Erdogan's government has paid attention to the needs of business, said Bulent Celebi, who returned to Turkey in 2004 after more than a decade working in California's Silicon Valley.

Celebi has set up AirTies, an Istanbul-based maker of wireless routers and Internet television technology. "I used to come to all these conferences and do all these great speeches and think that nobody ever listens, but maybe they listened," Celebi said. "They took tangible action. They said OK, every school in Turkey is going to have ADSL."

Turk Telekomunikasyon AS in Ankara has extended broadband networks throughout the country, said Celebi, whose company had $36 million of sales last year. He also cited laws that encourage research by granting tax incentives and measures that require technology investors to use local products.

Cheapest in a Generation
Credit is the cheapest in a generation for Turkish companies as banks, including Isbank and Istanbul-based Akbank TAS, in which New York-based Citigroup holds a 20 percent stake, followed Central Bank Governor Durmus Yilmaz in lowering interest rates. Consumer prices rose 5.1 percent in the 12 months through October, the lowest in almost four decades.

The inflation rate has since increased to 9.6 percent, prompting some economists to question whether Turkey has solved its long-term problems.

"In the most disinflationary environment you can imagine, inflation bottomed out at 5 percent and, in the blink of an eye, ping, it was back at 10 percent," said Akarli, the author of Goldman Sachs's 2008 report on Turkey's prospects of pulling ahead of Germany.

Eoin Treacy's view Turkey's stock market has been one of the better local currency performers since bottoming in November 2008. It is currently testing the 2007 high below 60,000 and a sustained move below 48000 would be required to question medium-term upside potential. The market's performance is all the more notable when compared to its regional competitors which have been somewhat slower to recover and/or experienced deeper economic travails. In US Dollar terms, the Turkish market's performance remains impressive but is considerably more volatile than when viewed in local currency terms. The ISE National Financials Index appears to moving back into a position of outperformance relative to the wider market.

The New Turkish Lira has experienced a number of abrupt devaluations over the last decade, the most recent of which occurred in October 2008. This suggests monetary authorities regard the currency as a pressure release valve to be used in times of relatively frequent crises. The US Dollar encountered at least medium-term resistance near TRY1.8 in March 2009 and continues to range below that level. A sustained move below TRY1.2 would be required to indicate that a longer-term process of Lira appreciation is underway. The Euro remains in a 9-year uptrend against the Lira, defined by a progression of higher reaction lows. It is currently pulling back to test that sequence but a sustained move below TRY1.7 would be required to question the consistency of the overall uptrend.

Turkish interest rates have been held near 6.5% since November having fallen from 16.75% in November 2008. However with inflation pushing higher and real yields in the region of 1%, it would appear to be only a matter of time before rates head back up. The 5yr government bond yield has been ranging with an upward bias around 10% since November and would need to sustain a move below 9.5% to question scope for additional higher to lateral ranging.

Turkey has a large young population which could help to drive future economic growth, but this demographic advantage needs to be supported by sound economic and political governance if the country's potential is to be unleashed. Investing in education is a sound first step but jobs need to be found for these up and coming workers if they are to be productive. Unemployment is currently close to 13.5%. Let's not forget this figure represents the current working population, not the masses still at school who will need to find jobs in the next decade.

Turkey has not posted a positive trade balance since at least 1984 and while the situation has improved over the last year, there remains a way to go before the gap is closed not to mind reversed. Turkey has posted current account deficits since 2003. The lack of significant natural resources and the threat of political upheaval are also highly relevant considerations for long-term investors.

While the stock market advance remains consistent, headwinds are increasing and I believe Turkey is less attractive than Fullermoney themed markets in Asia and commodity producing Latin America.