1. Globalization and
Turkish economy

2. Path of Turkish Economic Development
Two transitions:
From an agrarian to an industrial economy
From protectionist to a neoliberal economy
1960s-70s:
Planned economic development
Import-substitution industrialization
State economic enterprises
1980s-present
Neo-liberal economic development
Free trade and export oriented development
Privatization

3. Neo-liberal transition
24 Jan 1980 decisions
Devaluation and floating exchange rate
Limits on state subsidies, and price controls
Privatization and reform of state enterprises
Lifting of import restrictions and export incentives
August 1989: liberalization of the capital account
Lifting restrictions on foreign direct and portfolio investment, and foreign exchange transactions
Full convertibility of Turkish lira
1995 Turkey –EU Customs Union Agreement
2001 Independence of Central Bank

4. Turkey and Economic Crises- The Impact of Globalization
Primarily caused by domestic imbalances
Falling agricultural prices
Appreciation of lira, trade deficit
Oil shocks
1994
Over-dependence on short-term capital inflows
Import boom, outflow of short-term capital
2000/2001
Recurrent crises in emerging markets
Massive outflow of capital
Problems in the banking sector

5. Key Patterns in Turkish Economic Development
Combination of moderate growth with significant industrial transformation
Falls behind East Asian countries
High income inequality characteristic of Latin America
Populist cycles and periodic fiscal crises
Economic crises linked to military interventions
With neoliberal transition, populist cycles and crises become more frequent.
Low-growth/ high inequality syndrome
Financial openness makes economy vulnerable to external and domestic shocks
Premature liberalization of the capital account

6. Post-2001 trends Strengths: Vulnerabilities
Successful monetary policy, inflation-targeting, independent central bank
Restrained fiscal policy, declining public debt/ GDP ratio
Strong regulation and supervision of banking sector
High level of growth
After crisis, rapid resumption of capital inflows
Vulnerabilities
Fall in domestic savings
High level of unemployment
Low level of investment
Appreciation of lira

7. Turkish Economy

8. FDI Inflows to Turkey

9. Europeanization
and Turkish Economy

10. EU-Turkey Customs Union (1995)
Free movement of industrial and processed agricultural goods
Harmonization of:
Customs policy
Common Trade Policy
Competition policy
Intellectual property rights
Public Procurement

11. Debating Customs Union
Removal of protectionist measures
Five year transition for automotive and some other sectors
Restrictions on free movement of labor
Growing trade deficit but decreasing trade deficit with EU.
EU’s Free Trade Agreements with Third Countries
Turkey lacks decision-making power
Third Countries are only invited to conclude FTAs with Turkey
Total trade (Turkey-EU)
Trade deficit
1996
37 billion USD
12 billion USD
2007
129 billion USD
8 billion USD

12. Turkey’s exports (2009) A-EU COUNTRIES (27) 42 463 959 46,1
B-FREE ZONES IN TURKEY
1,9
C-OTHER COUNTRIES
52,0
1-Other European Countries
11,2
2-North African Countries
7,4
3-Other African Countries
2,7
4-North American Countries
3,5
5-Central America and Caribbean
0,6
6-South America Countries
1,2
7-Near And Middle Eastern
18,7
8-Other Asian Countries
6,4
9-Australia and New Zealand
0,3
10-Other Countries
Total
100

13. Turkey’s imports (2009) A-E.U COUNTRIES (27) 50 304 989 40,05%
B-FREE ZONES IN TURKEY
0,68%
C-OTHER COUNTRIES
59,27%
1-Other European Countries
18,60%
2-North African Countries
2,55%
3-Other African Countries
1,57%
4-North American Countries
6,77%
5-Central America and Caribbean
0,33%
6-South America Countries
1,62%
7-Near And Middle Eastern
6,95%
8-Other Asian Countries
20,35%
9-Australia and New Zealand
0,44%
8-Other Countries
0,09%
Total
100,00%

14. EU-Turkey Accession Negotiations (2005 to present)
35 chapters,
1 chapter provisionally closed: Science and Research
11 chapters opened for negotiation:
Environment
Free movement of capital
Information Society and Media
Enterprise and Industrial policy
Statistics
Trans-European Networks
Company Law
Intellectual Property Law
Consumer and Health Protection
Financial Control
Taxation

15. EU-Turkey Accession Negotiations (2005 to present)
8 blocked in 2006 for failing to extend CUA to NMS Cyprus. Blocked chapters:
Free movement of goods
Right of establishment and the freedom to provide services
Financial services
Agriculture and rural development
Fisheries
Transport policy
Customs Union
External Relations
Chapters unofficially vetoed by France and Cyprus (10).
4 chapters possible to start negotiation

16. Europeanization of Turkish economy
Harmonization of rules and policies, regardless of state of accession negotiations.
High level of alignment in free movement of goods, customs union, competition policy as a result of customs union
High level of alignment only in some open chapters, i.e. intellectual property law, enterprise and industrial policy.
Little progress in some open chapters, i.e. free movement of capital
Considerable progress in some closed chapters not part of CUA, i.e. energy.

17. Recent progress Adoption of European standards by TSE
Financial transactions in all currencies
Electronic communications law
Foot and mouth disease and avian flu
Reform of the electricity market
Development of renewable energy
Alignment of VAT and direct taxation
Improvement of statistical data

18. Things that need to change…
Mutual recognition principle
Work permits for foreigners and nationality requirements for certain professions
Real estate acquisition by foreigners
15% price advantage for domestic bidders in public procurement
Legislation of state aid
Laws on the establishment of Radio and Television enterprises
Land identification and farmer registration system
Agricultural support systems linked to production
Independence of central bank
Reform of trade union legislation
Health and safety of workers
Equal opportunity for men and women

19. Turkey Should Withdraw From Customs Union
YES NO
External budget deficit is growing
Restricting Turkey’s external trade policy
Subjects national producers to intense competition
It is independent from membership
Turkey will have new foreign policy options
Growing trade with EU generates employment growth
Turkey’s exports to EU increasing
It would kill Turkey’s membership prospect completely
Turkey will lose institutional advantage
Increases FDI flow
Turkey would lose a growing market to competing countries

20. Global Economy and Turkey
Membership Status: Joined in March 11, 1947
Stand-by Agreements
Type
Date of
Arrangement
Expiration Date
Amount
Approved SDR
Million
Amount Drawn SDR Million  
Stand-By  
May 11, 2005 
May 10, 2008
6,662.04 
Feb 04, 2002
Feb 03, 2005
12,821.20  
11,914.00
Dec 22, 1999
15,038.40
11,738.96
of which SRF
Dec 21, 2000
Dec 20, 2001
5,784.00