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The Kapali Carsi

Will the ruling AKP pay for the Turkish graft scandal in the upcoming local elections?

If nothing else, the Turkish graft scandal has put the country right in investors’ radars. The FT, WSJ, Bloomberg, Reuters and the like each have not one, but several stories on Turkey everyday.

Being in the spotlight is exciting, and the long-term prospects of Turkey are important for anyone considering FDI in the country, not just those unlucky enough to be Turkish citizens/residents. But for short-term money, which finances most of the country’s current account deficit, short-term prospects are much more important. These guys are wondering, rather than if Turkey will stay democratic, if the ruling Justice and Development Party (AKP) will be able to conserve its popular support in the local elections at the end of March. These elections are local, and so the AKP will not be losing the government, but loss of key cities such as Istanbul and Ankara, and more generally a significant lower percentage of votes than its 50 percent in the 2011 general elections, could undermine perceptions of political stability.

The party was continuing to have strong support before the graft scandal, and an indirect way of answering this question, without resorting to the surveys (see below), is to decide how much voters could punish the AKP for the scandal. Obviously, it is impossible to know for sure, but I argue in a recent Hurriyet Daily News (HDN) column that the AKP will probably not be losing more ground than a few percentage points.  You can read the whole thing at the HDN website, but I base my argument on two interrelated observations:

First, voters have not punished corrupt incumbents in Turkey as long as the economy is doing well. Those instances where some think they did are episodes right after a major crisis, as in 1995 and 2002. Moreover, there is some international evidence that this is the case not only in Turkey, but also in other countries with high levels of corruption.

Let me be clear: I am not saying the AKP will emerge unscathed from the scandal. All I am saying is that it may not lose more than a few percentage points if the economy doesn’t tank.

But how are the latest polls? Here are a few, compiled by a market economist friend of mine:

Gezici IVEM ORC Konsensus ANAR Andy-Ar KONSENSUS DENGE ORC
AKP

48

47

44

48

51

47

44

51

46

CHP

39

35

33

36

25

41

44

38

37

9

12

11

12

26

6

0

13

9

As you can see, the votes of ruling AKP and main opposition CHP are all over the place. There are two reasons for this wide range: First, polling is not the most ethical business practice in Turkey, perhaps a notch above construction. There are polling companies that are known to be close to the AKP and CHP. Second, several polling companies just do not do a good job: They do not choose a representative sample, and then they conduct phone interviews rather than speaking to respondents face to face.

I honestly do not know which companies are sloppy, but I am sure KONDA, which has not released their results yet, does a very good job, as I have analyzed their data for them.Their sampling is very tedious, and they talk to respondents face to face. Another one I more or less trust is Sonar, which released their results today. If I don’t misremember, they did quite well in the 2009 local elections, whereas KONDA was spot on in the 2011 general elections. As summarized by the WSJ, they see the AKP at 42.3 percent, whereas the CHP gets 30 percent of the votes. This is more or less what I would have predicted. The graft scandal + an economy slowing down have brought down the AKP’s votes 7 percentage points compared to the 2011 elections.

Bear in mind that there are two and a half months to the elections, though! Much can happen during that time, in economics or politics…

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