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Istanbul Nightclub Jihad Hits Erdogan Where It Hurts Most: The Economy

Turkey ended a turbulent 2016 with a terrorist attack targeting the heart of Istanbul’s tourist industry, leaving the neighborhood with closed businesses and empty streets.

The early returns on 2017 bode ill for President Recep Tayyip Erdogan, whose pro-business policies once revitalized the Turkish economy and secured him voter loyalty for the better part of a decade.

Hurriyet reported earlier this week that Istanbul’s Ortaköy neighborhood, where the Reina nightclub the Islamic State targeted on New Year’s Eve is located, appeared significantly affected, with businesses not only in Ortaköy but throughout the city still shut down on Tuesday. “Usually busy streets housing renowned venues have also seen a sharp fall in patrons,” the newspaper notes, “[while] security measures were increased in Istanbul’s most popular touristic districts, especially in the Ortaköy neighborhood.”

Local business owners expressed fears that they would lose the support of Middle Eastern tourists, who had yet to abandon Turkey as a vacation spot despite the numerous Islamic State and Kurdistan Workers’ Party (PKK) terror attacks in 2016, as well as the deadly failed coup that swept Ankara in July.

“Nobody has been coming from Europe for a few years. I hope Arab tourists don’t now also flee Turkey following these attacks,” fast food chain manager Bülent Yıldız told Hurriyet.

“Unfortunately for Turkey, the New Year’s Eve nightclub attack is likely to continue to fuel concerns about the safety of the destination,” Olivier Jager, the CEO of the intelligence firm ForwardKeys, told CNN. ForwardKeys found a 69 percent decline in the number of bookings to travel to Istanbul after the bombing of the city’s Atatürk Airport in June. CNN notes that, nationwide, the number of international tourists flying into Turkey fell 21 percent from 2015 to 2016, again citing the intelligence firm.

Erdogan, aware of the threat to the economy, delivered a speech on Wednesday demanding business leaders increase production to keep the economy afloat as demand for tourism declines. “Let mobilize all means. Produce, buy, sell, employ, invest and revive the markets,” he told his audience, “All banks should cut rates to let entrepreneurs and businesspeople invest in a much more comfortable manner,” he demanded. “This will enable all of us to overcome these difficult days with success.” He alleged that the repeated terror attacks on the nation have not levied “any permanent damage” on the country’s economy.

In addition to threatening the political stability of the nation, this latest terror attack highlights how this instability threatens to force Erdogan’s Justice and Development Party (AKP) to fail to deliver on the only campaign promise they have been able to consistently keep: maintaining stability in the Turkish economy.

While socially and politically Islamist, the AKP is largely pro-business and free market, with its party platform highlighting “privatization as an important vehicle for the formation of a more rational economic structure” and asserting “that the State should remain, in principle, outside all types of economic activities.”

The AKP’s platform also vows the party will “simplify taxation regulations, shall reduce the number of tax types, shall decrease taxation rates and bring fairness to taxes.” Most relevantly, it lays out what the party calls the “Tourism Master Plan”: “increasing the diversity of products in tourism, identifying the priorities, ensuring the contribution of the local initiative, drawing up and assessing the tourism inventory of our country, projects for local promotion, shall be prepared by cooperating with professional organizations.”

For the first half decade of its position in power, the AKP largely succeeded in boosting the Turkish economy. Between 2002 and 2012, exports rose 325 percentThe Guardian noted in 2014 that inflation, having reached “up to 100%, has been brought down to single digits, while GDP has risen by more than 45% in real terms” between 2002 and then. That year, the AKP won reelection with 45 percent of the vote; it stayed in power in large part through three elections by courting international investment.

The next year, Turkey’s GDP grew another 4 percent, with observers citing “strong foreign trade and an acceleration in domestic demand” as the main reasons for growth. It was less than the average 6.8 percent a year between 2002 and 2007 but still significant amid the turbulent regional politics, including an influx of Syrian refugees and a higher number of terror attacks.

Experts attributed the slowed down economy, before the July coup attempt, partly to the decline of Turkey’s trade partners in Europe and Russia. While tourism was hindered, other industries continued to develop. The coup and subsequent crackdown marked a shift in the muted optimism still present in the business community about Erdogan’s tenure, however.

Erdogan blamed Islamic cleric Fethullah Gulen for orchestrating the coup and ordered thorough investigations to arrest and neutralize anyone the police found evidence of having ties to Gulen. The AKP government seized nearly 500 companies and detained hundreds of industry employees, including many in the Finance Ministry. Investors were now forced to fear the potential of their employees or companies being swept up in the purge.

The Gulen purge is, Erdogan insists, a pivotal arm of Turkey’s war on terror. The Turkish government calls Gulen’s charter school movement, Hizmet, the “Fethullah Terrorist Organization” (FETO). Police have insisted that Mevlut Mert Altintas, the jihadist assassin who shot Russian Ambassador Andrei Karlov dead in December, acted on behalf of FETO.

Erdogan himself has said “there is no difference between PKK, the FETO, or Daesh [ISIS],” meaning any terrorist attack can result in mass arrests of those suspected of being a member of any of the groups mentioned. The uncertainty this possibility carries is highly repugnant to foreign investors, previously the AKP’s reliable saviors come election time, and may bode ill for Erdogan’s political viability should they flee along with tourists.

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