Turkey: Is Foreign Minister's Hometown a Harbinger of Economic Change?

An unprecedented thing happened last year in Konya, the capital of the province where Turkey's mould-breaking foreign minister Ahmet Davutoglu was born in 1959. For the first time in its recent history, this agricultural center-turned-industrial boom town exported more goods to the Middle East than to Europe.

It is a statistic that sheds light on an issue frequently overlooked in debates about whether Davutoglu's multi-lateral foreign policy is leading Turkey away from Europe: Turkey's western orientation has always been paralleled by its economic dependence on the West, and that dependence now seems to be waning.

Just over a half-century ago, when Davutoglu was born in the nearby district town of Taskent, Konya's population was 50,000, and the town was known only for its wheat, its conservatism and its Seljuk mosques. Today, the population has grown to over a million and the city's four organized industrial zones extend 20 miles north on the Ankara road. Konya annually exports goods worth about $1.3 billion, roughly the same as annual exports for the whole of Turkey during the 1970s.

Rather like Ottoman Empire reforms from the 18th century on, it is a transformation that took place in Europe's shadow: Konya's first industrialists were the owners of workshops set up in the 1950s and 1960s to repair western-made agricultural equipment.

The engineer Ali Akkaya was one of them. He remembers how work in the state water department which employed him was held up for weeks because three US-made excavators had broken down. "Cogs about the size of my fist, that's all it was," Akkaya says, describing how he paid for a small shipment of Austrian steel with his first wage, fashioned new cogs out of it, and promptly resigned to set up his own engineering works.

Accelerating after Turkey and Europe signed a Customs Union in 1995, Turkey's links with the West reached a high point after 2001, when a banking breakdown triggered the worst self-inflicted economic crisis in the country's history.

"The domestic market dried up," remembers Esref Cifci, head of a Konya-based factory that supplies parts to car-makers like Renault. "We all made our catalogues, set up our websites, picked up our briefcases and set out to find new buyers."

Back then, new buyers meant Europe. Turkish industry didn't have the reputation to permit people like Cifci to sell directly to buyers in the developing world. "Instead, we sold to Europe to be repackaged and sold on," Cifci says. "They may not have written 'made in Germany' on the box, but that is what it looked like."

A decade on, the economic dependence of Konya (and Turkey as a whole) on Europe is waning. The industrial pecking order is less pronounced than it was 10 years ago, cutting out the need for the middlemen Cifci refers to. Plus the current global crisis has affected developed western economies far more than Turkey and its less economically developed eastern neighbors.

Long before European Union members began debating how to deal with Greece, Turkey's heavily indebted western neighbor, most analysts were predicting at most 1 percent growth in the eurozone this year. On Turkey's southern border, Iraq's Kurdish region, meanwhile, roughly 90 percent of whose construction sector is controlled by Turkish companies, is expected to grow by 20 percent, according to the market intelligence company Euromonitor.

Trade figures reflect the changing balances. Between 2007 and 2009, Europe's share of Turkish exports dropped from 57 percent to 49.5 percent, while the Middle East's share more than doubled from 10 percent to 22 percent.

An official at Konya's Chamber of Industry, Fatih Ulutas, describes talk of Turkey drifting away from the West as "dumb." "Turkey is just getting on with business," he says. "Isn't that true of the rest of the world?"

Widely acclaimed as the chief architect of Turkey's increasingly pro-active foreign policy, Davutoglu has always insisted there is no contradiction between Turkey's growing regional prominence and its candidacy for European Union membership. "The more you pull the bow-string eastwards, the further you can shoot the arrow westwards," he says, using a curiously belligerent image at odds with his reputation as the most peaceable of men.

Yet there does appear to be an inverse relationship between Turkey's enthusiasm for European Union membership and the strength of its economy.

When the domestic crisis knocked nearly 10 percent off Turkey's GDP in 2001, economists talked endlessly about the need for anchors to help Turkey weather the storm. Konya's businessmen responded by taking to the road to find new markets. Turkey's politicians responded by signing a deal with the International Monetary Fund to rebuild their banks and - after years of hesitation - rolling up their sleeves to pass the sensitive reforms required to ensure a start to EU accession negotiations.

Shortly after Ankara got the green light from Brussels in 2005, the economic buzzwords began to change. Instead of "anchors," analysts began speculating about a "paradigm shift" in Turkey's economy away from a two-decade vicious circle of booms and busts toward one that emphasized stable growth.

The on-going global crisis would seem to have put paid to that thesis, knocking 6 percent off Turkey's GDP in 2009 and contributing to a three-point rise in unemployment.

In December 2009, however, a leading international credit agency put Turkey's credit rating up two notches. Praising the strength of Turkey's financial sector, Fitch seemed unconcerned that Turkey's two strongest economic anchors from the early years of the new millennium had largely disappeared: while other emerging economies rushed last year to sign credit agreements with the IMF, Turkey, one of the Fund's most loyal clients over the years, announced this week after 18 months of shilly-shallying that it could "stand on its own feet" without a new deal. A recession, likewise, appears to have done nothing to revive the AKP government's enthusiasm for EU-backed reforms, non-existent since 2005.

A conservative city, Konya became the first place in Turkey to elect an Islamist - and anti-western - deputy in 1969, and it is not difficult to find locals who view Europe's faltering economy with schadenfreude.

"Europe may not pay much attention to us now, but they will," says Mehmet Ali Atiker, one of Konya's best-known industrialists. "The era of kingdoms is finished. The kings - Europe and America - are condemned to disappear."

But many more businessmen see the switch in trade patterns as a sign of Turkey's growing resemblance to a western industrialized country.

"Turkey has learned its lesson well", says Seyit Mehmet Buga, CEO of Ittifak, a company set up 20 years ago with contributions from thousands of religious-minded Turks working in Germany and listed on the Istanbul Stock Exchange this January. In the past, "those who accepted western lifestyles shaped this country. Now, [it is] those who have accepted Europe's culture of production."