AKP yet to win over wary business elite

By Vincent Boland

Published: July 9 2007 03:00 | Last updated: July 9 2007 03:00

When a group of analysts and economists at Garanti Securities in Turkey recently gathered for a regular meeting, talk turned to the country's looming general election. In a show of hands, three quarters of those round the table said they would vote for the Republican People's party (CHP), the main opposition, which is strong on secularism but weak on the economy.

Then they fessed up. As Mahmut Kaya, head of research at the Istanbul-based brokerage, recalls: "We all said we'd vote for the CHP but we all hope it doesn't get into the government" after the July 22 election. Like many in the commercial and financial elite in Istanbul, they want the outgoing government of Recep Tayyip Erdogan, prime minister, and his Justice and Development party (AKP) to be returned to power. But they would never vote for them.

It is a sign of the admiring but wary relationship that has developed in the past 4½ years between the socially conservative AKP, which has its roots in political Islam, and Turkey's business and financial elite, who got rich under the secular republic. Business leaders respect the AKP's economic record and its reformist credentials. But they retain a suspicion of its social and populist origins in conservative Anatolia, which some of them consider to be in a different country.

"The business elite and the government seem to have reached a sort of modus vivendi," says Ercan Uygur, president of the Turkish Economic Association. "There is a genuine worry that the AKP is not very sensitive to secularism and that this insensitivity might at some stage destabilise the business environment. But business also realises that the AKP is much more modern than the opposition, and much more in tune with global currents and events."

Turkish business - and its relations with politics - have also changed. Business was politically engaged but tended to keep its distance from any one party. Now with the rise of the AKP, business is becoming more engaged - particularly in Anatolia where many of the party's activists are themselves entrepreneurs. Although all Turkish parties get state funding, the fact that the AKP has an entrepreneurial base is changing the rules of the game.

The result is that Mr Erdogan, a former mayor of Istanbul, can afford to ignore the ambivalent elites in his old stamping ground. Opinion polls suggest the AKP will again be able to form a government on its own. If it does, it will be with the support of Turkey's new business establishment in Anatolia, for precisely the mix of pro-business social conservatism that vaguely repels the old guard.

Businesses created by families and entrepreneurs in places such as Kayseri, Konya, Gaziantep, and even Ankara, are contributing a growing share of Turkey's $400bn (€295bn, £200bn) gross domestic product, which has expanded at an average annual rate of7.4 per cent in the past five years. Moreover, as Tolga Ediz, an economist at Lehman Brothers, noted in a recent commentary on the election, they are becoming increasingly important political actors.

They represent the "new centres" challenging the established business culture of Istanbul and demanding a greater share of capital and human resources. They also have a greater stake in the reforms being pursued by the AKP. Istanbul, with its banks and multinationals, thrives regardless of the political climate. Anatolia is more dependent on the domestic economy and its industries - mainly textiles, food products, and manufacturing - have a less secure foothold in the global economy. It needs a sympathetic political environment.

One of the most striking characteristics of the AKP is its embrace of the idea of Turkey becoming rich while retaining its conservative traditions. That vision resonates in Anatolia much more than in Istanbul. "It's very important to retain your conservative values while adjusting to economic liberalism," says Mustafa Boydak, chairman of Boydak Holding, a $1.8bn conglomerate in Kayseri.

The AKP has not given up on Istanbul. Since it was swept to power in 2002, it has consistently wooed the financial community. Senior ministers, such as Ali Babacan, in charge of relations with the International Monetary Fund, are fluent in the language of the financial markets. "The lines of communication between this government and investors, and especially with foreign investors, have been much more impressive than with any previous government," says Mehmet Sami, an investment banker.

Yet the ambivalence remains. Like many Turks, the financial community likes the AKP's economic management but has never bought into the political vision. Rightly or wrongly, they regard it as a threat to the secular republic. Stockbrokers are secularists, too. They want the AKP in government, but with less room to throw its weight around. As Garanti's Mr Kaya puts it: "I'm sure people like myself will vote for the CHP not because we want it in the government but so that we can ensure that certain things never happen."

Copyright The Financial Times Limited 2007