Método de la solución TPM Análisis de las condiciones existentes

As already discussed, along with the corporate sector’s external borrowing, the post-2001 crisis era was also marked by a significant increase in the foreign direct investment (FDI).¹⁰⁹ Foreign investor presence in the business coalition was strongly encouraged compared to the previous policy phases (Öniş & Şenses, 2007). FDI was regarded as an important tool that would allow the further integration of the Turkish economy into the world economy and act as a channel for upgrading technology.

Within the scope of this paper, the most important aspect of the FDI after the post-2001 crisis is the concentration of it in the financial sector. The totals on the sectors that attracted rapid increases in FDI are in Table 5.9. The financial sector attracted the highest volume of FDI in the post-2001 crisis period, receiving 11,409 million dollars of FDI in 2007, which constituted 59.5% of the total FDI that entered the economy in that year.

109 In 2005, Turkey climbed to 22nd place among countries attracting FDI, up from the 53rd place in 2003 and 37th place in 2004 (YASED, 2007).

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Table 5.9: FDI Inflows in Top 5 Sectors between 2002 and 2007 ($US Million)

Sectors 2002 2003 2004 2005 2006 2007

1. Financial Intermediation 260 51 69 4,018 6,956 11,409

2. Transport, Storage and Communications 1 2 639 3,285 6,700 1,119

3. Chemicals and Chemical Products 9 9 39 174 602 1103

4. Real Estate, Renting and Business Activities 0 6 3 29 99 905 5. Manufacture of other Non-metallic Mineral Products 0 0 1 53 125 766

Other 352 677 540 979 3,163 3,888

Total 622 745 1,291 8,538 17,645 19,190

Source: The Undersecretariat of Treasury (2008).

Within the financial sector, the banking subsector has been the major recipient of FDI, mainly in the form of mergers and acquisitions. Table 5.10 shows the fixed capital investment into the Turkish Banking Sector, November 2004 and June 2007, in detail. According to BAT statistics, the percentage of foreign bank assets among total banks assets increased from 2.8%

in 2003 to 14.1% in 2010, and their share of total loans and receivables rose from 4% to 16%

over the same period. It is important to insert a caveat here that although there was a rapid increase of foreign banks entering the Turkish banking sector, foreign banks’ assets in relation to Turkish banks remain moderate in comparison to many other developing countries.¹¹⁰

110 For instance, by 2009, in Latin America, foreign bank assets accounted for 36% of total bank assets, on average, while it was more than 60% in Central and Eastern European countries (Mihaljek, 2010).

167 country. Relaxation of restrictions on the foreign bank entry, improvements in macroeconomic stability, and high growth potential are highlighted as major reasons for foreign banks looking to move into Turkey (Aysan & Ceyhan, 2008). Some of the effects that foreign banks had on the Turkish banking system are mentioned as that they expanded product variety, increased competition, transferred know-how, and strengthened domestic

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banks’ move towards lending to households (see, for instance, Çakar, 2003). What is of particular importance in the context of this study is this final point.

Both the increase in consumer loans and the foreign bank entry into the Turkish market gained momentum after 2004 (BAT, 2008). This can be seen as an indicator of the positive correlation between the two events. With foreign banks already being specialized in lending to households in their home countries, they were motivated to take advantage of Turkey’s rapidly growing consumer credit markets as well. Foreign banks rapidly expanded their consumer-banking services, and, concerned they might fall behind, domestic banks began to also increase their consumer-banking activities.

As seen in Figure 5.14, the foreign banks’ ratio of consumer loans to total loans was higher than in the total banking sector between 2002 and 2010. NBG, HSBC, Citibank were among those banks which pursued an aggressive strategy to take part in the growing Turkish credit market by purchasing domestic banks. For instance, the share of consumer loans to total loans of Finansbank (NBG) and HSBC was above 60% and 50%, respectively, by the end of 2010 (BAT, 2010c).

Figure 5.14: Consumer Loans in Total Loans (%)

Source: BAT

5.4 Conclusion

Studies on the reasons behind the rise in consumer credit most often focus on financial sector developments to understand the phenomenon. This dissertation argues that while examining the developments in the banking sector in the post-2001 crisis era gives

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2002 2003 2004 2005 2006 2007 2008 2009 2010

Banking System Foreign Banks

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valuable insights into an understanding of the reasons behind the increased supply of credit, an accurate understanding of the subject can only be provided by accounting for broader structural developments in Turkey’s economy. It is in this framework that this chapter gives an analysis of the major transformations in real and financial sectors of the economy.

The post-2001 crisis period has been characterised by Turkey’s greater integration into the world economy. Turkey experienced a transformation in its trade and production structure toward medium- and high-tech products during this period. Reductions in labour costs and deregulation of labour markets were important determinants for Turkey’s increased competitiveness in the world markets. One of the arguments of this study is that the rise in household debt in Turkey must be analysed against the background of the developments in the labour market: a rise in unemployment, stagnating real wages, and new types of low-paid and insecure jobs. The chapter also draws attention to the importance of considering the effects of the privatisation of services provided by public sector on the financial backs of workers in Turkey. All these factors contributed to the rise in demand for consumer credit and increased the vulnerability of wage earners to debt in an age when consumption was increasingly promoted through various mechanisms. The analysis of extending consumer loans particularly to low-income wage earners, given in Chapter 1, supports this argument.

On the supply side, there are four main factors that affected the banking sector and increased their desire to include consumer credit as one of their services. First, the banking sector went through major reformation and restructuring in the aftermath of the 2001 economic crisis. The process led to a breakdown of the holding structure of the banking sector, increased the concentration ratio, and created conditions for foreign bank entry. In this new environment, banks started to search for alternate ways of making a profit. Second, prior to the crisis, financing the public deficit and providing loans to firms were the major banking activities in Turkey. However, fiscal and monetary policies implemented in the postcrisis period reduced banks’ opportunities to make a profit from financing the public deficit. Third, the increased access to international credit markets reduced the reliance of Turkish corporations on domestic banking. Further, increased borrowing by banks from international markets created an alternative source of funds for them to finance credit expansion. The fourth factor is that a growing foreign bank presence stimulated domestic banks’ interest in consumer banking because, as mentioned above, foreign banks were already specialised in consumer banking and wanted to benefit from similar banking opportunities in host countries.

Domestic banks soon followed along the same path. Driven by all these factors, banking sector activities have increasingly moved to include consumer credit as a service, which has

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created the conditions for the financialisation of household income. While financialisation has provided individuals with greater access to consumer loans, credit cards, and financial services, the process resulted in a remarkable growth in household debt.

The rest of this study elaborates on the causes and consequences of the rise in consumer debt, particularly for workers in Turkey, and discusses the findings from the fieldwork amongst metal workers. However, before turning to the fieldwork results, Chapter 6 discusses the methodological approach used in undertaking the fieldwork.

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