Tag Archives: emerging markets

Unutilised Youth in Emerging Markets

I consider myself quite lucky that I can travel to many countries throughout the year for business and pleasure.

I had the chance to visit Athens after almost four years for a weekend and lately I was in Istanbul for a week. One of my latest observations is  that emerging countries, such as Greece and Turkey, are unable to utilise their very well educated youth not only in the labour force, but also in the social arena.

Consider Greece… Youth unemployment is close to 45 per cent and overall unemployment is around 25 per cent.

Consider Spain… Youth unemployment is close to 50 per cent and overall unemployment is around 22 per cent.

And finally Turkey… Youth unemployment is around 20 per cent and overall unemployment is around 10 percent.

A common point among all these countries—besides the fact that they are all Mediterranean—is that they have a highly educated minority youth population, whether they be not fully utilised in the labour force and inactive in the country’s social arena, or fully utilised in the labour force (very few of them), but again inactive in the social arena.

To be sure, a minority of the minority is active in the both arena and this is huge loss for these countries in closing the gap between them and highly developed nations.

Another common point among these countries is that there have been coup attempts and coups in their recent histories: a coup attempt in Spain in 1982, a coup in Greece in 1967–1974, and most recently, a coup attempt in Turkey in 2016.

Whether we like it or not, the common history of violence and coups has pushed the youth of these countries away from voluntary social  work and has made them completely apolitical, as well as more individualistic and disinterested in local/global issues.

Given that they are living in much better conditions than their peers, these groups of people live completely for themselves, make fun of everything and, more significantly, do not produce much.

It is no secret that all societies are becoming more individualistic, irrespective of the culture and countries that we live in, but it is always important to feed the soul as well as the stomach.

We should reincorporate these youths back into society and grow together! Unfortunately, I do not have a concrete plan to act upon, but I have the ambition to start somewhere!

All the best from a beautiful Mediterrean country.

Sukru Haskan
Twitter: @sukru_haskan

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Convergence in Economies, Is it really happening?


In my third year in university in 2004, I followed the Economic Development course delivered by a very good professor, Elif Çepni, in Istanbul. I remember her telling us about the convergence in economies over time.

The concept is pretty simple and logical. It is the hypothesis that the emerging market economies and developed market economies will in the end converge in terms of GDP per capita. The underlying reasoning is that the rate of the growth in the developing world is higher than the rate of the growth in the developed world.

Have developing economies really been catching up with the developed economies since 2004?


The share of the developing world’s population living on less than $1.25 a day (the international definition of poverty) has fallen from 30 per cent in 2000 to below ten per cent according to an estimate by the Centre for Global Development, based on new data published by the World Bank in April 2015.

According to an article in The Economist in 2014, were the emerging world able to maintain a 4.5 percentage point growth advantage over the rich world, then, all other things being equal, its average income per person would converge with that in America in just over 30 years—scarcely a generation.

Unfortunately, since the global financial crisis in 2008, a lot of things have changed. The growth rate of emerging market economies has slowed down and the convergence has faltered.

Growth rate is not the only factor, but it is one of the main reasons that convergence is not happening. Emerging markets have been still dealing with implementing efficient governing policies, productivity levels (technology) and rules of law.

Red tape in emerging markets is very high and corruption does not really help. According to a recent report by Transparency International, emerging markets continue to be more corrupt than the developed world. This reports highlights that Brazil and Turkey have seen the largest fall in terms of cleanliness in the last four years.

Unfortunately, corruption leads to less productivity, and less productivity leads to poor citizens, which in turn leads to less educated communities and bad governing policies along with weakened rule of law.

It is a vicious circle for emerging markets.

I personally believe India has very much potential, but with the current red tape level (opening a business is one of the hardest), the potential of the country is still not being realised. President Modi has been elected to change this, but easier said than done: it will take time.

A paper written by Harvard economist Dani Rodrik in 2011 argues that generalized, rapid convergence is possible in principle, but unlikely in practice. His baseline scenario has to be one in which high growth remains episodic. Sustained convergence is likely to remain restricted to a relatively small number of countries. I totally agree with his conclusions.

According to an Oxfam report, the combined wealth of the richest one per cent will overtake that of the other 99 per cent of people next year unless the current trend of rising inequality is checked. Oxfam made headlines at Davos last year in 2015 with the revelation that the 85 richest people on the planet have the same wealth as the poorest 50 per cent (3.5 billion people). That figure is now 80—a dramatic fall from 388 people in 2010. The wealth of the richest 80 doubled in cash terms between 2009 and 2014.


A prominent Turkish conglomerate, Ali Koc, has mentioned in a conference that we have to sort out the inequality in the system in order not to face bigger problems in the near future. The existence of large inequalities always open the door for correction, which may lead to a global war. The migrant crisis, for example, is an early symptom of this.

Sustainable growth is unlikely, so it will remain just a hypothesis. It is true that we have more middle class now, but we have still one in nine people living below the poverty line (less than $1.25 per day).

On the other hand, there are some voices claiming that the emerging markets’ catch-up with the developed markets will continue into the 2020s. A prominent economist, Kemal Dervis, believes it is not the end of the party for the emerging markets yet.

As a final note, I would like to share with you Dani Rodrik’s 2013 slides about the subject, with which I completely agree.

With low commodity prices; capital flowing back to the mainland; the Chinese slowdown and discussion about whether the landing will be soft or hard; geopolitical developments in the Middle East and Russia, it is likely that the growth rate of the emerging markets will be surpassed in the near future.

This weekend I am in Bintan, a beautiful island just one hour away from Singapore. I will write my observations about the island and my short journey next week.

All the best from Indonesia.

Sukru Haskan

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Hike the Interest Rate, Please!


There is a FOMC meeting scheduled for next week and September, 17th is the date when Janet Yellen will hold a press conference. Everybody is waiting for that date in the financial sector as Janet Yellen will convey the decision on whether they will hike the interest rate or not.

For those of you without a finance background, FOMC stands for Federal Open Market Committee.

FOMC consists of 12 members and it holds eight meetings per year. September is one of the last three meeting dates for this year.

This invaluable group of people are responsible for designing the United States’ monetary policy.

The last FED interest rate hike was in 2006.

Yellen, FED chairwoman, has indicated many times that they are data driven and not market driven.

The data are good. Unfortunately, the markets are not.

There has been huge volatility since early June. It started with Greece and now continues with China.

If Yellen delays the rate hike decision, it will once more contradict FED previous statements.

What happens when you contradict your statements continually?

You lose your credibility. 

And it is not good when you have competitors willing to replace you in the system.

Many will discuss that FED has a global role to stabilize the markets, I do not really agree with this point.

The fundamentals of different economies have recently changed dramatically.

The US is growing and its unemployment level is now back to pre-2008 levels.

In my opinion, we will continue to see divergent policies rather than convergent policies among central banks.

And it creates problems…


Because we got used to seeing convergent policies after 2008 and now that policies around the globe will be mixed, it will be harder to predict future moves in many markets.

There are many valuable economists and bankers that do not share my view.

A reputable columnist in FT, Martin Wolf, wrote an article this week entitled ‘Keep rates low – the world is abnormal’.

Andy Haldane of the Bank of England said “The act of raising the yield curve would itself increase the probability of recession”.

The World Bank has warned FED not to increase the rate as the world is not out of the woods yet.

Emerging markets will be affected dramatically by a rate hike. The rate hike will accelerate the outflows from emerging markets and it will create further turbulence.

This is an inevitable fact…

But some, surprisingly, are in favour of a rate hike.

Indonesian central banker, Mirza Adityaswara, is one of them. Another is Peru’s central banker.

Unsurprisingly, Swiss National Bank is praying for a rate hike. They want to abolish their negative interest policy as soon as possible. They know that it is unsustainable.

No matter what the decision is, the time for a rate hike is coming closer and closer…

There is no escape!

We will shortly experience the end of the cheap money era.

And I think it will start on September, 17th…

Good luck!

Best from Singapore,
Sukru Haskan
Twitter: @sukru_haskan

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