Last Sunday, Turkey’s ruling Justice and Development Party, known by its Turkish initials AKP, took a hit. But it’s a hit that’s stirring the hopes of the nation’s entrepreneurs and investors.
For the first time in 13 years, the AKP failed to secure a majority of seats in Turkey’s 550-seat parliament. Garnering 40 percent of the popular vote, it won 258 seats – 18 short of the 276 necessary to rule independently. The party must now scramble to figure out a formula that will enable it to rule. That formula will require the AKP to negotiate and collaborate with other political representatives in order to form some sort of coalition government.
Turkey’s history with coalition governments is troublesome. For much of the late 20th century only coalitions, rather than a single party ruled the country. Many, including bankers and traders, point to these coalition governments as the reason that Turkey struggled as an unstable backwater for so long.
These same people now fear that a coalition government will negate any of Turkey’s gains over the last decade plus and throw the country back into chaos, gridlock, and uncertainty. Just hours after Turkey’s polls closed the Turkish Lira fell 4 percent. On Monday morning Turkey’s main stock market fell 8 percent.
Turkey’s entrepreneurs and investors are less fearful. “What happened in Turkey on Sunday excited me,” said Barbaros Ozbugutu, CEO of digital payment solutions platform Iyzico. “We saw that democracy still works and we can affect it directly.”
The biggest message in these elections was a resounding “No” to the AKP’s proposed consolidation of power, its increasing authoritarian tone, and the erosion in the balance of powers Cem Sertoglu
Over the past several years the health of Turkey’s democracy had come under scrutiny. Many observed that the country’s president and, until last August, prime minister, Recep Tayyip Erdogan was moving Turkey toward strong man, authoritarian rule.
Indeed as Erdogan barked out decrees, jailed journalists, curbed civil liberties, interfered in the markets, and pushed an agenda that prioritized his conservative and religious beliefs, comparisons with Russia’s leader Vladimir Putin seemed apt. Several Turkish entrepreneurs and investors told me that was what damaging to Turkey – not Sunday’s election results and the prospect of a coalition government.
“The biggest message in these elections was a resounding “No” to the AKP’s proposed consolidation of power, its increasing authoritarian tone, and the erosion in the balance of powers,” said Cem Sertoglu, a partner with the Istanbul-based venture capital firm Earlybird. Overall, he said, “the elections were a positive sign.”
Sertoglu noted that the Erdogan government’s propensity to rush legislation without any debate and deliberation hurt Turkey, particularly its entrepreneurs. Entrepreneurs, he noted, depend on trust and a strong rule of law.
Turkey’s startup scene has boomed over the last decade. Over the past year alone it has had two major exits.
The rule of law is something that Firat Isbecer, a tech entrepreneur who co-founded Pozitron that sold to the UK-based Monitise, said Turkey’s leaders needed to address. With the change in government he believes that that is more likely to happen. “The flaws in our justice and legal system need to be fixed by all parties, not just one.”
The one party that was previously in power, he noted in reference to the AKP, did not represent the views of all Turks. Now, with the election results in no one party’s favor, there are real prospects for progress. “This election showed that parties from different background, representing different ideas will have to better understand and respect each other, which is a sign of a stronger and pluralist democracy” Isbecer said. “That in the long run will advance Turkish entrepreneurship and Turkey’s position in the global economy.”
Mete Cakmaci, the secretary general of the Turkish Technology Development Foundation (TTGV), agrees. “No matter who is at the wheel, Turkey needs to reorient itself to strengthen the basic institutions toward an inclusive free enterprise economy with strong social standards,” he said. The strong voter turnout, over 85 percent, Cakmaci said underscored that – and the desire of the Turkish people to achieving it.
“What worries me is not the prospect of a coalition government or even early elections, but the chronic reluctance (of Turkey’s leaders) to implement structural reforms, particularly related to the venture economy” Cakmaci said.
The flaws in our justice and legal system need to be fixed by all parties, not just one Firat Isbecer
Other reforms Turkish entrepreneurs and investors told me they’d like to see is accountability and transparency. Under the AKP’s single majority rule over the last 13 years that had become increasingly difficult. And that in turn made it difficult for Turkey’s nascent yet promising startup scene to reach its potential.
Turkey’s startup scene has boomed over the last decade. Over the past year alone it has had two major exits. In February 2014, the UK-based Monitise acquired Pozitron, an Istanbul-based mobile money platform for $100 million. Last month, Delivery Hero, the global online food ordering service, bought Yemeksepeti for $589 million – one of the country’s biggest deals yet.
Numan Numan, a partner at the Istanbul based venture capital firm 212 believes that these types of deals, along with investments into new and existing startups, will continue. Investors to and in emerging markets like Turkey, he told me, understand not just the economic but the political risks at hand. And investors, he noted, have shown that they’re interested in Turkey. “The reality is there is a lot of promise here,” he said.
“With this election, people showed that they want all voices to be heard. Politicians now should put their egos behind and focus on growing the country,” said Numan. “That’s what Turkey’s startup community has been and is doing.”