Economy of Turkey

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Turkey's economy is an industry and traditional economy where agriculture sector that in 2005 still accounted for 30% of employment. Turkey has a strong and rapidly growing private sector, yet the state still plays a major role in basic industry, banking, transport, and communications. In recent years, the Turkish economy has expanded particularly strongly, registering growth rates of 8.9% and 7.4% for the 2004 and 2005 fiscal years respectively.

[edit] Macro-economic trend

Turkey's per-capita GDP places it among the Upper-middle income countries and it maintains a medium status in the United Nations' Human Development Index. This is a chart of trend of gross domestic product of Turkey at market prices estimated by the International Monetary Fund with figures in millions of Turkish Lira.

For purchasing power parity comparisons, the US Dollar is exchanged at 0.85 New Liras only.

[edit] Agricultural sector

Turkey ranks seventh worldwide and first within the Muslim world in farm output.

Turkey has been self-sufficient in food production since the 1980s. The agricultural output has been growing at a respectable rate. However, since the 1980s agriculture has been in a state of decline in comparison to the total economy. Agricultural loans are issued with negative interest rates. Today, many of the institutions established between 1930 and 1980 continue to play important roles in the practices of farmers. Many old agricultural attitudes remain widespread, but these traditions are expected to change with the EU accession process. Turkey is dismantling the incentive system. Fertiliser and pesticide subsidies have been curtailed and remaining price supports have been gradually converted to floor prices. The government has also initiated many planned projects, such as the G.A.P project (Southeastern Anatolia Project). The advent of the G.A.P promises a very prosperous future for the southeastern agriculture.

Given all the efforts of the government, agricultural extension and research services are, in relative terms, inadequately organized in Turkey. This has been attributed to shortages of qualified advisers, transportation, and equipment. Agricultural research is distributed among nearly 100 government institutions and universities. The inability to spread the use of new technologies has been attributed to a reluctance of trained personnel to work in the field. The pay disparity in this sector is traditionally very high and incentives to train people do not cover this gap. Research is organized by commodity, with independent units for such major crops as cotton, tobacco, and citrus fruit. Observers note that coordination of the efforts of different research units and links between extension services are inadequate.

The livestock industry, compared to the initial years of the Republic, showed little improvement in productivity, and the later years of the decade saw stagnation. However livestock products, including meat, milk, wool, and eggs, contributed to more than ⅓ of the value of agricultural output.

[edit] Industrial sector

Turkey ranks twenty-first worldwide and third within the Muslim world in factory output. Its industrial sector has 19% share in employment, 29% share in national production, and 94% share in total exports.

The largest industry is textiles and clothing (16.3% of total industrial capacity in 2005 according to the State Institute of Statistics), followed by oil refinery (14.5%), food (10.6%), chemicals (10.3%), iron and steel (8.9%), automotive (6.3%), and machinery (5.8%). Textiles and clothing also constitutes the largest share in total exports (19% in 2005), followed by automotive (18%), iron and steel (13%), white goods (10%), chemicals and pharmaceuticals (9%), and machinery (7%).

The automotive industry, which is the seventh largest in Europe, is an important part of the economy since late 1990s. The companies in the sector are mainly located in the Marmara Region. Existing motor vehicle production capacity of the automotive industry in Turkey is 1,015,000 units per year, as of 2002. Existing capacity of the 6 companies producing cars stands at 726,000 units per year. FIAT/Tofas has 34% of this capacity, Oyak/Renault 31%, Hyundai/Assan and Toyota 14% each, Honda 4%, and Ford/Otosan 3%. With a cluster of car-makers and parts suppliers, the Turkish automotive sector, the 17th largest producer in the world, has become an integral part of the global network of production bases and now exporting over USD 14 billion worth of motor vehicles and components.

EU market share of Turkish companies in consumer electronics has increased significantly in the last 15 years - in color TVs from 5% in 1995 to 45% in 2005, in digital devices from 3% to 15%, and in white goods from 3% to 18%.

Turkey is one of the strongest sources of foreign direct investment in central and eastern Europe and the CIS, with more than $1.5 billion invested. Of this, 32 per cent has been invested in Romania, primarily in the natural resources and construction sectors, and an additional 46 per cent in Turkey’s Black Sea neighbours, Bulgaria and Romania. In addition, Turkish firms have sizeable recorded FDI stocks in Poland ($100 million). The Turkish construction/contracting industry has been a significant player (e.g. Enka and Ucgen Insaat, etc) as well as the three industrial groups, namely Anadolu Efes Group, SiseCam Group and Vestel Group.

Turkish export mix has changed considerably in the last two decades. Share of natural gas decreased from 74% in 1980 to 30% in 1990 and 12% in 2005. Share of mid/high technology products has increased from 5% in 1980 to 14% in 1990 and 43% in 2005.

[edit] Service sector

The road network was an estimated 382,397 km in 1999, including 95,599 km of paved roads and 1,749 km of motorways. The rail network was 8,682 km in 1999, including 2,133 km of electrified track. There are 1,200 km of navigable waterways. There were 118 airports in 1999, including six international airports in Istanbul, Ankara, İzmir, Trabzon, Dalaman and Antalya.

Telecommunications were liberalised in 2004 after the creation of the Telecommunication Authority. Private sector companies operate in mobile telephony and Internet access. There were 19 million fixed phone lines, 36 million mobile phones, and 12 million Internet users by the August, 2005.

[edit] Tourism sector

Tourism is one of the most dynamic and fastest developing sectors in Turkey. According to travel agencies TUI AG and Thomas Cook, 31 of the 100 best hotels of the world are located in Turkey.

In the year 2005, 21,122,798 tourists vacationed in Turkey. The total revenue was $18.2 billion and with an average expenditure of $679 per tourist. Over the years, Turkey has emerged as a popular tourist destination for many Europeans, often competing with Greece, Italy and Spain. Turkish destinations such as Antalya and Muğla (sometimes called the Turkish Riviera) have become very popular among European tourists.

[edit] Financial sector

The currency of Turkey is the New Turkish Lira (Yeni Türk Lirası or YTL for short)

The Central Bank of the Republic of Turkey (Türkiye Cumhuriyet Merkez Bankası) was founded in 1930, as a privileged joint-stock company. It possesses the sole right to issue notes. It also has the obligation to provide for the monetary requirements of the state agricultural and commercial enterprises. All foreign exchange transfers are exclusively handled by the central bank. The bank has 25 domestic branches, as well as branches in New York, London, Frankfurt, and Zurich.

In 1998 there were 72 banks. In late 2000 and early 2001 a growing trade deficit and weaknesses in the banking sector plunged the economy into crisis. There was a recession followed by the floating of the lira. This financial breakdown brought the number of banks to 31. Currently more than 34% of the assets are concentrated in the Agricultural Bank (Ziraat Bankasi), Housing Bank (Yapi Kredi Bankasi), IsBank and Akbank. There are also Middle Eastern Trading Banks, which practice an Islamic type of trading. The five big state-owned banks restructured during 2001. Political involvement was minimized and loaning policies were changed. However, over-staffing remains a problem.

The Istanbul Stock Exchange opened in 1985 and Istanbul Gold Exchange in 1995.

Government regulations passed in 1929 required all insurance companies to reinsure 30% of each policy with National Reinsurance Corp. In 1954, life insurance was exempted from this requirement. The insurance market is officially regulated through the Ministry of Commerce.

After years of low levels of foreign direct investment (FDI), in 2005 Turkey succeeded in attracting $9.6 billion in FDI and is expected to attract a similar level in 2006. A series of large privatizations, the stability fostered by the start of Turkey’s EU accession negotiations, strong and stable growth, and structural changes in the banking, retail, and telecommunications sectors have all contributed to the rise in foreign investment. Turkey has taken steps to improve its investment climate through administrative streamlining, an end to foreign investment screening, and strengthened intellectual property legislation. However, a number of disputes involving foreign investors in Turkey and certain policies, such as high taxation of cola products and continuing gaps in the intellectual property regime, inhibit investment. Turkey has a number of bilateral investment and tax treaties, including with the United States, that guarantee free repatriation of capital in convertible currencies and eliminate double taxation.

In recent years the economic situation has been marked by erratic economic growth and serious imbalances. Real GNP growth has exceeded 6% in many years, but this strong expansion has been interrupted by sharp declines in output in 1994, 1999, and 2001. Meanwhile the public sector fiscal deficit has regularly exceeded 10% of GDP - due in large part to the huge burden of interest payments, which in 2001 accounted for more than 50% of central government spending - while inflation has remained in the high double digit range. Since 2003, the inflation has lowered to single digits, and the economy is showing an average growth of 6.2%, between 2003-2005. Fiscal deficit is benefiting (though in small amount) from large industry privatizations.

For a time, the lira was synonymous with low-valued currency. Recently, the "New Turkish lira" was introduced, worth 1 million old lira. (In essence, they "slashed off six zeroes".) This was meant to be a symbol of a stronger currency, after a long period of high inflation that had devalued the currency so greatly.

[edit] Natural resources

Main article: Natural Resources in Republic of Turkey

Turkey ranks tenth in the world in terms of the diversity of minerals produced in the country. Around 60 different minerals are currently produced in Turkey. The richest mineral deposits in the country are boron salts and Turkey’s reserves amount to 63% of the world’s total.

Turkey is an oil producer, but the level of production isn't enough to make the country self sufficient. As a result, it is a net oil and gas importer.

The pipeline network in Turkey included 1,738 km for crude oil, 2,321 km for petroleum products, and 708 km for natural gas in 1999. Several major new pipelines are planned, especially the Baku-Tbilisi-Ceyhan pipeline for Caspian oilfields, the longest one in the world, which recently opened in 2005.

According to the CIA World Factbook, other natural resources include coal, iron ore, copper, chromium, uranium, antimony, mercury, gold, barite, borate, celestine (strontium), emery, feldspar, limestone, magnesite, marble, perlite, pumice, pyrites (sulfur), clay, arable land, hydropower.

The ore borax, from which boron is extracted is very abundant in Turkey. Turkey along with the United States, is one of the world's largest producers of boron.

[edit] Energy

To cover the increasing energy needs of its population and ensure the continued raising of its living standard, Turkey plans several nuclear power plants. Nuclear power proposals were presented as early as in the 1960s, but plans were repeatedly canceled even after bids were made by interested manufacturers because of high costs and safety concerns. Turkey has always chosen Candu nuclear reactors because they burn natural uranium which is cheap and available locally and because they can be refueled online. This has caused uneasy feelings to Turkey's neighbors because they are ideal for producing weapons grade plutonium.

[edit] Labour

Turkey's workforce is flexible, with a wide spectrum of skills from the unskilled to highly qualified. Turkey is obliged to apply EU (European Union) employment and social laws to qualify for membership.

[edit] Environment

With the establishment of the Turkish Environment Ministry in 1991, Turkey began to make significant progress addressing some of its most pressing environmental problems. The most dramatic improvements were significant reductions of air pollution in Istanbul and Ankara. The most pressing needs are for water treatment plants, wastewater treatment facilities, solid waste management and conservation of biodiversity. On average, the environmental performance of private corporations is much better than the large number of state owned enterprises.

[edit] See also

• Economy of Europe

[edit] External links

• TAIK (Turkish- U.S. Business Council) website
• OECD's Turkey country Web site and OECD Economic Survey of Turkey
• Deutsche Bank Research
• Turkey: Automobile Exports Reach US $10.6 Billion Between Jan-Sep 2006

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