Turkey turns east to form free trade zone



ISTANBUL // Turkey has embarked on the road to a "Middle Eastern Union" as an alternative to the European Union, according to some observers, after Ankara unveiled its vision for a giant free-trade zone spanning from the Bosphorus to Sudan and Morocco.

The country has taken the first step towards forming the bloc by signing an agreement with three southern neighbours - a move being viewed in some quarters as further evidence that Ankara is losing interest in joining the EU. "Turkey's new aspiration: Middle Eastern Union," the Milliyet daily newspaper trumpeted on its front page after the signing of a free-trade agreement between Turkey, Syria, Lebanon and Jordan during a Turkish-Arab forum in Istanbul last week. According to the agreement, the four countries will drop all trade and visa restrictions between them.

Ahmet Davutoglu, Turkey's foreign minister, said this was only the beginning. His country was in favour of strengthening co-operation within a region spanning from Turkey to equatorial Africa, he said. "We want to turn this region into a security region, into a region of economic integration." Mr Davutoglu did not present any concrete proposals to make that giant new trade zone a reality, and there was no sign that his statement had been coordinated in advance with any of the two dozen countries that would make up a bloc reaching from the Black Sea to the Gulf of Guinea. Neither did Mr Davutoglu address the question of how realistic the chances are to create a regional pact that would bring together sworn enemies like Iran and Israel.

But despite the unanswered questions, the signing of the regional trade agreement with Syria, Lebanon and Jordan, along with Mr Davutoglu's enthusiastic words about a wider co-operation, were enough to cause alarm among critics of Ankara's conservative religious government. Such critics, as well as politicians in the West, are concerned that Recep Tayyip Erdogan, the prime minister, wants to replace Turkey's historic mission of integration with the West with a long-term strategy to seek closer union with the Muslim world.

This so-called "axis" debate has been around for some time, fanned by Mr Davutoglu's ambitious new foreign policy, which is based on a perception of Turkey as a regional centre of power. In recent years, the country has significantly improved its relations with nations such as Syria and Iran, while ties with Israel, a traditional ally, have deteriorated. Last week, Turkey openly defied the United States, its single most important ally, by voting against new sanctions against Iran in the UN Security Council. "Turkey has brought religion to the forefront of its foreign policy," Kamran Inan, a former Turkish diplomat and government minister, told the Vatan daily.

"It is the latest fashion to create co-operation with the Middle East, to create a union [with Middle Eastern countries] and to be against the EU," he added, labelling such developments "very dangerous". Onur Oymen, a former ambassador and prominent member of the Republican People's Party, or CHP, the country's biggest opposition party, said Turkey was "sliding towards a Middle Eastern axis, towards religious, traditional and authoritarian regimes".

Deniz Bolukbasi, another former diplomat and member of the right-wing Nationalist Movement Party, or MHP, said Mr Erdogan was seeking close ties with leaders of Iran and Hamas. Mr Erdogan's governing Justice and Development Party, or AKP, has denied the allegations. Taner Yildiz, the energy minister, said Turkey remained committed to becoming a member of the EU and was engaged in "strategic co-operation" with the United States. But those western ties "do not mean that we will not co-operate with Arab countries, with the Middle East," he insisted.

This week, Abdullah Gul, Turkey's president and a former prime minister and foreign minister of the AKP, also dismissed the axis debate as baseless. Those arguing that Turkey's foreign policy axis was shifting were doing so "either because of a lack of information or because of bad intent", the president told reporters. One reason the axis debate has attracted so much new attention is that Turkey's relations with the EU seem to have hit a dead end.

Although the country's membership negotiations started in 2005, progress has been painfully slow. A growing sense of frustration has led to speculation that Turkey may be looking for friends elsewhere. The unsolved Cyprus conflict and the open resistance of some EU members to Turkey's efforts to join the Union have drained the Turks' enthusiasm for Europe, according to some politicians and diplomats.

A recent poll found only slightly more than half of Turkish voters favoured joining the EU, down from approval rates of 70 per cent several years ago. One in three Turks say the Europeans will never take in their country. Asked where Turkey's EU application stood, a high-ranking Turkish diplomat, speaking on condition of anonymity, recently replied: "Nowhere". "We are making all efforts, but nothing is going on,"he said, adding that there was now a real chance that Turkey's negotiation process would grind to a complete halt by the end of the year.

Robert Gates, the US defence secretary, recently voiced fears that the EU had pushed Turkey towards the East by dragging its feet over Ankara's membership application. His view is shared by many in Turkish government and diplomatic circles. The Turkish diplomat admitted Turkey had not done enough to implement EU reforms, but said they would still be possible, even under the limited progress of talks in Brussels. He said it remained hard to motivate politicians and bureaucrats under the current circumstances. "With no end in sight, it is difficult," he said.

@Email:tseibert@thenational.ae

The story of Edge

Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, established Edge in 2019.

It brought together 25 state-owned and independent companies specialising in weapons systems, cyber protection and electronic warfare.

Edge has an annual revenue of $5 billion and employs more than 12,000 people.

Some of the companies include Nimr, a maker of armoured vehicles, Caracal, which manufactures guns and ammunitions company, Lahab

 

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At a glance

Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.

 

Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year

 

Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month

 

Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30 

 

Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse

 

Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth

 

Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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UK's plans to cut net migration

Under the UK government’s proposals, migrants will have to spend 10 years in the UK before being able to apply for citizenship.

Skilled worker visas will require a university degree, and there will be tighter restrictions on recruitment for jobs with skills shortages.

But what are described as "high-contributing" individuals such as doctors and nurses could be fast-tracked through the system.

Language requirements will be increased for all immigration routes to ensure a higher level of English.

Rules will also be laid out for adult dependants, meaning they will have to demonstrate a basic understanding of the language.

The plans also call for stricter tests for colleges and universities offering places to foreign students and a reduction in the time graduates can remain in the UK after their studies from two years to 18 months.

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The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

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