After five exciting days in Africa, I arrived in Turkey to meet prospective students and to reconnect with local alumni. The Istanbul “meet and greet” with prospective students for our MBA program had barely begun when I was starkly reminded how interconnected our world is. As one candidate explained that he currently works in project finance on a $5 billion refinery in western Turkey, the candidate sitting next to him asked me bluntly if I thought such a project could move ahead even if the tapering of quantitative easing by the U.S. Federal Reserve drove up Turkish interest rates. I remembered reading a few weeks earlier comments by Indian central bank head Raghuram Rajan who echoed the sentiment across many emerging markets that Fed policy imposed considerable externalities on the rest of the world. Just as ultra loose monetary policy in the U.S. in the wake of the financial crisis had made lots of cheap capital available to fuel emerging market growth, tapering now sparks the fear money will equally quickly flow out again. Indeed, Turkey’s current account deficit rose to 7.1% of GDP in 2013, the currency keeps sliding, and the central bank has been forced to nearly double interest rates and moving them into double digit territory.
But macroeconomic turmoil is not the only factor weighing down on Turkish business. The government of Prime Minister Tayyip Erdogan, who has been in power for 11 years, is ensnared in a growing corruption scandal. Police have found millions in cash in the houses of senior government officials and a recording was leaked onto the internet that allegedly features the Prime Minister instructing his son to “get rid of it” just as police were raiding various ministers’ homes. Ironically, many Turks have not heard the recording because the mainstream media has variably ignored the issue or stuck to the government’s claim that the allegations are fabricated. In contrast, those with access to social media—particularly the urban youth in Istanbul and Ankara—seem to be spending more time on Facebook, Twitter, and YouTube spreading word about government abuse and organizing protests than checking in with their friends. In fact, the number one topic on the minds of MBA candidates and Yale alumni I met was the scandal and its impact on Turkey’s politics and economy.
Turkey’s business community must walk a delicate tightrope. One the one hand, Erdogan has given the country much-needed stability and his government may well escape upcoming municipal elections unscathed. On the other hand, many business leaders know that factors contributing to the devastating East Asian financial crisis of the late 1990s included allegations of “crony capitalism” and endemic corruption in hitherto high-growth markets and tightening monetary policy in the U.S. Are we about to witness, to quote Yogi Berra, déjà vu all over again? The risk alone apparently was enough for Mustafa Koç, head of the country’s most important industrial group, to grant a rare interview to the country’s largest newspaper in which he called on the government to address the corruption allegations and calm financial markets. “There is this perception out there and to act like there is nothing or to call all of it complete lies does not seem right to me,” Koç told Hurriyet. “Markets have been tense since December 17 [and] would immediately respond positively to a reduction in this tension. Trust needs to be rebuilt at once.”
The Koç family is of course the founder and principal benefactor of Koç University, which has quickly established itself as the country’s premier private university. We are fortunate that Koç University’s Graduate School of Business has been a very active and committed member of the Global Network for Advanced Management since its launch in April 2012. Saturday, March 1, was a big recruiting day at Koç and I was glad that Nida Bektaş, the business school’s executive director, and Başak Yalman, the academic programs director, gave me the opportunity to speak to prospects, students, and alumni about the Global Network and the Master of Advanced Management. The group was magnificent and gave me confidence that we can attract some great candidates this year and build a steady talent pipeline for the future.
As I was getting ready to leave Istanbul en route to Tel Aviv, more than 40 students from Fudan University in China, EGADE Business School in Mexico, FGV-EAESP in Brazil, Hitotsubashi ICS in Japan, IE Business School in Spain, and of course the Yale School of Management began to arrive in the city for the third edition of Global Network Week. Through lectures and case studies led by Koç faculty, as well as multiple company visits and conversations with business leaders, the students will no doubt develop a solid understanding of Turkey’s recent rapid growth, current challenges, and future opportunities. They could not be visiting at a better time. I do hope though that with all the focus on contemporary business and politics, the visiting students also find some time to explore this splendid city. I was glad that I finally had a few hours for sightseeing in a city that for millennia has connected civilizations, religions, and cultures. I saw and was blown away by the Hagia Sophia, the Blue Mosque, the Yerebatan Sarnici Cistern, the Spice Bazaar, and the Galata Tower. For millennia, the city by the Bosporus has been a bridge, a connector of cultures, markets, and societies, and its rich cultural heritage reflects this. Stepping into the Hagia Sophia in particular was an extraordinary experience. As I wandered around this architectural masterpiece, built in less than six years and completed in 537 AD, I could not help but wonder what, if anything, we have built in our time that will stand the test of time and still be marveled at 1,500 years hence?