1. Transformation of Agriculture in Turkey Gökhan Dilek Canan Satır Beste Gün Aslan Melis Semerci Rüveyda Nur Arslan Candas Torun

2. AGENDA  An overview  Historical development of agriculture in Turkey  Future expectations in Turkish agriculture

3. Long-term trends in Turkish agriculture since 1870

5. During the period between 1870-2000; -Total agricultural output in constant prices increased about nine times -GDP per capita increased about six times

6. Agricultural development in Turkey It would be best to examine between the years 1870-2000 in two sub- periods, before and after 1950; Despite the scarcity in agriultural techniques and the large disruptions caused by both the First and Second World Wars The growth of agricultural output from 1880 until 1950 at an annual rate slightly above 1 per cent Mostly due to the expansion of inputs, land and labour Rate of growth of agricultural output initially rose above 3 per cent per year Thanks to -Marshall plan -The introduction of high yielding varieties of seeds, fertilizers, irrigation, agricultural machinery and equipment (tracktors) Before; After;

7. Two Main Issues Regarding Agriculture Whole historical development of agriculture in Turkey can also be discussed around these two main issues; 1. Scale of the production units Small scale family businesses or large scale “professional” firms? 1. Creation and transformation of agricultural surplus Via taxation or internal terms of trade between sectors?

8. Historical Development of Turkish Agriculture There are 6 main periods that are needed to be examined;  The Early Republic: 1923-1929  The Great Depression: 1929-1939  Second World War: 1939-1945  First and Second Republic: 1946- 1976  Fall of the Second Republic and Third Republic: 1977-1988  1989 and onwards

9. The Early Republic: 1923-1929 -Principle agricultural product is wheat, thus the pace of agriculture was set by wheat production Why? -It is suited to Turkish growing conditions -urgently needed by Turkish postwar economy

10. Rain-fed cultivation -using animals for draft power -human labor -unimproved land Traditional technology was sufficient to support agricultural expansion from 1923 to World War II Technology in Agriculture; WHY? The Early Republic: 1923-1929 It actually helped because revival of production after 1923 did not have to wait upon new capital or the inputs of nonexistent sectors

11. 4 main developments that help agricultural production flourish; -Abolishment of Ashar in 1925 : since farmers do not have to give 1/10 of their harvest to state any more, there is an incentive for farmers to produce surplus for the market -Improvement of transport infrastructure ( railway extensions) -Transport pricing is changed so that farm products could reach coastal markets -Government support such as the expansion of credit to farmers through the state- owned Ziraat Bank The Early Republic: 1923-1929

12. Debate over Ashar Tax *The abolishment of Ashar was a critical decision in 1925, considering 22% of total government revenues in 1924 is financed by Ashar Tax. After abolishment, the burden of taxation has levied on basic consumption goods of urban consumers. **There is also another line of reasoning in terms of this tax: As the abolishment of Ashar had left the agriculture sector out of taxation, causing industrialization process to be lack of accumulated capital. Thus, it would be reasonable not to abolish it completely but implement it after reforming it. However, during the Great Depression years, due to internal terms of trade, there were favourable conditions for industry to accumulate capital.

14. The Great Depression: 1929-1939 Great depression (1929) hit Turkish economy, the terms of trade turned against agriculture Government’s price supports were of little avail Peasants did not react by producing less because other alternatives were not developped

15. Effects of Great Depression; -The sharp decline in the prices of agricultural commodities -Prices of wheat and other cereals declined by more than 60 per cent and remained at those levels until the end of decade -Prices of the leading export crops (tabocco, raisins, hazelnuts and cotton) also declined by around 50 per cent The result was a sharp decline in the real incomes of agricultural producers 1929-1939

18. Despite the sharp deterioration of the intersectoral terms of trade, there is still an increase in agriculture output during the period. Availability of marginal land Demographic recovery of the countryside after a decade of wars lasting until 1922 1 2 Thanks to

19. -Farmers responded to the lower cereal prices after 1929 by working harder to cultivate more land and produce more cereals in order to reach certain target levels of income -Increases in land under cultivation per household and per person in the agricultural labour force would support this explanation as well as the argument for the demographic and economic recovery 1929-1939

21. Second World War: 1939-1945 -Weak GDP growth combined with high inflation rates -Increase in wartime defense spending -The negative effect of withdrawal of manpower for army on agricultural production -Weakening of world relations due to war negatively affected exports and imports -Negative growth rates for most of the 1940s ⇒ Agricultural sectors in economic slump

22. 1939-1945 Legislations on Agriculture -Milli Korunma Kanunu(1940): introduced forced labor, compulsary sales of agricultural products to the state, money tax. Agriculture was the sector most heavily affected -Agricultural Produce Tax Act (1943): “Revival of ashar”: in kind taxation of almost all kinds of agricultural products, (cereals and legumes 12%, others 8%.) After the implementation of tax act, 10% for all agricultural products These repealed after 45, and state began to apply policies in favor of rural population such as: -Land Reform (1945-73)

23. First and Second Republic: 1946- 1976 -Increased attention paid to agriculture in development policies -New factors were appearing on the economic scene Military and economic aid to Turkey by the United States (Marshall Plan) An increase in the flow of resources available Very favorable weather conditions prevailing between 1948 and 1953 An unprecented expansion in agriculture 1952 Nato Membership (Korean War 1950-1953) Increase in Turkish agricultural exports

24. Marshall Plan; -Of the total $184.5 million dollars supplied between the years 1948 and 1952, $38.282 million was reserved for the agricultural sector -The aids brought about a number of significant contributions; agricultural mechanization the farmers’ taking over the modern agricultural production techniques the enlargement of farmlands and enhancement of agricultural production First and Second Republic: 1946- 1976

25. Turkey received a total of $184.5 million dollars as part of the Marshall Aids between the years of 1948-1952.

26. The received aids particularly encompassed agriculture, transportation, security, mining and private sector.

27. -These funds were particularly implemented for mass motorization in agriculture -A significant amount of the Marshall Plan Aids was invested in the infrastructures of public works and transportation. -This helped the agricultural production to reach the markets, and thus had an indirect impact on the development of the agricultural sector

31. Thanks to the developments in the agricultural sector; -The proportion of agricultural sector in gross national product was 38.4% in 1947, it rose to 45% in 1953. -The per capita income increased 28% in this four years period Marshall Plan (1948-1952);

32. Fall of the Second Republic and Third Republic: 1977-1988 Import substitution period required higher internal demand However, in order to achieve export-led growth, internal demand should be repressed and cheap production should be achieved for global price competitiveness The export-led growth path consists of wage suppression, depreciation of the domestic currency, and extremely generous export subsidies Decline in support of state to agricultural sector ( subsidies and support purchases) can be the rationale behind undermining SEEs in agriculture

34. February 24, 1980 Decisions Marks the starting of a new period in agriculture; Leaving import substition growth, open economy based on exporting industrial goods that are product of cheap labor and low technology Shrinking the share of state in the economic activities: Especially in support and credit mechanisms in agricultural products, as well as privatising K İ Ts (State Economic Enterprises). We observe the effects of neoliberal policies and structural adjustments with the world in agricultural sector, as well. After 1980, a “reorganization” of state instutions marks an era in which it is hard to regulate agriculture with private regulating agencies.

35. State Economic Enterprises (KIT) The effects of gradual removal of KIT as follows; State economic enterprises supported agricultural production for a long time Without support that KIT provides, it can be said that development of agricultural sector in Turkey slowed Removing KIT without making necessary adjustments (such as a replacement of it with another strong substitution) decreases the functionality of agricultural market, because agricultural sector consisted of small scale family businesses which are vulnerable to fluctuations

36. Demographic Effects of Agricultural Policies in 1980s After the military coup of September 12, first implemantation was the limitation of support purchases of agricultural products In this period both price supports and credit possibilities are substantially decreased These interventions resulted in huge domestic migration from rural areas to urban areas In the census of 1985, rural population dropped to 23,1 million from 25 million and urban population increased to 33,3 million from 19,6 milion

40. 1989 and onwards 1995-2005 “Restructuring in Agriculture” Based on a report by The Ministry of Agriculture and Rural Areas, financed by World Bank, the targets of agriculture is set as: -Integration of agriculture and industry -End of state-control in agriculture sector -Sustainable agriculture -Land consolidation and planning -Production in line with EU and GATT agreements, to be controle by demands in external and internal market.

41. GAP ( Southeastern Anatolia Project ) The aims of the project are the increase in irrigation possibilities in South Eastern Anatolia and energy production;  Expected area that is irrigated is around 1,8 million hectar  Expected production of electricity is around 22 billion kwh per year A significant increase in the production of agricultural products is expected  Cotton 118%, oil seed 73,5%, rice 84,4% etc

42. Future Expectations in Turkish Agriculture Future of agriculture ⇒ GMO crops - What may be the adverse effects of GMO regulations on agricultural sector in future? Common agricultural policy (a system of European Union agricultural subsidies and programmes) -What may be the effects of applying the CAP to Turkey?

43. Turkey’s GMO regulation came into force in September 2009 with the aim of controlling the importation and use of GMOs So far, no GM crops have been granted approval for food use in Turkey and only three GM soybean lines and 13 maize lines have been approved for feed use ➔ Does GMO regulations cause any cost in Turkish economy? -Yes, in fact the negative impact is likely to get progressively worse GMO crops;

44. Adverse effects of GMO regulations Looking forward, continuation of no approvals for food use of any GMO in Turkey and based on 2011 prices of cereals and oilseeds, the estimated on-going annual cost is between $0.4 billion and $0.46 billion The net effect is a loss of competitiveness, both in the domestic market and export markets, relative to suppliers who have greater flexibility on GMO products Agri-food processing and manufacturing businesses may decide to re-locate away from Turkey to countries/regions with a more competitive, flexible and less risky business environment

45. Rationale behind CAP; Abolishment of legal institutional and fiscal pillars of populism Inefficiency argument regarding State Economic Enteprises Without any intervention to the agricultural market, social transfers are supposed to be made through direct income support programmes Common Agricultural Policy;

46. In regard of CAP, through Agricultural Reform Program, EU suggested Turkey to make following adjustments; Abolishment of price ceilings Abolishment of subsidies in raw materials and credit Reconstruction of agricultural State Economic Enterprises and sales cooperatives Transformation to Direct Income Support program Recontruction of agricultural production

47. Thank you for listening