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What’s the Risk for Investors of Turkey Going Islamist ?

Thursday, 30 Aug 2012 | 2:05 PM ET

Turkey is as complex as a Byzantine mosaic or a potent Turkish coffee. Straddling Europe, Asia and the Middle East, it’s a Muslim country with ancient Christian roots — but founded as a modern nation in 1923 by a militant secularist, Mustafa Kemal Ataturk. For decades an economic backwater, it’s now the fastest-growing economy in Europe.

Turkey Mosque
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Turkey Mosque

That economic success was achieved by an Islamist-leaning government that has managed successfully to meld the conservative religious devotion of the masses with the economic interests of the secular elite.

But what if Turkey, propelled by its majority of populist conservative Muslims, were to adopt a more extreme version of Islam? Syria, its neighbor to the south, is disintegrating — abetted according to some reports by rebels connected to Al Qaeda. Some of those rebels may be drifting across the border into Turkey. And there are rumors that Prime Minister Recep Tayyip Erdogan has intestinal cancer; with no clear successor to his decade-old leadership, his ruling Justice and Development (AKP) party could splinter and give rise to a more extremist Islamic rule.

(Read More: Slideshow: Investing in Turkish Art)

Yet experts say Turkey is so much improved economically from a decade ago that there is little chance its people would risk that prosperity — and relations with the West — to adopt an extremist Islamic state.

That is not to say, however, that Turkey isn’t dealing with a precarious religious situation. “The society is going more conservative,” said Ebru Erdem, political science professor at the University of California at Riverside. “It’s been going on since the 1990s, and that is still in progress.”

Erdem said Turks who don’t fast during the holy month of Ramadan, for instance, or who drink alcohol, face ostracism. And last spring the AKP ignited a debate about the morality of abortion and C-sections, two issues Erdem said had never before caused so much as a flicker on the Turkish radar screen.

“They are not like the Islamist parties of before,” Erdem said. “They come from the same traditions, but they said they have taken off that shirt and they present themselves as a ‘liberal’ political party.”

Erdem and other Turkey experts liken the religious dynamic in Turkey to none other than the U.S., comparing the AKP to the most conservative Christians of the Republican Party.

“They are modeling on the Americans,” Erdem said. For instance, she said, the government has gradually begun regulating alcohol sales. “They say it’s not good for you, and they give the example of the U.S. Bible Belt, where you can’t buy alcohol on Sundays.”

Slippery slope to an Iranian-style Islamic regime?

Brian Mello, a Turkey expert who teaches political science at Muhlenberg College in Pennsylvania, said “political Islam is really popular, especially in Istanbul. You’ll see a lot of women wearing a headscarf, and if you look at the popular support for the ruling party, they’ve done nothing but increase their support.”

Muslim Women Turkey
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Muslim Women Turkey

He said “the real fear” is that Turkey is home to “various Islamic movements that have sought to reclaim the capacity to engage in religion in the public square. ... That could be a slippery slope to an Iranian-style Islamic regime.”

The emphasis is on the word “could,” however.

According to Mello, “if you look at the U.S. now, and look at all the anti-abortion laws passed in state legislatures, and if you’re a secularist, then you might become afraid about the role of religion in American politics. If those fears are legitimate in the U.S., they’re legitimate in Turkey, too.”

But Mello added: “The way religion affects the Republican Party in the United States is stronger than the way it affects (the ruling AKP) in Turkey.”

Which is to say — interesting, worrying if you happen to be a secularist — but likely unimportant when it comes to the economy.

(Read more:Investing in Europe’s Fastest-Growing Economy)

Andrew Birch, senior economist for Europe for IHS, agrees. “When you look at the Justice and Development Party, there are a lot of concerns from the West, including the party’s lack of democracy. But from an economic point of view, they’ve been good stewards of the economy.”

The biggest recent concern about Turkey’s Muslim bent was that its banks would adopt Islamic-style banking. (Islam officially forbids lending money at high interest rates.) But that hasn’t happened — in fact, most of the country’s biggest banks operate exactly like Western ones.

A more immediate concern is that Turkey’s economy has begun to slow, Birch said. Last year the economy grew at an 8.5 percent pace, but in the first half of 2012, its growth was below 3 percent.

“If there are economic hardships, that’s going to give a boost to Islam because the fundamentalist movement is being drawn from poorer, disenfranchised areas,” Birch said. “But I’m not worried about them cycling back. As long as Istanbul stays important — that’s where the secular business people reside and hold a strong grasp — I wouldn’t be worried that much about an influx of conservative ideology going into the business sector.”

Erdem says the ruling party would probably like to enforce a more conservative Islamic society — but can’t afford to.

“The current success is dependent on incoming foreign flows,” she said. “Especially with the financial crisis in Europe, a lot of hot money has come to Turkey because Turkey is stable.

“Even if they wanted to [enforce a change] for an ideological reason, they couldn’t risk it,” Erdem said. “They owe their electoral success to economic security.”

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