BRICs go into battle: Russia vs Turkey

Round two: who wins in Eurasia?

In each issue this term, The Gateway is pitching one of the four BRIC economies - Brazil, Russia, India and China - against one of the second tier of emerging markets nations. Which country has the brightest future? We'll try to decide.

This week the BRIC everyone loves to hate, Russia, takes on the young Turks.

Turkish delight

"Turkey is Europe's BRIC" exclaimed an excited David Cameron after a recent trip to the Turkish capital Ankara. He seems to have ignored the fact that Europe includes at least part of one of the four original BRIC states - Russia. But, his sentiments underline Turkey's growing standing in the world economic order.

This once impoverished backwater between southeastern Europe and Asia has recently found its way onto investors' radars thanks to a combination of factors. Firstly, the country boasts a substantial population of just under 80 million people, making it the third most populous state in Europe after Russia and Germany, and offering both a considerable consumer market and a large workforce. What's more, its population is young, with an average age of just 28, compared with the European Union (EU) average of 39. The country also boasts a thriving banking sector, which has profited from a growing need for corporate and consumer financial services in the country and the surrounding region.

A sign of just how far Turkey has progressed in recent years is that the country is on track to be accepted into the EU within the coming decade, a development which appeared laughable when the government first made the application to join the union in 1987, such was the perilous state of the country's finances.

Acceptance into the EU would provide Turkey with a platform from which to bring itself on par with its western European neighbours. In order for this to happen, however, the country must undergo a series of economic reforms which will allow it to meet the requirements of EU entry. One of the hardest tasks has been taming the country's historically high levels of inflation, with policymakers setting a medium term target of 5 per cent per year. As the Bank of England is only too aware, meeting inflation targets without undermining economic growth rarely proves easy.

From Russia with(out) love

Whichever way you look at it, Russia must be considered one of the world's major economic success stories of the past decade. From the crumbling heap that was the old Soviet Union, the country has reinvented itself as a capitalist haven and a hotbed of entrepreneurship. Much of the country's economic progress in recent years can be attributed to the process of privatisation of state enterprises at the end of the Communist era. In particular, the takeover of Russia's plentiful oil and gas reserves by private investors has allowed the country to market its resources effectively on an international level, paving the way for incredible economic growth as global energy prices have sky-rocketed. Reinvestment in the hydrocarbons industry has seen the country's resources grow, along with production levels. Russia now has the world's second largest oil reserves after Saudi Arabia, giving it an enviable position as the main energy supplier to western Europe.

Criticism of Russia's new-found economic strategy has not been lacking, however, and the country's Achilles heel remains endemic corruption in both business and politics. The result has been a growing level of economic disparity across Russian society. While an elite class of the nouveau riche has established itself in the major cities, the standard of living for many Russians has actually fallen since the fall of the Soviet Union. As such, despite its new-found economic and political power, Russia can still be said to display more in common with many developing nations than the West, which is perhaps why those such as Cameron still fail to recognise the continent's largest state as a "European" country.

Verdict: Turkey's future looks brighter

It's a contentious verdict, but it can be argued that Turkey has more in its armoury to establish itself as a longterm global economic force. That its chances of joining the EU are greater than Russia's has never been in doubt, but it's the relative sophistication of the country's economy that gives it the edge over its Soviet neighbour. While Russia's economic growth depends overwhelmingly on its ability to harness its considerable oil and gas reserves, Turkey boasts a more diverse economy, based on services such as banking as well as manufacturing. Add to these advantages the youth and dynamism of Turkey's population, and its future looks even more rosy.