turkey - international university of japan · iceland, italy, luxembourg, the netherlands, norway,...

Country Profile 2004

TurkeyThis Country Profile is a reference work, analysing thecountry’s history, politics, infrastructure and economy. It isrevised and updated annually. The Economist IntelligenceUnit’s Country Reports analyse current trends and provide atwo-year forecast.

The full publishing schedule for Country Profiles is nowavailable on our website at http://www.eiu.com/schedule

The Economist Intelligence Unit15 Regent St, London SW1Y 4LRUnited Kingdom

The Economist Intelligence Unit

The Economist Intelligence Unit is a specialist publisher serving companies establishing and managingoperations across national borders. For over 50 years it has been a source of information on businessdevelopments, economic and political trends, government regulations and corporate practice worldwide.

The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where itslatest analysis is updated daily; through printed subscription products ranging from newsletters to annualreference works; through research reports; and by organising seminars and presentations. The firm is amember of The Economist Group.

LondonThe Economist Intelligence Unit15 Regent StLondonSW1Y 4LRUnited KingdomTel: (44.20) 7830 1007Fax: (44.20) 7830 1023E-mail: [email protected]

New YorkThe Economist Intelligence UnitThe Economist Building111 West 57th StreetNew YorkNY 10019, USTel: (1.212) 554 0600Fax: (1.212) 586 0248E-mail: [email protected]

Hong KongThe Economist Intelligence Unit60/F, Central Plaza18 Harbour RoadWanchaiHong KongTel: (852) 2585 3888Fax: (852) 2802 7638E-mail: [email protected]

Website: www.eiu.com

Electronic deliveryThis publication can be viewed by subscribing online at www.store.eiu.com

Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, on-line databasesand as direct feeds to corporate intranets. For further information, please contact your nearest EconomistIntelligence Unit office

Copyright© 2004 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication norany part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means,electronic, mechanical, photocopying, recording or otherwise, without the prior permissionof The Economist Intelligence Unit Limited.

All information in this report is verified to the best of the author's and the publisher's ability. However, theEconomist Intelligence Unit does not accept responsibility for any loss arising from reliance on it.

ISSN 0269-6029

Symbols for tables"n/a" means not available; "–" means not applicable

Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK.

Country Profile 2004 www.eiu.com © The Economist Intelligence Unit Limited 2004

Turkey 1

© The Economist Intelligence Unit Limited 2004 www.eiu.com Country Profile 2004

Contents

3 Regional overview3 Membership of organisations

5 Basic data

6 Politics6 Political background8 Recent political developments13 Constitution, institutions and administration14 Political forces19 International relations and defence

25 Resources and infrastructure25 Population27 Education28 Health28 Natural resources and the environment29 Transport, communications and the Internet32 Energy provision

35 The economy35 Economic structure37 Economic policy40 Economic performance43 Regional trends

44 Economic sectors44 Agriculture45 Mining and semi-processing47 Manufacturing51 Construction51 Financial services55 Other services

56 The external sector56 Trade in goods59 Invisibles and the current account60 Capital flows and foreign debt63 Foreign reserves and the exchange rate

65 Appendices65 Sources of information67 Reference tables67 Population67 Labour force68 Transport statistics68 National energy statistics70 Interest rates71 Real gross domestic product by expenditure71 Gross domestic product by output, at current producer prices72 Gross domestic product by output, at 1987 producer prices

2 Turkey


72 Prices and earnings72 Livestock numbers73 Agricultural production73 Minerals production74 Manufacturing production74 Construction statistics74 The stockmarket75 Exports75 Imports75 Main trading partners76 Balance of payments, IMF series77 External debt, World Bank series77 Foreign reserves77 Exchange rates

Turkey 3


Regional overview

Membership of organisations

In April 1949, as post-war relations between the West and the Soviet Unionworsened, ten west European countries—Belgium, Denmark, France, the UK,Iceland, Italy, Luxembourg, the Netherlands, Norway, and Portugal—plus the USand Canada formed the North Atlantic Treaty Organisation (NATO), a politicaland military alliance with a commitment to mutual defence in the event ofattack against any of its members (Article 5 of the North Atlantic Treaty). In 1955the Soviet Union and east European socialist states formed an alliance knownas the Warsaw Pact, as a counterweight to NATO.

Since its establishment the Alliance, which now has its headquarters inBrussels, has been expanded five times, bringing the current number ofmembers to 26. In 1952 Turkey and Greece joined; in 1955 West Germany and in1982 Spain. In 1999, after the collapse of the Soviet Union, NATO admitted threecentral and east European countries, Poland, Hungary and the Czech Republic.In November 2002 seven more—Bulgaria, Estonia, Latvia, Lithuania, Romania,Slovakia and Slovenia—were invited to join and their accession took place atthe beginning of April 2004. The Alliance is open to further expansion.

Following the end of the cold war at the end of the 1980s the Alliance has hadto undergo a major transformation to justify its continued existence. Frombeing an alliance between countries with a common enemy, it has increasinglyfocused on international crisis management and peacekeeping. In 1994 NATOestablished a Partnership for Peace programme intended to foster co-operationwith non-member states. There are currently 27 countries participating in theprogramme. Since 1994 the Alliance has supported the development of astronger European Security and Defence Identity (ESDI). More recently,following difficult negotiations, the EU has begun to set up a 50,000-60,000 EUrapid reaction force (RRF), which will have access to NATO assets andcapabilities. The role of the RRF will be to undertake military operations led bythe EU in response to international crises, in circumstances where NATO as awhole is not engaged militarily.

In the post-cold-war period NATO has undertaken several controversial militaryoperations in the Balkans, particularly air strikes against the Bosnian Serbs in1995 and against Yugoslavia over the question of Kosovo in 1999. The 1999 airstrikes were carried out without UN approval. In the aftermath of bothconflicts NATO has been heavily involved in peacekeeping in both Bosnia andKosovo. Following the September 11th 2001 terrorist attacks on the US, NATO’ssecretary-general, George Robertson, invoked Article 5 of the North AtlanticTreaty; however the US did not involve NATO in the subsequent militarycampaigns in Afghanistan and Iraq.

Established in 1972, the Conference for Security and Co-operation in Europe(CSCE) was initially a non-institutionalised multilateral forum for East-Westdialogue, and served for almost 20 years as a convenient and flexible

North Atlantic TreatyOrganisation

Organisation for Security andCo-operation in Europe

4 Turkey


arrangement for easing cold war tensions. The organisation gradually expandedin aim and strengthened its organisational structure in the 1990s. After the endof the cold war the role of the body started to change quickly, and in December1994 the conference was officially renamed the Organisation for Security andCo-operation in Europe (OSCE). With 55 member states, the OSCE is the onlyinclusive pan-European security organisation. Canada and the US are alsomembers of the organisation.

The OSCE has played a major role in conflict prevention and resolution, aswell as post-conflict reconstruction in Europe. Its activities embrace threedimensions: security, economy and human rights. The OSCE is engaged inpreventive diplomacy, arms control and confidence-building activities. Itundertakes fact-finding and conciliation missions, and carries out crisismanagement. The organisation is a component of the European securityarchitecture. It is a "regional arrangement" in the sense of Chapter VIII of theUN Charter, which gives it the authority to try to resolve a conflict in the regionitself, before referring it to the UN Security Council. Since the early 1990s theOSCE has been heavily involved in the Balkans and the Transcaucasus.

The activities of the OSCE are performed by a web of specialised agencies.The High Commissioner on National Minorities, based in The Hague, is theprimary source of "early warning", with responsibility for identifying ethnictensions that might endanger peace. The Office for Democratic Institutions andHuman Rights (ODIHR), based in Warsaw, focuses on promoting human rights,democracy and the rule of law. It monitors elections, assists in developingnational electoral and legal institutions, promotes the development of non-governmental organisations (NGOs) and civil society and conducts meetings,seminars and special projects. The Office of the Representative on Freedom ofthe Media, based in Vienna, assesses the implementation of the memberstates’ commitments concerning freedom of journalism, broadcasting andaccess to information.

The Organisation of the Black Sea Economic Co-operation (BSEC) beganoperating in 1999, several years after regional leaders established a frameworkfor co-operation at a summit in 1992. The organisation’s supreme body is thePresidential Summit, which comprises the heads of state and government ofthe member states (Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece,Moldova, Romania, Russia, Turkey and Ukraine). The main decisions in theBSEC are taken by the Council of Ministers of Foreign Affairs, which meets on atwice-yearly basis.

The BSEC was formed with the goal of extending economic co-operation byfacilitating contacts between businesses and eliminating barriers to trade. BSECmember states have set up a number of bodies to meet these goals, althoughresults to date have been limited. The Black Sea Trade and Development Bankwas established in 1999 to finance and implement joint regional projects. ABSEC Co-ordination Centre was founded in Ankara to promote the exchange ofstatistical data, and the Istanbul-based BSEC Business Council is charged withidentifying private and public investment projects.

Organisation of the Black SeaEconomic Co-operation

Turkey 5


Basic data

783,562 sq km (including lakes and islands), of which 30% arable, 3% orchards,olive groves and vineyards, 26% classified as forest

67,809,927 (2000 census)

Population (2000 census; brackets indicate city and province combined)

Istanbul 8,803,468 (10,033,478)Ankara (capital) 3,203,362 (4,007,860)Izmir 2,232,265 (3,387,908)Bursa 1,194,687 (2,106,687)Adana 1,130,710 (1,854,270)

Mediterranean on the south coast, continental inland

Hottest month, August, 15-31°C (average daily minimum and maximum); coldestmonth, January, –4-4°C; driest month, August, 10 mm average rainfall; wettestmonth, December, 48 mm average rainfall

Turkish

Metric system

Turkish lira. Annual average exchange rate in 2003: TL1,500,885:US$1; exchangerate on April 28th 2004: TL1,418,296:US$1

2 hours ahead of GMT; 3 hours in summer

Calendar year

January 1st, April 23rd, May 19th, three days for Ramadan and four days forKurban (dates vary according to the Muslim calendar), August 30th, October28th (half-day), October 29th

Population

Main towns

Climate

Weather in Ankara (altitude861 metres)

Language

Measures

Currency

Time

Fiscal year

Public holidays

Land area

6 Turkey


Politics

The current government was formed in March 2003 under Recep TayyipErdogan, the leader of the Justice and Development Party (AKP). Thanks to the10% threshold for representation in parliament his party won a massivemajority of 363 of the 550 seats in Turkey’s unicameral parliament at thegeneral election held in November 2002. Initially, however, Mr Erdogan wasunable to enter parliament, and thus take over the premiership, because of acourt ban imposed on him in 1998 for allegedly making pro-Islamiststatements. Accordingly, a temporary government was set up under his deputy,Abdullah Gul. The current AKP government has the advantage over all itspredecessors since 1991 of being formed of a single party with a large majority.As former members of the Welfare Party, the leaders of the AKP have anIslamist past, but they now disavow this, and the government has generallyadhered to secularist principles.

Political background

Modern Turkish politics have been shaped by two crucial historicalexperiences: the foundation by Mustafa Kemal (who assumed the surnameAtaturk, "father of Turks", in 1936) of a secular, unitary republic in the 1920s, andthe establishment of a multiparty democratic regime since 1945. The latter hasbeen interrupted by three periods of military rule in 1960-61, 1971-73 and in1980-83.

The Republic of Turkey was established in 1923 on the ruins of the Ottomanempire, which reached its zenith in the 16th century before suffering a longperiod of decline. Its fate was finally sealed when it joined the German side inthe first world war (1914-18). After the war, the victorious Entente powersdetached the remaining Arab provinces and prepared an elaborate plan todivide Anatolia, the Turkish-inhabited heartland of the former empire. In 1919Greek forces occupied Izmir (Smyrna) and fanned out into western Anatolia.The occupation triggered off a nationalist resistance movement, led by Ataturk,which decisively defeated the Greeks in 1922. In November of that year thesultanate was officially abolished. Following the signature of the Treaty ofLausanne in July 1923, Turkey became a republic, with Ataturk as its presidentand Ankara its capital.

Until his death in 1938 Ataturk presided over a single-party state. He broke withthe country’s Islamic past and promoted a secular national identity. An étatisteprogramme of state-led industrialisation was also instituted. His successor aspresident, Ismet Inonu, managed to maintain Turkey’s neutrality during thesecond world war (1939-45). In 1945 he ended the single-party era, allowing theDemocrat Party (DP), led by Adnan Menderes, to come to power in Turkey’sfirst genuinely free election in 1950. Meanwhile, direct territorial threats fromthe Soviet Union had pushed Turkey into the Western camp in the cold war; itwas admitted to NATO in 1952.

The establishment ofthe republic

Turkey 7


Against a backdrop of growing economic difficulties, the military ousted the DPgovernment on May 27th 1960, ostensibly because of its increasing intoleranceof the opposition. The army held power until October 1961, when a generalelection took place following the trial and execution of Menderes and two ofhis former cabinet members. A period of weak coalition governments followeduntil 1965, when the Justice Party (AP), led by Suleyman Demirel and viewed asthe successor to the DP, won the general election. Steady economic growthmaintained the popularity of the AP, which retained power in the 1969 election.

However, increased left- and right-wing terrorism led to a second putsch by themilitary in March 1971 and the installation of a technocratic government until1973. In democratic elections in 1973 and 1977 none of the parties succeeded inwinning an overall majority. Thus, between 1974 and 1980 Turkey was ruled byfive feeble coalitions, headed alternately by the AP and the centre leftRepublican People’s Party (CHP), headed by Bulent Ecevit. By the end of the1970s the government and the economy seemed to be heading for totalcollapse, and political violence claimed about 5,000 lives. A third militarytakeover in September 1980 was greeted with general relief.

The leader of the 1980 coup, General Kenan Evren, established a five-man juntathat remained in power until November 1983. During this period the militaryregime restored law and order through the draconian curtailment of civil rights.Economic reforms directed by the deputy prime minister, Turgut Ozal, reducedinflation and the trade deficit, and economic growth was restored. InNovember 1982 a more restrictive constitution, intended to provide stablegovernment, was accepted in a national referendum, and General Evren waselected president for the next seven years. Only three parties were allowed tocontest the September 1983 general election, in which Mr Ozal’s newMotherland Party (Anap) won a majority.

Under Mr Ozal, who stayed in office as prime minister until 1989, partiesexcluded from the 1983 election emerged as important players. These includedmost notably the Social Democrat Party, led by Erdal Inonu, which merged withthe Populist Party in 1985 to become the Social Democrat Populist Party (SHP),and the True Path Party (DYP), set up by Mr Demirel. Mr Ecevit, who had beenimprisoned for a time by the military after the 1980 coup, formed theDemocratic Left Party (DSP), while the Islamist tendency was represented bythe Welfare Party led by Necmettin Erbakan. Following constitutionalamendments, all these parties were allowed to contest the 1987 election, butMr Ozal was returned to power with an increased majority.

When General Evren retired as president in November 1989, he was succeededby Mr Ozal, who won approval in the West for his support of Kuwait followingthe Iraqi invasion in August 1990, but failed to turn this to domestic politicaladvantage. His successor as prime minister, Yildirim Akbulut, was replaced byMesut Yilmaz in June 1991. The latter opted for an early general election inOctober of that year, in which Anap lost its majority. Mr Demirel thus returnedto office at the head of a coalition between the DYP and the SHP, withMr Inonu as deputy prime minister.

The 1960s and 1970s

The military regime, 1980-83

Turgut Ozal’s leadership,1983-89

8 Turkey


Recent political developments

The Demirel government lasted until April 1993, when Mr Ozal died suddenly.Mr Demirel was elected president the following month. His successor as partyleader and prime minister was Tansu Ciller. Serious financial and balance-of-payments crises in the first quarter of 1994 marred Mrs Ciller’s record in office,but she did succeed in reaching an agreement with the EU on the terms of acustoms union, which came into force on January 1st 1996. In early 1995 theSHP merged with the CHP under the name of the latter. On September 20ththe CHP leader, Deniz Baykal, decided to withdraw the CHP from the coalition,following Mrs Ciller’s refusal to meet his demands on the terms for thecoalition. She resigned the same day, paving the way for a general election inDecember 1995.

By this time the Kurdish issue had become Turkey’s major internal politicalproblem. About 15-20% of the country’s population are Kurds. Around one-halflive in their traditional homeland in the south-east, with the other half havingmigrated to the industrial cities of western Turkey. The war in the south-easternprovinces against militants of the Kurdistan Workers’ Party (PKK) claimed around30,000 lives between 1984 and 2000. By 1999 the army had re-establishedcontrol over most of the south-east. However, the counter-insurgency campaignled to serious human rights abuses by government forces, the compulsoryevacuation of thousands of villages, severe disruption of the region’s economy,and a cost to the government of an estimated US$6bn per year.

The results of the general election of December 24th 1995 confirmed the risingpopularity of the Welfare Party, which received the largest share of the vote(21.4%). After the election the two secular centre-right parties, Anap and theDYP, formed a coalition at the end of February 1996, which lasted only untilmid-June. Put into place principally to keep Welfare from power, the coalitionfell apart when the Anap leader, Mr Yilmaz, agreed to parliamentaryinvestigations into alleged malpractice by Mrs Ciller during her time as primeminister. To avert corruption investigations, Mrs Ciller then agreed to form acoalition with the Welfare Party. The Welfare Party-DYP coalition government,headed by Mr Erbakan, took office on June 25th, bringing to power an Islamist-led government for the first time in Turkey’s history.

From the start Mr Erbakan’s government was wracked by dissent between itstwo constituent parties, on both economic and foreign policy issues. It wasfurther weakened by the revelation of damaging links between parts of thegovernment (and the police service) with organised crime. Meanwhile,Mr Erbakan's moves towards creeping Islamisation (especially in education)aroused the anger of the staunchly secularist generals, as well as that of muchof an emerging civil society of intellectuals, business organisations, tradesunions and women's groups. On June 18th 1997, in the face of repeatedwarnings from the military-dominated National Security Council (NSC), andmounting public protests, Mr Erbakan resigned. Accordingly, President Demirelpassed on the baton to Mr Yilmaz of Anap, who on June 30th 1997 formed a

Mrs Ciller became primeminister in 1993

1995 election confirmed therise of the Welfare Party

An Islamist-led governmentlasted just 11 months

Turkey 9


minority government, in coalition with the DSP and with outside support fromthe CHP.

Mr Yilmaz’s third government—and Turkey’s fifth since the 1991 election—washampered by its minority status and dependence on the support of the CHP. InNovember 1998 it collapsed when the CHP withdrew its support. In January1999 Mr Ecevit became the head of a minority DSP caretaker government,supported externally by Anap and DYP, with a mandate to take the country tolocal and parliamentary elections on April 18th 1999.

The April 1999 legislative election produced an unlikely coalition government,led by Mr Ecevit and comprising his DSP, the ultra-nationalist Nationalist ActionParty (MHP) led by Devlet Bahceli, and Mr Yilmaz's Anap. The electionoutcome was influenced to a considerable extent by the capture of the leaderof the PKK, Abdullah Ocalan, on February 16th. The DSP topped the poll, with22.2% of the votes cast, while the MHP, aided by strong nationalist sentiment,finished a close second. Anap, DYP and the Virtue Party (the successor to theWelfare Party, which had been banned in February 1998) were the other threeparties to win representation in parliament. The CHP was excluded since itfailed to reach the 10% vote threshold.

Mr Ecevit’s government chalked up some notable early achievements, mainlyin the economic and foreign policy fields, and in particular reforming the socialsecurity system and thereby helping to pave the way for approval by the IMFof a three-year stand-by credit in December 1999. Simultaneously, there was acrucial turning-point in Turkey's relations with the EU. At the meeting of theEuropean Council in Helsinki in December 1999 the EU heads of governmentreversed the decision taken in Luxembourg two years earlier and declaredTurkey a candidate for EU accession. However, besides laying down importantconditions regarding Turkey's relations with Greece and settlement of theCyprus problem, the EU also made it clear that accession negotiations could notbegin until Turkey met the political conditions, especially human rightsimprovements, stipulated by the Council in June 1993. The political conditionsare the first of the three so-called Copenhagen criteria necessary for accession.Full compliance with the other two criteria—"a functioning market economyand an ability to take on the obligations of membership, including adherence tothe aims of political, economic and monetary union"—is not necessary forstarting negotiations.

In April 2000 Ahmet Necdet Sezer, formerly the chief justice of theConstitutional Court, was elected by parliament to succeed Mr Demirel aspresident. Tensions between Mr Ecevit and the new president subsequentlyemerged and reached crisis point on February 19th 2001, when an openargument between the two triggered a collapse of international and domesticconfidence, less than three months after Turkey had avoided a crisis thanks toemergency funding from the IMF to supplement its existing stand-byagreement. The February crisis forced the government to abandon the crawling-peg exchange-rate regime, and this was followed by a sharp devaluation of theTurkish lira and the suspension of the disinflation strategy. The appointment onMarch 2nd 2001 of Kemal Dervis, a respected economist at the World Bank, as

The 1999 election produced athree-party ruling coalition

Political tensions triggered afinancial crisis in early 2001

10 Turkey


the new minister for the economy helped to restore a degree of confidence. OnMarch 15th he drew up a programme of financial and economic reforms thatobtained substantial financial support from the IMF (see Economic policy).However, as the crisis receded his influence diminished, reflecting the fact thathe did not belong to any political party and that the IMF-backed measures thathe sponsored were increasingly unpopular with the electorate.

Although there were initial disagreements within the coalition over theimplementation of the IMF's prescriptions, most of them were eventually putin place, and in February 2002 Turkey reached a new, three-year stand-byagreement. In October 2001 and August 2002 parliament passed two packagesof constitutional amendments and legal changes, which met most of the EU’srequirements for human rights reforms, including the abolition of the deathpenalty and permission for broadcasting and education in Kurdish.Nevertheless, by mid-2002 Mr Ecevit’s government had collapsed as a result ofthe prime minister’s ill health, constant disagreements between the MHP andthe other government parties, and the resignation from the party of a largegroup of DSP backbenchers, led by the minister of foreign affairs, Ismail Cem.

An early general election held on November 3rd 2002 resulted in theelimination of virtually all the parties in the previous parliament because theyfailed to pass the 10% threshold, and a landslide victory for the AKP, led byMr Erdogan. The AKP’s victory was a clear sign of the public’s disgust at themismanagement and corruption of the old parties. Mr Erdogan, a former mayorof Istanbul, and most of his colleagues had formerly been members of theWelfare Party, and its pro-Islamist successor, the Virtue Party (see Politicalforces). However, following the closure of the Virtue Party they had movedtowards an accommodation with Turkey's secularist tradition, promoting theAKP as a modernist party with no more than Islamist tinges.

In the new parliament the CHP in effect became the sole opposition party, butwith only 178 seats to the AKP’s 363. Since Mr Erdogan was ineligible to beelected to parliament and thus to assume the premiership as a result of a courtdecision dating back to 1998, his deputy, Abdullah Gul, formed the first post-election government on November 16th 2002. This held office until March 12th2003, when Mr Erdogan took over, following the removal of the ban on hiselection to parliament by a constitutional amendment, and his victory in a by-election held on March 9th.

The government suffered a serious setback on March 1st 2003, when parliamentrefused to allow US forces to use Turkish territory in its planned war againstIraq. As a result, the US withdrew a substantial package of economic aid, whichincreased fears of another severe financial crisis. When the war started, a farmore limited set of measures in support of the US-led coalition was agreed toon March 20th and April 2nd 2003, and the US offered Turkey a smallerfinancial aid package, the details of which were finally agreed in August.Relations remained tense in the intervening period because of the uncertaintysurrounding the situation in Iraq (see International relations and defence), butby April 2004 close ties with the US appeared to have been restored.

The government entered asevere crisis in July 2002

AKP won a landslide victoryin the November 2002 election

Turkey 11


Until November 2003 Turkey had been fortunate in escaping attacks byextremist Islamist terrorist organisations, several of which exist in Turkey. Thisapparent immunity was shattered on November 15th, when car bombs outsidetwo synagogues in Istanbul killed 25 people and injured around 300 others.Five days later, on November 20th, two more suicide bombings rocked Istanbul:one directed against the British consulate-general and the other at the Turkishheadquarters of the British bank, HSBC. In the second round of attacks another30 people were killed, including the British consul-general, Roger Short, andaround 450 injured.

Besides concerns about developments in Iraq and tackling the threat of Islamistterrorism, the AKP's main priorities in government have been to try to meet thepolitical conditions to start accession negotiations with the EU and to maintaineconomic stability (see The economy, Economic policy). In 2003 the govern-ment continued to implement the IMF-backed reform programme, whichhelped to generate strong economic growth while lowering inflation. InDecember 2002 the European Council agreed to start accession negotiationswith Turkey "without delay" after December 2004, provided Turkey wasdeemed to have met by then the Copenhagen political criteria. The governmenthas continued to reform Turkish laws to bring them into line with EU practices.Although further legislative changes were still needed at the beginning of 2004,the biggest obstacle to persuading the EU to start negotiations remained theimplementation of reforms introduced in recent years to improve the humanrights regime and ensure the protection of minorities, specifically the Kurds.Also, to try to improve Turkey's chances of starting accession negotiations, inearly 2004 Mr Erdogan led efforts to reach a settlement of the Cyprus problembased on a plan drafted by the UN (see International relations and defence).

Although support for the AKP fell short of that indicated in opinion polls,Mr Erdogan and his party received a major boost to morale in the March 28th2004 local elections, winning about 43% of the national vote (compared with34% in the November 2002 parliamentary vote), 57 of Turkey's 81 provincialcouncils, and the mayorship of two of Turkey's three largest cities.

Important recent events

June-December 1999

In June the Democratic Left Party (DSP), the Nationalist Action Party (MHP) and theMotherland Party (Anap) form a government with a clear majority of 351 out of 550seats in parliament, and Bulent Ecevit as prime minister. In December the EuropeanCouncil meeting in Helsinki places Turkey on the list of candidates for eventual EUmembership.

February-May 2001

A public quarrel between Mr Ecevit and the president, Ahmet Necdet Sezer, triggers afinancial crash. The government appoints Kemal Dervis, a respected economist fromthe World Bank, to formulate a new programme of economic reforms. The IMF andthe World Bank pledge additional financial support.

The AKP intensifies efforts tostart EU accession negotiations

12 Turkey


October 2001

Parliament passes a package of 24 constitutional amendments, aimed at bringingTurkey into line with the Copenhagen criteria stipulated by the EU as a preconditionfor the start of accession negotiations.

July 2002

The Ecevit government experiences a severe crisis as important DSP ministers resignfrom the cabinet and over 60 DSP members of parliament leave the party. Mr Eceviteventually agrees to hold an early election in November 2002.

August 2002

Parliament enacts changes to the Penal Code and other statutes fully abolishing thedeath penalty, improving freedom of speech and allowing limited broadcasting andeducation in Kurdish.

November 2002

In the general election the Justice and Development Party (AKP) wins a landslidevictory; all other parties except the Republican People’s Party (CHP) are eliminatedfrom parliament. Since the AKP leader, Recep Tayyip Erdogan, is prevented by a courtdecision dating back to 1998 from running for parliament, a temporary governmentis formed under his deputy, Abdullah Gul.

December 2002

Meeting in Copenhagen, the European Council agrees that if it decides in December2004 that Turkey fulfils the Copenhagen political criteria, then accession negotiationswith the EU will start "without delay".

March 2003

Mr Erdogan becomes prime minister, following the removal of the ban on hisrunning for parliament and his victory in a by-election. His government is virtuallya continuation of that of his predecessor. Parliament fails to ratify a plan to allowUS forces to use Turkish territory in the forthcoming war against Iraq in return fora substantial aid package, but later agrees to a limited raft of measures in supportof the US-led coalition.

November 2003

Four suicide bombings in Istanbul carried out by Islamic fundamentalists leave 45dead and 700 injured. Two attacks, on November 15th, are targeted at synagoguesin the city. Two further attacks, five days later, hit the British consulate and theTurkish headquarters of a UK-based bank, HSBC. In another attack in March 2004only the two bombers are killed

January-March 2004

Determined to persuade the EU to start accession negotiations with Turkey in early2005, Mr Erdogan leads efforts to bring about a settlement in Cyprus based on aplan drafted by the secretary-general of the UN, Kofi Annan.

April 2004

In the Turkish Cypriot north 65% of the voting population support the Annan plan,but it is rejected by 75% of the Greek Cypriots in the south.

Turkey 13


Constitution, institutions and administration

Turkey is a unitary republic, in which power is exercised by a unicameralparliament (Meclis) and the prime minister. The prime minister is designated bythe president and is customarily the leader of the largest party. The Meclis electsthe president, who may serve only one seven-year term. He can delay, but notveto, legislation. The president is supposed to be a neutral figurehead and isobliged to resign from a political party before assuming office. In practice, hemay exercise substantial influence behind the scenes, particularly in periods ofgovernmental crisis. Constitutionally, the prime minister must be a member ofparliament, but cabinet ministers can be appointed from outside. Theparliament must also authorise any deployment of Turkish troops abroad, or offoreign forces on Turkish soil, except in performance of Turkey’s treatycommitments to NATO. The constitution can be altered only by a two-thirdsmajority in the Meclis, with a subsequent referendum if this is ordered by thepresident, or by a three-fifths majority, followed by a compulsory referendum.

Parliament currently has 550 members, with a parliamentary term of five years,although an early election can be held if the Meclis votes to this effect. Theelectoral system is based on multi-seat constituencies, with parties that fail toexceed a threshold of 10% of the national vote being excluded. The 10%threshold does not apply to independent candidates. As a result of thethreshold, over 45% of the votes cast in the November 2002 election have norepresentation in parliament. Elections are usually conducted fairly, but groupsconsidered by the secular establishment to endanger the unitary, secular natureof the state (in effect, Kurdish nationalist parties or pro-Islamist parties) havebeen banned periodically. (see Political forces).

In principle, Turkey accepts the European Convention on Human Rights andother international human rights instruments. If properly implemented, recentreforms should give effect to this: they include the abolition of the deathpenalty (except in time of war or the imminent threat of war), the alteration ofstatutes affecting criticism of the government or the armed forces, or allegedincitement to ethnic or religious hatred, and permission for broadcasting andeducation in Kurdish, albeit on a limited scale. The main remaining restrictionis on activities seen as endangering the territorial integrity of the state (in effect,Kurdish separatism). The regular torture of suspects by the police is anotherserious abuse, although it has been curtailed in recent years.

The independence of the judiciary is respected in Turkey, and rulings by theConstitutional Court can overturn acts of parliament. The judiciary containsmany conservative elements which, like the military, are suspicious of the AKPand pro-Kurdish political groupings. The EU has been calling for reforms toincrease the efficiency and effectiveness of the judicial system. A majorcriticism of the system has been that because of very different interpretationsof the law, particularly those regarding human rights and freedom ofexpression, decisions differ significantly from court to court. In 2003-04,through a programme sponsored jointly by the European Commission, theCouncil of Europe and the Ministry of Justice, the government intensified its

Parliament

The judiciary

14 Turkey


efforts to improve the knowledge of European and international human rightsstandards among a greater number of Turkish judges and public prosecutorsand ensure that the European Convention of Human Rights and the rulings ofthe European Court of Human Rights are implemented effectively.

Among the important ministries, the Ministry of Foreign Affairs hastraditionally enjoyed a respected and non-partisan position, while the Ministryof Finance and the Ministry of the Interior and Education have often beenweakened by partisan appointments and interference. The Ministry of Defencehas little real control over the armed forces. These are in effect controlled by thechief of the general staff, who theoretically reports to the prime minister, but inpractice enjoys wide autonomy, although reforms aimed at meeting theCopenhagen political criteria have begun to reduce the military's influence overthe civilian authorities.

The administrative system is highly centralised. Turkey is divided into 81 pro-vinces, each under a governor appointed by the central administration, and intodistricts within these. Since the 1980s elected municipalities have been givenmore powers and resources, but these are still fairly limited. Between 1987 and2002 a special emergency regime was in place under a regional governor in theKurdish-inhabited provinces in the south-east, but this has now been wound up.

Although believed to be widespread in Turkey, corruption was not a majorsource of instability until the second half of the 1990s, as past corruptioninvestigations tended to be either inconclusive or directed at the lower levels ofgovernment. However, episodes of corruption involving parts of theadministration emerged between 1995 and 2002, resulting in several govern-ment resignations. In the 2002 election campaign the AKP announced a strongcommitment to "clean government" and the eradication of corruption, but thisdoes not appear to have been a priority in its first 16 months in office.

Political forcesElection results

Dec 1995 Apr 1999 Nov 2002Seats % of votes Seats % of votes Seats % of votes

Justice & Development Party (AKP)a - - - - 363 34.3

Republican People’s Party (CHP) 49 10.7 0 8.7 178 19.4Democratic Left Party (DSP) 76 14.6 136 22.2 0 1.3

Nationalist Action Party (MHP) 0 8.2 129 18.0 0 8.3Felicity Party (Saadet)a - - - - 0 2.5

Virtue Party (Fazilet)b - - 111 15.4 - -Welfare Party (Refah)c 158 21.4 - - - -Motherland Party (Anap) 132 19.7 86 13.2 0 5.1

True Path Party (DYP) 135 19.2 85 12.0 0 9.5People’s Democracy Party (Hadep)d 0 4.2 0 4.8 - -

Democratic People's Party (Dehap) - - - - 0 6.3Independents/others 0 2.0 3 5.7 9 13.3Total 550 100.0 550 100.0 550 100.0

a Formed in 2001, following the closure of the Virtue Party. b Formed in 1998, following the closure of the Welfare Party. c Dissolved by courtorder in 1998. d Dissolved by court order in 2003; competed in the 2002 election as People's Democracy Party (Dehap).

The ministries

The administrative system

Turkey 15


Political forces at a glance

The centre right

The policies of the ruling Justice and Development Party (AKP), led by Recep TayyipErdogan, can best be classified as moderate-conservative. The True Path Party (DYP),formerly led by Tansu Ciller, failed to reach the 10% vote threshold for representationin parliament in the November 2002 elections. But it now has several members ofparliament, who were elected as independents.

The centre left

This is dominated by the Republican People’s Party (CHP), which was founded byAtaturk in 1923. The party's current leader is the controversial Deniz Baykal.

Pro-Islamist

If the AKP is classified as a centre-right party, the only significant party currentlyclassifiable as Islamist is the Felicity Party, under Recai Kutan.

The ultra-nationalist right

The Nationalist Action Party, led by Devlet Bahceli, was part of the governmentduring 1999-2002, but failed to surpass the 10% threshold in the 2002 election.

Pro-Kurdish political groupings

These are currently represented by the People’s Democracy Party and the illegalKurdistan Freedom and Democracy Congress (formerly the Kurdistan Workers’ Party).

The centre-right has traditionally attracted most support in Turkey but wasweakened by its division into two rival parties, the Motherland Party (Anap)and the True Path Party (DYP), originally founded by Suleyman Demirel andTurgut Ozal respectively. With its victory in the 2002 election the Justice andDevelopment Party (AKP) in effect took over this share of the electoral market.Although most of its leadership has Islamist origins and belonged to thebanned Welfare and Virtue parties, the AKP also incorporates former membersof other centre-right parties, notably Anap, and its policies can best bedescribed as moderate conservative. In the light of the AKP's good performancein government so far and its growing support, it will be difficult for Anap orDYP to return to prominence in the short to medium term. In the March 28thlocal elections the DYP polled about 9% and Anap less than 3%.

Following Mr Ecevit’s poor performance as prime minister, especially in 2002,his party, the Democratic Left Party (DSP), suffered a crushing defeat with less2% of the vote in the November 2002 election. The Republican People’s Party(CHP), with 19.4%, is currently the sole representative of the centre left inparliament. But the party led by Deniz Baykal has not shaken off publicsuspicions that it is still wedded to dirigiste, étatiste methods. It has performedpoorly in opposition since the November 2002 general election and failed toincrease its share of the vote in the March 2004 local elections (it won about18%). There has been increased opposition within the party to Mr Baykal,whose authoritarian style of leadership and chequered political past are seen byhis critics to be damaging the CHP. When the ageing Mr Ecevit retires (onDecember 1st 2003 he announced his impending retirement), the DSP facesextinction. Other centre-left parties, such as Ismail Cem’s New Turkey Party

The centre right

The centre left

16 Turkey


(YTP), are thinly supported and unlikely to play more than a marginal role solong as the centre-left remains fragmented.

In February 1998 the Welfare Party, under Necmettin Erbakan, Turkey’s veteranIslamist leader, was closed down, and Mr Erbakan was excluded from officialparticipation in politics for five years. The Islamists then regrouped to form theVirtue Party (Fazilet). In June 2001 the party followed its predecessor by beingclosed down by the Constitutional Court. In its place two successor partieswere established, in the shape of the AKP and the Felicity Party (SP), nominallyled by Recai Kutan, but in fact controlled by Mr Erbakan from behind thescenes. Although Mr Erbakan became leader of the SP following the expiry ofthe ban, the party's heavy defeat in the 2002 election, Mr Erbakan’s advancedage and a new conviction in late 2003 for financial irregularities in his partymake it unlikely that he will make a comeback. The SP could revive if the pro-Islamist element in AKP were to decide to leave the party, but there are nocurrent signs that this will happen.

The ultra-nationalist right is mainly represented by the Nationalist Action Party(MHP) under the leadership of Devlet Bahceli. This became the second-largestparty, with 18% of the vote, in the April 1999 general election, but obtained only8.3% of votes cast in 2002. Following the election Mr Bahceli said he would stepdown, but has not yet done so. In the March 2004 local elections the MHPpolled about 9%. A maverick party, the Youth Party (GP) led by the millionairebusinessman, Cem Uzan, cut into the MHP’s vote in the 2002 election bysecuring 7.3% on a platform of strong nationalism and economic populism. In2003 opinion polls suggested that growing support for the GP might pose athreat to the AKP. However, the Uzan family's financial and legal difficultiesappear to have ended any hope of mounting a major challenge.

Kurdish nationalism was previously represented in parliament by theDemocracy Party, originally a splinter group of the Social Democrat PopulistParty (SHP). This was closed down by court order in 1994 and was succeededby the People's Democracy Party (Hadep). Hadep failed to overcome the 10%threshold in the 1995 and 1999 elections, but won an important role inmunicipal government in the south-east in 1999. Following its closure in March2003 for allegedly supporting the Kurdistan Workers' Party (PKK), Hadep has ineffect been succeeded by the Democratic People’s Party (Dehap). However, itsexistence is threatened by another closure case, which is expected to be decidedby mid-2004. Although Hadep has denounced the use of force, many of itsgrass-roots supporters were probably sympathetic to the PKK. This was themost militant of the Kurdish political groupings and waged a campaign ofviolence and terrorism against the government between 1984 and 2000.It suffered a major setback in February 1999, when its leader, Abdullah Ocalan,was captured in Nairobi, Kenya, by Turkish security agents. In April 2002the PKK officially wound itself up, renaming itself first the Kurdistan Freedomand Democracy Congress (KADEK), then the People's Congress of Kurdistan(Kongra-Gel). Following the capture of Mr Ocalan the PKK announced the endof its armed campaign. On September 1st 2003 the PKK (then KADEK) officiallyresumed its armed campaign, although it appeared to play down the

The ultra-nationalist right

Kurdish political movements

Pro-Islamists

Turkey 17


significance of the decision immediately after its announcement. ThePKK's demand that it should be treated as a legitimate negotiator for apeaceful settlement of the Kurdish problem has never been accepted by theTurkish authorities.

Among non-party actors the army has played a crucial role in the recent past,staging three coups between 1960 and 1980. It was instrumental in the removalof the Welfare Party-led government in June 1997 and considers itself theguardian of the secular republic. So far the army has wielded power mainlythrough the National Security Council (MGK), which is supposed to advise thegovernment on security questions, but in practice has exercised considerableinfluence on a wider range of issues, especially in opposing Kurdish nationa-lism and political Islamism. As part of the package of constitutional reformspassed in October 2001, the composition of the MGK was altered to provide fora majority of civilian members, and its officially stated authority was reduced.Following the AKP’s election, the armed forces chiefs reluctantly acknowledgedthe verdict of the voters and adopted a wait-and-see attitude towards the newgovernment. In the second half of 2003 the army backed down from itsopposition to essential human rights reforms and further changes to the MGKbecause the changes were deemed necessary to advance Turkey's bid to startEU accession negotiations. In early 2004 the generals agreed to put aside theirreservations regarding the UN settlement proposals for Cyprus so thatnegotiations could resume. The AKP leadership has generally appeared anxiousto avoid a clash with the military. Although tensions are likely to continue, themilitary is unlikely to take decisive action to undermine the position ofMr Erdogan's government unless they think that it is seeking to revive anunacceptable pro-Islamist programme in education, or on other cultural issues.

Main political figures

Ahmet Necdet Sezer

Mr Sezer was unexpectedly elected president in May 2000. At the time of his election he was the chief justice of theConstitutional Court, making him the first president of Turkey to have been neither a prominent politician nor a formersenior military commander. He is widely respected and a strong advocate of political reform and improvements in humanrights. Between 2000 and 2002 he acquired an unexpectedly important political role through his challenges both to high-handed actions by the government and to its failure to follow up serious charges of corruption. Similarly, his opposition tothe US-led war against Iraq (on the grounds that it was not supported by the UN) won widespread support. Following theNovember 2002 election he adopted a cautious approach to the Justice and Development Party (AKP) and its popularleader, Recep Tayyip Erdogan, suggesting that he would make full use of his powers as president to oppose any AKPpolicies that he considered to be undermining the secular nature of the state as enshrined in the constitution. In 2003 hereturned several bills to parliament for reconsideration, but the AKP has generally sought to avoid outright confrontationwith the president. Mr Sezer's main weakness before the Erdogan government was that he had no direct experience ofparty politics, or personal influence within parliament. However, the high level of popularity and respect that he enjoyshas provided a counterbalance to the AKP's huge parliamentary majority.

Recep Tayyip Erdogan

As a successful and popular mayor of Istanbul in 1994-98, Mr Erdogan won the approval of many voters who did notsupport his Islamist political attachments. Nevertheless, he was ejected by a court from the mayoralty in 1998 andsentenced to four months’ imprisonment. Subsequently he sought to rebuild his political career by breaking with the leaderof the Welfare Party, Necmettin Erbakan, and launching the AKP as a mainstream party of the liberal right with only a tinge

The army

18 Turkey


of Islamism. At the time of his party’s victory in the general election of November 2002, the 1998 court decision preventedhim from running for parliament, and hence becoming prime minister. However, this ban was removed by a constitutionalamendment passed in December 2002. This allowed him to be elected to parliament in a by-election and thus assume thepremiership in March 2003. In the crisis over Turkey’s policy towards the impending war against Iraq he was not outspoken inhis support for the US, but later he sought to patch up Turkey’s differences with the Bush administration. As a result, by April2004 Turkish relations with the US were vastly improved. Clearly motivated by a desire to obtain a start to EU accessionnegotiations for Turkey in 2005, he was a driving force behind efforts to revive UN-sponsored settlement talks between theGreek and Turkish Cypriots in early 2004. In making appointments to crucial economic posts he has been criticised forreverting to traditional methods of political favouritism, rather than respecting the standards of impartiality demanded bythe IMF.

Abdullah Gul

As deputy leader of the AKP, Mr Gul served as prime minister while Mr Erdogan was excluded from parliament betweenNovember 2002 and March 2003, after which he became deputy prime minister and minister of foreign affairs. Originallytrained as an engineer, he worked as an economist in the Islamic Development Bank, based in Saudi Arabia, between 1983and 1991. He was first elected to parliament in 1995 as a member of the former Welfare Party, serving as a minister of stateand government spokesman in the ill-fated coalition of the Welfare and True Path parties in 1996-97. Following the closureof the Welfare Party in 1998 he joined its successor, the Virtue Party. In May 2000 he emerged as a leader of the modernistwing of the party, being narrowly defeated in a race for the party leadership by Recai Kutan, the protégé of Mr Erbakan, at aspecial party convention. This propelled him into the second slot in the AKP, behind Mr Erdogan, when the party waslaunched in August 2001. While he has firm local support in his home city of Kayseri, he does not enjoy the same nation-wide grassroots appeal as his party leader. Like Mr Erdogan, he has shown an unwavering commitment to bringing Turkeycloser to the goal of EU membership.

Deniz Baykal

As the chairman of the Republican People’s Party (CHP), Mr Baykal is leader of the opposition in parliament. Originally amember of the CHP when the latter was led by Bulent Ecevit in the 1970s, he served as minister of energy in 1973, emergingas a potential rival to the party leader and the standard-bearer of the left wing of the party. After the military takeover ofSeptember 12th 1980 he suffered a short period of detention, but in 1987 he re-entered parliament as a member of the SocialDemocrat Populist Party (SHP) led by Erdal Inonu. Following several unsuccessful attempts to dislodge Mr Inonu from theleadership of the SHP, Mr Baykal broke away from the party to re-establish the CHP in 1992. In February 1995, afterMr Inonu’s retirement, the SHP, which was then part of a coalition government under the DYP leader, Tansu Ciller, mergedwith the CHP under the latter’s title. Between then and September 1995 the party was led by Hikmet Cetin. However,Mr Baykal then resumed the party leadership, withdrawing the party from the coalition and thus provoking a generalelection in December 1995, in which his party only just scraped over the 10% threshold. Mr Baykal repeated thisperformance in November 1998 by withdrawing his party’s external support for the minority government led by MesutYilmaz. In the subsequent general election of April 1999 the CHP was eliminated from parliament, and Mr Baykal wasforced to resign from the leadership in favour of Altan Oymen. Mr Baykal then ousted Mr Oymen, being re-elected partyleader in September 2000. In the 2002 election the CHP re-emerged as the sole parliamentary rival to the AKP government.But Mr Baykal's allegedly authoritarian style, his chequered past, the CHP's poor performance in opposition and its failureto make gains in the March 2004 local elections make it unlikely that he will be able to survive at the helm much longer.

Bulent Ecevit

Leader of the Democratic Left Party (DSP) founded in 1983, he became prime minister for the fifth time in June 1999,heading a coalition government that included the Nationalist Action Party (MHP) and the Motherland Party (Anap).Respected for his honesty, Mr Ecevit was a staunch nationalist advocating a hardline stance on issues such as Cyprus andthe Kurds. However, his popularity was badly dented by the financial crisis that erupted in February 2001 and by hisrefusal to stand down during a period of illness in early 2002. This was worsened during 2002 by his failing health and thebreak-up of his coalition, leading to his party’s annihilation in the November general election. Given his advanced age (heis now almost 80) and poor health, he is no longer a force in Turkish politics.

Turkey 19


The press and numerous private television and radio stations can have animportant effect on public opinion. Increasing monopolisation has dampenedpress independence, with a few large media groups dominating the press andtelevision (the Dogan group, which owns three daily papers as well as severaltelevision channels, controls two-fifths of advertising revenue).

Pressure groups are also of growing importance. The main businessorganisations are the Turkish Industrialists' and Businessmen's Association(TUSIAD) and the Union of Chambers of Commerce (TTOBB). The industrialworkforce is fairly heavily unionised, particularly in the state sector. There aretwo main trade union confederations: the Turkish Trade Union Confederation(Turk-Is), which officially adopts a centrist, non-partisan position, and theReformist Trade Union Confederation (DISK), on the political left. Otherpromotional pressure groups that have acquired an enhanced political roleinclude the Fethullahcis and other religious brotherhoods, and groups modelledon movements in western countries, such as those promoting secularist values,women's rights and environmental protection.

International relations and defence

Turkey's relations with many of its neighbours were radically changed by theend of the cold war and by the Gulf crisis of 1990-91. Since the dissolution ofthe Soviet Union Turkey has developed political, economic and cultural linkswith the Turkic countries of Azerbaijan, Kazakhstan, Uzbekistan, the KyrgyzRepublic and Turkmenistan, as well as a valuable economic and even militaryrelationship with Russia. Turkey's main political, economic and military ties arestill with western Europe and the US. Although the Iraq war in 2003 causedserious tensions with the US, by April 2004 ties had been restored to normal.

Long-running disputes with Greece and the Greek Cypriots have not beenresolved. Since mid-1999 Greece and Turkey have moved towards agreement onbilateral issues. Reversing its previous stand, Greece now supports Turkey’saccession to the EU, at least in principle. However, there is a degree ofuncertainty hanging over the future of the process of rapprochement betweenthe two countries following the new conservative Greek government elected inMarch 2004.

Turkey has been a committed member of NATO since 1952 (see Membership ofregional organisations). After initially opposing the EU's plans to establish anew European security structure outside of NATO, in December 2001 Turkeyreached an agreement with the UK (negotiating on behalf of the EU) that willallow Turkey to play a "decision-shaping" role in any EU-led military operationsrequiring the use of NATO assets. Greek objections to this plan were eventuallyovercome in December 2002. Following the terrorist attacks of September 11th2001 relations with the US were initially strengthened by full Turkish supportfor the US-led intervention in Afghanistan and the campaign against globalterrorism. As an indicator of this, Turkey took over command of theInternational Security Assistance Force (ISAF) in Afghanistan between June2002 and February 2003. In the crises in the Balkans, Turkey shunned unilateral

The media andpressure groups

Western Europe and the US

20 Turkey


action, but joined UN and NATO peacekeeping missions in Bosnia andHercegovina and the NATO air campaign in Kosovo in 1999.

The US-led war in Iraq presented the Turkish government with a classic foreignpolicy dilemma. External factors dictated a need to support the US campaignagainst Saddam Hussein, but domestic political pressures were clearly againstthis, with over 90% of the Turkish public opposed to war with Iraq. The Turkishgovernment was also concerned that the overthrow of Saddam might allow theIraqi Kurds to form their own state and capture the important oil-producingcentre of Kirkuk, thus re-igniting the Kurdish separatist movement withinTurkey. At the end of February 2003, after lengthy negotiations, Mr Gul’sgovernment reached an agreement with the US allowing up to 62,000 UStroops to enter Turkey, so as to open up a "northern front" in the expected war.In return Turkish troops would be allowed to enter a limited zone in northernIraq, officially to prevent a flood of refugees into Turkey and to secure itsborder, but in effect as a means of putting pressure on the Iraqi Kurds. The USalso promised Turkey a massive financial aid package worth up to US$6bn ingrants and US$24bn in loan guarantees.

To take effect the plan had to be authorised by the Turkish parliament, but thiswas refused on March 1st 2003 by a narrow margin, since around 100 AKPdeputies failed to support the motion. But on March 20th, the day the warstarted, the Turkish parliament endorsed the use of Turkish airspace by thecoalition forces. However, it also authorised sending additional Turkish troopsabroad (Turkey already had troops in Afghanistan). Reports that Turkey hadstrengthened its existing military presence in northern Iraq just days after thestart of the war produced stern warnings from the US and the EU. On April 2ndthe US secretary of state, Colin Powell, helped to heal the rift, when it wasagreed that Turkey would allow US forces in northern Iraq to be supplied viaits territory and to send humanitarian supplies from Turkey to northern Iraq.Officially the Turkish government reserved the right to intervene in northernIraq, but agreed that if it did so this would be "in co-ordination" with the US.

Turkey has had an association agreement with the EU since December 1st 1964and entered into a customs union with the EU on January 1st 1996. However, inDecember 1997, at the Luxembourg meeting of the European Council, the EUexcluded Turkey from the list of candidates for enlargement. As a result, theTurkish government froze its relations with the EU until 1999. The relationshipthen improved, following the installation of the Social Democrat-Greencoalition under Gerhard Schröder in Germany in 1998 and the new ententewith Greece. This paved the way for Turkey's inclusion as a candidate for EUmembership at the Helsinki meeting of the European Council in December1999. However, before accession negotiations can start, Turkey must meet thepolitical aspects of the "Copenhagen criteria"—notably by implementinglegislation improving its human rights regime and allowing cultural rights forthe Kurdish minority. In December 2002, following important human rightsreforms in Turkey, the European Council agreed that if it decided in December2004 that Turkey had met the Copenhagen political criteria, then accessionnegotiations would begin "without delay". Strictly speaking, a settlement inCyprus has not been cited as an essential condition for the start of negotiations,

Turkey and the EU

Turkey 21


although Turkey was required to facilitate international efforts to find asolution. This it did in early 2004. However, the Greek Cypriots' rejection of theUN sponsored draft settlement in a referendum on April 24th means that theywill join the EU without the Turkish Cypriots on May 1st and might decide toblock the start of EU accession negotiations with Turkey to try to obtain furtherconcessions from the Turkish side. The EU requires Turkey to have settled itsbilateral disputes with Greece before it can join the EU.

The disputes over Cyprus and the Aegean have been major sources of tension inTurkey's relations with Greece. Following years of bitterness, relations betweenthe two countries began to improve after mid-1999. The rapprochement washelped by the generous Greek response to the Turkish earthquake disaster inAugust 1999 and by Greece's agreement to accept Turkey as a candidate foreventual EU membership at the European Council meeting in December of thatyear. The two governments signed agreements on non-contentious issues, suchas economic and cultural co-operation and environmental protection, and inMarch 2002 reached an agreement on building a trans-border gas pipeline. Inthe Aegean Sea, Turkey is opposed to the potential declaration by Greece of a12-mile limit for territorial waters and disputes the Greek claim to offshoremineral rights over almost the whole of the Aegean. However, when acceptingEU candidacy in December 1999, Turkey also agreed to the possibility ofarbitration by the International Court at The Hague if bilateral discussions wereto fail to produce a positive result. That said, a change of government in Greecein March 2004 and Greece's decision not to use its influence with the GreekCypriots to support the UN's settlement plan for Cyprus have created a degreeof uncertainty about the future direction of relations between the two countries.

The détente between the two mainland governments after 1999 helped to bringabout a resumption of negotiations between the Greek and Turkish Cypriots toput an end to the division of the island. However, the Turkish Cypriotadministration, headed by Rauf Denktash and supported by Turkey, continuedto insist on recognition of northern Cyprus (the self-proclaimed TurkishRepublic of Northern Cyprus is only recognised by Turkey), which led to thebreakdown of indirect talks under the auspices of the UN in September 2002.When the AKP formed the government in Turkey at the end of 2002 the partyleader, Mr Erdogan, initially welcomed a new draft settlement plan put forwardby the UN secretary-general, Kofi Annan, in November. But at the time he wasnot yet prime minister and soon backed away from this position, which wasnot supported by the military or the foreign ministry establishment. However,when pro-Annan-plan parties won a narrow majority of the votes (but not theseats) in the parliamentary election in northern Cyprus in mid-December 2003,Mr Erdogan renewed his efforts for a settlement based on the UN's proposals.Several rounds of talks, which in the final stages also involved Greece andTurkey at prime ministerial level, failed to produce an agreement, and the draftsettlement plan, which was put to separate referendums on the island on April24th, had to be finalised by Mr Annan. In the referendums about 75% of GreekCypriots voted against the Annan plan, whereas 65% of Turkish Cypriots votedin favour.

Greece and Cyprus

22 Turkey


Relations with Bulgaria, Georgia and the other Black Sea countries are generallygood, and Turkey has taken the lead in forming a Black Sea EconomicCo-operation (BSEC) region, which includes all of the above as well as Greece,Albania, Azerbaijan, Russia and Armenia (see Regional overview, Membershipof regional organisations). Strong economic, trade and energy links with Russiahave tended to counterbalance underlying historic tensions over competitionfor influence in the former Soviet republics. Since the election of Vladimir Putinas president of the Russian Federation in March 2000 relations between Turkeyand Russia have improved greatly. In January 2002 Russia and Turkey signed anagreement on military co-operation, providing for joint manoeuvres andexchange visits to military installations, as well as "co-ordination" of the twocountries' policies in Transcaucasia.

In the absence of a resolution to the Azeri-Armenian conflict over the region ofNagorny Karabakh following the May 1994 ceasefire, Turkey has not normalisedrelations with Armenia. Diplomatic contacts suggest that Turkey may open itsborder with Armenia without an Armenian withdrawal from south-westAzerbaijan, but the latter will probably remain a condition for theestablishment of full diplomatic relations between the two states.

Massacre or genocide? A source of tension in Turkey's foreign relations

Under the Ottomans it is estimated that between 1915 and 1922 up to 1.5mArmenians died in eastern Turkey, many as a result of forced relocation or fromfamine, while those who survived left their former homeland for other countries.The Turkish Republic, founded in 1923, denies the Armenian allegation that whatoccurred was genocide. However, in recent years the Armenian government and theArmenian diaspora have had a degree of success in persuading some westernparliaments to recognise the events as genocide (rather than massacres, as they areofficially referred to by Turkey). This has created tensions between Turkey and thosecountries. Most recently, in April 2004, Canada's federal parliament voted torecognise the killing of Armenians by Ottoman forces as genocide, despiteopposition to the resolution from the Canadian government.

For many years Turkey’s relations with Syria were tense, given Syrian supportfor the PKK and disputes over the Euphrates waters following the constructionof the Ataturk dam in Turkey. By expelling the PKK leader from Syria in October1998 the then Syrian president, Hafez al-Assad, removed a major bone ofcontention between the two countries. Although the Euphrates dispute remainsunsettled, relations with Syria, mainly in the economic field, have movedforward since the installation of Bashar al-Assad as president in June 2000. Inearly 2003, in an effort to avoid the war in Iraq, Turkey fostered closer ties withseveral countries sharing a border with Iraq, including Syria, to the displeasureof the US. The rapprochement between the two countries continued in early2004 with the signing of agreements to boost economic ties.

In 1991 Turkey and Israel signed a military training and co-operation agreement,under which Turkey has benefited from access to Israel's advanced militarytechnology and has also gained the support of the pro-Israeli lobby in the USCongress. The relationship suffered a shock from the Israeli invasion of thePalestinian Authority's territory in April 2002, with the Ecevit government

Relations with Russia andother Black Sea neighbours

Syria, Israel, Iran and Iraq

Turkey 23


sharply critical of the Israeli action, but it appears that Israel exerted abeneficial influence in overcoming the rift between the US and Turkey in thecrisis over Iraq in March-April 2003. However, the Turkish government stronglycondemned Israel's assassination of Palestinian Hamas leaders in March andApril 2004.

With the exception of a brief flirtation under the Islamist-led Erbakangovernment, Turkey has tended to be cautious in its relations with Iran,suspicious of actual or potential attempts by that country to export Islamicradicalism. A natural gas pipeline between Iran and Turkey has increased thecountries’ economic interdependence. The pipeline came into operation inDecember 2001, but Turkey later closed it for five months because of what itclaimed were "quality problems". The real reason was more plausiblyTurkey’s overestimation of its energy needs at the time of the original supplycontract. Supply resumed in mid-November 2002 following the renegotiation ofthe contract.

Turkey’s position in the Middle East has been profoundly affected by the war inIraq in 2003. Turkey is concerned about the possibility of an independentKurdistan emerging in northern Iraq and fuelling separatist sentiment amongTurkey’s Kurds in the south-east. As a result, the Turkish government has soughtassurances from the US that Iraq’s territorial integrity will be preserved, therebypreventing the foundation of an independent Kurdish state in northern Iraq,which none of Iraq’s other neighbours supports.

Security risk in Turkey

Armed conflict

Turkey is potentially in a zone of conflict, at the junction of the Middle East, the Balkans and the ex-Soviet republics ofCentral Asia and Transcaucasia. The Turkish authorities are particularly concerned that Iraqi Kurds will use the changeof regime in Iraq to establish an independent Kurdistan, which might inspire Turkish Kurds to renew their struggle forautonomy. Turkey, which already had troops in the border region of northern Iraq to contain the threat of Kurdishmilitants across its border with Iraq, increased its military contingent at the border during the Iraq war and warned theIraqi Kurds against taking control of the oil-rich area of Kirkuk and Mosul in northern Iraq. It now seems unlikely thatTurkey will become embroiled in an armed conflict with the Iraqi Kurds, but because of continued uncertainty regardingthe shape of the new regime in Iraq and widespread instability in the country, it cannot be completely ruled out.Nevertheless, the main industrial and tourism centres in western Anatolia are around 2,000 km from the frontier region,so businesses would be unlikely to be affected by armed conflict there. Chechen terrorists have twice staged sieges inTurkey, to gain publicity for their cause, but both incidents were short-lived and ended peacefully, thanks to the swiftresponse of the Turkish authorities. Furthermore, there are no clear signs that Turkey will be sucked into other militaryconflicts in Transcaucasia.

Terrorism

Violence perpetrated by Islamist extremists was not a major problem in Turkey in the past. but as the four suicidebombings in Istanbul in November 2003 and one in March 2004 have illustrated, the risk of terrorist attacks by Islamistextremists, perhaps working with al-Qaida or like-minded organisations, is now high. In contrast with past attacks byTurkish Islamist terrorist groups, the November Istanbul bombings were ostensibly against foreign interests (twosynagogues, the Turkish headquarters of the UK-based bank HSBC, and the British consulate), although the AKPgovernment's pro-Western policies, including partial support for the US in Iraq, may also have been a factor. The mainthreat of Islamist violence is probably from the two main Islamist extremist groups, Hizbullah (no relation to the Lebanese

24 Turkey


group of the same name) and the Great Eastern Islamic Raiders Front, which openly espouse extremist sentiments andembrace violence. Both appear to lack the logistical capability to carry out an extended campaign. The same applies toTurkey's far-left fringe, which has occasionally attacked western targets since the 1960s. (For the Kurdish militancy, seeCivil unrest.)

Civil unrest

Turkey's unsettled political and economic climate has posed some business risks. However, tight security in most parts ofthe country limits the threat of civil unrest among the population, which is in any case far more concerned with makingends meet than with causing a disturbance. In the larger cities a heavily armed police presence is the norm. The authoritiesrarely permit public demonstrations and maintain tight security at airports and outside embassies, consulates and allofficial buildings. Following the capture in 1999 of the leader of the Kurdistan Workers’ Party (PKK), Abdullah Ocalan, therewas an initial increase in armed attacks on police and security forces, including several suicide bombings. During his trial,however, Mr Ocalan called on his supporters to end the conflict. With the exception of scattered clashes with security forces inthe south-east, his message was heeded. However, since early 2003 clashes between security forces and Turkey's Kurdishmilitants have been more frequent, but limited to the Kurdish-inhabited south east. On September 1st 2003 the PKK, nowcalled the Kurdistan People's Congress (Kongra-Gel) after a brief spell as the Congress for Freedom and Democracy inKurdistan (KADEK), called an end to its unilateral ceasefire. However, its campaign of violence is likely to be on a smallscale and restricted to the Kurdish-inhabited south east.

Violent crime

Violent crime is not a major problem in Turkey. Street crime is less prevalent in Turkish cities than in western cities ofequivalent size. When foreign nationals are victims of street crime, the perpetrators tend to be dealt with harshly bythe courts.

Drug smuggling and organised crime

Turkey is a major drug-trafficking route, in particular for heroin originating from countries in south-west Asia on its way toEurope and, to a lesser extent, the US. It is estimated that around 75% of the heroin in Europe has been processed in, orcome through, Turkey. Hand in hand with the drugs trade goes money-laundering. This is often carried out through casinosor construction companies. However, organised crime groups have no history of targeting foreign nationals. Kidnapping forransom is almost unheard of.

Turkey has a mainly conscript army, in which most young men are required tocomplete 15 months of military service. Nonetheless, the large majority ofofficers, together with senior non-commissioned officers and specialist troops,are long-servicing professionals. The air force and navy also have a relativelyhigh proportion of long-term servicemen. The military is trying to movetowards domestic production of arms and equipment, to avoid the threat of anarms embargo, like the one imposed by the US after the invasion of Cyprus,which lasted until 1978.

Armed forces(mid-year)

Active 514,850 Army 402,000 Navy 52,750 Air force 60,100

Reserves 378,700Paramilitary (gendarmerie/national guard) 150,000

Total armed forces 1,043,550Forces in Cyprus 36,000

Source: International Institute for Strategic Studies, The Military Balance, 2003/04.

Armed forces

Turkey 25


In 1998 Turkey announced a ten-year defence modernisation programme worthsome US$31bn, which was expected to include main battle tanks, attackhelicopters and assault rifles. Turkey already assembles its own advancedweapons, notably the F-16 aircraft, under an agreement with General Dynamicsof the US. However, the financial crisis of February-March 2001 has led todelays in the planned purchases or production of helicopters, tanks and somewarships. According to the London-based International Institute for StrategicStudies, Turkey spent US$9.2bn (5% of GDP) on defence in 2002, comparedwith the official figure for the defence budget of US$6.5bn.

Resources and infrastructure

Population

Turkey has the third-largest population in Europe, after Russia and Germany.According to the results of the October 2000 census, the population at the timewas 67.8m. It was expected to reach 70.9m by mid-2003. The rate of growth ofthe population has declined in recent decades, but is still estimated at about1.4% per year. This is high by European standards, but low by the norms of theMiddle East. The deceleration in the birth rate since the 1950s is related to animprovement in the educational level of women, migration to urban areas, anda wider use of modern birth-control practices. The State Institute of Statisticsestimates the birth rate for 2002 at 2.13% and the fertility rate at 2.46%. Thedeclining birth rate has been partly offset by a declining mortality rate (at anestimated 0.7% in 2002). Infant mortality rates were estimated to have droppedto a still high 3.94% in 2002. The figure remains higher than in all European andmost Middle East countries. Life expectancy is put at 66.2 years for men and70.9 years for women.

Population, sex and age distribution, 2000 census(‘000)

Age group Total Male Female0-19 27,430 14,144 13,28520-39 22,449 11,409 11,040

40-64 14,043 7,031 7,01165+ 3,882 1,762 2,120Total 67,804 34,347 33,457

Source: State Institute of Statistics.

Turkey’s population is still young. According to the UN, 67.6% were below theage of 35 in 1998, compared with 49% in France (based on 1993 data) and 48% inPortugal (based on 1997 data). Research published by the Turkish Industrialists'and Businessmen's Association, TUSIAD, forecasts the number of householdsat 18.5m in 2010, compared with about 15m at present. There has been a highlevel of migration from rural areas to major cities and, increasingly, to otherregional centres. In the largest cities this has led to the creation of shanty towns,which somethimes account for one-half or more of the population. However,many of the shanty-town areas have gradually been transformed into standardmulti-storey housing areas benefiting from all urban services. The 2000 census

Cities are expanding throughmigration from rural areas

26 Turkey


figures indicate that urbanisation has increased, with the urban population(comprising provincial and district centres) accounting for about 65% of thetotal, compared with 60% in 1990 and 27% in 1960. The process of internalmigration and urbanisation is likely to continue for many years to come.

About 25% of the population is concentrated in the Marmara region in thenorth-west, including Istanbul. According to the 2000 census results, this is alsothe area of most rapid population growth (2.67% per year between 1990 and2000). Another 25% lives along or close to the western and southern coasts. TheBlack Sea region accounts for about one-eighth of the population, but as a resultof outward migration the population there has stabilised. Inland areas east ofthe capital, Ankara, are sparsely populated. However, the south-east accountsfor about 10% of the total population, and population growth is strong there,despite outward migration, thanks to natural increase.

There are large discrepancies in income distribution between regions, betweenurban and rural parts of the same region, and within individual urban areas.

The size of the workforce varies according to seasonal trends, particularly inagriculture. In 2003 the workforce averaged 23.8m, more or less flat on thepervious year, despite two consecutive years of strong economic growth (seeThe Economy, Economic performance). Unemployment averaged 10.5% in 2003,little changed from 2002 but well up from 6.6% in 2000, the year before theFebruary 2001 crisis. Almost another 5% were considered "underemployed" in2002. Work for wages and salaries accounts for about one-half of allemployment, with around one-quarter of these jobs provided by the publicsector. Some 30% of the working population are employers or self-employed—abroad definition that includes, for example, street-hawkers, shopkeepers, taxidrivers, independent professionals, farmers and owner-managers in industryand services. The remaining 20% are unpaid family workers on farms and inother family-sized enterprises.

By sector, services account for over 40% of employment, agriculture for aboutone-third and industry, including construction, for one-quarter. Women makeup just under one-half of the population, but little over one-quarter of theworkforce. Approximately 60% of working women are employed in agriculture.The non-participation of urban women in the workforce is the main reasonwhy the workforce participation rate—which measures the proportion of thoseworking or seeking work in the population of working age—has remained atabout 49%, compared with over 60% in most EU countries.

Over 99% of the population is at least nominally Muslim. The Greek, Armenianand Jewish communities have steadily declined. Among the Muslims, theunorthodox Alevi minority is estimated at anywhere between one-tenth andone-quarter of the total. Massacres of Alevis have occurred, most recently inKahramanmaras in 1978 and in Sivas in 1993. Kurds form the majority of thepopulation in the south-east and parts of the east, where Kurdish is commonlyspoken and many villagers still cannot speak Turkish. People of wholly orpartly Kurdish origin also make up a substantial minority of the populations ofmany major cities, where they are usually indistinguishable in appearance and

The services sector hasbecome the largest employer

The population is almostentirely Muslim

Turkey 27


behaviour from other Turks, except in some cases of recent migration. Kurdsalso live in neighbouring regions of Iran, Iraq and Syria. Arabic-speakers, foundmainly along the southern frontier with Syria, account for 1.5-2% of the totalpopulation. There are believed to be several hundred thousand illegalimmigrants living in Istanbul and other Turkish cities, mainly from poorer partsof the Balkans and the former Soviet Union as well as Iran, Iraq, Afghanistanand Africa.

Education

The minimum period of schooling was raised from five to eight years in 1997,and there is a single curriculum for the 6-14 age group. Primary enrolment is95-100% in most parts of the country, but in some undeveloped or conservativeprovinces in the east and south-east up to 40% of girls may not be enrolled. Allthose successfully completing primary education are entitled to go on to attendthree years at secondary school (although entry to certain schools is byexamination). According to an OECD education and skills report, however,Turkey had by far the highest drop-out rate in the OECD in 1998, with some50% of 15-19-year-olds neither enrolled in school nor in possession of an uppersecondary qualification. UNESCO gives the gross secondary enrolment ratio for1999-2000 as 57% (48% for girls), which is lower than in most Middle Easterncountries and many developing countries. The Ministry of Education gives anenrolment rate of 64% for 2001-02. About two-thirds of Turkish secondaryschools have broad curriculums aimed at preparing students for university.There is also a range of specialist schools, including the religious Imam Hatipsecondary schools. The rapid expansion of these schools, regarded by many asa training ground for Islamist radicals, has been reversed in the past five years.Any attempt by the Justice and Development Party (AKP) government topromote the Imam Hatip schools is likely to be opposed by the president andthe military.

Entry to university for secondary-school graduates is by national examination.Places are limited—UNESCO put gross tertiary enrolment at a modest 15% in1999-2000. The education ministry gives a ratio of 18% for 2001-02—or 28%when the Open University is included. A handful of universities, mainly inAnkara and Istanbul, enjoy special prestige. Courses are normally four years,but many students take longer. There has been an increase in two-year courses.The Open University plays a significant role in catering for those unable to winfull-time university places. All levels of education, from the relativelyundeveloped pre-school level upwards, are available in both the public and theprivate sector. However, public-sector provision accounts for over 95% of allprovision and is in principle free, with the exception of partial university fees.A World Bank report in 2000 (Turkey: Economic Reforms, Living Standards andSocial Welfare Study) put consolidated budget spending on education at 3.1% ofGDP in 1998, well below the 4.8% average for middle- and lower-middle-income countries, and comparable to the 3.3% average for low-incomecountries. Many of the most prestigious universities and secondary schools,both public and private, use a foreign language, usually English, as the mediumof education.

Eight-year educationis compulsory

The public sector has thedominant role

28 Turkey


Today’s young people are far better educated than the older population, most ofwhom have completed five years of primary education at most. The illiteracyrate in 2000 was 15%, according to UNESCO (23.5% for women), compared with43.5% (60.5% for women) in 1970. There are some 14m students in primary,secondary and tertiary education, and about 500,000 teachers. The quality ofeducation, however, is uneven. It suffers from an emphasis on rote-learning andcentralised multiple-choice examinations (encouraging the proliferation ofprivate cramming schools), outdated curriculums, a lack of practical facilities, afailure to encourage initiative and free debate, poorly trained and poorlyrewarded teachers, and large class sizes. In rural areas schools can be severelyunder-equipped, and in some cases they barely function.

Health

Healthcare standards in Turkey are well below those of the developedcountries. According to OECD data, public expenditure on healthcare was 3.5%of GDP in 2001, compared with 5-8% for most developed countries. Totalexpenditure on healthcare is about 5% of GDP. There is one doctor for every 797people and one hospital bed for every 392, according to the Ministry of Health.Apart from the overall shortage of resources, the fact that about 35% of thepopulation still lives in small and often isolated rural settlements increases thedifficulties of adequate provision. There is far more health provision in thewestern than in the eastern provinces of the country.

Access to health services is mainly via three social security organisations, whichalso provide pensions. Around 80-90% of the population have now beenincluded in the system, but resources are stretched. There are plans to separatehealth and pension provision as part of ongoing social security reforms.

Just as the inadequacies of the state education system have encouraged themiddle classes to turn to private-sector education providers, so the bureaucracyand overcrowding associated with the public health system have encouragedthe growth of private health services. Private specialists are commonlyconsulted, particularly in the big cities, and many new private clinics andhospitals have opened in recent years. The development of private healthinsurance, however, remains limited to about 2% of the population.

Natural resources and the environment

At 783,562 sq km (including lakes and islands), Turkey’s land area is about thesame as that of France and the UK combined. Approximately 264,000 sq km(34%) is agricultural land and much of the rest can be used for grazing.However, there is also a substantial area of exposed highland, particularly incentral and eastern Anatolia (Mount Ararat, in Agri province, rises 5,137 metres).Much of this region is extremely cold in winter. Water resources are lessplentiful than in western Europe, but much less scarce than in most of theMiddle East. The Black Sea region is warm and wet, with over 1,000 mm ofrainfall per year in many places. Other parts of the country enjoy considerablesunshine, especially in summer, with between 300 mm and 1,000 mm of

The quality ofeducation varies

Health provision isunder-resourced

Land and climate favouragriculture and tourism

Turkey 29


precipitation annually, depending on proximity to coasts and the lie of the land.This climatic variety allows a wide range of crops to be grown.

Mineral resources include much lignite and some hard coal, iron ore, metalsand salts. Turkish boron minerals and chromium are significant forinternational trade. Only relatively small amounts of oil and natural gasreserves have been found and exploited, but several rivers have been or arebeing dammed for hydroelectricity generation as well as irrigation. Windpower also has potential. Long coastlines offer opportunities for shipping,fishing and above all tourism, which also benefits from warm summers, finecoastal scenery and the presence of historical remains (see Economic sectors).

The earthquake disasters of August and November 1999 served as a reminderthat large areas of Turkey are at risk from active fault lines. Both the 1999earthquakes occurred towards the western end of the country-wide NorthAnatolian fault. A major earthquake or series of quakes, centred further westunder the Sea of Marmara, is considered likely within the next 10-15 years,potentially causing more damage in Istanbul. The south-west and south-east arealso particularly prone to earthquakes.

Transport, communications and the Internet

Long distances, mountainous terrain and a lack of resources have hinderedroad-building projects. The length of the state and provincial road network isjust over 60,000 km. This figure has increased little for many decades.However, road surfaces have been improved, and some roads have beenwidened. The Ankara-Istanbul toll road (motorway) has almost beencompleted. This forms part of the E-5 link between Europe and the Middle East.In all, there are about 1,900 km of motorway. The total vehicle stock (excludingmotorcycles) has risen from around 1.4m in 1983 to 3.6m in 1993 and 6.6m in2003. About 3,000 people die in traffic accidents every year, down from 6,000in the early 1990s, according to national statistics. Urban congestion andpollution are also significant problems. Projects awaiting financing include aroad crossing of the Gulf of Izmit, cutting journey times between Istanbul andthe Aegean region, and more controversially, a bridge across the Dardanellesand a third Bosporus bridge.

There is a modest 8,671 km of railway, of which 85% was built before 1940 andover 40% predates the Republic. Most lines are single-track and circuitous, andrail travel is slow. All are owned by the loss-making state railways, TCDD. Onlya few suburban lines are commercially successful, while services to the easthave been run at a loss. Although several ports and state enterprises producingbasic goods are served by rail, the railways account for only 4% of goodstransport (about 14.5m tonnes/year) and 2% of passenger transport (about 70mjourneys a year, down from a peak of about 140m in the late 1980s and early1990s). A number of projects have recently been devised to increase the role ofrail. Branch lines are to be built to industrial zones, private train operators are tobe permitted, and the Istanbul-Ankara line is due to be upgraded in 2004-05,with a high-speed train to follow. In early 2004 a Japanese-led consortium was

Earthquakes are frequent

Roads are the main means ofland transport

The railways havebeen neglected

30 Turkey


selected to build a tunnel under the southern Bosporus, with official Japanesefinancial support. This is the first phase of the Marmaray project, an east-westrail link across Istanbul slated for completion in 2008. Several municipalitieshave built or are building metro systems.

The state-controlled Turkish Airlines (THY) dominates domestic air transport,although it started to face more private competition in 2003. International airtraffic in and out of Turkey is shared by THY, other major airlines and (forholiday-makers and émigré Turks) charter companies. THY has 65 aircraft andcarried around 10.5m passengers to 27 domestic and 76 internationaldestinations in 2003. THY is slated for privatisation when market conditionspermit. The new international terminal at Istanbul’s main Ataturk Airport wascompleted in early 2000, and the main tourist airport at Antalya has also beenexpanded. These projects were carried out on a build-operate-transfer (BOT)basis. Most airports are owned and run by the state.

Sea transport is important for domestic and international trade and travel, withthree of Turkey’s main industrial conurbations (Istanbul-Izmit, Izmir and Adana-Mersin) located on the coast. The establishment of private ports and the trendtowards private management of state-owned ports have gone some waytowards mitigating overcrowding and inefficiency in recent years. Mersin, Izmirand Samsun are the main ports on the Mediterranean, Aegean and Black Seacoasts, respectively; there are several ports in the Marmara region, centring onIstanbul. The largest port facilities, including Izmir, Mersin, Iskenderun,Haydarpasa (Istanbul) and Samsun are still managed by the state railways,TCDD, but privatisation is possible in 2004. Many commuters in Istanbul usethe mainly state-owned steamers and ferries. The tonnage of the Turkishmerchant marine has been stable at about 11m deadweight tonnes since 1996.The share of Turkish-flag vessels in the transport of exports and imports hasslipped to under 30%. Shipping is dominated by the private sector.

The telecommunications network was improved and expanded rapidly in the1980s and early 1990s. Digitalisation is almost complete, but todayinfrastructure is again failing to keep up with demand, particularly for Internetand data services. The state-controlled Turk Telekom has about 19m fixed-linesubscribers and owns the national infrastructure. The fixed-line penetration ratewas 27% in 2002, well below the rates in most European countries. TurkTelekom also has significant satellite, Internet and cable television assets. Itstarted operating Turkey's fourth mobile service in 2001. Attempts to part-privatise Turk Telekom failed in 2000 and early 2001. A tender for a majoritystake in the company is due to be announced in May 2004. The company hasreportedly been valued at US$5bn-7bn, but prospective buyers may find thisexcessive. Meanwhile, Turk Telekom's monopoly on fixed-line voicetransmission and infrastructure expired at the end of 2003. It will now beobliged to open up its infrastructure to licensed private operators and willgradually face increased competition, notably in long-distance telephony.The telecoms market is regulated by the Telecommunications Agency, asemi-autonomous watchdog.

Turkish Airlines is facingcompetition

More port privatisationis planned

The telecommunicationsmarket is opening up

Turkey 31


So far, the main private-sector involvement in telecoms services in Turkey hasbeen in mobile telephony. The penetration rate reached an estimated 40% in2003. This is well above Middle Eastern countries such as Egypt (10%), but wellbelow the levels in EU countries, where penetration rates are in the 70-100 per100 population range. Turkcell (jointly owned by the Cukurova group and theFinnish company, Sonera) dominates the market with 19m subscribers as ofFebruary 2004. In recent years it has increased its lead over Telsim, which isbelieved to have 5-6m subscribers. Telsim is owned by the Uzan Group, whoseImar Bank was seized by the banking sector regulators in mid-2003 because ofpayments difficulties. The takeover of the bank revealed huge irregularities,obliging the state to finance a US$6bn compensation package for savers (seeThe Economy, Financial services). Since early 2004 Telsim has been undermanagement appointed by the Savings Deposit Insurance Fund (SDIF), andthere are plans to sell it to recoup some of the cost of the compensation to ImarBank depositors. In early 2001 Is-TIM (Aria), jointly owned by Turkiye IsBankasi and Telecom Italia Mobile, became the third mobile phone operator. Is-Tim bid an unexpectedly high price of US$2.35bn for its licence in an auction inApril 2000, and its entry into the market prompted intense competition.However, because of the economic crisis and a dispute over roaming, Is-TIMclaimed fewer than 2m subscribers at the end of 2003. Turk Telekom’s service,Aycell, also started up in 2001 and has been no more successful. In 2003, withIs-TIM threatening to pull out of the Turkish mobile phone market, it wasdecided to merge Is-Tim and Aycell. A new company, TT&TIM, was formed, butthe Aria and Aycell trade marks continue to be used. Third-generation licenceshave yet to be issued, but a range of general packet radio services (GPRS, or2.5G technology) are on offer.

The Post Office (PTT) continues to dominate traditional mail and parcelservices. About 820m domestic and international small letters and parcels areposted annually, down from over 1bn per year up to and including 2000. Thedecline can be attributed to the greater use of telecommunications and e-mail.There are numerous private cargo and courier firms. Internet usage has beenincreasing steadily in Turkey, but for a country with a moderate standard oftelecoms infrastructure it is extremely low at 5.5% in 2002, compared with 20%in Hungary and Poland, almost 40% in Slovakia and around 50% in the CzechRepublic. The number of Internet service providers (ISPs), which mushroomedin the late 1990s, has fallen to under 50. Over 40% of the market is held bySuperonline, which belongs to the Cukurova group (also the owner of YapiKredi Bank and Turkcell). Other leading ISPs and portals are also associatedwith established conglomerates with banking or media interests (Sabancis’sturk.net-TNN, Is Bank's is.net and Koc's koc.net, for example). More specialisedInternet companies, such as Borusan, Meteksan and Netone, concentrate on thecorporate market. Turk Telekom also has its own ISP, tt.net, which its private-sector rivals accuse of unfair competition.

Many subscribers make use of Internet banking and shopping facilities.Broadband has been slow to come to Turkey. Turk Telekom now claims 70,000advanced digital subscriber line (ADSL) customers, as well as providing Internetaccess via its cable television network. Private ISPs are eager to offer ADSL

Mobile telephones nowoutnumber conventional lines

Internet usage has risensharply, but from a low base

32 Turkey


access now that the telecoms market has been liberalised. All majorgovernment and private-sector organisations and many small businesses havewebsites, and business-to-business services are on the increase. An InternetBoard made up of representatives of interested parties meets regularly at theMinistry of Transport and Communications.

There is a plethora of newspapers and television and radio channels. The best-known are owned by large media groups, which aim at a wide audience. Thesingle largest media group is the Dogan group, which claims over 40% ofadvertising revenue. The best-selling newspapers are Hurriyet, Posta (bothDogan group) and Sabah (Bilgin group, backed by Turgay Ciner). These arefollowed by Vatan and Milliyet (Dogan), Takvim (Bilgin) and Aksam (Cukurova),with 200,000-300,000 copies each. The other dailies are either sports-focused,low-priced or have a specific political bias. Turkiye (Ihlas), Yeni Safak (Albayrak)and Zaman are influential conservative/Islamic papers, while Cumhuriyet is themost influential independent left-of-centre daily.

The top television channels are Kanal D (Dogan), ATV (Bilgin), Show TV(Cukurova) and TGRT (Ihlas). The fate of the Uzan group's media organs isuncertain following their seizure by the SDIF in connection with the Imar Bankscandal. Before the Uzan group ran into difficulties, Star was one of Turkey's topfive best-selling daily newspapers, and Star TV was one of the top fourchannels. The state-owned TRT, which held a monopoly on broadcasting untilthe 1980s, continues to run several television and radio channels. CNN Turk(Dogan), NTV and CNBCE (both Dogus) and Sky-Turk (Cukurova) are mainlynews channels. The Dogan group also leads the way in the fledgling digital andpay-TV market. Broadcasting is supervised by an independent agency, RTUK,which is best known for ordering television and radio channels to closedown for a day or more as punishment for showing offensive programmes.RTUK has yet to settle chaotic frequency allocations. All major media organsalso run websites.

Energy provision

With extremely limited domestic production, Turkey is a major importer of oiland, increasingly, of natural gas. Both are used by industry and for residentialheating, alongside coal, which is mainly produced locally. Lignite accounts forthe vast majority of coal production. Reserves of lignite are put at 8.4bn tonnesbut may well be much higher, and lignite production was 48.2m tonnes in2002, according to the State Institute of Statistics. The state-owned TKI is themain producer. Hard coal is mainly found on the declining Zonguldak field onthe Black Sea coast, with reserves put at 1.2bn tonnes. Production, controlledby another state-owned company, TTK, was 3.3m tonnes in 2002. Hard coal isalso imported.

Turkey is a major crossroads for pipelines carrying oil and natural gas to theMediterranean region and western Europe from Russia, the Middle East andAsia. There are two main international gas pipelines, one from Iran, whichbecame operational in January 2002, and the so-called Blue Stream pipeline

Major media outlets are runby powerful groups

Aside from coal, Turkeydepends on imports

Turkey has become a crossroadfor oil and gas pipelines

Turkey 33


running from Russia under the Black Sea to Turkey, which became operationalin February 2003. However, a lack of demand in Turkey appears to have beenthe main reason for the government's decision temporarily to suspend importsfrom Iran in June-November 2002 and from Russia in March-December 2003.Greece and Turkey reached agreement at the end of 2003 to build a natural gaspipeline between the two countries, to be completed in 2006. The pipeline isintended to carry gas from Azerbaijan to Greece and possibly beyond to otherwest European countries, but it may also be used to export natural gas fromIran to the rest of Europe. An oil pipeline runs from Kirkuk in Iraq to theMediterranean port of Ceyhan in eastern Turkey.

Plans to construct other gas and oil pipelines are at different stages.Construction of the controversial 1m barrel/day capacity Baku-Tbilisi-Ceyhan(BTC) pipeline from Azerbaijan through Georgia to Turkey began in late 2002and is expected to be completed in mid-2005. The BTC pipeline has enjoyedstrong support from the US, which sees it as strategically important, as it willend Russia's sole control of the Caspian oil export routes. It will also reduce thehuman and environmental risks resulting from the large number of oil tankerssailing through the Bosporus. In addition, the pipeline will add to Turkey’sstrategic importance and generate employment and transit fees. Plans to build agas pipeline from Azerbaijan's Shah Deniz gas field through Georgia to Erzurumin Turkey (the South Caucasus gas pipeline) have been delayed, in part byTurkey's reduced natural gas requirements.

Beginning in the 1990s, when the first natural gas was imported from Russia,Turkey has turned to gas as a clean fuel for power generation and residentialuse. Since then Turkey has sought to diversify its gas supplies, bringing gas fromAlgeria, Nigeria and Iran. Less developed plans exist to pipe gas from Egypt,Turkmenistan and Iraq. However, the 2001 recession and the slower thanplanned development of the natural gas distribution network have cut the paceof gas demand growth, with the result that Turkey has supply contracts for farmore gas than it now expects to need. Domestic demand is officially estimatedto rise from about 24bn cu metres in 2003 to 32bn cu metres in 2005 and55bn cu metres in 2010, but these projections are likely to be subject to furtherdownward revisions. To avoid a costly surplus (there are expensive take-or-payprovisions in the supply contracts with countries such as Iran and Russia), thestate gas and pipeline company, Botas, is seeking to export gas to Europethrough Greece to Italy and through the Balkans to Austria.

Domestically, gas is transported by Botas, which has a monopoly on imports.Botas also supplies gas to households and small businesses in Bursa andEskisehir; in Istanbul, Ankara and Izmit gas is supplied to these customers bycompanies owned by the municipalities. Legislation to liberalise the gas marketin line with EU norms was passed in April 2001. Under this, Botas will lose itsmonopoly on imports and transport, and city distribution will be carried outby private companies. The gas market is now being supervised by anindependent body, the Energy Market Regulatory Authority. The urbandistribution networks and Botas's gas import contracts are slated forprivatisation, and new distribution companies will be set up and householdsand workplaces in dozens more cities will be converted to natural gas.

Official gas demand growthprojections have been cut

34 Turkey


Electricity demand in Turkey more than doubled between 1990 and 2001.Consumption growth averaged about 8.5% a year in that period, despite a fallof 1.3% year on year in 2001. As demand growth has outpaced increases inelectricity-generating capacity, Turkey has experienced power shortages and hashad to import electricity, despite a doubling of net generating capacity in theten years up to 2002. It is estimated that generating capacity will need to nearlydouble again by 2010 for electricity supply to keep pace with demand. At end-2001 total installed electricity-generating capacity was 28.3bn kwh, of whichthermal plants accounted for 58.7%. These plants are mainly fuelled by lignite,although gas and oil are also used. The remainder of Turkey’s electricity comesfrom hydroelectric plants, principally the Ataturk and Karakaya dams on theEuphrates. Decade-old plans for a nuclear plant at Akkuyu on the Mediterraneancoast have been shelved. Electricity imports have been mainly from Bulgaria,Georgia and Iran (although in early 2004 the government suspended electricitysupplies from Bulgaria, ostensibly because of a dispute over public constructioncontracts there). At the beginning of 2004 the government announced that itwould begin to purchase electricity from Turkmenistan. Renewable energy isgrowing steadily as an alternative energy source for Turkey’s electricitygeneration. The country has enormous hydroelectric, wind and solar potential.

The Electricity Market Law was approved by parliament in February 2001,bringing Turkish legislation into line with that of the EU. As foreseen in the law,a new energy watchdog, the Energy Market Regulatory Authority, took overresponsibility for the electricity market in late 2002. The authority has powersto issue licences. Eventually, it will supervise a free market in which the privatesector produces electricity and sells it to trading companies, large users anddistributors under contracts freely negotiated by the parties. The state mustmeanwhile privatise its generation assets—which account for some 60% of totalgenerating capacity—and make the transmission network available to allcomers. Distribution is also to be privatised. Households and small commercialusers currently purchase their electricity either from the national distributioncompany, TEDAS, or (in three regions) from private regional distributionmonopolies. In future, all regions will have private distributors. In preparationfor the envisaged open market, the state generation and transmission company,TEAS, has been divided into three companies: EUAS, to manage the generationcapacity that remains in state hands; TEIAS, to handle transmission; and TETAS,to buy electricity wholesale from producers and sell it wholesale to distributors,until such time as this function is taken over entirely by the market.

In the long term, competition and market regulation are expected to improveelectricity provision and reduce prices, while limiting loss and wastage ofelectricity and reducing the non-payment of bills. However, in the short termsignificant problems still have to be solved. Some of these problems arerelated to past attempts to attract private investment into the power sector. Inthe 1980s and 1990s dozens of contracts were awarded for the construction ofpower plants under BOT and build-operate (BO) schemes, and for themanagement of existing power plants and regional distribution networks on atransfer-of-operating-rights (TOR) basis. These schemes did not amount tooutright privatisation, and the private companies were not obliged to take full

Electricity demand growth hasoutpaced generating capacity

The transition to the electricitymarket has been troubled

Turkey 35


market risks, as they benefited from state guarantees for the purchase or supplyof power, the supply of fuel, and the repayment of loans for the period of thecontract. Despite a complex history of legal disputes, several of the power plantschemes have been completed. The guarantees that their operators enjoy nowrepresent an obstacle to free and fair competition. Moreover, clauses of theElectricity Market Law intended to minimise the number of additional schemesthat are allowed to proceed have been overturned by the Constitutional Court,and contract-holders have started to sue for compensation on the grounds thatthe government is not honouring their contracts. The existence of suchdisputes, which had not been resolved by mid-April 2004, constitutes anobstacle to the outright privatisation of the power plants and distributionnetworks concerned.

These and other uncertainties are likely to discourage new private investmentin power generation—whether through privatisation or greenfield plants. It istherefore unclear where future investment in generating capacity will comefrom. For the next few years, however, there is likely to be excess capacity,mainly because of five major new, mainly gas-fired BO plants built with foreigncapital. These projects have a total capacity of 5,700 mw. The first three werecompleted in 2002. In addition to BOT and BO plants, attempts to attractprivate investment in the face of budgetary constraints have led in recent yearsto the rapid spread of small-scale "auto-producers"—companies and industrialestates producing their own electricity and entitled under certain conditions tosell surplus output.

Electricity distribution is carried out in most parts of the country by affiliates ofTEDAS. Blackouts can still occur from time to time—even in major cities—because of transmission losses or equipment failures, and the qualityof electricity supplied can be uneven. Efforts are being made to stem thelosses of the state power companies, but this has served to push up prices,which are among the highest in Europe. Theft and non-payment of bills arealso major problems.

The economy

Economic structureMain economic indicators, 2003(actual unless otherwise indicated)

Real GDP growth (%) 5.8Consumer price inflation (av; %) 25.3Current-account balance (US$ m) -6,805.5 a

Exchange rate (av; TL:US$) 1,500,885.0Population (m) 71.3 a

External debt (year-end; US$ m) 147,341.1 a

a Economist Intelligence Unit estimate.

Source: Economist Intelligence Unit, CountryData.

36 Turkey


After the crises of the 1970s Turkey abandoned import substitution and optedfor an open economy, in line with international trends. Liberalisation of thedomestic economy also began, but it remains mixed, with the state stillplaying a major role. Despite some privatisation, infrastructure, utilities, manybasic industries, some food-processing industries and about 30% of thebanking sector are still owned by the state. Under pressure from the IMF andthe World Bank, privatisation and liberalisation has begun or is imminent inmost of these areas.

The economy is driven primarily by private consumer demand, which accountsfor about two-thirds of nominal GDP, compared with just under 15% of GDP forpublic consumption. Fixed capital investment demand accounted for about 25%of GDP in the mid-1990s, with the private sector supplying up to 80% of this,but the share of investment in GDP has since fallen sharply, mainly because ofsluggish private investment. In 2001 and 2002 total fixed investment accountedfor only 17-18% of GDP, with over 30% of this carried out by the public sector. In2003 it fell further to 15.5% (it is about 25% in Greece, Spain and Portugal, almost30% in the Czech Republic, 20% in Hungary and 18.5% in Poland). In 2001 theshare of exports of goods and services in GDP shot up to over 30% for the firsttime, reflecting mainly the positive impact on exports of the devaluation of thelira, but also the low level of overall GDP because of the recession that year. In2002-03 exports of goods and services declined slightly but were still close to30% of GDP, despite a strong real appreciation of the lira. Imports of goods andservices have remained steady at about 30% of GDP.

On a sectoral basis, the share of agriculture in GDP declined steadily in the1960s, 1970s and 1980s, but it subsequently stabilised at around 12-15%, withvariations depending mainly on prices, weather conditions and theperformance of other sectors. In 2001-03 agriculture, fisheries and forestrycontributed just under 12% of nominal GDP. This is below the share of thesector in Romania and Bulgaria, but still well above an average of about 4-5% inthose central and east European countries that will join the EU on May 1st2004. It also accounts for about one-quarter of male employment and 60% offemale employment. Industry (excluding construction) accounts for about 25%of GDP and just under 20% of employment. Industry is dominated by themanufacturing industry; the private manufacture of consumer goods—led bytextiles and clothing, motor vehicles and consumer electronics—has been themost dynamic sector of the economy in recent years. Construction contributed5-6% of GDP in 1995-2001, down from 6-8% of GDP in the late 1980s and early1990s. The share of construction in GDP fell further to just over 4% in 2002 andabout 3.5% in 2003.

The contribution of services to GDP has risen steadily. Trade (including hotelsand catering) accounts for about 20% of GDP, while transport and communi-cations contributes some 15%. Public services account for around 10% of GDP.The share of the services sector in employment is over 40%.

The Marmara region, including Istanbul, Izmit and Bursa in north-west Turkey,accounts for about one-third of GDP. The regions centring on Izmir in the west,the Adana-Mersin-Iskenderun triangle in the south and the capital, Ankara, are

Consumer demand drives astill-mixed economy

Manufacturing and servicesare the major sectors

Four regions dominateindustry and business

Turkey 37


also significant areas of industrial and other business development. Outsidethese areas there are few large private-sector operations. However, several citieswithin relatively easy reach of these areas (for example, Denizli, Konya, Kayseriand Gaziantep near the Syrian border) have attracted significant investment insectors such as textiles, food-processing and furniture. The south and west enjoythe lion’s share of income from both tourism and agriculture. Antalya, on thesouth coast, is the leading tourist destination.

Comparative economic indicators, 2003

Turkeya Germany a Spainb Poland b Egypta

GDP (US$ bn) 239.7b 2,410.8 b 841.3 209.6 70.1b

GDP per head (US$) 3,361 29,258 20,591 5,485 976GDP per head (US$ at PPP) 6,744 27,086 23,183 11,090 3,705

Consumer price inflation (av; %) 25.3b 1.1 b 3.0 0.7 4.3Current-account balance (US$ bn) -6.8 57.2 -23.8 -4.1 3.6Current-account balance (% of GDP) -2.8 2.4 -2.8 -1.9 5.1

Exports of goods fob (US$ bn) 50.8 750.1 166.6 61.0 8.8Imports of goods fob (US$ bn) -64.8 -611.4 -209.7 -66.7 -14.6

External debt (US$ bn) 147.3 – b 718.4a 84.3 a 30.4Debt-service ratio, paid (%) 43.9 – b 20.8a 19.0 a 7.9

a Economist Intelligence Unit estimates. b Actual.

Source: Economist Intelligence Unit, CountryData.

Economic policy

For over two decades the Turkish economy has been notorious for persistentlyhigh levels of inflation (the annual rate of consumer price inflation averagedover 65% in 1989-1993 and 85% in 1994-99). This has made business planningand accounting difficult, discouraged long-term saving and lending and led tohigh real interest rates. High inflation in Turkey has gone hand in hand with apersistently large fiscal deficit, financed sometimes by the Central Bank ofTurkey, but generally by domestic and foreign borrowing. Initially driven byexpansionary and populist policies, as well as outright abuse of publicresources by (or through the intermediary of) politicians and officials, thepublic deficit then expanded greatly as a result of the soaring cost of servicingrising government debt at high real rates of interest. Bank bail-outs have alsoplayed a role, especially following the 2001 crisis, when government debt roseto almost 100% of GDP, from just over 50% in 2000.

Other causes of inflation include repeated devaluations of the Turkish lira tokeep the economy competitive in the face of increasing openness, andinadequate competition in many sectors. Once inflation became familiar, itwas perpetuated by inflationary expectations that resulted in inflationarywage and price increases. In these circumstances, variations in domesticdemand or the level of international commodity prices have had only amoderate effect on the level of inflation. Inflation has been particularlyresponsive to exchange-rate movements, which affect the domestic prices ofimported industrial inputs and fuel, on which Turkey relies heavily. Inflationand currency depreciation have generally reinforced one another, but the pace

Inflation and budget deficitshave been main concerns

38 Turkey


of price increases has slowed noticeably whenever the lira has been relativelystrong (because of capital inflows or government policy), and accelerateddramatically at times of lira weakness.

Summary of government finances(TL trn unless otherwise indicated)

2002 2003Consolidated budgetRevenue 75,592 100,238Non-interest spending -63,812 -81,445

Primary balance 11,781 18,793 % of GDP 4.3 5.2Interest payments -51,871 -58,609

Budget balance -40,090 -39,816 % of GDP -14.5 -11.1

Source: Ministry of Finance, General Directorate of Public Accounts.

In the 1990s the rising government debt was generally managed with the aid offoreign borrowing and foreign capital inflows to the domestic financialmarkets. Monetary policy was accommodating, facilitating the rollover of thedebt, but perpetuating inflation. In 1994 a failed government attempt to forcedown interest rates and support the lira ended in financial crisis and a largedevaluation. Turkey lost the good reputation it had enjoyed in the eyes of theinternational financial community since the liberalising measures of the 1980s(including the introduction of capital-account convertibility in 1989). In thesecircumstances a stand-by agreement with the IMF was concluded, and thegovernment was obliged to tighten fiscal policy sharply. However, theagreement was abandoned just one year later, in 1995, giving way to anotherperiod of relatively expansionary policies, as governments came and went.

In August 1998 the availability of international finance was again severelycurtailed, this time as a result of the Russian rouble crisis, threatening Turkey’sfinancial stability. The April 1999 general election and August 1999 earthquakewere followed by a fresh IMF standby accord. Despite the inevitable difficulty ofobtaining public support for painful measures, a general consensus had emergedamong bureaucrats and leading politicians by end-1999 about the need forresponsible fiscal policies and for "structural reforms" designed to reducegovernment spending in the long term, harness the benefits of competition, andattract foreign capital. Larger business interests, which in the past had benefitedfrom fiscally induced consumer demand, also became more concerned aboutissues of stability, lower interest rates and national competitiveness.

The privatisation of state-owned industries had enjoyed the support of manypoliticians since the 1980s. From the late 1990s the government also began totackle issues such as the regulation of markets, the opening up of infrastructureand utilities to free competition, the overhaul of the social security andagricultural support systems, the transparency of the public finances, regulationand strengthening of the banking system, and the removal of bureaucraticimpediments to business activity. IMF-backed programmes in place since theend of 1999 have made the release of funds conditional on progress in allthese areas.

Reform policies gainedmomentum from 1999

Turkey 39


Responsibility for fiscal policy is divided among the Treasury, the Ministry ofFinance and the State Planning Organisation. The Treasury, which is responsiblefor debt management, has come to the fore in recent years as the IMF’s mainpoint of contact. Public financial management is being overhauled under theIMF-backed reform programme. Monetary policy is conducted independentlyby the Central Bank, in line with the Central Bank Act of 2001.

Despite some delays and slippages, under the Justice and Development Party(AKP) government that swept to power in November 2002 the IMF-backedreform programme has remained on track, helping to maintain strong economicgrowth while reducing inflation (see Economic performance). In addition, atthe request of the government the IMF agreed in August 2003 to ease Turkey'srepayment schedule in 2004 by moving some of the repayments from 2004-05to 2005-06. Also, in late September Turkey successfully concluded negotiationswith the US regarding loans worth US$8.5bn, which Turkey had not yet startedto draw down by mid-April 2004. These developments, combined with factorssuch as exceptionally low short-term international interest rates and thegovernment’s good progress on political reforms required by the EU, havehelped to sustain investor confidence and improve Turkey’s short-termeconomic outlook.

IMF-backed programmes, 1999-2004

December 1999: a three-year US$4bn agreement

The IMF stand-by credit agreement that Turkey signed in December 1999 had to be amended and augmented three times injust over two years. The initial three-year programme supported by a US$4bn stand-by loan replaced an IMF staff-monitored programme put in place in 1998. The central aim was to cut inflation from almost 70% at end-1999 to 25% byend-2000 and to single digits by end-2002. To achieve this, and to start to rein in the budget deficit, new tight fiscal targetswere established and a crawling-peg exchange-rate regime was adopted.The programme began to run into difficulties in the second half of 2000. Although inflation slowed sharply (end-2000consumer price inflation was 39%), it was above target and considerably higher than the currency depreciation rate, leadingto perceptions that the currency was overvalued. Meanwhile, the crawling-peg exchange-rate policy prompted large capitalinflows to the equity, debt and money markets. This reduced real interest rates dramatically, encouraging Turks to spendrather than save. The ensuing consumer boom combined with a sharp rise in international oil prices to produce a largecurrent-account deficit. In addition, although the IMF-agreed fiscal targets were generally achieved, concern built up that thegovernment was falling behind schedule in the areas of structural reform and privatisation. Notably, there were delays inbanking-sector reform, and no strategic foreign partner was found for Turk Telekom.

December 2000: a supplemental reserve facility of US$7.5bn

Once capital began to flow out of lira-denominated assets in response to the above factors, the upward impact on interestrates was exacerbated by the weakness of the banking system. Private and state banks—the latter weakened by the rolethey had been called on to play in financing government policy, particularly towards agriculture, in previous years—wereforced to depend on short-term money-market financing to meet their obligations. In December 2000, in response tomarket turmoil, the IMF provided Turkey with a US$7.5bn supplemental reserve facility (SRF).

May 2001: a revised programme and additional funds

However, the turmoil resumed in February 2001 with the cost of short-term money reaching 7,500%—this time, the currencypeg was abandoned and the original programme suspended. This resulted in a 50% devaluation of the lira in two months,a resurgence of inflation and the entry of the economy into a deep recession. The cost of bailing out the banks had to be

Strong growth and declininginflation took hold in 2002-03

40 Turkey


added to the government debt, which soared to about 100% of GDP. After the devaluation, a former World Bank vice-president, Kemal Dervis, was brought into the government as minister of the economy, with responsibility for overseeingthe drafting and implementation of a revised programme. In May the IMF announced that it would provide US$8bn incredit, in addition to the US$6bn still available under the old programme (including the SRF). Enhanced fiscal restraint,structural reform and privatisation were combined with an added emphasis on bank restructuring. This time, the currencywas left to float freely, and a gradual move towards inflation targeting was foreseen for monetary policy.

February 2002: a new three-year agreement

Market confidence in the government's long-term ability to service its debt proved difficult to restore, especially in view ofdebates within the government over the future of Turk Telekom in July 2001 and the terrorist attacks on the US inSeptember 2001. The currency tumbled and interest rates remained high. However, a combination of the government'soverall commitment to reform and Turkey's perceived importance as a secular Muslim country and a western ally close tothe Middle East persuaded the Fund to lend further support. In February 2002 the existing IMF agreement was supersededby a new, three-year stand-by accord. The floating currency policy was retained, tight fiscal targets were extended up to2004 and greater detail was added to the existing programme of structural reform. The IMF pledged a total of aboutUS$17bn, including around US$4bn still outstanding under the previous accord. Of this amount, US$9bn was releasedimmediately, although US$6bn was used to make repayments to the IMF under the December 2000 SRF. Turkey becamethe IMF's largest creditor, owing some US$20bn at the end of 2002. The November 2002 general election led to a long delayin the release of IMF loans. Under the February 2002 accord Turkey was still due to receive a total of close to US$4bn bythe end of 2004. There were prolonged negotiations with the new government, which at times appeared unwilling toaccept IMF conditions. The release of credit finally resumed in April 2003 and has continued, despite some delays towardsthe end of 2003 and the beginning of 2004. Following the release of a credit tranche of almost US$500m in April 2004,about US$2bn remain to be disbursed before the agreement expires at the end of 2004.

Economic performance

Annual real GDP growth averaged 3.7% between 1991 and 2000. The averagerate of economic expansion in Turkey in this period compared relativelyfavourably with an average annual rate of growth of little over 2% in the OECD.However, it was unspectacular by the standards of some middle- or lower-income countries, especially in Asia. It was also disappointing by historicalstandards: growth averaged some 6% per year in the 1960s and 4-5% in the1970s and 1980s.

Growth, which had always been volatile, became even more so in the 1990s.This was because of the dramatic contractions of the economy in 1994 and1999—years when Treasury bill yields soared, amid concern about risinggovernment debt. While the 1994 contraction was sparked off by a currencycrisis and a subsequent tightening of fiscal policy, the 1999 contraction reflectedthe impact of the Russian financial crisis—which reduced demand for Turkishexports, including tourism and contracting, and prompted capital flight—andwas compounded by the earthquake in August of that year, which devastatedthe industrialised Izmit region.

In the "boom" years of the 1990s the economy was driven by domesticdemand. There were sharp increases in expenditure both on privateconsumption and on gross fixed investment. By contrast, the contribution ofthe foreign balance to growth was negative during most of the decade, with theexception of 1994 and 1998, when domestic demand either contracted sharplyor was extremely weak.

Growth in the 1990s wasvolatile and modest

Turkey 41


In 2000 GDP grew by 7.4%. This was partly because of the post-1999earthquake reconstruction work, but mainly it was the result of a consumerlending boom fuelled by the sharp fall in interest rates that greeted the IMFstand-by agreement signed in December 1999. In 2001 Turkey suffered anothermajor financial crisis, which was exacerbated by severe problems in thebanking sector. GDP contracted again, this time by 7.5%, the sharpest drop ineconomic activity since the second world war. Incomes and consumerconfidence were severely hit by the devaluation in February of that year, theattendant surge in inflation, high interest rates and a significant rise inunemployment. Economic uncertainty depressed investment.

Economic activity bounced back again in 2002-03. In 2002 GDP rose by 7.9%,driven mainly by stockbuilding and exports, which continued to benefit fromthe positive impact of the devaluation in 2001. Government spending also rosesharply, probably because an election was held that year. In 2003 GDP slowed,but was still robust at 5.8%. There were sharp increases in private consumption(particularly of durable goods) and private investment in machinery andequipment (building construction investment continued to decline). In contrast,public consumption weakened, reflecting government efforts to reduce publicspending. Accumulation of stocks also continued contributing 3% to overallGDP growth, although this was well down from 7.1% in 2002. Exports of goodsand services showed robust growth, despite a real appreciation of the lira.However, imports of goods and services increased at almost twice the rate ofexports as a result of accelerating domestic demand growth and the strongercurrency, which has made imported goods cheaper.

Gross domestic product(% change; constant 1987 prices)

Annual average2003 1999-2003

Private consumption 6.6 0.4Public consumption -2.5 1.4Gross fixed capital formation 10.0 -6.0

Exports of goods & services 16.0 8.9Imports of goods & services 27.1 6.0

GDP 5.8 1.6


Turkey experienced significant bouts of inflation during the second world war,in the late 1950s and for most of the 1970s. After reaching treble figures in 1980,when the currency was devalued, inflation dipped below 30% in 1982, but thenbegan to rise again. Between 1988 and 1999 the annual average rate ofconsumer price inflation ranged between 60% and 90%. The one exception was1994, when it exceeded 105%, driven again by a sharp devaluation. In 2000 thenew exchange-rate policy began to reduce both imported inflation andinflationary expectations (see Economic policy). At end-2000 consumer priceinflation stood at 39%, with an annual average rate of 54.9%. However, inflationsurged again following the abandonment of the currency peg in February 2001,to reach a peak of 73% in January 2002. A generally stronger lira and continuedexcess capacity helped to drive inflation down again to 29.7% by the end of2002, below the IMF-agreed target of 35%, and 26.4% in January 2003. Following

Growth rebounded in 2002-03,after a severe recession in 2001

Inflation fell sharplyin 2002-03

42 Turkey


a brief pick-up in the early months of 2003 the downward trend resumed, withinflation falling to 11.8% in March 2004. The steady decline mainly reflects theimpact of the sharp appreciation of the lira (even against the euro) since April2003, which has curbed import prices. Wage increases have also been modest,as the government has sought to tailor its incomes policy in 2003 to theinflation targets agreed with the IMF. There would also appear to have been adownward adjustment in overall inflation expectations. Given the highbaseline in the first half of 2003 the year-on-year rate could dip below 10% inthe next few months, but further major declines will be difficult to achieve.

Prices(% change; av)

Annual average2003 1999-2003

Wholesale prices 25.6 47.9Consumer prices 25.3 48.3


Information regarding wages is limited, especially given the extent of informalemployment. However, the available evidence suggests that real wages fellsharply in real terms after the 1994 crisis, recovered in the latter half of the1990s, but then fell sharply during the 2001 recession and again in 2003. In themanufacturing sector, real hourly wages—previously boosted by generous paydeals, particularly in the public sector—fell by 20% between 2000 and 2002 tostand at about 90% of their 1997 level. In 2000-03 increases in the minimumwage failed to keep up with inflation, but in January 2004 the governmentraised the net monthly minimum wage by 34% to TL303m (about US$230) forthe first half of 2004.

Non-unionised civil servants have seen their pay eroded by inflation in thepast, but enjoyed considerable protection in 2000-02 thanks to a system ofmonthly inflation-linked increments (pensions were also linked to inflationunder the 1999 social security reform). This system was shelved in 2003, and atthe beginning of 2004 public servants received a pay increase of just 6%. Thegovernment has been under pressure from the IMF to reduce the wages ofpublic-sector workers in real terms. Social security contributions are high—atleast 33.5% of gross salaries and an estimated 18% of total labour costs—and areunlikely to be reduced.

Together with high returns on rent and financial earnings, inflation is widelyheld to have exacerbated inequalities of wealth and income. Incomedistribution is already considered to be poor because of inter-regional and rural-urban differences, as well as inadequate education, a lack of effectiveredistributive mechanisms and other factors. In 2000 income per head was putat US$7,556 in Kocaeli (Izmit) in the industrialised north-west, but at only US$725in Mus in the remote east. According to a recent World Bank report, Turkey:Economic Reforms, Living Standards and Social Welfare Study, the Gini coefficientbased on 1994 data was 0.45 for income and 0.41 for consumption. This suggeststhat inequality in Turkey is considerably higher than in other west Europeancountries and similar to that in Russia, Ecuador and Tunisia. The results of a

Wage rises are no longerrunning ahead of inflation

Income distribution is poor

Turkey 43


further survey carried out by the State Institute of Statistics in 2002 will revealwhether the situation has worsened in the past eight years. Educated Turkshave frequently expressed concern that poor income distribution may lead topolitical radicalism, social unrest and a rise in crime.

Regional trends

Turkey's highly centralised system of administration leaves little room forregional initiatives. Public services and infrastructure are generally provided bycentral government, either directly or through the provincial governorates,which are headed by appointed governors. However, in major citiesmunicipalities play a significant economic role, given their responsibilities inareas such as local transport, water supply, gas supply (in three cities), wastedisposal and the maintenance of streets and parks. Such services are oftenprovided through affiliates. Some municipalities have also set up companies toprovide other goods and services, such as bread and coal. (See Economicstructure for an outline of the regional distribution of industry and income.)

Like the provinces, the municipalities are mostly funded by a share of centralgovernment tax revenue, distributed on the basis of population size. The 16"greater cities" also receive a portion of the national tax revenue collected in thecity itself. Total central government disbursements to the municipalities haveworked out at around 2% of GDP. Revenue from local property taxes andhousehold levies are relatively insignificant. In the largest cities municipalbudgets are dwarfed by the total turnover of municipal companies. Togetherwith its affiliates the largest municipality, the Istanbul Greater City Municipality,has a reported consolidated budget of US$6,700trn (about US$5bn) for 2004. Bycontrast, the finances of smaller municipalities tend to be extremely weak.

Numerous larger municipalities have undertaken major infrastructure projectsfinanced by foreign loans. Such loans are guaranteed by the Treasury, whichhas frequently had to make payments on behalf of the municipalities. As aresult, the Treasury has claims of several billion dollars on these municipalities.Treasury guarantees are now provided very sparingly.

In mid-2004 parliament is expected to approve legislation decentralising publicadministration, increasing the responsibilities of local government and possiblyaltering the local government revenue structure. The impact will be feltgradually over a period of years.

Special incentives are available for private-sector investment in poorer parts ofthe country, but these have generally had little impact. The south-east attractsspecial attention, as the war between government forces and the Kurdishnationalist Kurdistan Workers’ Party (PKK) severely disrupted the region’seconomy and resulted in the depopulation of rural areas. Trade withneighbouring countries was also affected.

The South-east Anatolian Project (GAP) was started before the violence began,and its centre of activity is slightly west of the main trouble spots. It is basedaround a series of dams being built on the Euphrates and Tigris rivers and ismaking slow progress (except in electricity generation). Nevertheless, large areas

Major municipalities havestrong economic influence

Economic development in thesouth-east remains a priority

44 Turkey


of dry land are now being irrigated and are starting to attract investment inagriculture and related industries. The economic viability of these activitiesremains unproven.

Economic sectors

Agriculture

Agriculture (including forestry and fishing) accounted for about 12% of GDP in2003, but for 32% of total employment. Turkey grows a wide range of crops,headed by wheat, and meets most of its own needs for agricultural produce.There are significant exports, especially of dried fruits and to a lesser extenttobacco from the Aegean region, as well as hazelnuts—of which Turkey is theworld’s largest supplier—from the Black Sea coast. Some crops, notablyTurkish-style tea and tobacco, have been overproduced and attempts are beingmade to limit production and introduce alternatives. By contrast, importsare increasingly needed to top up local production of crops such as cotton,oilseeds and rice, and there are significant imports of non-oriental tobaccos. In2000 and 2003 Turkey registered its first deficits in trade in agricultural andforestry products.

A major driver of growth up to and including the 1950s, the agricultural sectorhas since grown by an average of only about 1.5% a year. Annual growth variesaccording to meteorological factors and agricultural prices; agricultural value-added fell by 6.5% in 2001, partly because of drought, but bounced back by 7.1%in 2002. The sector is generally characterised by a low level of efficiency, whichstems from the large number of small farms, problems of transport and storage,relatively low levels of mechanisation and, above all, the large populationdependent on agricultural income. Intensive agriculture is practised along thesouth coast and in the Aegean region, but this accounts for only a small fractionof total production. Major irrigation projects currently under way in theEuphrates valley should boost production in this region.

The state has traditionally supported agriculture by means of irrigation, seedand fertiliser subsidies; cheap state bank loans to farmers; direct purchases ofagricultural produce (sugar, tea, tobacco, grains) by state enterprises; pricesupport to producers selling their output in the free markets, and financialsupport to producer co-operatives for cotton, olives, hazelnuts and other crops.However, agricultural support policies have often been instruments of politicalpatronage and vote-seeking, and have led to mismatches of supply anddemand. Agricultural support has also proved costly. In the late 1990s supportto agriculture cost the government about 2.5% of GDP annually, without takinginto account the under-taxation of the sector or the cost to the economy ofmaintaining high tariff barriers for most agricultural goods.

In recent years fiscal constraints and IMF and World Bank programmes havebrought significant changes. Subsidies have been eliminated or reduced, and aprogramme of limited direct income support based on land area has beenphased in instead. However, direct income support payments have at times

A wide range of crops isgrown and some are exported

Agricultural subsidies havebeen revised and reduced

Turkey 45


been delayed because of budget cutbacks. The agricultural support system islikely to be amended further to achieve more specific aims. Meanwhile, theco-operatives are being restructured, and new market mechanisms have beenintroduced for tobacco and sugarbeet, supervised by new autonomousagencies. The privatisation of the state cigarette company, TEKEL, and the statesugar refineries is on the agenda for 2004 (an attempt to sell TEKEL failed inlate 2003). While these policies are designed to harness market forces, there arefears that they will provide insufficient incentive for production, acceleratemigration off the land and lead to higher imports, particularly given the highlevel of agricultural subsidies in the EU and the US. Reductions in tariff barriersas a result of EU or World Trade Organisation (WTO) commitments couldexacerbate these problems in years to come.

Fisheries and forestry make only a small contribution to GDP—0.4% each in2003. About 80% of fishery production (600,000 tonnes in 2000) comes fromconventional sea fishing, mainly in the Black Sea.

Milk output is around 10m tonnes/year. Production of red meat and poultryhas been estimated at 800,000-900,000 t/y and 700,000 t/y respectively. Dairyfarmers sell their output through informal, local channels or to dairy plants,including some large ones with national distribution channels. Large-scaleenterprises have also begun to play a role in the disparate and often informalmeat and meat products sector. Almost all of the assets of state enterprisesinvolved in meat and milk processing and fodder production have been sold tothe private sector or closed down since 1986.

The population of cattle, sheep and goats was almost halved in the 1980s andearly 1990s. Reasons given include premature attempts at liberalisation, highcosts, smuggling and the impact of the war in the south-east on internal tradeand access to grazing. The quality of livestock is poor and various diseases arecommon. Smuggling of livestock and meat from neighbouring Middle Easterncountries continues. Meat and live animal imports to Turkey were banned inthe wake of the bovine spongiform encephalopathy (BSE) scare in 1996.

Mining and semi-processing

Turkey has a relatively wide range of mineral deposits, but in recent yearsmining has accounted for little over 1% of gross value-added. The non-energyminerals sector is dominated by a handful of state companies, in particular, EtiHolding, which extracts and processes boron and chromium mainly for worldmarkets, aluminium mainly for the domestic industry, and some copper andsilver. Turkey possesses over 60% of world reserves of boron, which isprimarily used for glass products (fibreglass) and detergents, and earns aboutUS$220m annually from sales of raw minerals and refined boron.

While the state has a monopoly on boron, other ores and industrial mineralsare also mined by the private sector for export in raw or processed form, forsale to state processors or for use in the building materials industry. The latterincludes a large cement sector and major ceramics and glass companies. Naturalstones, primarily marble, have become Turkey's most important mineral export,

Livestock farming declined inthe 1980s and 1990s

Turkey has the potential toraise mining output

46 Turkey


earning over US$400m in 2003. Other mineral exports include chromites,copper, magnesite and zinc ores and concentrates, and feldspar.

The private sector, including multinational companies, is also involved indeveloping promising deposits of soda ash and gold. Defined gold resourceshave risen to 450 tonnes. Normandy Mining has begun production at a goldmine on the Aegean coast, despite a long court battle involving localinhabitants and environmentalists (Turkey is currently a substantial importer ofgold, spending about US$1.5bn a year on average).

Amendments to the Mining Act and other laws have been drafted in a bid tomake better use of Turkey's mineral potential. The proposals address issues suchas licence security, red tape and environmental restrictions. Most of the assets ofEti Holding, excluding the boron mines, are to be privatised.

The Turkish iron and steel industry is approximately the fifteenth-largest in theworld. Output of raw steel rose to over 18m tonnes in 2003, or about 1.9% ofworld output. In 2003 exports were valued at US$2.8bn and imports atUS$2.6bn. Exports are mainly long products, whereas imports include iron ore,scrap iron and steel for the many private-sector electric arc furnaces, flat steelsand specialised steels. Eregli Iron and Steel (Erdemir), situated on theZongukldak coalfield, is the only domestic producer of flat steels and can onlymeet about 60% of demand. Erdemir, which is run and 49% owned by the state,is a major privatisation target. It recently acquired a state-owned integrated steelmill, Isdemir, at the east Mediterranean port of Iskenderun. Isdemir is to bemodernised and will eventually produce flat steel. Another integrated state-owned steel plant, Kardemir, also located near Zonguldak, was privatised andsold for a symbolic TL1 to workers and local interests in 1995, and was laterfloated on the stockmarket. However, it continues to face financial difficulties.

Other basic industries in which the state has played the leading role are oilrefining and petrochemicals through Tupras (petroleum) and Petkim(chemicals), the respective state enterprises. In both cases the two main plantsare at the seaports of Aliaga (Izmir) and Yarimca near Izmit. In 2001 Tuprasacquired Petkim’s Yarimca plant. Tupras has repaired the damage caused to itsYarimca plant by the August 1999 earthquake and has made numerousimprovements. It was partly privatised through a share offering in the first halfof 2000. A privatisation tender for the state's remaining 66% stake was held in2003 and was won by Efremov Kautschuk, an arm of Russia's Tatneft, with abid of US$1.3bn. Efremov is to be partnered by the Turkish textiles-to-televisionsconglomerate, Zorlu Holding. The deal had still to be concluded at the time ofwriting. Tupras's four refineries processed 24m tonnes of crude oil in 2003,mostly for the domestic market. Some 2.4m tonnes of the crude comes fromlocal production, mainly by the state petroleum company, TPAO, in Adiyamanand Batman in the south-east. The rest is imported. Tupras accounts for over85% of domestic refinery output, while the Atas private-sector refinery atMersin provides the remainder. Turkey also meets 5-10% of its demand forrefined products through imports. Some smuggling of petroleum products fromneighbouring countries persists. Distribution of refinery products is carried outby the private sector, including international oil companies. The largest single

There is a substantialsteel industry

Privatisation of oil refiningand petrochemicals

Turkey 47


distributor, Petrol Ofisi (Poas), was part-privatised through the sale of a 51%stake to a consortium of Turkiye Is Bankasi and the Dogan Group in 2000. Thestate went on to sell its remaining shares through a public offering in March2002 and a deal with the controlling group in August 2002. Turkiye Is Bankasiand Dogan Group companies now own 95% of the company, with theremainder floated on the stockmarket.

The Petroleum Market Act of December 2003 put the petroleum products sectorunder the energy watchdog, the Energy Market Regulatory Authority. As aresult, domestic retailers are no longer obliged to purchase oil products fromTupras. Tupras will be allowed to set up a retail chain, provided it does notdiscriminate against rival chains.

Petkim produces 1.2-1.3m tonnes of polyethylene per year, polyvinyl chloride(PVC), benzene, carbon black and other saleable petrochemicals. It meets aboutone-third of the demand of domestic industry for petrochemicals, with theremainder supplied almost entirely from imports. Two unsuccessful tenderswere held in 2003 for a majority stake in Petkim, and a further attempt isanticipated in 2004.

Manufacturing

Manufacturing output has been a major driver of economic growth since the1960s. Manufacturing also accounts for over 90% of merchandise exports and16-18% of employment. Most types of finished product consumed in Turkey aredomestically manufactured in significant quantity and variety. Among theexceptions are some goods requiring relatively high technology. A wide varietyof industrial materials, such as chemicals, plastics and building materials, arealso produced within the country, although not always in sufficient quantity orvariety to meet domestic demand. Production of industrial machinery andelectronic components is limited. The majority of exports are made up ofconsumer goods. The consumer electronics industry and a large section of theclothing and textiles industry are primarily geared to exporting, and numerousother manufacturing industries export a significant share of their output.

Aside from primary processing sectors, cigarette plants and a few othermiscellaneous plants not yet privatised, ownership of the manufacturingindustry rests almost entirely with the private sector. Tens of thousands ofsmall firms coexist with a dozen large conglomerates. The extent and nature ofintegration with the international economy varies greatly. All major automotiveplants, including many parts producers, are partly owned—and increasinglymajority-owned—by multinational partners, which regard Turkey as one oftheir strategic bases. However, independent Turkish companies are in themajority in the household appliances and consumer electronics sectors. Thetelevision sets exported by these companies are generally made to order formultinational electronic goods producers or western retail chains. This is alsothe typical pattern in the clothing sector, with most export goods made to orderfor international fashion houses, and only a minority exported under Turkishtrademarks. In food-processing and other perishable consumer goods sectors,multinational companies have a significant presence either directly or through

Manufacturing accounts for90% of total exports of goods

48 Turkey


long-standing partnerships or licensing arrangements with local firms.However, innumerable independent local firms of varying sizes also competefiercely for these markets.

Manufacturing output rises and falls primarily with domestic consumerdemand. However, exports have increased in importance, enablingmanufacturers to tap into a wider market and serving as a lifeline in years oflow domestic demand.

Various forms of state support have been used to favour the growth of themanufacturing industry. State support for agriculture and direct state investmentin energy, infrastructure and basic industries have provided necessary inputsand facilities. In the 1930s the state also invested directly in consumerindustries, such as clothing. In the post-war period the state supported theefforts of nascent private capital through specific tariff protection, capitalinjections and a range of incentives, including tax breaks and the duty-freeimport of investment goods. Industrialists made use of foreign technology andformed joint ventures with foreign capital. Some became virtual monopolies inthe domestic market. These "import substitution" policies reached their peak inthe 1960s and 1970s. In the 1980s and 1990s trade barriers came down, butinvestment incentives continued. The state turned a blind eye to tax evasionand informal employment, increased its own payroll and financed its deficitswith the help of capital inflows. A new generation of small industrialenterprises grew up, particularly in relatively low-technology areas such asfood-processing and textiles and clothing. These smaller enterprises were alsothe main beneficiaries of various schemes to support exports.

Specific incentives have at times been made available to certain sectors, oftenresulting in excess capacity, but also contributing to critical mass andaccumulation of expertise. The excessive number of steel furnaces and carplants is partly attributable to such incentives. In the early 1990s, in the run-upto the establishment of the customs union with the EU and the abolition of EUtextiles quotas, specific incentives were made available for the textile industry.Today, investment incentives are available to all, but are of limited value inpractice. There is a special emphasis, at least in theory, on the development ofbackward regions, small and medium-sized enterprises and high-technologyindustries. New incentives for investment in low-income regions—includingsubsidies for energy and new employment and the possibility of free stateland—were provided for in legislation approved by parliament in January 2004.Exporters benefit from credits and guarantees from the state foreign trade bank,Eximbank, a value-added tax (VAT) rebate system, and an internal processingcustoms regime. However, energy costs are relatively high, partly because of thefragile state of Turkey's public finances. Social security premiums and tax ratesare also high, in part owing to the large informal economy.

Textiles and clothing account for about one-third of exports and employ some1.5m people. The spinning and weaving industry, originally based on localcotton, is still internationally significant, but has been overtaken by the clothingand home textiles industries. These industries meet the great majority ofdomestic demand as well as generating one-quarter of Turkey's exports.

EU rules and fiscal constraintslimit state support to industry

Textiles lead the way, butface problems

Turkey 49


Germany and other west European countries are by far the largest exportmarkets. Export orientation provides the clothing industry with a measure ofprotection from the volatility of domestic demand: according to the StateInstitute of Statistics, output fell by just 3.1% in the 2001 recession and recoveredby 3.3% and a disappointing 1.7% in 2002 and 2003 respectively. Exports aremostly made to order for western fashion houses, but a few manufacturers alsomarket abroad under their own trade marks. Firms face the challenge ofmoving up the value-added ladder to cope with intense internationalcompetition, which will increase further with the elimination of quotas forWTO members (including China) by end-2005.

The traditional textiles industry is centred in Istanbul, Bursa and the cotton-growing Izmir and Adana regions. In recent years investments, especially infinished products, have also spread to Denizli and other more remote centres,where labour is cheaper. The industry is made up of a large number of tiny,small and medium-sized firms displaying various degrees of specialisation andachieving various levels of quality. Foreign investment in the sector is rare. Asignificant proportion of all production is believed to go unrecorded.

Turkey has about 20 manufacturers of cars, commercial vehicles and tractors,almost all of which have multinational owners or partners. The two largest carplants are the OYAK-Renault and Tofas (Koc-Fiat) plants, both located in Bursa.Since the mid-1990s Toyota, Honda and Hyundai cars have also been made inTurkey. Light commercial vehicles have become a Turkish speciality in recentyears, accounting for one-third of exports and 40% of production, withdomestic demand boosted by Turkey's numerous small businesses. Otosan(Koc-Ford) started production of commercial vehicles, mainly for export, at itsmajor new Izmit plant in 2001.

Domestic vehicle production began in 1963 and reached about 150,000 units in1975-76. Output then fell back, surpassing its previous level only in the late1980s. Between 1990 and 1993 vehicle output doubled to just over 450,000.Demand collapsed in 1994 as a result of the financial crisis and devaluation,and while it recovered in subsequent years, domestic manufacturers facedstronger competition from imports. The Asia crisis temporarily made FarEastern models cheaper, and the customs union with the EU, in force since1996, permanently lowered high customs barriers. The record productionfigures of 1993 were not broken until the low-interest credit boom of 2000,when 468,000 vehicles were produced. By this time, over half of all cars andone third of all commercial vehicles sold in the domestic market wereimported, mainly from western Europe. However, Turkish plants were alsostarting to diversify their output and increase their exports in response to theliberalisation of trade.

Domestic vehicle sales collapsed by 70% in 2001, in the wake of anotherfinancial crisis and devaluation, and fell by a further 10% in 2002, beforerecovering by 140% in 2003. The number of vehicles produced declined by 39%in 2001, but rose by 25% in 2002 and 57% in 2003, when it reached 562,000,according to the Turkish Automotive Industry Association (OSD). Exports wereof vital importance for the automotive sector during this period. Annual vehicle

The automotive sector isincreasingly export-oriented

50 Turkey


exports have increased elevenfold in five years to reach 350,000 vehicles(360,00 including tractors). Vehicles are exported through the internationaldistribution networks of the foreign partners. In 2001 and 2002 Turkey enjoyeda surplus in its trade in motor vehicles and parts. In 2003 trade was roughlybalanced, with sales of US$5.2bn and foreign purchases of US$5.4bn.

The manufacture of household durables and consumer electronics isdominated by a small number of big firms. The largest, Arcelik, which spansboth sectors, is also Turkey’s largest private-sector industrial company, withannual sales worth some US$2bn. It is a member of the Koc group and is aclassic product of the import substitution era. It has successfully turned toexports and in 2002 acquired several brands in the UK, Germany, Austria andRomania. It also uses the trade mark of its sister company, Beko, which inJanuary 2004 acquired part of Grundig, the failed German electronics group, inconjunction with Alba of the UK. Arcelik's domestic rivals include Profilo Telrain electronics, the German-controlled BSH-Profilo in white goods, and Vestel inboth sectors. Although still partly dependent on imported technology and parts,Turkish firms are investing in research and development and adopting digitaltechnology and other innovations. Vestel’s television and monitor plant atManisa is one of the largest in the world, with a capacity of 8m units per year.

The consumer electronics industry is predominantly concerned with themanufacture of television sets, which are mostly exported to Europe. Exports oftelevision sets surged from under 2m until 1995 to 7.2m in 2000-01, benefitingfrom cheap labour and better customs access than East Asian competitors. Theindustry was cleared by an EU anti-dumping inquiry in 2001. In 2003 exportsreached 13.3m. About 2m sets were also produced for the domestic market.Output of white goods has been more dependent on the domestic market,but since the 2001 recession this sector too has been exporting the majorityof its output, aided by booming exports of refrigerators and ovens. Accordingto the State Institute of Statistics, 4.1m refrigerators, 2.4m washing machines,1.6m ovens and 400,000 dishwashers were produced in 2003. Imports accountfor about 15% of domestic sales of household durables and consumerelectronics products.

Manufacturing production(1997=100; % change year on year unless otherwise indicated)

2003Annual average

1999-2003Food & beverages 7.1 2.2Textiles 2.3 2.5Clothes 1.7 0.8

Refinery products 3.1 0.6Chemicals 9.2 4.3

Non-metallic goods 9.7 1.5Metals 11.8 3.8Non-electrical machinery & equipment 22.4 3.8

Motor vehicles 47.7 11.6Total manufacturing 9.4 2.6

Sources: State Institute of Statistics.

Household durables andconsumer electronics

Turkey 51


Construction

The construction sector has traditionally been a significant source of economicactivity and the motor for a number of other industries, including iron andsteel, the wholly privatised cement sector, glass, ceramics and paint. In recentyears, however, the growth of the sector has slowed. Construction accountedfor an annual average of 7% of gross value added in the late 1980s and early1990s, but for only 5.8% a year in 1995-99, 5.2% in 2000 and 2001, 4.1% in 2002and 3.5% in 2003. Public investment spending has been squeezed, while publicsupport for housing co-operatives has dried up. Despite lower interest rates in2002 and 2003, private demand for new commercial or residential buildingshas been slow to pick up in line with the recovery in the rest of the economy,perhaps reflecting continued doubts about long-term prospects for profitsand incomes.

There are innumerable small construction companies providing much informalemployment, but also dozens of larger firms capable of undertaking contractsabroad, such as Alarko, Ceylan, Dogus, Enka, Gama, Guris, Nurol, STFA andTekfen, which in the past have undertaken contracts mainly in Russia, otherCommonwealth of Independent States (CIS) countries, South Asia, NorthAfrica, the Middle East and the Balkans. According to balance-of-payments data,annual revenue from contracting activities abroad climbed to US$2.3bn in 1997,but declined steadily after the 1998 Russian financial crisis to just US$650m in2001. These receipts recovered to US$830m in 2002 and US$900m in 2003.More contracts were won in 2003, and the industry is also hoping to winsignificant business in Iraq. Some of Turkey’s best-known conglomerates startedout as building contractors, before moving into areas such as manufacturing,hotels, tourism, energy, media, telecommunications and financial services.

Financial services

Financial institutions accounted for 5% of gross value-added in 2003—up from4.7% in 2002 and 3.7% in 2001, but well below the pre-financial crisis peak of6.3% in 1998. Turkey’s financial system is susceptible to sudden and dramaticcrises of investor confidence. Such bouts of panic in late 2000 and early 2001sparked a sell-off in the currency, drove up interest rates and undercut shareprices. Banking, which dominates the financial services sector, witnessedconsiderable development in the 1990s in terms of assets, profits, sophisticationand number of institutions.

At the same time, however, the sector faced a number of problems. State bankswere weakened by the role they were made to play in financing agriculturalpolicy and other public expenditure, while the banking system in general wasover-dependent on high interest earnings from government securities. Inaddition, there were a large number of small private banks that lackedeconomies of scale and in some cases existed mainly to finance the otherbusiness activities of their owners. A 100% deposit insurance schemeintroduced following the devaluation and financial crisis of 1994 alsocontributed to an increase in moral hazard and erosion of market discipline.

Construction’s contribution toGDP has declined

Banks are still recovering fromthe crises of 2000-01

52 Turkey


The authorities began to tackle some of these problems under IMF monitoringin 1999-2000, amending the Banks Act, taking control of ten suspect privatebanks and setting up an independent banking watchdog, the Bank Regulationand Supervision Authority (BRSA). Meanwhile, however, another imbalancegrew, as banks side-stepped regulations and increased their short-term hard-currency borrowing to benefit from the "crawling peg" currency policy in placebetween end-December 1999 and February 2001.

When liquidity tightened in November 2000 and February 2001—with theCentral Bank of Turkey barred from intervening as a result of the IMF-mandated monetary policy—both state and private banks that had been relyingon borrowing from the money markets faced severe liquidity shortages. Whenthe lira was finally devalued on February 22nd, banks with net foreign-currencyliabilities made an instant loss. Nine more troubled banks, includingDemirbank, were seized by the authorities during the crisis period and in theensuring months. The recession that followed the devaluation exacerbated theproblem of bad loans. Meanwhile, both troubled state banks and seized privatebanks were refloated through the issue of some TL40,000trn (US$23.5bn at July2002 exchange rates) of government bonds, some of which were cashed by theCentral Bank. Efforts to restructure or dispose of the banks were accelerated.

Among the measures taken since 1999, short foreign-exchange positions havebeen limited to 20% of capital and new rules have been introduced to limit in-group exposure and ensure credit risk diversification. Banks have been requiredto set up internal risk management systems and to provision more thoroughlyfor bad loans. In the first half of 2002 all banks were subjected to a specialaudit to ensure that they matched up to a new 8% capital adequacyrequirement. This process led to the seizure of Pamukbank, the fifth-largestprivate bank, in June of that year. Pamukbank was owed some US$2bn by itsowner, the Cukurova group. These claims were eventually restructured inFebruary 2003, along with the debts of the Cukurova group to its other bank,Yapi Kredi Bank (YKB). Cukurova was removed from the management of YKBand obliged to sell off its stake within two years. The audit failed, however, toidentify problems at the Uzan family-owned Imar Bank, which eventuallycame to light in July 2003, when the bank collapsed, saddling the state with acost of US$6bn in compensation to depositors. The Imar Bank collapse hasraised questions about the authorities' claims that the banking sector is nowtightly regulated.

Turkey had 50 banks at the end of 2003—down from 81 at end-1999. The declinein numbers is partly because of mergers, which have been encouraged. For themost part, however, it is a result of the sale, liquidation or merger of the seizedprivate banks managed by the Savings Deposit Insurance Fund (SDIF).

A handful of large domestic banks dominate the sector. As of the end ofSeptember 2003 the five largest banks accounted for 50% of the sector's totalassets, 63% of total deposits and 54% of total loans, according to the BanksAssociation of Turkey. Most are owned by large conglomerates. The big four areAkbank, Garanti Bank, YKB and Isbank. Akbank and Garanti Bank belong to theSabanci and Dogus business empires respectively, while Isbank—formerly

Top conglomerates and thestate own the major banks

Turkey 53


part-owned by the state—is an empire in its own right, with stakes in majorglass, petroleum retailing and mobile telecoms companies. Second-tier Turkishbanks include Disbank (controlled by the Dogan group), Finansbank, Oyakbank(Oyak group—originally a savings fund for army officers) and Kocbank. Kocbankis part of the Koc group's financial services arm, in which Italy's Unicreditoacquired a 50% stake in October 2002. Apart from Unicredito, the onlysignificant foreign player in the Turkish commercial banking market is HSBCof the UK.

There are three remaining mainstream state banks which control about 30% ofthe sector’s assets. Ziraat Bank and Halkbank, which have traditionally beenresponsible, respectively, for state-supported lending to agriculture and smallbusinesses, have been managed by a specially appointed joint executive boardsince April 2001. They have been downsized radically and are slated forprivatisation. Attempts have already been made to privatise the smallerVakifbank, but without success. The scandal-ridden state bank, Emlakbank,originally set up to finance housing projects, was dissolved into Ziraat Bank inJuly 2001. State banks are no longer required to take on policy responsibilitiesunless the necessary funding has been provided in the state budget.

Foreign banks are tiny by comparison, but they have played a dynamic role inbringing innovations to the local industry. In September 2003 majority-ownedforeign banks accounted for approximately 3% of the Turkish banking system’sassets and approximately 2% of total deposits and 4% of total loans, accordingto the Banks Association of Turkey. HSBC, which is the largest foreign bank inTurkey, acquired Demirbank from the SDIF in September 2001. In early 2004 itwas announced that preparations were under way for a friendly takeover ofGaranti Bank by Italy's Banca Intesa. Most foreign banks in Turkey lack theextensive branch networks of the major domestic retail banks and depend onthe interbank market for Turkish lira funds.

The banking sector is small in asset terms compared with the size of theeconomy. The BRSA put total assets at US$179.9bn at end-2003—around 75% ofGDP—up from US$130bn or 71% of GDP at the end of 2002. Aside fromfinancial crises, inflation and high real interest rates have hindered the growthof financial savings and credit and made long-term credits such as housingmortgages almost unthinkable. Both credits and deposits are typically highlyshort-term—around three months—although they are usually renewed. Manybusinesses avoid using bank credit.

Holdings of government securities have long made up a large proportion ofbanks' assets. Such holdings almost doubled in real terms in the wake of thefinancial crises of 2000-01, as the government issued special bonds in order tobalance the books of the state and the SDIF banks. At the end of 2002government securities accounted for just under 40% of bank balance sheetassets. This figure rose marginally to just over 40% at the end of 2003. Bycontrast, bank credits accounted for 26.5% of balance sheet assets at the end of2003, up from about 20% in 2002. This ratio was about 32% at privatecommercial banks at the end of 2003. Banks have had to provision against badloans, which at the end of 2002 amounted to about one-quarter of total bank

Government securities accountfor large share of bank assets

54 Turkey


credits, although this figure had fallen to a still high 14% by the beginning of2004. Attempts to restructure the debts of viable large companies and smallbusinesses facing difficulties as a result of the 2001 devaluation and recessionhave made progress.

A deposit insurance scheme covers 100% of deposits in banks taken over by theSDIF, but in mid-2003 it was announced that the upper limit for the depositprotection scheme would be TL50bn (about US$35,000) from July 5th 2004,with a one-year transition period. Following the financial crises of end-2000and early 2001, Turkish banks made less use of international loans and short-term lending from international banks. However, in 2003 international lendingto Turkish banks resumed in earnest.

The large government securities market aside, fixed-income markets areunderdeveloped, with little private debt. However, the Istanbul Stock Exchange(ISE), which opened in December 1985, has proved popular among companiesand savers and has at times attracted significant foreign investment. Itsperformance has tended to be extremely volatile, mainly because of a lack oflocal institutional investors, apart from investment funds set up by the banks.The price movements on the ISE are often closely linked to politicaldevelopments and the returns on government securities, particularly Treasurybills, rather than the fundamentals of companies. The establishment of privatepension funds under legislation approved in April 2001 may go some waytowards reducing volatility in the long term.

The ISE National-100 index enjoyed its best year in 1999, when it surged by242%, pushed up mainly by anticipation of the stand-by accord signed with theIMF in December of that year and the related fall in interest rates. But shareprices fell sharply in the following three years, declining by just over 50% inUS dollar terms in 2000 and by 30-35% a year in 2001-02, reflecting asuccession of financial and political crises. Following a brief rally after theelection in November 2002, the index fell again in the final weeks of 2002 andin the first quarter of 2003 because of uncertainty over the conflict in Iraq anddomestic political instability. However, prices firmed again through mid-year, asthe National-100 index rose to 11,612 at end-August, before slowly gatheringpace in the final months of the year. The index jumped again, from 13,056 atend-September to 15,754 at end-October, before closing the year at 18,625, a riseof 79.6% in local currency terms and 111% in US dollar terms compared withend-2002. Share prices were volatile in the first three months of 2004, butoptimism that the government's efforts regarding Cyprus had improvedTurkey's chances of starting accession negotiations with the EU in early 2005and the ruling party's clear victory in local elections in late March helped tomove the index higher. After falling from 19,926 on January 9th to 16,966 onFebruary 6th it then picked up, rising to almost 21,000 by the end of March.

The stockmarket grew considerably in the late 1990s, but it remains small withjust 284 listed companies. The companies listed include many of the leadingconglomerates and banks and a few large state-controlled companies. However,not all large companies are open to the public. In addition, most Turkish firmsretain their family structure, typically making only about one-quarter of the

The stockmarket recoveredin 2003

Turkey 55


equity publicly tradable when listed. Market capitalisation is also low at about30% of GDP in 2003, despite the increase of over 100% in the main share priceindex in US dollar terms in that year. This compares with market capitalisationratios of over 100% of GDP in the UK, about 40% in Germany and 35% in Italy.Average daily trading volumes on Turkey's equity markets rose from US$3m in1989 to US$356m in 1999 and US$740m in 2000. After that volumes declinedrapidly, to US$324m in 2001 and US$281m in 2002, before recovering toUS$407m in 2003. The average daily value of trading was about US$700m inthe first three months of 2004. The government plans to privatise the ISE.

Insurance companies are important players in Turkish finance, but in terms ofinsurance expenditure per head Turks spend less than any other nation in theindustrialised world. Total insurance premiums of US$2.27bn were equivalentto 1.36% of total GNP in 2002, down slightly from 1.41% (US$2.05bn) in 2001.Non-life premiums totalled US$1.85bn, up 30.3% from US$1.42bn in 2001. Lifepremiums rose to US$418.6m, up 30.6% from US$320.5m in 2001, but were stillwell below the US$485.6m of 2000. Provisional figures released by the Treasurysuggest that total premiums grew by nearly 20% in real terms over the first sixmonths of 2003. In December 2003 industry sources predicted that totalpremiums for 2003 would exceed US$4bn.

The largest insurance firms are linked to the major banks or internationalinsurance groups. There are also many small firms. Most risk is passed on tointernational reassurance companies and the Turkish reassurer, Milli Re. Thesector is regulated by the Treasury, but an independent regulatory board hasbeen proposed. Successive governments have promised to introduce a new law.By early 2004 the Ministry of Justice was still working on a draft, and no detailshad been leaked. Industry sources report that although the current situation isunsustainable in the medium or long term, the lack of effective legislation hadironically improved morality within the sector: without the possibility of legalrecourse, transactions were now based on trust and reputation.

A national compulsory earthquake insurance scheme was introduced after the1999 earthquake, but as there are no sanctions, only 15-20% of property-holdershave taken out policies. Many insurance companies are looking to set upprivate pension funds under legislation approved in April 2001.

Other services

The international tourism industry expanded quickly along Turkey's westernand southern coasts in the 1980s, creating employment and boosting domesticconsumer demand. Expansion continued in the 1990s, with the number offoreign visitors exceeding 10m for the first time in 2000. In 2003 the numberreached almost 14m. The majority of visitors are still north Europeans,particularly Germans, followed by British and Dutch, taking cheap packageholidays. The fastest-growing market, however, has been Russia. In 2003 some1.3m Russians visited Turkey, second only to Germans (3.3m). The number ofvisitors from other neighbouring countries such as Bulgaria and Iran has alsoincreased. Besides seaside holidays, some of these visitors travel to Turkey forshopping expeditions and family visits. Istanbul, the coastal regions and

Tourism

Banks and multinationals leadthe small insurance sector

56 Turkey


Cappadocia also attract visitors from a wide range of countries for cultural andhistorical reasons. Istanbul has enjoyed some success in attracting internationalconferences, and various activity holidays are available. The vast majority ofhotels are locally owned, typically by small businesses, although conglomeratesand hotel chains are playing an increasing role through new investments.

Revenue from tourism has grown less rapidly than the number of visitors inrecent years. A failure to attract higher-spending visitors has been compoundedby the deterrent effect of the terrorist attacks on September 11th 2001 onbusiness travel as well as on foreign travel by US citizens. In 2003, in anapparent reversal of recent trends, travel receipts rose by 14% to reach US$9.7bn,according to balance of payments figures issued by the Central Bank, althoughthe number of visitors rose by just 5%. However, this can be attributed to therelative weakness of the US dollar against the lira last year. The Iraq war hadonly a modest impact on bookings in 2003, although political and securityconcerns hit tourism badly during the 1991 Gulf war and again in 1999, whenvisitors were deterred by violent protests in Europe and bomb attacks inTurkish cities following the capture of the Kurdish guerrilla leader, AbdullahOcalan. In addition to foreign visitors, Turkish citizens resident in othercountries pay about 5m visits to Turkey each year. By way of comparison, Spainreceives 50m tourists per year (excluding day-trippers), generating revenue ofabout US$40bn.

Retail trade is dominated by small businesses. However, the 1990s saw thegrowth of some major hypermarket and supermarket chains. The largest ofthese is Migros, controlled by the Koc Group, with over 450 stores and adomestic turnover of some US$1bn in 2003. Migros also has major investmentsin Russia and eastern Europe and an Internet shopping arm. It is followed byGima and the Dogus group's Tansas. Foreign retailers operating in Turkeyinclude the German Metro group, Carrefour of France, and most recently Tescoof the UK.

The external sector

Trade in goods

As an importer of fuel, technology, machinery and materials for industry,Turkey’s foreign trade balance has constantly shown a deficit. Before 1980governments were mainly concerned with supporting the domestic productionof imported goods by building up and protecting local industry. Exportsconsisted largely of unprocessed agricultural goods. After the currencyshortages of the late 1970s the government sought to liberalise trade. Incentiveswere provided to boost exports, encouraging the expansion of the textilesindustry, in particular. Meanwhile, quantitative restrictions on imports werelifted and customs duties were progressively reduced. By the 1990s exportsubsidies that contravened the General Agreement on Tariffs and Trade (GATT)had been abolished, while the process of import liberalisation continued.

The retail sector

Foreign trade has beenprogressively liberalised

Turkey 57


In 1996 Turkey entered into a customs union with the EU. Accordingly, tariffbarriers on industrial products have been mutually abolished. In 1999 Turkeyadopted EU-style customs legislation. The customs union has been extended tothe ten new members of the Union from May 1st 2004. A separate process isunder way with those countries in North Africa, the eastern Mediterranean andthe Middle East that are covered by the EU-Med agreements. There is also anagreement with the EU on trade in agriculture. Imports of agricultural goods aresubject to varying tariff barriers, and in some cases other restrictions.

Trade figures have shown wide variations from year to year, mainly because offluctuations in the value of imports, which have risen and fallen dramaticallyin line with sharp variations in domestic demand. In 2003 the formal tradedeficit on a customs basis (excluding informal "suitcase trade", which isestimated in the balance of payments) was almost US$22bn. This was muchlarger than the US$15.5bn trade deficit of 2002, and far in excess of the deficit ofonly US$10bn recorded in 2001, a year of recession. Nevertheless, the 2003trade deficit fell short of the US$26.7bn recorded in the boom year of 2000. In2003 imports surged in value by 33% to almost US$69bn on a customs basis,boosted by strong domestic demand growth, strong export demand for Turkishgoods requiring imported inputs, and a relatively strong lira. The previousrecord import bill was US$54.5bn in 2000.

Less volatile than imports, exports have generally risen from year to year.Export growth has strengthened in the past three years, culminating in a 30%rise in value to US$47bn in 2003, assisted by the strength of the euro against theUS dollar (almost 50% of export transactions are conducted in euros). Therecent improvement in exports follows considerable efforts by Turkishcompanies to increase their presence in international markets and protect them-selves from the uncertainty of domestic demand. Multinational companieshave also come to regard Turkey as an export base as well as a market, notablyin the automotive industry.

Foreign trade, 2003a

(US$ m)

Exports fob Imports cif BalanceAgriculture, hunting, forestry & fisheries 2,525 -2,558 -33

Mining & quarrying 532 -10,884 -10,352Manufacturing 43,699 -54,928 -11,229Total incl others 46,878 -68,734 -21,856

a Provisional data. Customs basis, excluding "suitcase" trade, which involves goods ostensiblycarried on the person of individual travellers.


The share of processed and unprocessed agricultural products in Turkey'sexports has shrunk to under 10%, while minerals and mineral productsaccount for less than 5%. Clothing and other finished textile products accountfor one-quarter of the total value of exports, and fibres, yarn and cloth (cottonand artificial) for another 5%. A wide range of other manufactured goods isalso exported, including steel, construction materials, household appliancesand electrical goods (especially televisions). Exports of motor vehicles andparts have grown strongly and represented about 11% of total exports in 2003.

The trade deficit fluctuateswith domestic demand

Exports are mainlyfinished goods

58 Turkey


Over half of Turkey's exports are consumer goods. Most of the remainderare intermediate goods, while investment goods still account for less than 10%of the total.

Imports are made up primarily of intermediate goods. These mainly compriseinputs for Turkish industry and business—materials such as steel and plastics(and even traditionally home-grown cotton and tobacco), and semi-finishedgoods such as electronic components. Imports of oil and gas are also regardedas intermediate goods. (US$11.4bn was spent on mineral oils and fuels in 2003,including over US$4.8bn on crude oil.) Investment goods—principally industrialmachinery—have normally accounted for over 20% of imports, but thispercentage fell to 16-17% amid low investment demand in 2001 and 2002, andwas unchanged in 2003. The share of consumer goods (headed by cars) in totalimports reached 13.2% in 2000, but dipped below 10% in the recession of 2001and remained at the same level in 2002. It was 10.9% in 2003.

The EU accounts for just over half of Turkey's formal exports and about 45% ofits imports. The US takes 8-10% of Turkey's exports. The remainder of Turkey'sexports go mainly to the neighbouring regions of central and south-east Europe,the Middle East and the former Soviet Union. Since the rouble crisis in 1998only about 3% of Turkey's exports have gone to Russia. However, this figure isbased on formal trade returns and therefore excludes the informal "suitcasetrade" in goods ostensibly carried on the person of individual travellers.Earnings from suitcase trade with the Soviet Union and other formercommunist countries were officially estimated in the balance of payments atUS$8.8bn—one-quarter of all exports—in 1996. They then contracted sharply,before recovering to around US$3bn a year in 2000-01 and US$4bn in both2002 and 2003. Russia is seeking to curtail (or formalise) this trade.

Turkey's chief suppliers, other than the EU countries, include developedcountries such as the US, Switzerland and Japan, and energy exporters such asRussia—Turkey's primary natural gas supplier—and Saudi Arabia. Imports fromChina doubled to US$2.6bn in 2003. Informal imports of petroleum productsfrom neighbouring countries continue to some extent. Various other productsare also imported informally from or via neighbouring Middle East countriesand the former Soviet Union.

Main trading partners, 2003Exports foba % of total Imports cifa % of totalEU 51.9 EU 45.8 Germany 15.9 Germany 13.7 UK 7.8 Italy 7.9 Italy 6.8 France 6.0 France 6.0 UK 5.1

Middle East 10.7 Russia 7.9US 8.0 US 5.0CIS 6.3 Middle East 6.3

Africa 4.5 Switzerland 4.3

a Provisional data. Customs basis, excluding "suitcase" trade, which involves goods ostensiblycarried on the person of individual travellers.


Intermediate goodsdominate imports

The EU accounts for about 50%of exports and 45% of imports

Turkey 59


Invisibles and the current account

Turkey regularly achieves a substantial surplus on its invisibles balance (netearnings from services, income—interest, profits and dividends—and currenttransfers). This surplus is mainly a result of earnings from tourism and workers’remittances. In years of low growth, the invisibles surplus sometimes exceedsthe perennial merchandise trade deficit, producing a current-account surplus. Inmost years, however, the current account has been in deficit.

Earnings from tourism first became significant in the 1980s and have been amajor source of foreign currency ever since, despite occasional setbacks causedby weak international demand or political difficulties (see Economic sectors:Other services). Tourism revenue reached a record US$9.6bn in 2003. Workers’remittances come mainly from Turkish workers in Germany and otherEuropean countries. They averaged about US$3bn a year in the early 1990s andpeaked at over US$5bn in 1998—perhaps boosted by high domestic interestrates. However, they declined sharply in 2001-02, falling just short of US$2bn in2002. An increase to US$2.3bn was recorded in 2003, perhaps spurred bythe stability of the lira, but they were still some 50% lower than their peak inthe late 1990s.

Turkey also enjoys modest net earnings from transport, freight and constructionwork. Interest payments constitute a growing drain on the invisibles balance,reflecting Turkey's large net debtor position in relation to internationalinvestment. In 1999-2003 net interest payments abroad averaged aboutUS$3.8bn, compared with US$2.5bn in 1995-1998. The deficit on the broaderinvestment income balance increased in 2003, rising to US$5.4bn, comparedwith US$4.6bn in the previous year.

Current account(US$ m)

2002 2003Total exports of goods 40,124 50,831 "Suitcase" trade 4,065 3,953

Total imports of goods -48,461 -64,765Foreign trade balance -8,337 -13,934Services income: credit 14,783 17,436 Travel income 8479 9,676Services income: debit -6,904 -8,500

Services balance 7,879 8,936Investments income: credit 2,486 2,246 Interest 784 634Investments income: debit -7,040 -7,674 Interest -4,417 -4,587

Investments income balance -4,554 -5,428Current transfers 3,491 3,618 Workers' remittances 1,936 2,321

Current-account balance -1,522 -6,808

Source: Central Bank of Turkey.

Turkey has a substantialinvisibles surplus

60 Turkey


Capital flows and foreign debt

Since the declaration of full capital-account convertibility in 1989, the level ofcapital inflows has varied greatly from year to year, depending on internationalliquidity conditions and domestic and international confidence in the conductof economic policy. In most years, capital flows have been positive, more thanmaking up for current-account deficits and leading to a build-up of foreign-exchange reserves. However, these inflows have often taken the form of short-term investments in the Turkish bond, money and stockmarkets and short-term loans to Turkish banks, creating the potential for sudden large outflows ofshort-term capital as a result of a reassessment of Turkey’s creditworthiness.This occurred in 1994 and again in 1998.

Capital inflows were strong during most of 2000, spurred by the crawling-pegexchange-rate policy and confidence in the new IMF stand-by accord. However,at the end of the year the IMF had to provide Turkey with a supplementalreserve facility (SRF) as problems in the banking sector caused substantialcapital outflows. In 2001, when the currency was floated, loans to Turkishbanks fell by about US$8bn and another US$3.7bn or so fled the domesticgovernment bond market. These outflows were offset by the receipt ofUS$10.2bn in net lending from the IMF. The IMF extended an additionalUS$6.4bn in loans to Turkey in 2002, whereas private international lenders andinvestors maintained a cautious attitude.

In 2003 Turkey enjoyed strong net financial inflows, although foreign directinvestment was even lower than in previous years, at about US$600m (thefigure barely exceeded Turkish direct investments in other countries). In contrastto 2001 and 2002, there were large net inflows of portfolio investment. Foreignpurchases of Turkish shares and government bonds outpaced similar Turkishportfolio investments in other countries by about US$2.3bn, reflecting increasedconfidence in the Turkish economy and strong international demand for"emerging market" assets in general. For similar reasons—and in parallel witheconomic growth—Turkey received net inflows of "other investments"amounting to about US$3.3bn. Banks and companies obtained more foreigncredit, particularly short-term credit, and non-resident deposits with Turkishbanks rose. (In 2002 Turkey enjoyed inflows of over US$7bn in the "otherinvestments" category. However, most of this amount was made up of IMFcredits. In 2003 IMF credit disbursements were fully offset by repayments tothe Fund.)

Aside from support in the form of loans from the international financialinstitutions, government bond issuance on the international capital markets hasbeen a significant source of capital inflows, although it has not always beenavailable. The Treasury has taken every opportunity to raise funds in this wayin recent years. Net issuance was as high as US$6.1bn in 2000, but negligible in2001 and only just over US$1bn in 2002. Between 1997 and 2000 Turkishprivate companies also rapidly increased their foreign borrowing, but thisprocess slowed sharply in 2001 and 2002.

Recent capital outflows havebeen offset by IMF credit

Turkey 61


Capital account(US$ m)

2002 2003Current-account balance -1,624 -6,808Financial-account balance 7,764 5,634 Direct investments (net) 863 79 Portfolio investments (net) -593 2,287 Other investments (net) 7,494 3,268 IMF credits 6,365 -50Net errors & omissions 13 5,221

Overall balance 6,153 4,047Reserve assets (- indicates increase) -6,153 -4,047Reserve position in Fund 0 0

Official reserves -6,153 -4,047

Source: Central Bank of Turkey.

Foreign direct investment (FDI) into Turkey has been disappointing. Reasonsgiven for low foreign investment include political uncertainty; corruption;inflation and the associated accounting problems; competition from central andeastern Europe; and other negative factors ranging from inadequateinfrastructure to abuse of intellectual property rights (IPRs), bureaucraticirritants, and the unpredictability of the legal and judicial systems. In early2002 the government adopted a strategy designed to make the investmentclimate more attractive. Progress was subsequently delayed because of thechange of government, but a bill removing bureaucratic obstacles andproviding incentives for foreign investors became law in 2003.

In 1997-2000 FDI inflows averaged less than US$1bn a year, and in 1999 and2000 inflows barely exceeded the outflows resulting from Turkish companies’direct investments abroad. In 2001 FDI inflows increased to US$3.3bn (orUS$2.8bn net of outflows). However, much of the improvement was accountedfor by payments made by the Turkish-Italian joint venture Is-Tim for its mobiletelephone licence and the purchase of Demirbank by HSBC of the UK. In2002-03 inward foreign direct investment fell again, to just over US$1bn in 2002and about US$600m in 2003, when inflows barely exceeded Turkish directinvestments in other countries.

Turkey’s total foreign debt stock has risen steadily, recording particularly sharpincreases in the mid-1980s and the late 1990s. According to the Treasury, it wasUS$79.2bn, or about 45% of GDP, at end-1996. By end-2000 it had reachedUS$118.7bn, or almost 60% of GDP. The rise in the debt stock between 1996 and2000 was almost entirely the result of an increase in private-sector debt, butthis was then invested in high-yielding domestic government securities. In 2001the total fell to US$113.9bn, but as a percentage of GDP it rose to over 75%. Thiswas the result of the decline in the US dollar value of GDP, driven by therecession and a sharp fall in the lira. The private sector’s share in total foreigndebt declined in 2001, as the sector, particularly banks, paid off some US$12bnin short-term debt, while public-sector borrowing was boosted by IMF credits.In 2002-03 the foreign debt soared. In 2002 it was US$131.6bn. The increase waspartly attributable to the weakness of the dollar, but IMF lending again played

Total external debt reachedUS$147.3bn at the end of 2003

FDI has been limited

62 Turkey


an important role. As a percentage of GDP, however, it declined to about 72%. In2003 it reached US$147.3bn (61.5% of GDP). This was partly a function of theweakness of the US dollar against other currencies in which Turkey hascontracted foreign debt, but also a result of government bond issues andprivate-sector borrowing related to the strength of the economy.

Some 45% of the total foreign debt is denominated in dollars, 32% in euros,17% (IMF lending) in Special Drawing Rights, 4% in yen and 2% in othercurrencies. Rises in the value of the latter currencies against the dollar causesthe dollar value of the debt to rise.

External debt stock(US$ m; end-period)

2002 2003Short-term debt 15,220 22,922Medium- & long-term debt 116,044 124,342

Total outstanding debt 131,264 147,264By lender:Short-term debt Commercial banks 5,187 8,257 Private creditors 10,033 14,665Medium- & long-term debt Official creditors 40,158 42,789 Bilateral lenders 9,193 9,377 Multilateral organisations 30,965 33,412 Private creditors 75,886 81,553 Private lenders 52,042 53,981 Bond issues 23,844 27,572

By borrower:Short-term debt General government 0 0 Central Bank of Turkey 451 2,861 Deposit money banks 6,344 9,688 Other sectors 8,425 10,373Medium- & long-term debt Public sector 63,920 70,334 General governmenta 59,104 65,624 Other governmentb 1,038 1,195 State-owned enterprises 3,778 3,514 Central Bank of Turkey 21,544 21,490 Private sector 30,580 32,518 Financial institutions 4,701 5,052 Non-financial institutions 25,879 27,466

a Central and local government, universities and extra-budgetary funds. b Export-import Bank andTurkish Development Bank.

Source: Under-secretariat of the Treasury.

According to Central Bank data, Turkey's medium- and long-term foreign debtwas US$124.3bn at end-2003, compared with US$116.4bn in 2002. Short-termdebt also rose sharply to US$22.9bn, from US$15.2bn in the previous year. Short-term debt is held almost entirely by the private sector. Private-sector medium-and long-term debt was little changed on 2002, at US$32.5bn in 2002. About15% of this was owed by banks and other financial institutions, and the

About 62% of total externaldebt is owed by public sector

Turkey 63


remainder by non-financial institutions. In 2003 public-sector medium- andlong-term debt amounted to almost US$92bn. Outstanding IMF lendingamounted to US$24bn at the end of 2003. The remainder of the public-sectormedium- and long-term debt arose from other credits from governments andmultilateral organisations, and commercial bonds and loans.

Foreign reserves and the exchange rate

Central Bank foreign-exchange reserves were lower than US$2bn until 1988, butbegan to grow rapidly following capital-account convertibility in 1989. At theend of 2002 they stood at US$27bn. Reserves were depleted during the 1994crisis, in the wake of the Russian financial crisis in 1998, and again during thefinancial crises of 2000-01. In each case, they staged a complete recovery.Although the 2001-02 recovery required substantial IMF lending, internationalreserves excluding gold had risen by about US$7bn to US$34bn by the end of2003, a year in which Turkey made net repayments to the IMF.

The Turkish lira averaged TL2.80:US$1 in the 1950s and TL9:US$1 in the 1960s. Itwas devalued more frequently in the 1970s and went on to depreciate rapidlyas the economy was opened up in the 1980s. In the early 1980s a weakcurrency helped to improve the trade balance and foster export-led growth. Intime a constantly depreciating lira was to become both a cause and effect ofpersistently high inflation. In the early 1990s the real value of the lira (its valueafter allowing for inflation differentials) was bolstered by capital inflows, butthis lasted only until the crisis of 1994, when capital flight led to a fall of over60% against the US dollar in nominal terms. The resulting weakness of thecurrency helped to reverse the current-account deficit and ensured a return togrowth. By end-1999 the lira had reached TL541,400:US$1.

The "crawling-peg" currency regime introduced under the December 1999 IMFprogramme limited the pace of depreciation of the currency to theprogrammed inflation rate. However, while the Central Bank maintained thecurrency policy, the ambitious inflation targets were missed, and the real valueof the lira rose. According to the Central Bank’s real effective exchange-rateindex (1995=100, consumer price-based), the real value of the lira rose from 127.3at end-1999 to 148.1 at the end of January 2001. The strength of the lira in 2000contributed to a sharp fall in inflation and a record current-account deficit.

Amid financial turmoil the lira was floated on February 22nd 2001 and fellalmost instantly from TL680,000:US$1 to over TL1,000,000:US$1. The currencycontinued to tumble, reaching a low point of TL1,650,000:US$1 in October2001, in the wake of the September 11th terrorist attacks. Extra credit from theIMF led to a major recovery, and at the end of April 2002 the exchange ratestood at TL1,330,000:US$1. However, in response to political uncertainty thelira fell again to TL1,700,000:US$1 in July 2002 and remained at this level untilthe end of 2002, with the exception of a brief rally after the November 2002election result.

Reserves have recovered aftera series of crises

The volatile real exchange rateaffects inflation and trade

64 Turkey


The lira weakened again in the final weeks of 2002 and in the run-up to theIraq war, but strengthened from April onwards, with the exception of a briefbut sharp dip against both the euro and the dollar in October 2003. InNovember and December it stabilised again, strengthening against the dollarand weakening only marginally against the euro. At the end of 2003 the liratraded at about TL1,400,00:US$1 and TL1,750,000:€1. In the first three monthsof 2004 it strengthened further to close to TL1,300,000, before easing back againto almost TL1,400,000:US$1 in mid-April.

Although volatile for much of the past two years, the lira has appreciatedsharply in real terms against the US dollar, and to a lesser extent against theeuro. After rising by 16% against the dollar and almost 10% against the euro in2002, the lira appreciated in real terms in 2003 by an average of about 23%against the US dollar and by about 3% against the euro.

Turkey 65


Appendices

Sources of information

Briefing, an English-language weekly news magazine published in Ankara,which prints current economic statistics, mainly from the State Institute ofStatistics (DIE), together with analysis of current political and economicdevelopments

Census of population (until 1990 the census was held every five years; from1990 it was to be held every ten years, although a census was also held inNovember 1997). Full results are usually published two or three years later bythe State Institute of Statistics in Population by Administrative Division and Socialand Economic Characteristics of Population

Central Bank of Turkey, Annual Report

State Institute of Statistics (DIE), Monthly Bulletin of Statistics

State Institute of Statistics (DIE), Household Labour Force Survey

State Planning Organisation (DPT), Main Economic Indicators (monthly; providesmore data than the DIE on topics such as national income)

IMF, International Financial Statistics (monthly)

IMF, Turkey: Selected Issues

OECD, Economic survey (annual)

There is a rich collection of books on Turkey’s history and contemporarypolitics and society, but academic literature on the economy is disappointinglypatchy, considering its importance. The following is just a selection.

Tosun Aricanli and Dani Rodrik (eds), The Political Economy of Turkey: Debt,Adjustment and Sustainability, Macmillan, Basingstoke, 1990. Technical overallstudy, but the last chapter has a good summary of economic reforms in theearly 1980s

Cigdem Balim (ed.), Turkey, revised edition, Clio Press, Oxford, WorldBibliographical Series Vol. 27, 1999. A useful overall bibliography

Brian W. Beeley, (ed.), Turkish Transformation: New Century, New Challenges,Eothen, Hemingford Grey, 2002. Papers on politics, society and the economy

Ali Carkoglu and Barry Rubin, (eds), Turkey and the European Union: DomesticPolitics, Economic Integration and International Dynamics, Frank Cass, London,2003. Informative papers on political and economic aspects

Clement H. Dodd, The Cyprus Imbroglio, Eothen, Hemingford Grey, 1998. Adetailed study of the problem since 1974

Clement H Dodd, (ed.), Cyprus: the Need for New Perspective, Eothen,Hemingford Grey, 1999. Contains valuable papers

National statistical sources

International statistical sources

Select bibliographyand websites

66 Turkey


Clement H Dodd, Storm Clouds over Cyprus, Eothen, Hemingford Grey, 2nd edn,2002. Brings the author’s earlier book up to date

William Hale, The Political and Economic Development of Modern Turkey, CroomHelm, London, 1981. Mainly useful for information on the economy from 1923to 1980

William Hale, Turkish Foreign Policy, 1774-2000, Frank Cass, London, 2nd edn,2002. Historical survey concentrating on the period since the second world war

Metin Heper and Ahmet Evin (eds), Politics in the Third Turkish Republic,Westview, Boulder, CO, 1994. Includes useful papers on the economy

A Kazancigil and E Ozbudun (eds), Ataturk: Founder of a Modern State, Hurst,London, 1981. Contains more than the standard biographical information

Heinz Kramer, A Changing Turkey: The Challenge to Europe and the United States,Brookings Institution Press, Washington, DC, 2000. Concentrates on Turkey’sforeign relations since the end of the cold war

Bernard Lewis, The Emergence of Modern Turkey, Oxford University Press,London, 1961. A classic; reprinted several times

Andrew Mango, Ataturk, John Murray, London, 1999. An excellent biography ofthe founding father of modern Turkey

Ziya Onis and Barry Rubin, The Turkish Economy at the Crossroads: CriticalPerspectives on the 2000-1 Crisis, Frank Cass, London, 2003. The most recentoverall study of the economy

Ergun Ozbudun, Contemporary Turkish Politics: Challenges to DemocraticConsolidation, Lynne Rienner, Boulder, CO, 2000. The best recent overall guideto the political system

Philip Robins, Suits and Uniforms: Turkish Foreign Policy since the Cold War,Hurst, London, 2003. Investigative and topical

Barry Rubin and Kemal Kirisci (eds), Turkey in World Politics: an EmergingRegional Power, Lynne Rienner, Boulder, CO, 2002. Foreign relations since theend of the cold war

Barry Rubin and Metin Heper, (eds), Political Parties in Turkey, Frank Cass,London, 2002. Useful papers on the main political parties

Sabri Sayari and Yilmaz Esmer (eds), Parties, Politics and Elections in Turkey, LynneRienner, Boulder, CO, 2002. Up-to-date articles on political parties and politics

David Shankland, Islam and Society in Turkey, Eothen, Hemingford Grey, 1998.An original survey of Islamist movements

Paul Stirling (ed.), Culture and Economy: Changes in Turkish Villages, Eothen,Hemingford Grey, 1993. Valuable scholarly papers on an understudied subject

Jenny B. White, Islamist Mobilization in Turkey: a Study in Vernacular Politics,University of Washington Press, Seattle, 2002. An important study, coveringcultural as well as political aspects

Turkey 67


Sweder van Wijnerbergen, Ritu Anand, Ajay Chhiber and Roberto Rocha,External Debt, Fiscal Policy and Sustainable Growth in Turkey, Johns Hopkins forWorld Bank, Baltimore, MD, 1992. A valuable specialist study

Eric J Zurcher, Turkey, a Modern History, I B Tauris, London, 1994. The best up-to-date overall history, with a valuable annotated bibliography: frequently reprinted

DIE website: www.die.gov.tr

DPT website: www.dpt.gov.tr

Istanbul Stock Exchange website: www.ise.org

Ministry of Finance, General Directorate of Public Accounts:www.muhasebat.gov.tr

Ministry of Foreign Affairs: www.mfa.gov.org

Treasury: www.treasury.gov.tr

Turkish Daily News (English language daily newspaper):www.turkishdailynews.com

Turkish Economic and Social Studies Foundation (leading Turkish think-tank):www.tesev.org.tr

Reference tables

These reference tables provide the most up-to-date statistics available at the time ofpublication

Population(m unless otherwise indicated)

1999 2000 2001 2002 2003Total (mid-year estimates) 67.2 68.3 69.3 70.3 71.3 % change, year on year 1.6 1.6 1.5 1.4 1.5

Source: UN, UN Population Database; EU intrapolations.

Labour force(‘000 unless otherwise indicated)

1999 2000 2001 2002 a 2003Civilian labour force 23,659 23,409 22,527 23,818 23,640 Employed 21,860 20,941 20,607 21,354 21,147 Unemployed 1,799 1,468 1,921 2,464 2,493Unemployment rate (%) 7.6 6.6 8.5 10.3 10.5 Urban 11.3 8.8 11.6 14.2 13.8 Rural 3.7 3.9 4.5 5.7 6.5Workforce participation rate (%) 49.5 46.1 45.4 49.6 48.3

a Break in series. Figures for 1999-2001 are based on population over 12 years. Figures for 2002-03 are based on population over 15 years.

Source: State Institute of Statistics, Household Labour Force Survey.

68 Turkey


Transport statistics1999 2000 2001 2002 2003 a

RailwaysPassenger traffic (m passenger-km) 6,146 5,832 5,568 5,204 5,893Goods traffic (m tonne-km) 8,237 9,761 7,486 6,841 8,271SeaPassenger traffic (m passenger miles) 75 69 63 58 55Passenger vessels (gross tons) 111,833 107,597 107,450 86,358 86,358RoadLength of motorway (km) 1,749 1,773 1,851 1,851 1,892Length of state & provincial roads (km) 60,923 61,090 61,305 61,369 61,491Passenger cars (no.) 4,072,326 4,422,180 4,534,803 4,688,140 4,677,765Passengers carried (m person-km) 175,236 185,681 168,211 163,327 171,493Goods carried (m tonne-km) 150,974 161,552 151,421 150,912 158,458AirPassengers (‘000) 10,410 12,031 10,277 10,383 10,325Aeroplanes (no.) 75 73 69 66 65

a Provisional figures.

Source: Central Bank of Turkey, Annual Report.

National energy statistics(m tonnes petroleum equivalent)

1999 2000 2001 2002 2003 a

Consumption 74.5 81.3 76.0 78.4 85.2 Commercial 67.6 74.8 69.8 72.4 79.5 Petroleum 30.1 32.3 31.0 30.8 32.3 Lignite 12.3 13.2 11.9 10.6 12.4 Hard coalb 9.3 11.7 8.5 10.6 9.1 Hydroelectricity 3.0 2.7 2.1 2.9 3.2 Net imported electricity 0.2 0.3 0.4 0.3 0.1 Natural gas 11.8 13.7 14.9 16.1 21.3 Renewable 0.9 0.9 1.0 1.1 1.1 Non-commercial 6.7 6.5 6.2 6.0 5.7 Wood 5.3 5.1 4.9 4.7 4.5 Wastes 1.4 1.4 1.3 1.3 1.2Supply 74.3 81.3 76.0 78.4 85.2Domestic products 27.6 26.9 25.2 24.6 26.9 Petroleum 3.1 2.9 2.7 2.5 2.3 Lignite 12.2 12.1 11.6 10.5 12.4 Hard coalb 1.0 1.2 1.3 1.2 2.0 Hydroelectricity 3.0 2.7 2.1 2.9 1.2 Wood 5.3 5.1 4.9 4.7 4.5 Wastes 1.4 1.4 1.3 1.3 1.2 Natural gas 0.7 0.6 0.3 0.4 0.2 Renewable 0.9 0.9 1.0 1.1 1.1

Turkey 69


National energy statistics(m tonnes petroleum equivalent)

1999 2000 2001 2002 2003 a

Imports 49.4 56.3 52.7 58.3 58.3 Petroleum 30.2 32.0 30.7 32.6 30.1 Hard coal 7.8 10.5 6.7 9.6 7.0 Electricity 0.2 0.3 0.4 0.3 0.1 Natural gas 11.2 13.5 14.9 15.8 21.1

Exports 2.8 1.6 2.6 3.2 0.0 Petroleum 2.8 1.6 2.6 3.1 0.0 Electricity 0.0 0.0 0.0 0.1 0.0Marine bunkers 0.6 0.5 0.6 1.2 0.0Change in stocks 0.5 0.3 1.1 -1.0 0.0

Statistical error 0.2 -0.1 0.2 0.9 0.0

a Provisional figures. b Including secondary coal, coke and petrocoke.

Sources: Central Bank of Turkey, Annual Report; Ministry of Energy and Natural Resources.

Consolidated government finances(TL trn unless otherwise indicated)

1999 2000 2001 2002 2003Consolidated central government revenue 18,933 33,440 51,543 75,592 100,238 Tax 14,802 26,504 39,736 59,631 84,334 Non-tax 4,131 6,936 11,807 15,961 15,904Consolidated central government expenditure 28,085 46,705 80,579 115,682 140,054 Personnel 6,912 9,979 15,212 23,089 30,201 Other current 2,261 3,635 5,236 8,019 8,218 Capital 1,544 2,475 4,150 6,892 7,165 Interest 10,721 20,440 41,062 51,871 58,609 Other transfers 6,647 10,176 14,919 25,812 35,861Consolidated central government balance -9,152 -13,265 -29,036 -40,090 -39,816 % of GDP -11.8 -10.6 -16.3 –14.4 -11.1Consolidated central government balance excl

interest 1,569 7,175 12,026 11,781 18.793.3 % of GDP 2.0 5.8 6.7 4.2 5.2Public-sector borrowing requirementa 12,209 14,944 28,927 34,887 31,119b

% of GNP 15.8 12.0 16.2 12.6 8.6b

a As calculated by the State Planning Organisation. b Estimate.

Sources: Ministry of Finance General Directorate of Public Accounts; State Planning Organisation.

Money supply(TL trn unless otherwise indicated; end-period)

1,998 1,999 2,000 2,001 2,002Money (M1) incl others 2,431,970 4,709,810 7,406,910 10,839,600 14,814,300 % change, year on year 63 94 57 46 37Quasi-money 18,039,900 36,303,400 50,225,800 96,456,500 123,680,000

Money (M2) 20,472,870 41,013,210 57,632,710 107,296,100 138,494,300 % change, year on year 90 100 41 86 29

Source: IMF, International Financial Statistics.

70 Turkey


Interest rates(%; period averages unless otherwise indicated)

1999 2000 2001 2002 2003Lending interest rate (%) 88.4 62.2 95.0 72.0 48.0Deposit interest rate (%) 78.4 47.2 74.7 50.5 37.7

Money-market interest rate (%) 73.5 56.7 92.0 49.5 36.2


Gross domestic product(market prices)

1999 2000 2001 2002 2003Total (US$ bn)At current prices 184.9 199.3 145.6 183.1 239.7Total (TL bn)At current prices 77,415,272 124,583,458 178,412,439 276,002,988 359,762,926At constant (1987) prices 110,647 118,789 109,886 118,613 125,485 % change, year on year -4.7 7.4 -7.5 7.9 5.8

Per head (TL)At current prices 2,714,164,674 3,457,272,222 3,130,691,467 4,435,202,219 5,641,307,889At constant (1987) prices 1,645,676 1,739,708 1,585,127 1,687,377 1,759,496 % change, year on year -6.2 5.7 -8.9 6.5 4.3

Sources: State Institute of Statistics; UN Population Data Base and EIU estimates for population data.

Nominal gross domestic product by expenditure(TL trn at current prices; % of total in brackets)

1999 2000 2001 2002 2003Private consumption 559,278,761 89,097,791 128,513,017 184,420,200 239,585,900

(72.2) (71.5) (72.0) (66.8) (66.6)Government consumption 11,747,739 17,538,950 25,405,358 38,721,957 49,004,499

(15.2) (14.1) (14.2) (14.0) (13.6)Gross fixed investment 16,930,593 27,847,893 32,408,979 46,043,019 556,183,340

(21.9) (22.4) (18.2) (16.7) (15.5)

Stockbuilding 1,148,534 2,685,223 2,475,257 13,133,761 26,328,924(1.5) (2.2) (-1.4) (4.8) (7.3)

Exports of goods & services 17,972,067 29,959,128 60,150,878 81,134,078 98,496,339(23.2) (24.0) (33.7) (29.4) (27.4)

Imports of goods & services 20,801,156 39,284,674 55,861,684 85,232,383 110,334,367(26.9) (31.5) (31.3) (30.9) (30.7)

GDP 77,415,272 124,583,458 178,412,439 276,002,988 359,762,926


Turkey 71


Real gross domestic product by expenditure(TL bn at constant 1987 prices; % change year on year in brackets)

1999 2000 2001 2002 2003Private consumption 76,077.0 80,774.0 73,355.0 74,894.0 79,862.0

(-2.6) (6.2) (-9.2) (2.1) (6.6)Government consumption 9,623.0 10,311.0 9,431.0 9,940.0 9,696.0

(6.5) (7.1) (-8.5) (5.4) (-2.5)Gross fixed investment 28,473.0 33,281.0 22,783.0 22,531.0 24,782.0

(-15.7) (16.9) (-31.5) (-1.1) (10.0)

Stockbuilding 1,895.0 3,082.0 -1,700.0 6,121.0 9,714.0(2.0)a (1.1)a (-4.0)a (7.1)a (3.0)a

Exports of goods & services 32,890.0 39,198.0 42,098.0 46,787.0 54,264.0(-7.0) (19.2) (7.4) (11.1) (16.0)

Imports of goods & services 37,876.0 47,498.0 35,701.0 41,351.0 52,541.0(-3.7) (25.4) (-24.8) (15.8) (27.1)

GDP 110,647.0 118,789.0 109,886.0 118,613.0 125,485.0(-4.7) (7.4) (-7.5) (7.9) (5.8)

a Change as a percentage of GDP in the previous year.


Gross domestic product by output, at current producer prices(TL trn; % of total in brackets)

1999 2000 2001 2002 2003Agriculture 11,851 17,541 21,521 32,115 42,126

(15.3) (14.1) (12.1) (11.6) (11.7)Industry excl construction 17,974 29,028 45,881 70,834 88,813

(23.2) (23.3) (25.7) (25.5) (24.7)

Construction 4,362 6,483 9,241 11,399 12,662(5.6) (5.2) (5.2) (4.1) (3.5)

Trade 14,751 24,907 37,403 55,935 71,330(19.1) (20.0) (21.0) (20.2) (19.8)

Transport & communications 10,868 17,646 28,159 41,821 53,846(14.0) (14.2) (15.8) (15.1) (15.0)

GDP at producer prices 77,415 124,583 178,412 277,574 359,763


72 Turkey


Gross domestic product by output, at 1987 producer prices(TL bn; % change year on year in brackets)

1999 2000 2001 2002 2003Agriculture 15,369 15,962 14,923 15,948 15,549

(-5.0) (3.9) (-6.5) (6.9) (-2.5)

Industry excl construction 31,814 33,738 31,207 34,142 36,973(-5.0) (6.0) (-7.5) (9.4) (7.8)

Construction 5,739 5,991 5,662 5,346 4,866(-12.5) (4.4) (-5.5) (-5.6) (-9.0)

Trade 23,756 26,608 24,096 26,741 28,902(-6.3) (12.0) (-9.4) (11.0) (8.1)

Transport & communications 14,834 15,655 14,880 15,715 17,028(-2.4) (5.5) (-5.3) (6.0) (8.4)

GDP at producer prices 110,646 118,789 109,885 118,612 125,485(-4.7) (7.4) (-7.5) (7.9) (5.8)


Prices and earnings(% change, year on year)

1999 2000 2001 2002 2003Consumer prices (av) 65.1 54.9 54.4 45.0 25.3Consumer prices (year-end) 68.8 39.0 68.5 29.7 18.4

Wholesale prices (av) 53.2 51.4 61.6 50.1 25.6Wholesale prices (year-end) 62.9 32.7 86.6 30.8 13.9Hourly wages of production

workers in manufacturing (av) 83.1 55.8 31.8 37.2 n/a


Livestock numbers(‘000 head)

1997 1998 1999 2000 2001Cattle 11,185 11,031 11,054 10,761 10,548Goatsa 7,761 7,523 7,284 6,828 6,676

Sheep 30,238 29,435 30,256 28,492 26,972

a Excluding Angora goats.


Turkey 73


Agricultural production(‘000 tonnes unless otherwise indicated)

1999 2000 2001 2002 2003a

CerealsWheat 18,000 21,000 19,000 19,500 19,000Barley 7,700 8,000 7,500 8,300 8,100Maize 2,297 2,300 2,200 2,100 2,800Industrial cropsSugarbeet 17,102 18,821 12,633 16,396 13,090Cotton 791 880 900 979 959Tobacco 243 200 145 161 152Oil seedsCotton seed 1,158 1,295 1,438 1,563 1,526Sunflower 950 800 650 850 800Tuber cropsPotatoes 6,000 5,370 5,000 5,200 5,300Dry onions 2,500 2,200 2,150 2,050 1,800Fruit-bearing vegetablesTomatoes 8,956 8,890 8,425 9,450 9,750Water melons & melons 5,725 5,805 5,795 6,395 6,150Fruit & nutsGrapes & figs 3,675 3,840 3,485 3,750 3,930Citrus fruits 2,263 2,222 2,478 2,493 2,423Apples 2,500 2,400 2,450 2,200 2,500Hazelnuts 530 470 625 600 490Olives 600 1,800 600 1,800 900Tea (undried leaves) 1,096 758 825 792 770Value-added in agriculture (TL bn;

at 1987 prices) 15,369 15,962 14,923 15,948 15,549a Second estimates.

Sources: State Planning Organisation, Main Economic Indicators; State Institute of Statistics.

Minerals production(‘000 tonnes unless otherwise indicated)

1998 1999 2000 2001 2002Lignite 64,845 66,582 61,315 58,173 49,627Hard coal 2,337 1,990 2,330 3,492 3,347Chrome ore 1,220 1,020 546 455 326

Iron ore 5,865 4,846 4,076 4,435 3,433Crude oil 3,224 2,940 2,748 2,551 2,441

Sources: State Planning Organisation; State Institute of Statistics.

74 Turkey


Manufacturing production(1997=100; % change, year on year)

1999 2000 2001 2002 2003Total manufacturing -4.2 6.5 -9.5 10.9 9.4 Food & beverages -0.4 3.7 -2.3 2.9 7.1 Textiles -7.1 10.0 -5.0 12.5 2.3 Clothes -4.4 6.6 -3.1 3.3 1.7 Refinery products -4.0 -11.4 6.0 9.1 3.1 Chemicals 1.5 9.0 -12.6 14.2 9.2 Non-metallic goods -5.9 7.7 -15.0 10.9 9.7 Metals -1.8 3.7 -5.0 10.1 11.8 Non-electrical machinery & equipment -11.1 6.7 -20.5 21.4 22.4 Motor vehicles -18.6 47.8 -45.2 27.1 47.7


Construction statistics1999 2000 2001 2002 2003

Construction permitsArea (‘000 sq metres) 62,762 61,695 57,449 36,187 43,119Value (TL bn) 4,970,995 7,658,360 10,547,936 8,945,190 12,863,410

Occupancy permitsArea (‘000 sq metres) 38,500 42,463 40,179 31,676 29,723Value (TL bn) 3,081,051 4,879,977 7,417,321 7,634,637 8,626,643


The stockmarket1999 2000 2001 2002 2003

Traded value (annual; US$ m) 84,034 181,934 80,400 70,756 100,165Traded value (daily av; US$ m) 356 740 324 281 407

No. of stocks traded (annual; m) 5,823,858 11,075,685 23,938,149 33,933,251 50,099,780No. of stocks traded (daily av; m) 24,677 45,023 96,525 134,656 240,243No. of contracts (annual; ‘000) 25,785 32,427 31,380 28,967 29,944

No. of contracts (daily av; ‘000) 109 132 127 115 122National 100 index (Jan 1986=100; US$-based;

year-end) 1,654 817 558 368 778

National 100 index (Jan 1986=100; TL-based; year-end) 15,209 9,437 13,783 10,370 18,625Total share market capitalisation (US$m) 114,271 69,507 47,689 34,402 69,003

Source: Istanbul Stock Exchange.

Turkey 75


Exportsa

(US$ m; fob)

1999 2000 2001 2002 2003Agriculture, hunting, forestry &

fisheries 2,432 1,998 2,264 2,081 2,525Mining & quarrying 385 400 349 387 532

Manufacturing 23,755 25,339 28,695 33,549 43,699Total incl others 26,587 27,775 31,334 36,059 46,878

a Customs basis, excluding "suitcase" trade, which involves goods ostensibly carried on the personof individual travellers.


Importsa

(US$ m; cif)

1999 2000 2001 2002 2003Agriculture, hunting, forestry &

fisheries 1,654 2,128 1,413 1,706 2,554Mining & quarrying 4,254 7,105 6,583 7,199 10,884

Manufacturing 34,672 44,973 33,220 42,235 54,928Total incl others 40,671 54,503 41,399 51,554 68,734

a Customs basis, excluding "suitcase" trade.


Main trading partnersa

(US$ m; % of total in brackets)

1999 2000 2001 2002 2003Exports to:Germany 5,475 5,180 5,367 5,869 7,453

(20.6) (18.6) (17.1) (16.3) (15.9)US 2,437 3,135 3,126 3,356 3,736

(9.2) (11.3) (10.0) (9.3) (8.0)Italy 1,683 1,789 2,342 2,376 3,167

(6.3) (6.4) (7.5) (6.6) (6.8)UK 1,829 2,037 2,175 3,025 3,659

(6.9) (7.3) (6.9) (8.4) (7.8)France 1,570 1,657 1,895 2,135 2,818

(5.9) (6.0) (6.0) (5.9) (6.0)Russia 763 644 924 1,172 1,363

(2.9) (2.3) (2.9) (3.3) (2.9)EU 14,348 14,510 16,118 18,459 24,350

(54.0) (52.2) (51.4) (51.2) (51.9)

76 Turkey


Main trading partnersa

(US$ m; % of total in brackets)

1999 2000 2001 2002 2003Imports from:Germany 5,880 7,198 5,335 7,042 9,400

(14.5) (13.2) (12.9) (13.7) (13.7)Italy 3,192 4,333 3,484 4,097 5,446

(7.8) (7.9) (8.4) (7.9) (7.9)Russia 2,374 3,887 3,436 3,092 5,420

(5.8) (7.1) (8.3) (7.5) (7.9)US 3,080 3,911 3,261 3.099 3,420

(7.6) (7.2) (7.9) (6.0) (5.0)France 3,127 3,532 2,284 3,053 4,158

(7.7) (6.5) (5.5) (5.9) (6.0)UK 2,190 2,748 1,914 2,438 3,471

(5.4) (5.0) (4.6) (4.7) (5.1)EU 21,416 26,610 18,280 23,321 31,495

(52.6) (48.8) (44.2) (45.2) (45.8)

a Customs basis, excluding "suitcase" trade.


Balance of payments, IMF series(US$ m)

1998 1999 2000 2001 2002Goods: exports fob 30,662 28,842 30,721 34,373 40,124Goods: imports fob -44,926 -39,311 -53,131 -38,916 -48,461

Trade balance -14,264 -10,469 -22,410 -4,543 -8,337Services: credit 23,879 16,881 20,429 16,059 14,785Services: debit -10,373 -9,394 -9,061 -6,929 -6,905

Income: credit 2,481.0 2,350.0 2,836.0 2,753.0 2,486.0Income: debit -5,466.0 -5,887.0 -6,838.0 -7,753.0 -7,040.0

Current transfers: credit 5,861.0 5,295.0 5,317.0 3,861.0 3,536.0Current transfers: debit -134.0 -120.0 -92.0 -58.0 -46.0

Current-account balance 1,984.0 -1,344.0 -9,819.0 3,390.0 -1,521.0Direct investment in Turkey 940.0 783.0 982.0 3,266.0 1,038.0Direct investment abroad -367.0 -645.0 -870.0 -498.0 -176.0

Inward portfolio investment (inclbonds) -5,089.0 4,188.0 1,615.0 -3,727.0 1,503.0

Outward portfolio investment -1,622.0 -759.0 -593.0 -788.0 -2,096.0Other investment assets -1,464.0 -2,304.0 -1,939.0 -601.0 -777.0

Other investment liabilities 6,762.0 3,716.0 9,389.0 -12,296.0 1,836.0Financial balance -840.0 4,979.0 8,584.0 -14,644.0 1,328.0Net errors & omissions -703.0 1,720.0 -2,700.0 -1,634.0 -21.0Overall balance 441.0 5,355.0 -3,935.0 -12,888.0 -214.0Financing (– indicates inflow)Movement of reserves -572.0 -3,743.0 859.0 3,627.0 -8,230.0Use of IMF credit & loans 0.0 797.5 3,458.6 11,324.7 12,861.5


Turkey 77


External debt, World Bank series(US$ m unless otherwise indicated; debt stocks as at year-end)

1997 1998 1999 2000 2001Public medium- & long-terma 47,514 50,197 50,755 57,368 56,004Private medium- & long-terma 18,684 25,340 27,124 27,828 28,652

Total medium- & long-term debta 66,197 75,538 77,880 85,196 84,656 Official creditors 13,739 14,568 12,914 13,130 13,609 Bilateral 7,132 8,099 7,479 7,458 6,375 Multilateral 6,606 6,468 5,434 5,672 7,234 Private creditors 52,458 60,970 64,966 72,067 71,047

Short-term debt 17,994 21,217 23,472 28,912 16,345 Interest arrears 0 0 0 0 0Use of IMF credit 594 388 890 4,176 14,117

Total external debt 84,785 97,143 102,242 118,285 115,118Principal repayments 6,767 9,228 12,837 13,865 16,181

Interest payments 4,906 5,682 5,792 6,871 6,206 Short-term debt 1,034 1,127 1,247 1,800 588Total debt service 11,673 14,910 18,629 20,736 22,387

Ratios (%)Total external debt/GDP 44.7 48.5 55.3 59.4 79.1Debt-service ratio, paidb 20.1 23.9 35.4 35.4 40.0

a Long-term debt is defined as having original maturity of more than one year. b Debt service as apercentage of earnings from exports of goods and services.

Source: World Bank, Global Development Report.

Foreign reserves(US$ m; end-period)

1999 2000 2001 2002 2003Total reserves incl gold 24,357.0 23,498.0 19,871.0 28,101.0 35,549.0

Total international reserves exclgold 23,346.0 22,488.0 18,879.0 27,069.0 33,991.0

Gold, national valuation 1,011.0 1,010.0 992.0 1,032.0 1,558.0


Exchange rates(TL per unit of currency unless otherwise indicated; annual averages)

1999 2000 2001 2002 2003US$ 418,783 625,219 81,405 1,507,227 1,500,885£ 677,580 945,967 117,188 2,258,954 2,450,535

€ 446,773 577,715 72,909 1,424,194 1,699,377¥ 3,677 5,802 670 12,020 12,946


Editors: Robert O'Daly (editor); Charles Jenkins (consulting editor)Editorial closing date: April 28th 2004

All queries: Tel: (44.20) 7830 1007 E-mail: [email protected]

turkey - international university of japan · iceland, italy, luxembourg, the netherlands, norway,...

Documents