Turkey in Turmoil

Just when we wrote about Turkey as a powerful emerging market 2 weeks ago, this country unexpectedly turns to turmoil of civil unrest. The fear of Arab Spring might have splattered into Turkey, though some frustrating entrepreneurs complain that the irrational protestors have turned the steady economic growth into Arab Winter instead!

It all started with a squabble of re-development in city estate. The dreadful civil unrest has tripped into the biggest protest movements against the Turkish Prime Minister Recep Tayyip Erdogan since he was elected more than 10 years ago.

The Gezi Park situated in the central city of Istanbul is the last piece of green land inside the commercial district. Recently, the local authorized announced the plan to demolish it and be replaced by a shopping mall. This government decision has not been going popular among the nearby residents despite the district judge reiterated this is part of the renovation project of Taksim Square but building the shopping mall is not the main intention.

The initial protest was started by a handful of irate residents sitting on the park when they were lobbed with tear gas from riot police. When the opposing civilians joined hands to stand against bigger security forces, they were attacked by pepper gas and thicker gases with barricades setup. The reaction turned into rampaging activities involving hurling bottles and charging against uniformed forces!

As the international human rights groups said the police and security forces have used excessive countering measures against peaceful demonstrators, Turkish citizens began to yell for Prime Minister Erdogen to step down. According to local media, 67 out of 81 provinces have erupted civilian protests. Moreover, confrontations are seen in the capital - Ankara, as well as the port cities of Izmir and Adana. The Turkish Medical Association claims that at least 3,195 people had been injured in clashes.

The crackdown in Gezi Park has sparked off wider unrest. People began to voice their unhappiness against government and Prime Minister Erdogen on hampering the freedom of speech and his authoritative style. Though Erdogen remains as the most powerful politician and leads the cabinet for more than decade, the fight of the Turks actually reflects the demarcation between the secular and modern generations against the older and more religious groups.

In April, the Turkish newspapers reported the ban of using certain eye shades, lipsticks and nail polish among the flight attendants as imposed by the new law. Other legislations include prevention to lift the ban on wearing headscarves for women in public universities and the controlled sale of drinking alcohols.

Turkey is ideally situated as a crossroad between the Central Asia and Europe. No one knows how long the Turkish government will take to quell the civil unrest nor the stoking fire be inflamed by its neighbor - Syria, who is in civil warfare now. Similarly, the debt crises of Greece sitting on the left side of Turkey has no clue on how these two countries may erupt into worsening conditions if the Arab Spring strides splurge into Turkey!

In summary, it is essential to keep an eye on the ongoing situation in Eastern Europe and Arab nations for next few months. The financial routs that have just been swept below the red carpet and grazing dispute in the Arab regions may easily spark off a flight of funds back into the U.S. greenback and equities. However, this may not be a good sign as U.S. policymakers prefer to see a weaker Dollar in bringing down their debt deficits.

As U.S. Federal Reserve Chairman Ben S. Bernanke has committed to keep interest rates at record low at least through 2015, the unexpected flight of offshore funds is always preferred to be locked into 10-year maturity or longer termed debt instruments instead of lifting the Dollar rates and cash stocks. Nevertheless, investors prefer to stake in liquid assets though this will constitute our projection of hidden danger in stock markets. What is your stake then?

~ DAR Wong is the Principal Consultant of APSRI. The expressions are solely his own. He can reached at dar@pwforex.com