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Turkish Economy

Turkey’s population of 62.8 million is young and growing, it has the largest landmass in Western Europe, and its economy is the 16^th largest in the world. The US Department of Commerce (DOC) has identified Turkey as one of the ten most promising emerging economies, and a recent World Bank study also declared Turkey one of the ten countries most likely to enter the top tier of the world economy. Today's Turkey, modern and open to the world, follows a liberal policy in economy just as in its political structure. 

The trend towards liberalization goes back to the 1950s, but related action became more prominent in the early 1980s when many radical changes and structural reforms have been made in the field. The main components of this economic reform were reducing government intervention; implementing a flexible exchange rate policy; liberalizing import regulations; increasing exports; encouraging foreign capital investment; establishing free trade zones; deregulating financial markets; privatizing State Economic Enterprises, and decentralizing government activities. As a result of economic reforms based on free market principles and an international orientation, the Turkish economy has experienced an average growth rate of almost 5 percent over the past 20 years. 

Industry : Industry, which has always been considered to be the key sector of the economy, takes the lead in this development process. Especially after the liberalization movements, it showed a remarkable growth, and level of production in this sector reached the world-wide standards. Among the several sub-sectors of the Turkish industrial sector, there exist the defense, electronics, iron and steel, automotive, glass and sugar industries. The cement industry plays an important role in the country holding a high-ranking position in world production. The textiles and clothing sub-sector is another advanced branch, and Turkey, as a major cotton producer, increases its exports of textile products every year. Processing of agricultural products, production of agricultural machinery, and the fertilizer industry are to be mentioned here, while they relate to another main sector of the Turkish economy, namely agriculture. UP

Agriculture : Turkey, as it is evident from its being one of the few countries in the world that is self-sufficient in food, is a main producer of agricultural products. Provided by its suitable land and climate, this country has a great capacity to grow many kinds of crops. Historically, the agricultural sector has been Turkey’s largest employer and a major contributor to the GNP. However, as the country has developed, the relative importance of agriculture has declined, while the position of industry and the service sector has increased. From 1980 to 1999, the share of agricultural products in exports declined from 57 to 10 percent, while industrial exports rose from 36 to 88 percent, signaling a wholesale shift from an agrarian to an industrial economy. Nowadays agriculture accounts for less than 20% of the GNP, although it employs well over half of the national labor force. Agricultural production is generally carried out by small family enterprises in Turkey. 10% of the farm land belongs to the large enterprises and 90% to smaller concerns. 70% of the cultivated land produces grain with wheat ranking as the first. Wheat is common all over the country except north. Barley ranks as second, corn is third. Corn requires humid weather conditions during summer time, so the Black Sea Region is very suitable for its growth. Vegetables account for 60% of agricultural production. Lentils, chickpeas and beans are common. Broad beans and peas also grow in Turkey but on a smaller basis. Chickpeas grow in Central Anatolia, broad beans in western parts and lentils especially in Southeastern Anatolia. The growing of potatoes has recently increased. Industrial products such as cotton, flax, sesame seeds and opium poppies have been grown for a long time in Turkey, but since the industrial developments after World War I new industrial vegetables such as sugar beet, sunflower seed and tea have also been produced. Tobacco is grown in the Aegean, Marmara and Black Sea Regions. Soybeans are grown in the Mediterranean. Many kinds of fruit are grown in most parts of the country. UP

Animal husbandry has a considerable potential in Turkey. In parts of the country where agriculture and farming are limited because of the land shape, people make their living with animals, especially in Central, Eastern and Southeastern Anatolia. Generally, traditional techniques are used, and the results are not much satisfactory when compared to modern countries. Animal husbandry is carried out as part of the agricultural operations and the share of animal products in total agricultural exports is relatively high. UP 

Fishing, which has been a perennial operation in this country of rich water resources. Unfortunately, because of the primitive techniques that are used, production and consumption of seafood per person is below the world average. Mostly fishing is made in the black sea followed by the Marmara, Aegean and the Mediterranean. Anchovy, small mackerel and bonito are the most common fish in Turkey. The major freshwater fish are carp and trout. Besides fish, mussels and shrimps are also abundant. Over fishing and water pollution are the major problems for the fishing industry. UP

Forestry: Large areas in the South, West and Northwest are covered by Mediterranean vegetation, consisting mainly of thick, scrubby underbrush in the lowlands and deciduous or coniferous forests at higher altitudes up to the timberline. The humid northern margins of the country are the most densely wooded regions of Turkey. On the eastern Black Sea coast there are subtropical forests. The Anatolian interior is a region of steppes. Forests of mostly oak and coniferous trees exist only on the elevated areas.

The forest areas comprise of 25% of the total area of Turkey. 99% of the forests belong to the state. Forests in Turkey are very rich regarding plant types. As a country with different climates and different ecosystems, Turkey has a tremendously rich flora and fauna.

The number of species of flowers in Turkey is approximately 9,000, out of which 3,000 are endemic, whereas in Europe there are 11,500 species.

Apart from these dominating sectors, there are other basic branches offering production of either goods or services. The beverages and food sector is leading with beer, wine and foodstuffs production. 

The mining sector is one, with the principal minerals of coal, iron, lead, chrome, aluminum, gold, silver, mercury, zinc, copper, bauxite and sulfur being extracted and processed. Industrial raw materials include asbestos and phosphate. Energy raw materials are coals, uranium, oil and geothermal sources. UP

Energy production (lumber and petroleum products) construction and transportation are other important areas, each continuing a steady progress.

Tourism: Another considerably large sector of the Turkish economy is tourism.  As a country of uniquely beautiful natural assets and vast historical treasures, Turkey constitutes a perfect center for touristy activities. There exists every kind of opportunity for every type of holiday-maker, due to the richness of the land with respect to its geographical and climatic characteristics granted by nature. With its enormously diverse natural figures, ranging from high mountains to extensive coasts, from wide green forests to broad lakes, this country possesses great resources in the field of tourism. Consequently, investments in modern and large capacity touristy establishments, are being made to put this potential into good use. Hotels, motels and holiday villages of high standards, offer services in all touristy areas with their high quality facilities. The establishment of an infrastructure for the training of qualified tourism personnel constitutes another investment area, and training programs are carried out at the newly established tourism centers serving this purpose and increasing the number of professional personnel. As a result of all these processes, Turkey has achieved the goal of providing the high level services suitable to the needs and wishes of foreign tourists. With the promotion policies being pursued and further arrangements in the sector, tourism will continue to rapidly increase its share in the Turkish economy. UP

Some Living Standard Measurements 

Turkey is an interesting country in means of standards of living. In general it is possible to divide the Turkish population in to seven groups according their monthly earnings :

All numbers are based on personal analyzes..

The legal minimum salary is about 90 USD . In the last 20 years the difference between upper levels  and lower levels have increased rapidly. While in 1980's most of the population was on level C+ and C this is changed to D. Also the A and A+ level increased from a total %7 to % 12.

The living standards and and the habits of people does change according their income level and neighborhood. Not in smaller towns but specially in big cities you could realize the big difference among areas. While in some areas it is very modern some areas still do remain very oriental.   

Income Tax : % 25 - %40 

Unemployment rate:  

Social Insurance:

There are three big social security institutions established by the state:

• The Retirement Trust (Emekli Sandigi)

• The Social Insurance Board (Sosyal Sigortalar Kurumu)

• The Social Insurance Board for businessmen, craftsmen and others (Bag-Kur)

Every working person pays a %20 percent of his/her salary to the state (This is being done automatically by the properties). In return of this man are being retired after 30 to 35 years working and could make usage of the free health service of the government.

Because the standards of many hospitals are below average, many people who could effort it do pay an additional fee to private health or life insurance companies.

Houses :

In Turkey the size of families has become smaller and because urbanization problems have arisen, people have started to live in apartment blocks in the urban areas and in smaller houses in the rural areas. Generally apartments have 3 bedrooms with an average surface area of 100 m² / 120 yd². In larger cities apartments are more expensive to own. The prices start from 10.000 USD and goes up to 100.000 USD. The average citizen cannot easily afford such a price even with the help of a mortgage. Periodically the government or the municipality build apartment complexes and arranges some mortgages to be paid in 20 to 30 years period.

Nearly half of the people living in big cities rent their flats rather than own them. The average rent is around $200 a month. In smaller cities, flats are less expensive and more people own their houses or apartments. The proportion of people who rent their houses nationwide is 35%. People who work for the state, live in apartments which belong to the state and they pay a very small amount of rent. 

Major Imports :

These include petroleum products, chemicals, pharmaceuticals, plastics, iron, steel, vehicles and machinery.

Major exports :

These include iron and metals, machinery, buses, chemicals, cement, ceramics, glass, cotton, textiles, leather, agricultural goods, tobacco, fruits, and foodstuffs.

Electricity: Electricity consumption per capita: 1,300 kw . % 40 Hydraulic and % 60 thermic energy.

Oil: Although it is belived Turkey has petroleum under its soil , since years because of financial reasons the process could not continue. Turkey imports  % 80 of its consumption from out side and has about   % 20 own production . UP

Current and Future developments of Turkish economy

The privatization of State Economic Enterprises has been a major structural objective of the Turkish government since the mid-1980’s. Although a formidable task, numerous state companies have already been privatized. Over the last ten years, the state has completely withdrawn from a number of industry sectors, including food processing and cement production. Similarly, more than half of government shares in the tourism, textile and forestry sectors have been privatized. Privatization of public banks has also begun.

From 1954 to 1980, total direct foreign investment in Turkey was only $288 million. Since 1980, thanks to liberal direct foreign investment regulations which make no distinction between foreign and domestic investors, Turkey has issued foreign direct investment permits totaling over $25 billion (as of December 1999). Almost 5,000 foreign companies actively participate in the Turkish economy.

The Turkish banking sector has also made significant progress in parallel with the structural changes undertaken to produce a more financially liberal Turkish economy. With the efforts to restructure the Turkish economy and integrate it into the modern financial system, Turkish banks have achieved important changes in their institutional structures and in the quality of their products and services.

One of the major developments in the Turkish financial sector was the establishment of the Istanbul Stock Exchange (ISE)in 1986. Stock and bond markets are completely open to foreign investors with no restriction on the repatriation of capital and profit. As a result, foreign investors’ equity portfolio holdings have made up more than 50 percent of the free float in recent years. In 1999, the ISE was the best-performing stock exchange in the world.

In the aftermath of the Cold War, Turkey has moved from the periphery of Europe to the center of the new political and economic reality of Eurasia. This region, which includes Central Asia, the Caucasus and the countries of the Black Sea, attracts increasing attention not only because of its potential as one of the world’s most important energy-producing areas, but also because of its position as a transport corridor linking East and West. Turkey has historic, cultural and linguistic ties with the majority of the countries in these regions. Turkey has significantly improved economic and trade relations in the region and Turkish companies have experienced phenomenal growth through their expansion into these markets. Since 1992, Turkey’s trade volume with the region has reached almost $6 billion. Turkey’s total volume of regional investment also exceeds $6 billion. Turkish contractors have become major players in the international construction market due to their reliability, creativity and cost effectiveness. Turkish contractors have undertaken projects in Central Asia, the Russian Federation and around the world with a total value of almost $40 billion.

Turkey has also made substantial investments in and reaped impressive rewards from the tourism sector. During the last decade, the number of tourists and tourism revenues have increased considerably. In 2002, more than 10 million tourists will visit Turkey, generating revenue of $12 billion.

In 1999, Turkey suffered two devastating earthquakes in its nine most developed provinces. The earthquake-effected provinces account for 50.4 percent of Turkey’s value-added manufacturing, 47.9 percent of all business establishments and 46.5 percent of all jobs.

Turkey’s future will be substantially shaped by the events in 1999. At the December 1999 Helsinki Summit, the European Union (EU)  declared Turkey an official candidate for full membership in the European Union. Turkey’s official candidate status for full membership in the EU is a landmark event for both Europe and Turkey. Turkey’s long-standing relations with the EU and familiarity with most EU regulation and policy will accelerate the accession process and allow Turkey to achieve full membership more quickly than expected.

Turkey’s inclusion in the newly established G-20 group in 1999 indicates its recognition as an important emerging market in the global economy.

During the Organization for Security and Cooperation in Europe (OSCE) Summit in Istanbul in November 1999, important steps were taken regarding the Baku-Ceyhan Crude Oil Pipeline Project and the Turkmenistan-Turkey-Europe Natural Gas Pipeline Project. With the completion of these major energy transportation projects, Turkey will become the main terminus for the petroleum and natural gas resources of the Caspian Sea basin.

With an estimated cost of $32 billion, the Southeast Anatolia Project (GAP)  is the largest and most comprehensive development project ever undertaken by Turkey. This project will not only develop water resources, but will also invest in agriculture, energy, transportation, telecommunications, health care, education and urban and rural infrastructure. Approximately 42.8 percent of the total investment has been realized and vital components of the project, including Ataturk dam (the fourth largest embankment dam in the world) and the Sanliurfa irrigation tunnels, have been completed. The increased agricultural and energy potential resulting from the completion of GAP will increase regional per capita income almost three times, and generate job opportunities for approximately 3.3 million people.

All these measures and developments are expected to fuel further economic growth. The most conservative projections predict an annual average growth rate of 6.5 percent in the coming years.

With its young and well-trained workforce; rich natural resources; well-developed infrastructure; improved transportation, telecommunications and banking systems; rapidly growing domestic market; and dynamic and developed industry, Turkey today and in the future offers an attractive and secure investment opportunity to foreign investors. UP