, the inflation rate averaged out 9.75 percent, surpassing the long-term inflation rate in the 2000s significantly. On the other hand, between 2011 and 2013, real interest rates were well below 10 percent and the average inflation rate was around 7.6 percent, somewhat below long-term average.

Unlike “official monetary policy understanding in the world” and as Post-Keynesian economists advocate, inflation results mostly from cost-push factors, not demand-pull ones, and the Turkish experience in the 2000s attests that clearly as shown in an empirical paper in a refereed-journal by TCMB itself. According to the study, half of the inflation in the period of 2006-2016 in Turkey cannot be explained at all, and more than 90 percent of the other half has not been demand-driven, but cost-driven, which is agonizingly at odds with the “weak” theoretical fundamentals on which TCMB constructs its “strict” monetary policy stance.

All in all, the TCMB purportedly has long been trying to contain the inflation rate by a strict monetary policy regime in Turkey, only to no avail on the part of inflation rate, and – unfortunately to the detriment of the Turkish economy and “common people.” The whole “strict” monetary policy stance in the 2000s has debilitated the real economy in favor of the financial industry, hence the deindustrialization of Turkey. Of course, not to mention the aggravated income inequality emanated from this monetary policy regime. One should add that the same deindustrialization process happened in developing countries such as Brazil in the 2000s. Then, time is more than ripe for the TCMB to reconsider its monetary policy stance and take into account real factors such as employment, economic growth, income inequality and, last but not least, the development process of the country when constructing monetary policy function. After all, central banks are for the people, right?

There are two main types of monetary policy regimes particularly for developing countries: high policy interest rate – overvalued exchange rate and low policy interest rate – undervalued exchange rate. While there are certain pros and cons for each of these monetary policy regimes, the right one for developing countries is certainly the latter one. However, a majority of developing countries have increasingly found themselves – for the most part inadvertently and/or unwillingly – in a position of embracing the former regime since the advent of neoliberalism together with the financialization of the world.

For a relatively closed economy, pursuing monetary policy conducive to the needs of the country is relatively easy. This was the case for developing countries before neoliberalism, which had been implementing import-substitution industrialization (ISI) roughly up until to the 1980s. During the ISI period, the government had controlled the financial system outright or to a great extent. Even in a large number of developing countries, all or most banks had been owned by the state. Besides that, countries around the world had also controlled credit and deposit interest rates in that era. Further, central banks had directly been controlled by the state. These countries were also rather closed in terms of both foreign trade and international capital flows. Therefore, it was rather effortless for these countries to pursue a low policy interest rate – undervalued exchange rate regime in that period.

However, with the rise of neoliberalism, developing countries one-by-one dropped ISI and embraced an export-oriented industrialization (EOI) strategy. With this switch in economic policy, foreign trade has expanded tremendously and international capital movements increased dramatically. Moreover, the financial system was liberated and the caps on interest rates were removed totally. This era also witnessed the privatization of state banks, alongside other state firms, thanks to the privatization wave, which originated from the aura of the Washington Consensus. Hence, developing countries have become much more open both economically and financially. This transformation diminished the capacity of the state to pursue an independent monetary policy from abroad via her central bank.

Ironically, the emphasis on the independence of the central bank from the state in neoliberal ideology gained much ground at the same time. In the end, central banks did not become independent from everybody as generally assumed, but their subjugation and independence has changed its nature. In the ISI era, states were the masters of central banks and international markets were not important in that regard at all. On the other hand, in the EOI era, the international financial industry became the master of central banks in developing countries to a great extent, and the influence of the state over central banks dwindled tremendously. Note that states in the developing world also became much more susceptible to international influence both economically and financially within the neoliberal regime.

All in all, pursuing a low policy interest rate – undervalued exchange rate regime has become much harder in the neoliberal era. However, in order to complete industrialization processes, developing countries such as Turkey should adopt this regime. This regime is certainly not enough to the industrialization end, but is a must.

Turkey marks significant developments in the defense industry. Undoubtedly, the project of developing indigenously-developed unmanned aerial vehicles (UAVs) is among the country’s leading innovations. Manufacturing and using indigenously produced drones contributed to Turkey’s counter-terror fight to a great extent in recent months. Therefore, the developments in UAV technologies and their place in the defense industry constitute a considerable object of interest. SETA Foundation’s Strategy Program Director Hasan Basri Yalçın and researcher Abdullah Erboğa conducted an interview with Haluk Bayraktar, the General Manager of Baykar Makina, which presents important information regarding Turkey’s position in the field.

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The requirement of building a national and domestic defense industry has been highlighted in Turkey for a long time and we have lately observed that Turkey has achieved rapid progress in terms of developing UAVs. What kind of a transformation has Turkey experienced in the defense industry? Was there any critical turning point?

In Turkey, major steps were taken in the defense industry during the early Republican period. A number of national entrepreneurs and businessmen such as Nuri Demirağ, Vecihi Hürkuş, Şakir Zümre and Nuri Kılligil formed a convention in this respect. These names used to embrace their jobs as a mission. During the late 1940s, their initiatives were interrupted with the Marshall Plan aid that was introduced after Turkey’s strategic decision was shaped by the U.S. during World War II. Instead of the national entrepreneur/businessman model, the businessman model based on distributing important foreign brands was preferred. The question as to why Turkey does not yet have a domestic automobile partially stems from such choices made at the time. With the Marshall Plan aid, our military was equipped with donated foreign armored vehicles, tanks and weapons instead of domestic weapons.

The interrupted phase resumed with the Cyprus incidents in 1974, as during this period Turkey was subject to an arms embargo. It was during this era that the “make your own plane” campaign was re-initiated. Turkish Aerospace Industries Inc. (TAI) and Turkey’s leading defense systems producer ASELSAN were among the facilities established during this period. The period from the 1970s to early 2000s can be defined as the period of direct procurement and utilization from abroad. Meanwhile, joint production and montage activities were seen in certain projects.

In addition to manufacturing plants being found, a joint montage line of F-16 jets were also established with TAI in 1984. ASELSAN was established in 1974 as a consequence of the embargo imposed following the Cyprus Operation. Following ASELSAN’s establishment, while the U.S. continued to donate radios to Turkey, these were not used solely in order to encourage the operations of ASELSAN. There was another turning point as of 2004. It is argued that the hood event was the main factor triggering this since the turning point did not occur solely with the effect of a civilian initiative. Some military factors were also in play and we were direct witnesses of this period.  From the 1990s onward, the “network centric warfare” strategy gained prominence across the world and software and electronic components came into prominence in platforms. This reflected the possibility that those weapons might be used against us unless an investment was made within our own means. With advancing technologies, this situation became even more clear. Everything was mechanic a century ago, and electronic software dramatically changed the modes in the industry.

The turning point occurred in 2004 due to the fact that major bids corresponding to several billion dollars were on the agenda during the previous five years, such as bids on UAVs, tanks and helicopters. All of these were canceled and a domestic and original development model began to be implemented in 2004. The model was implemented in the field of UAVs in the most outstanding way. So, Turkey’s current position in the field of UAV technologies is the result of gradual process. Although it was really interrupted – for instance we confronted numerous obstacles as Baykar – a will was certainly displayed in this respect and we are now living the outcomes of this will.

UAVs in Counter-Terrorism

UAV technologies have developed at a rapid pace – is this because they are more producible or did the field emerge as a strategic necessity in the context of counter-terrorism?

Both factors have been effective. UAV technologies do really create the effect of force multiplier in operations as combatant force cannot properly be employed unless the targets are pinpointed. In addition, the conditions stemming from asymmetrical warfare environments increase the need for UAVs. It also presents a couple of advantages in terms of production and technological improvement. Each move made in this scope can take you to the cutting edge since UAV technologies experience a paradigm shift in aviation industry. While the previous century was based on a platform-focused aviation, the current focal points of the sector include themes like electronics, software and artificial intelligence.

Military systems are the top platforms. Below them are main subsystems, material technologies and their components. This field is required to encompass both military qualifications and military standards. For instance, if you are developing tanks, an enterprise cannot randomly step up to develop tanks. It is not easy to compete in a field that has remained steady since the Second World War. But an enterprise can develop domestic and independent UAVs, as we did, and can yield successful results. Thanks to the initiatives we made around a decade ago, we can develop and manufacture our local UAVs in our country and put them into the service of our military.

Is this because tanks are more complicated?

Rather than being complicated, it is a system that was developed a long time ago and so therefore it is not very easy to make groundbreaking moves in this field. As UAV technologies are newly developing, no specific standards or qualifications are requested for it. No one puts emphasis on certain qualifications in this field across the world as technology is always ahead of legal regulations. Besides being a newly-developing technology, UAVs do not have established main sub-industries when their subsystems and components are viewed. For example, in the automotive sector, all components can be found in the market from alternators to the most basic ones. It is a stable sector unlike the newly-developing UAV industry and for this very reason, it enables a great deal of flexibility. So many components from civilian sectors can be incorporated into the UAV industry. We call this “off-the-shelf material.” For example, suppose that you are developing the flight control system of an UAV.  It is a computer system that stabilizes the aircraft and enables it to automatically follow the routes identified and uploaded by you. You develop a software to create this system. Also, you need to work on the computer’s electronic equipment design and architecture. You create this design and architecture, and gather the components forming the computer such as its processor, diode and transistor. While you devise an authentic board design, you can purchase the components off-the-shelf since you have access to them for civilian and commercial purposes. This thus allows for the rapid improvement of the UAV industry.

Do you think there has been a critical point in the international arena where the need for UAVs has increased? Such as the Gulf War and the Second Iraq War to give examples from the past. Do you think the progress of UAV technologies accelerated at a certain point?

When you consider the literature, an example of this are the target drones used by the U.S. in Bosnia. There are also reconnaissance drones. Prior to that, drones were used in the Beqaa Valley by Israel. Israel is intensively employing such technologies in wars. We know that they were used in the most intensive way in the aftermath of 9/11. In a sense, this is due to the fact that the opportunities offered by technology make it possible to utilize UAVs in such operations.

While not that common in the Gulf War, AWACS (the E-3 Airborne Warning and Control System) was used in Kosovo.

During the Gulf War, the U.S. did not have an established UAV technology yet. Especially following the results obtained through GNAT UAV in Kosovo, its upgraded version Predator was predominantly used in that area. Meanwhile, Turkey was among the first countries importing GNAT UAVs. We purchased ten of them in 1994 but did not use GNAT or I-GNAT systems in the following years. Their average duration of flight is around 100 hours, which is incredibly low. They were not used then possibly due to the fact that our military structure and outlook on this technology was different.

New Generation Wars and UAVs

There was the Revolution in Military Affairs (RMA) issue during the 1990s. From now on, military conflicts will arise not because of the problems caused by the industrial revolution but of the problems arising from information revolution. The network centric warfare will be out in the open and all systems will operate interdependently, which is called “system of systems.” Such a state was commonly seen during the 1990s and early 2000s, but there is a claim suggesting that firepower is still effective especially with the start of proxy wars. Which period do you think UAVs belong to?

Considering the phenomenon of network centric warfare, UAV systems encompass many different technologies including communication, sensor, processor, command and control technologies. As a matter of fact, the progress made in these technologies make us effective. For example, sorting out some communication systems allows one to develop satellite communication and a broadband communication system that is higher than the line of sight. This makes you acquire the ability to transmit images with very high resolutions. Or, the sensor you develop becomes portable in drones. In other words, UAVs will have the same function with AWACS. Consequently, technology and practice are parallel to each other. This is the point where network centric warfare comes into play. It enables regarding each component in the battlefield as a communication instrument or a sensor while enabling the reciprocal transmission of data at certain hierarchic layers.

UAV technologies are the direct outcome of network centric warfare as UAVs do not mean anything alone. For example, the aircrafts developed by Bayraktar are flying day and night, both inside and outside the country borders. From the moment, they take off, all the data is gradually transmitted to all centers and monitored by the top level. When an engagement decision is issued, it is conveyed to the base that flies the relevant jet. So, the system operates within a hierarchy of network centric warfare. Imagine a ground control station that flies a drone by itself. It has a pilot and a payload operator. It flies the drone, and while monitoring it, the image is simultaneously conveyed to various centers including brigade command and general staff, and each of them issue a decision on their own level. Then these decisions are transmitted to the system from a certain base.

The practices in the concept of network centric warfare depend on how far the developed technologies comply with this structure. Currently, our UAVs use a home-grown virtual globe, namely the Geographical Analysis System (CAS) developed by Piri Reis company. This is a software-based mapping technology. About a decade ago, the country did not have such a chance: Let’s say you are launching operations in a certain region. As teams change, you did not have a chance to analyze and filter the data of the previous team, which impedes the formation of strong ties. Now we have a software system operating above servers. All data is live. Everyone involved in the process enters their data and each one has the opportunity to see everything live. This is actually a component of the network centric warfare.

Turkey’s UAV capacity

How would you assess Turkey’s position in UAV technologies from a global perspective?

From 2004 onwards, Turkey displayed a will in this field that was reflected to the specifications of the Undersecretary of Defense Industries (SSM), which is the procurement authority. The necessity of being home-grown and authentic is asked in all the critical components as part of the specifications. Some criteria were adopted and implemented in this respect. For example, purchasing a component from a local supplier who buys it from abroad is not considered national. We started with micro UAVs and thought that starting from such a point was the most crucial factor.

As a matter of fact, this is another dimension represented by UAVs. In the previous century, aviation was completely based on aircrafts, air vehicles and platforms, but this has changed with the advent of UAVs. It has evolved into a technology solely focusing on electronic software and guidance and control systems. To give an example, we are currently developing all the components of UAVs including their flight control systems, frames, server systems that operate ailerons, batteries, power systems and ground command and control. Aeronautics and aircraft engineering constitute only 10 percent of this. In other words, designing the airframe is 10 percent of the overall job.

To explain our position, I can say that Turkey is among the countries that use UAVs intensively. Also, aircrafts keep developing as long as they fly. You can develop them. But an aircraft waiting in hangar cannot take you anywhere. It causes you trouble. In this sense, Turkey has significant experiences.

I think Turkey is among the top five or six countries that can use UAVs effectively in operational terms. Thanks to the contribution of the companies that have developed this technology in an authentic way like we have done, this experience has come to the fore. We started from the bottom of the ladder, and have come to our current position by gradually growing. Of course, we will keep our progress. Technology is a race. But one of the most important factors that will contribute to this progress is the experience of using them in the field. This factor will take us even further. Experience, identification of necessities, and additions on the system based on the feedback we have: These are the factors that improve us. No improvement can be achieved without practice.

What is the exact process? Does the military request a specific technology from you or do you develop and serve the technology to the army? Can the political and bureaucratic bodies rapidly respond to the technological improvements?

Bayraktar Mini UAV is the first system we developed. The SSM was the first one demanding Bayraktar Mini UAV. They invited us and other companies according to an invitation method based on competition and everyone developed and presented an aircraft model through their own means without any research and development support. We ranked first and the grounds of Bayraktar Mini was thus laid. For example, Malazgirt rotating-wing UAV is a project we kicked off with our own initiative. We also took initiative in many other things such as Bayraktar Tactical Bloc 2 without any demand from the procurement authority. We call it embracing duty as a mission. It happens very often. The structure in Turkey needs to change, and it is gradually changing. Currently, the military is the consuming body while the the SSM is the procurement authority. And the industry is the producer. The Turkish Armed Forces (TSK) has ten years procurement plans. Strategic plans and project necessities are determined based on these plans. The military reveals project needs by working within the structure and conveys the Project Definition Documents to the SSM. The documents state the needs and the SSM endeavors to meet the needs by means of the defense industry.

But to what extent is this technologically effective? How far are the country’s industrial infrastructure activities and competence concerned while determining the needs? This has many restrictions in terms of technology. Which feature is on which level? Which one needs more focus? To which one is our industry more inclined? As a matter of fact, various spheres across the country including industry and academia are required to take part in the process. In the U.S., there are test centers called battle space. Students, academics and entrepreneurs are invited to take part in exercises with the military. While we were testing Bayraktar Mini ten years ago in southeastern Turkey, military officers told us: “No one interacted with us like you did.” However, engineers must cooperate with the military as they need to see and feel the military’s necessities. If the military and engineers remain detached from each other, the process would not work out. We actually need a transformation in this structure. Currently, there is an array of procedures implemented in Turkey that begin with the manufacturing of the product after the needs are identified. They are currently more flexible and dynamic than a decade ago. As far as I see, the SSM can take on much more initiative. Such factors are also important in advancing the projects.

UAVs and the Regional Balance of Power

Among the regional rivals of Turkey such as Iran, Israel, Egypt and Russia, who are the actors we can compete with in the region?

Iran and Israel started their UAV works before us. They have been making a great deal of investment in the field. In some technological aspects such as guide control algorithms and navigation systems, we are more advanced than these countries. The triple-redundant flight control system we developed and the results we obtained clearly demonstrate that.

For instance, a triple-redundant flight control system has been used in a tactical UAV for the first time in the world. This is such a flight control system that the drone can manage its own taxiing, departure and navigation from the moment it departs hangar. It also has various automatic modes. The landing process is completely automatic and takes place with a triple-mode redundancy. The system automatically determines which landing mode is to be used according to the degree of the wind-force. It applies the brakes after it lands and then returns to hangar. This kind of automation is not available even in airliners yet. Bayraktar is the one who firstly employed this system in the UAVs of such size.

What about Israel’s Heron drones?

Turkey ordered 10 Herons from Israel in 2005. Some delays occurred in their delivery and the first delivery was made in 2010. But many malfunctions were subsequently encountered in the logistic process. Bayraktar TB2 UCAVs, on the other hand, have been in inventory since 2014 and they are currently much more advanced than Heron drones, which are procured for operational activities. This is due to the fact that it is an authentic system developed in line with latest technological advancements.

The U.S. provides a great deal of technological support to Israel. But we have observed that we are far more advanced especially in flight control algorithms and systems. To express more tangibly, Bayraktar TB2 has been in the air for 15.000 hours and it has been operating only for two years. Despite that, many results have been obtained. It is a fully automated system that manages all the phases of the flight on its own. Even the first prototype we developed in 2009 had automatic taxiing, departure and landing modes, while none of them was available in Heron. Heron drones were hired during these years, which were remotely controlled by Israeli pilots. The problems grew after those pilots left the country following the Gaza flotilla raid. In this sense, I can safely express that Turkey is far more advanced than these countries particularly in flight control systems.

Is there a distinction between the vehicles designed to be combatants and the ones that were subsequently used as combatants? For instance, do Bayraktar and other Turkish companies directly plan the vehicles as combatants?

As a matter of fact, Bayraktar TB2 was designed as a reconnaissance aircraft. What they demanded from us was an aircraft that reaches an altitude of 18.000 feet, carries 35 kg weight and flies for 10 hours. We developed an aircraft with further technical features and came up with a system that can reach an altitude of 27.000 feet, carry 100 kg, and fly for 24 hours so that it can carry ammunitions. But of course, it was not developed within the concept of offensive combat. Its airframe can make long-time flights. It also collects and transmits real time data and makes engagements in certain cases. When the types developed for offensive combat are considered, we need air vehicles that are much quicker, a little more maneuverable and with far more carrying capacity.

Does this transition require a qualitative or a quantitative distinction? Or is the distinction much sharper than this?

It is a very smooth and natural transition. There is no difference in terms of technology. It is actually a normal progress. So, what I said is aerodynamically true. There is no radical difference when you look at the subject through the lens of electronics or software.

Does this new platform require a new structuring?

It required a new hull. Also, we need to take certain steps regarding the turbine engine technology as a country. Our target is to become independent especially in critical components.

Domestic Engine Production

How can we solve the engine issue?

We do not have any problem with that since Bayraktar TB2 has a piston engine that can be procured from everywhere. But this is not the case for turbine engines, which have some constraints. Turkey is already investing in turbine technology with the support of the SSM. Also, it must be noted that the aim of developing home-grown and authentic drones is motivated by the will of improvement without depending on external sources. The whole system of Bayraktar TB2 was developed by Turkish engineers. As for the airframes, electronic systems, guidance and ground control systems, we can produce them as many as we desire whenever we wish. This is why they are national – 93 percent of it is home-grown. The average rate of this in the defense industry is currently around 50 percent. It is noteworthy that such an important technology is around 90 percent domestic while the average domesticity rate in the defense industry is around 50 percent. This is due to the fact that a considerably high added value can be provided when its electronics and software are developed.

Being domestic is crucial for the defense industry. This aspect is not so important for other civilian sectors such as the automotive sector. But in the defense industry, being domestic is really of critical importance since foreign producers can deny anything to you when defense is in question. There are many instances to that. Therefore, Turkey has taken certain platform-based steps with regard to critical components and now we are advancing in the field of main subcomponents and subsystems as well as the field of material technologies. We will keep our progress and hopefully reach the point we aim.

But still Turkey cannot procure combatant UAVs.

Piston engine, or internal combustion engine, is not a critical component for Bayraktar TB2. This product is manufactured in many places of the world since the technology for it has been in the market for a hundred years. Although being domestic is significant, there are some priorities for that. For instance, as Baykar, electronic software was a pivotal priority for us. Consequently, we endeavored to develop all the critical electronic and software components as completely home-grown in the first phase and now we are yielding the outcomes of this endeavor. In terms of engine, there is a serious need for tribune engines in the country. The SSM has been initiating and supporting programs in this respect. We are trying to come up with solutions that would consolidate our independence.

Suppose that you decide to make a combatant UAV, but it is not certain how long it will take for the tribune developing company, which was awarded the contract by the SSM to develop this. Do such situations affect your projects?

Sure, they do. But they have certain road maps. The SSM released the roadmap for UAVs for the first time. Maybe you have read about this. There is a road map encompassing the period until 2035 which also touches upon the engine issue. They are also engaging in activities of coordination regarding this. So, the SSM is trying to make a coordination, exerting efforts to prevent programs from conflicting each other.

What kind of advantages do the combatant UAVs offer in the concept of asymmetrical war?

They offer very important advantages. Above all, they can stay in the air for a long time. They can exercise assignments in dangerous spots for long durations without being located. In this sense, they bring a great advantage.

What if satellite technology would be more advanced? Do you have any plans regarding the use of satellite technology?

We are not using satellite in our current communications system as we are communicating in the line of sight by installing antenna systems in certain centers. You can think of it as a base station. Satellite communication is not so necessary for the vehicle we developed.

What kind of experiences have you gained from the Operation Euphrates Shield? Is there any point you find important in this context?

Over the course of the Operation Euphrates Shield, Bayraktar TB2 vehicles offered support to our troops from the air as far as the weather conditions allowed. Of course, we have gained some important experiences. For example, the project of central command and control system emerged as a result of this.

As the center of gravity of the global political economy is rapidly shifting from the Atlantic to the Asia-Pacific region, the relative importance and influence of the rising powers in the multipolar global system continue to increase. In this context, the attention in public opinion focusing on Turkey-China relations is quite natural given that China is the world’s leading rising power that gradually erodes Western institutional, economic and technological hegemony; while Turkey is the leading rising power in the Middle East, Balkans and Caucasus axis.

As far as Turkey’s foreign policy options are concerned; it is obvious that the country’s approaches and policy choices especially with regards to regional geopolitical developments have radically diverted from the stances of the US and the EU since the reversal of the Arab Spring via authoritarian coups, foreign interventions and civil wars.

Since many global powers are endeavoring to strike a balance in Syria, reminiscent of the power balances in the 19th century, and the Western allies are overtly attempting to undermine the national security of Turkey in the region; Turkey is spurred to seek new formulas that would balance its conventional Western engagement occasionally with Russia or other emerging powers. For instance, as  Turkish President Recep Tayyip Erdoğan clearly expressed during his recent meeting with the US President Donald Trump, Turkey vigorously condemns the NATO allies’ equipping the People’s Protection Units (YPG) with heavy weaponry under the pretext of an anti-Daesh fight, as Turkey recognizes the YPG as a terrorist group.

The concerns on this matter have so far been expressed in a calm and patient demeanor to avert risking NATO’s security umbrella and shouldering the heavy costs of a possible tension with the US. Meanwhile, it is evident that the diplomatic unrest with the EU has also continued in parallel with the rise in far-right movements in mainland Europe. The insincerity displayed by the EU on the refugee issue tarnished mutual trust and the crisis eventually reached a point of suspending Turkey’s EU membership negotiations due to soaring arrogance of European leaders during Turkey’s state of emergency and the constitutional referendum process.

Boosting ties with the Eastern World will balance out Western Influence 

Consequently, it would be utterly reductionist to interpret President Erdoğan’s remarks about joining the Shanghai Cooperation Organization and leaning towards boosting relations with the rising powers of the East as a yearning for a permanent detachment from the Western allies. In contrast, Erdoğan’s subsequent visits to the rising Eastern powers such as India and China ahead of his critical meeting with President Trump contained considerable symbolic messages in terms of strategic balancing of ties with Western allies.

http://thenewturkey.org/turkey-in-the-eastern-mediterranean-energy-equation/

Right before his first face-to-face meeting with President Trump, President Erdoğan attended the “Belt and Road Summit” in Beijing on May 14 and 15, in which he met around 30 world leaders. In the group photo from the Summit, the hosting leader Xi Jinping symbolically posed between Erdoğan and Russian President Vladimir Putin. As the leader of a key NATO member, Erdoğan’s participation in such an important meeting in which a new globalization vision has been introduced by China, serves as significant strategic leverage that could ease the diplomatic unrest between Turkey and the West. This is particularly true when it is considered that Erdoğan enjoyed great interest and respect from both the Russian and Chinese leaders.

Turkey’s Position in China’s Global Initiative

The “One Belt, One Road” (OBOR) project is of critical importance since it demonstrates that China has entered a new phase in its controlled integration process to the global system. The project embodies China’s willingness to start a bold initiative by forming networks of finance, trade, logistics, communications, infrastructure and culture from the Eurasia axis. In this context, it was illuminating to see that the final declaration of the Summit stressed “an open global economy” and “participatory and free trade” while articulating the need to object to all kinds of protectionism.

Neo-protectionist tendencies are climbing in all developed economies and particularly in the US as a measure against shrinking global demand and economic stagnation. And it is no secret that President Trump overtly targets rising economies like Mexico and China with these measures. Therefore, China’s insistence on global integration by means of free trade reveals the country’s self-confidence in international economic and technological competition.

As a matter of fact, China is known to have advanced in a stable manner on the axis of foreign policy and economic strategy while taking systematic steps towards expanding its possible spheres of influence in the world system since 1980s, when Deng Xiaoping’s opening policies were started. In this context, the OBOR project reflects the vision of establishing an expansive economic and political sphere of influence by financing the infrastructure and development investments of developing countries in a line extending from Central Asia to Africa and Latin America.

The project also sets out an aspiration to completely resolve the domestic infrastructure and accessibility problems of China, which galvanized its role as the world’s manufacturing production base. The project grants access to all Western countries including the United Kingdom and growing economies like Turkey, which denotes different partnerships and multilateral win-win cooperation links as part of hundreds of projects planned to be implemented under this initiative. The Asian Infrastructure Investment Bank (AIIB), the New Development Bank (NDB) and the Silk Road Fund (SRF), which are China-led multilateral initiatives, create significant public finance sources for the investments that are to be made as part of the project.

China’s ability to establish balanced relations with Western agents in political and strategic terms by making room for itself in the global system through economic integration, trade and technological competitiveness sets a feasible model for Turkey in certain terms. Of course, the two countries are not comparable in geographic size, population, economic and technological experience, military alliance structures and historical developments. However, both countries share a willingness to improve their positions in the global system by pursuing “developmental” policies. Consequently, it is not a surprise that the presence of Turkish contracting companies in the world market comes in second position after that of China while the two countries increasingly came across in economic diplomacy initiatives in Africa and Latin America.

The OBOR mega project is of vital importance for Turkey as well as China since Turkey was a natural component of the ancient Silk Road and the Central Asian Republics through which the project goes have strong linkages with Turkey. The project will definitely create many opportunities for Turkey to boost its economic dynamism and diplomatic influence via networks of infrastructure, transportation, communications, trade and finance in an area extending from East Asia to Europe and Africa. Ankara is perfectly aware of the fact that the economic and geo-strategic center of the global system is rapidly shifting towards the Asia-Pacific axis. In this framework, Turkey attaches great importance to its bilateral and multilateral relations with China.

There is a great potential in Turkish-Chinese trade relations through increasing investments by Turkey-based firms in the growing Chinese market and improving economic ties with China, which is Turkey’s second largest trading partner after Germany with a $20 billion trade volume. The leading fields with growth potential include large-scale projects such as nuclear energy and high-speed rail lines, science-technology, finance, currency exchange transaction to support national currencies in trade, and co-investments in third countries.

Turkey and China share similar perspectives on various global governance issues including reforming the global governance system, economic diplomacy and advocating a more participatory order. As diplomatic relations between the two countries develop, economic relations and strategic partnerships will undoubtedly gain momentum. These developments will not unsettle Turkey’s existing alliance with the West; but rather contribute to the formation of relations on a more equitable footing.