Turkish Industry Opening to the World
Throughout the years Turkey implemented five-year development plans, the first one beginning in 1963, high growth rates and structural changes for industrialization were the basic targets. The industrialization strategies and economic policies Turkey adopted before and after 1980, exhibit a marked difference. The Economic Stability Program of January 24, 1980and the subsequent policies are profoundly different in terms of the economic and industrial policies adopted in previous stability programs which were put into effect every 8-10 years. As a matter of fact, radical changes had been made in the monetary, fiscal, foreign trade and foreign currency exchange rate policies, and there was a shift from industrialization based on substitution of imports directed to domestic markets to industrialization based on exports directed to foreign markets.
Especially in the second half of the 1980s, the governments introduced the build-operate-transfer model in order to accelerate infrastructure investments in the industrial sector and to obtain the necessary financing on better terms. After necessary preconditions were prepared, the Capital Market Board was established by a law in 1981 with the objective of channeling small savings to industry through capital markets. Also in line with these measures, banking services were modernized and the necessary regulations were introduced to accelerate international transactions. Special importance was attached to the improvement of transportation and communications services which are indispensable for any industrialization policy.
A significant portion of the incentive measures supported those industrial activities providing foreign currency earnings and the new regulations of 1980 aimed to increase exports. These measures and regulations helped industry to gain competitive power and exports increased rapidly. The free trade zones and international fairs in Turkey have also been very effective in the development of Turkish industry and its integration with world markets. As a result of all these efforts exerted to develop the industrial sector, the share of industrial products in Turkeys total exports increased from 36% in 1980 to 94.3% in 2002.
The main reason for the growth of the industrial sector is the investments and dynamism of the private sector. In recent years, parallel to the activities to improve the existing industrial structure, privatization efforts have been accelerated. The investments of the public sector in industrial production have, on the other hand, decreased significantly.
Efforts to increase the share of small and medium-size enterprises in the economy and to strengthen their international competitiveness have been given priority. With the objective of overcoming the problems of small and medium-size enterprises regarding financing, quality and standards, these enterprises have been provided with benefits such as credits, tax exemptions, investment discounts and VAT support. Furthermore, research and development projects, promotional activities as well as efforts to increase exports have been enjoying state aid, too.
The establishment of organized industrial regions and small industry sites across the country is gradually receiving more support. As a matter of fact, the total number of businesses on 362 small industry sites in various regions of Turkey totaled 83,318 as of the end of 2002. Furthermore, a total of 70 organized industrial sites began to operate on a total of 17,132 hectares of land as of the end of 2002. The 2003 Investment Program envisaged investments and feasibility studies for 68 organized industrial sites. In order to meet increasing economic demands, Law No. 4562 for Organized Industrial Sites, which went into effect on April 15, 2000, introduced new regulations to the implementations in organized industrial sites and Law No. 4737 for Industrial Sites, which went into effect on January 18, 2002 aimed, to open up the industrial sector of the country to the world and to attract foreign investments.
It is important to note that the industrial sector was responsible for 21.5% of the gross domestic product in 2002, despite the fact that the financial crises at the end of 2000 and in February 2001 adversely affected this sector. A Program for Achieving a Strong Economy was put into effect in May 2001 and several measures were taken in line with this program to strengthen the industrial sector. Industrial production, which increased by 8.8% in 2000, decreased by 8.6% in 2001 because of the crises but it increased by 9.4% in 2002. The capacity utilization of the manufacturing sector, which was 75.9% in 2000, decreased to 71.1% in 2001 and increased to 75.8% in 2002. As a result of the fall in industrial production and devaluation of the Turkish Lira, exports of industrial products constituting 96.4% of total exports, also dropped to 39 billion US dollars in 2001 which corresponded to a 25.3% decrease compared to the previous year. In 2002 this figure increased by 23% to 49 billion US dollars. On the other hand, imports by the industrial sector increased by 12.1% and totalled 28.9 billion US dollars in 2001. Next year, this figure increased by 13.6% to a total of 33 billion US dollars. In 2002, 51.5% of the total exports were destined for the EU countries and 45.5% of the total imports were made from these countries.
Extensive efforts aiming at integration with world markets are continuing at full speed. Turkish industry, with the experience and knowledge it has acquired, has reached a level to make direct or joint investments in all countries of the world. Substantial investments are made especially in the Middle Eastern and Islamic countries as well as Central Asian Republics which won their independence in 1990. The Customs Union Agreement between the European Union (EU) and Turkey, which went into effect in 1996, favorably influenced the competitive power of the Turkish industry. The Customs Union, which paved the way for the free circulation of industrial goods and processed agricultural products, also contributed to certain structural changes and consequently, harmonization with the EUs Common Trade and Competition Policies. In addition, a variety of technical regulations were amended. The aim of these changes made in regulations was to accelerate the inflow of foreign capital and to increase the international competitive capability of the industrial sector. The Parliament also passed a constitutional amendment in 1999 allowing for International Arbitration in cases of commercial disputes with foreign investors. Thus, the way was paved for foreign capital investments in projects such as energy, highways, bridges, passageways and dams, requiring large financial sources and advanced technology.
Turkeys recognition as an official candidate for EU membership in the 1999 Helsinki Summit was another factor which brought impetus to efforts of harmonization of the technical regulations used by the industrial sector. As a result of studies carried out in the field of industrial property rights, the harmonization process regarding patents, industrial designs, trademarks and geographical signs was completed and the number of international agreements, which Turkey is a party to, reached ten. In addition, regulations for the establishment of the Turkish Accreditation Institution, for managing accreditation of the testing and certification institutions, were adopted and Turkey signed the European Patent Agreement. Meanwhile, studies on the harmonization of regulations concerning small and medium-size enterprises are still in progress.
Renewals and amendments in the technical and administrative regulations supervising and regulating theTurkish industrial sector aim at compliance with all EU standards and norms, hence, full membership to the Union. Therefore, within the framework of the National Program almost all work has been done to accommodate the necessary sectoral structuring to achieve full harmonization, such as regulations regarding accreditation and standardization, measurements and settings and environmental concerns regarding industrial products.
The food industry has a 20% share of the industrial sector. Private sector organizations hold a bigger share then public enterprises.
Private sector organizations or enterprises which are engaged in the food industry are concentrated in Western Anatolia and the Marmara region, whereas those belonging to the public sector are concentrated in Central Anatolia. The public sector in Turkey produces sugar, tea, tobacco and alcoholic beverages. A significant portion of the food companies owned by the public sector was privatized in the 1990s and the rest were included in the privatization program. The food industry is a sector where there is a multitude of small and mediumscale enterprises. The number of persons employed in this sector is around 250,000.
Over 25,000 companies are engaged in the processing of meat, milk and dairy products, flour and flour products, sugar, alcoholic and non-alcoholic beverages, tobacco, vegetables and fruits, and the production of vegetable oil or animal fat and agricultural products. Turkey, which has extremely suitable climatic conditions for tobacco production, is the leading tobacco producing country in the world. Exports of food products in 2002 amounted to 1.6 billion US dollars while tobacco products exports reached 382 million US dollars the same year.
Textile and Ready-to-Wear Clothing Industry.
Turkish textiles and the ready-to-wear clothing industry plays an important role in Turkeys development. Turkey is among the leading countries in the world regarding textiles and the ready-to-wear clothing industry. Turkey is the worlds 6th largest cotton producer. Almost 85% its textiles exports are cotton products. Nearly 35-40% of the total output of the textile industry is exported. The share of ready-to-wear exports is larger and amounts to about 60%. Turkey is the 10th largest exporter of textiles and the 6th largest exporter of ready-towear clothing in the world. In a classification based on exports to EU countries, Turkey holds the sixth place in textile exports and the second place in ready-to-wear clothing exports. Germany, the USA, the United Kingdom, France, The Netherlands and the Russian Federation are among Turkeys most important markets.
Approximately, 2.5 million people are employed in the extremely dynamic textiles and ready-to-wear clothing sector. İstanbul, Bursa, Denizli, Adana, Gaziantep, Kahramanmaraş, Kayseri, Antalya, Mersin and Malatya are among the cities where textiles and ready-to-wear clothing factories are concentrated.
With the contribution of the Customs Union with the EU and the intensive modernization investments since 1995, the textile and ready-to-wear clothing industry has increased its competitive power in foreign markets and managed to maintain its export-oriented development. The exports in this sector, which constitute 37% of total industrial exports, exceeded 12 billion US dollars in 2002.
Turkey is one of the leading countries in terms of quality and quantity of leather ready-to-wear products in the world. In 2002, 257 million US dollars worth of exports were made. Almost 70% of these exports were destined for EU countries. Germany holds the largest share among the EU countries. Nearly 90% of fur ready-to-wear products are composed of lamb fur. In 2002, 138 million dollars worth of fur ready-towear products were exported.
Despite the negative developments in the Turkish economy in 2001, the textile sector continues to be a driving force in terms of exports. The fact that Turkish fashion designers have increased their popularity internationally and that their labels are sought after in the world is of great importance in this development. The institutions which present educational possibilities in this field, have modernized their graduate and post-graduate programs in accordance with internationally accepted principles and strategies, aiming to educate experts necessary for the fashion designing sector. With the contributions of educational institutions, Turkey is rapidly becoming a country with highfashion creations and exports and İstanbul is becoming an international fashion center. This has been achieved through the quality, experience, provisions technical know-how, speedy service and the trend to create brands undertaken by the Turkish ready-to-wear industry, which has played a very important role in this development. Rıfat Özbek, Atıl Kutoğlu, Hüseyin Çağlayan, Cemil İpekçi, Yıldırım Mayruk, Cengiz Abazoğlu, Serap Koç, Arzu Kaprol, Dilek Hanif, the Ayşe and Ece Ege sisters (Dice Kayek) and Bahar Korçan, are some of the famous Turkish fashion designers who have achieved international acclaim.
Leather and Leather Products Industry.
The leather and the leather products industry is one of the most important sectors in Turkey, both in terms of production value and export potential. A significant increase has been obtained in the leather processing capacity, with the establishment of the İstanbul-Tuzla and the Tekirdağ-Çorlu organized leather industry sites as well as the İzmir-Menemen Leather Free Trade Site. These sites, especially the İzmir Leather Free Trade Site, provide opportunities for domestic and foreign investors. Turkey possesses 16% of the worlds sheep and goat skins and 2% of the raw-hide processing industry capacity.
With qualified personnel, a large domestic market and close proximity to foreign markets, a proper environment for foreign investors is already available. Meanwhile, shoe exports which totaled only 4.5 million pairs in 1989 increased to 62 million pairs in 2002.
The leather and leather products sector is an important field in Turkish industry as it has a 1.8% employment rate and 1.5% share in total exports and 213 million US dollars worth of exports every year.
Chemical industry production has a 7.3% share in total manufacturing industry output. This gradually growing industrial branch provides input for many other sectors in Turkey. Exports of the chemical industry were 1,477 million US dollars in 2002. There are a total of 970 enterprises, including 270 large-scale enterprises engaged in this field in Turkey.
The pharmaceutical sector, regarded a sub-sector of the chemical industry, is another field with substantial export opportunities. It has a noteworthy place in Turkeys economy with its exports of 170 million US dollars in 2002 and its modern production technology competing with developed countries. The pharmaceutical industry has accelerated its technological progress through investments necessitated by Good Manufacturing Practices (GMP) which came into effect in 1984 and it has attained a technological level comparable with that of the countries of the European Union. Approximately 80% of the raw materials used in this industry are provided through imports and 3,100 varieties of drugs are being produced. There are 196 companies operating in this sector, 84 of which are manufacturers.
The foundations of the Turkish automotive industry were laid in the 1950s. Automotive industry production first started in 1954 with the assembly of military jeeps and pick-up trucks and continued with the assembly of commercial trucks and buses. The first real mass production of automobiles began in 1966. Production began with OTOSAN and developed rapidly with the investments of the TOFAŞ and RENAULT companies in the 1970s and later on with the investments by TOYOTA, HYUNDAI ASSAN and HONDA in the 1990s.Ten of the 15 companies engaged in production in the automotive sector in Turkey are of EU origin. In 2002, a total of 346,565 motor vehicles were produced in Turkey, including 204,000 automobiles, 142,000 commercial vehicles and 25,000 tractors. A total of 174,560 motor vehicles, 88,000 of which were imported, were sold the same year. The exports of the main and allied automotive industries approached 3.5 billion US dollars in 2002. The prominent export markets are the EU countries such as Germany, France, Italy and Spain as well as Romania, Egypt, and the Russian Federation. The most important strength of this sector is its highly trained manpower. The sector, directly or indirectly, provides employment opportunities for 500,000 individuals.
The total production in the electronics industry was 2.2 billion US dollars in 2002 and exports in this sector amounted to 1.6 billion US dollars. Color TV sets are the most important export commodity group in this sub-sector. Exports of color television sets amounted to 1,324 million US dollars in 2002.
Durable Consumer Goods.
The durable consumer goods sector in Turkey is experiencing a lively period and there is an ever-increasing demand. In 2002, 3,318,000 refrigerators were produced and 2,247,000 of them were exported. A total of 1,654,000 washing machines were produced and 989,000 of them were exported. Corresponding figures for ovens were 1,341,000 and 1 million and for ishwashers 346,000 and 149,000. The sector can adapt itself to technological developments easily and it outdistances its competitors in terms of production, marketing and service networks. Another reason for the development of this sector throughout the country is the low saturation ratio in the market for products in general. For this reason, the potential demand is high and new producers and strategic partners can enter the market. In recent years, the participation of worldfamous foreign companies in the Turkish market has increased. With the Customs Union, theThe electronics industry, which developed rapidly in line with the advancing information and communications technologies, is one of the most rapidly growing sectors in Turkey. Especially in recent years, significant achievements have been made in the telecommunications, computers and consumer devices subsectors.
Bosch-Siemens Group and the Italian Merloni Company started production and marketing activities in Turkey. Total exports of durable consumer goods almost hit the 1 billion US dollar mark in 2002.
The jewelry making tradition in Turkey is very old for İstanbul became the most important jewelry center in the world during the reign of Sultan Suleyman the Magnificent. Today, the Turkish jewelry industry has attained justified acclaim throughout the world by integrating its rich cultural heritage with new and modern techniques. Traditional techniques which are unique to Turkey, such as filigree, niello and interwoven gold or silver, attract great attention. Although it is a very new export sector, the jewelry industry has displayed a very good performance, especially in recent years. As a matter of fact, jewelry exports, which totaled 60 million US dollars in 1995, reached 536 million US dollars in 2002. A prominent part of the exports consists of silver jewelry. Most of the jewelry products, almost 80% of them, are exported to the USA, Germany, UAE, Israel, Italy and Switzerland.
Foreign Economic Relations and Balance of Payments
Throughout its 78-year history, the Republic of Turkey, as in many other fields, has made great strides in developing the foreign trade to the benefit of the country. The İzmir Economy Congress played a central role in this outcome. The İzmir Economy Congress held on February 17, 1923, just before the proclamation of the Republic, played an important role in this regard for it adopted salient resolutions to protect and develop the national industry as well as to lessen the countrys foreign dependency.
The Great Depression of 1929 and the Second World War made it obligatory for the country to primarily adopt policies targeting national self-sufficiency. Correspondingly, the 1950s was a period in which the significance of liberal approaches in the management of the economy was witnessed. A noteworthy increase was observed in the national income in the first half of the 1950s, because of the increase in foreign aid, mechanization of agriculture, foundation of a widespread transportation network and the positive changes in world markets.
Together with the initiation of the planned economy stage in 1963, Turkey established a development policy based on the substitution of imports. As a result of the stability policies of 1970, the Turkish Lira was significantly devalued and from this point on export-based investments became a part of the national agenda.
The Economic Stability Measures applied as of January 24, 1980, were a turning point in the Turkish economy. For the first time, exports gained prominence on the agenda and were supplemented with tax rebates, low-interest credits, custom taxes exemption for the exporters from the manufacturing industry for their imports and various incentives depending on the sector. Due to the implementations of liberalization policies pursued since 1984, the domestic market was opened to competition and as a result there was a substantial increase in imports. On the other hand, the increase in exports during the same period was much more significant. The major exports items which used to be primarily agricultural products were replaced by industrial goods.
Economic policies adopted since 1980 targeted to create a stable and reliable economic environment. In line with the influences of the globalization of world economy, the volume of foreign trade which was 11 billion US dollars in 1980 reached 72.7 billion US dollars in 2001 and 85.9 billion US dollars in 2002. What is more, the ratio of the volume of foreign trade to the GNP, which is considered an important indicator of globalization, exceeded 45% in 2002 from a level of only 16% in 1980.
Exports are encouraged in various ways in Turkey. In recent years, monetary incentives have been replaced by incentives at the production and investment phases. Within this framework, exporters are provided with credit, guarantees and insurance support through the Türk Eximbank. Bureaucratic formalities in exports were reduced and simplified after 1980 as another tool to encourage exports.
Foreign Trade Indicators.
Turkey eliminated all trade barriers on imports of industrial goods from members of the European Union (EU) with the Customs Union established with the EU as of January 1, 1996 and also the EUs Common Customs Tariff has started to be applied in trade with other countries. As a result, the balance of foreign trade yielded a deficit of 20 billion US dollars in 1996. In 1997, exports increased by 13% reaching 26.2 billion US dollars and imports increased by 11.3% amounting to 48.6 billion US dollars. In fact, according to a report by the World Trade Organization (WTO) published in 1997 on Developments in World Trade, Turkey was listed among the 21 countries enjoying the most rapidly increasing foreign trade volume and thus the most dynamic foreign trade. As of the end of 2001, imports were 41.3 billion US dollars and exports were 31.3 billion US dollars. But in 2002 imports increased to 50.8 billion US dollars and exports to 35.1 billion US dollars.
Ratio of Exports to Imports.
The ratio of exports to imports was registered at about 50% in the 1990s, and increased to 77.8% during the 1994 crisis. Imports, which increased by 53.5% in 1995, decreased the ratio of exports to imports to 60.6%. Presenting a steady climb, this ratio was 54.1% in 1997, 58.7% in 1998 and it reached 65.4% in 1999. Even though there was a substantial decrease in this ratio in 2000, it increased to a level above 75% in 2001, and decreased to 69% in 2002.
Sectoral Structure of Foreign Trade.
An important structural change occurred in Turkeys exports in the 1980s. The share of agricultural products in total exports, which was at a high level of 75% in 1970 and 57% in 1980, fell to 12.6% in 2002. On the other hand, the share of industrial products in exports, which was 18% in 1970 and 36% in 1980, increased rapidly and reached 83.6% in 2002. Furthermore, there was a change in the composition of the products in favor of nonagro industry products in manufacturing industry exports after 1980. This development is in conformity with the structural change towards industrialization in Turkeys economic structure.
When the category of the imports to Turkey are examined, it is observed that the annual average share of investment goods and raw materials in imports was at high levels in the 1990s, as a natural result of the efforts for economic development and industrialization. While the share of intermediate goods in total imports was 76.7% in 2002, capital and consumer goods took shares of 12% and 10.6% respectively.
Turkey is among world leaders in terms of certain products in world trade. Her share in world exports varies between 5 to 10% with respect to ready-to-wear, tobacco, minerals, and dried fruits and nuts.
The Distribution of Foreign Trade by Country Groups.
The European Union countries have an important and permanent place in Turkeys foreign trade. The share of these countries in Turkeys exports and imports was 51.5% and 45.5%, respectively in 2002. Total exports to the European Union countries amounted to 18.1 billion US dollars in 2002.
Germany is the leading trading partner of Turkey, concerning both imports and exports. The USA, the UK, Italy and France are among the other important trading partners. The Russian Federation also gradually started to gain an important place in Turkeys foreign trade after the disintegration of the Soviet Union in 1990. From the beginning of the 1980s, the Islamic countries in the Middle East and North Africa started to figure prominently in Turkeys foreign trade. As of the end of 2002, these countries had a 12.9% share in total exports and a 11.7% share in total imports.
In recent years, trade relations between Turkey and Economic Cooperation Organization (ECO) and Black Sea Economic Cooperation (BSEC) countries have been gradually developing. The Central Asian Turkish-Speaking Republics are also potential important trading partners because of the complementary nature of their economies.
Balance of Payments.
Data on the balance of payments sheet in Turkey is based on foreign exchange records. The US dollar is used as a monetary unit on the balance sheet, and transactions through other foreign currencies are relayed in their conversion to dollars. After the reorganization in 1984, balance sheet tables of Turkeys balance of payments were published monthly, quarterly, and annually. Thus, Turkey became one of the few IMF countries issuing monthly balance of payment sheets.
The most important item on the current transaction account in the balance of payments is the trade of goods. The rapid negative development of the foreign trade balance in time and, especially after 1988, adversely affected the current transaction accounts and led to an increase in the foreign trade deficit. The share of imports and exports in the national revenue increased with time. However, this increase has been more rapid than the exports/GNP rate. This was a natural development in Turkey, which is opening to the world and integrating with the EU through the Customs Union. The foreign trade deficit was balanced to a certain extent after 1988, owing to increasing tourism revenues.
Another item with adverse effects is foreign debt interest payments. However, workers foreign exchange remittances, which reach an annual average of 3 billion dollars, are an important source of income.
The transfer balance which shows a surplus on the balance of payments sheet due to workers remittances illustrates the importance of the contribution to the economy by more than 1.2 million Turkish workers abroad.
The foreign trade balance, which was affected by the developments in foreign markets and the domestic economic recession which contracted both foreign and domestic demands, decreased by 78.6% in 2001 compared with the previous year and resulted in a 4.5 billion US dollars deficit. This deficit increased to 8.6 billion US dollars in 2002. However, in contrast to the deficit in 2000, the balance of current transactions had a surplus of 3.3 billion US dollars in 2001. In 2002, once again there was a deficit of 1,783 million US dollars.
The Turkish Economy and Economic Policies Open to Foreign Competition
Prior to 1980, Turkey followed an economic policy based on the substitution of imports. Instead of importing, her goal was to manufacture products in the country which would meet the domestic demand. For long periods of time, newly established industrial branches were protected by customs tariffs and other equally effective taxes. A comprehensive Stability Program with the objective of introducing substantial economic reforms was prepared and applied on January 24, 1980. Thus, Turkey abandoned the industrialization model based on the substitution of imports and adopted another one concentrating on and giving priority to exports.
The reform policies implemented also adopted a change in the economic philosophy by gradually concentrating more on the market mechanisms instead of the central administration. The Capital Markets Law went into effect in 1981 as a result of the restructuring efforts and developments in capital markets. The objective of the law is to secure effective and widespread participation of people in economic development by investing their savings in securities. The following year, the Capital Markets Board was established in order to regulate and supervise the Turkish capital markets. The İstanbul Stock Exchange (İSE), which played a very important role in the development of the Turkish economy, began its stock trading activities on January 3, 1986. Among the factors influencing the rapid expansion of the İSE were the accelerated growth of funds due to the effect of tax concessions and the liberalization of the entrance of foreign investors into Turkish capital markets. Currently, there are four markets operating at the İSE. These are the İSE Equity Market, Bonds and Bills Market, the International Market and the forward transactions market.
The waiting period of the cross-transaction in the Equity Market was decreased from three minutes to one minute with the İSE Managerial Boards July 18, 2000 decision, to facilitate the processing of orders of member representatives, and this application has been in effect since July 24, 2000.
Turkey is one of the leading countries in terms of liberal foreign exchange regimes in the world. In addition to the fact that the Turkish Lira is convertible, a policy embracing the free trade of securities in the İSE by foreign individual and organizational investors has been in effect since 1989. Under Decision No 32, of August 1989, all limitations imposed upon investor foreign organizations and individuals, who wish to undertake transactions concerning the securities quoted in the İSE, have been removed. With this, Turkish stocks and bonds are open to foreign investors without any limitation regarding the transfer of capital and profits abroad.
The İSE is a full member of the World Federation of Exchanges (WFE), the Federation of Euro-Asian Stock Exchanges (FEAS), the International Securities Services Association (ISSA), the International Securities Market Association (ISMA), the European Capital Markets Institute (ECMI), the World Economic Forum (WEF) and the Swiss Futures and Options Association.
The aim of the WFE in Paris is to ensure cooperation for the establishment and development of functional standards enabling the effective, fair and trustworthy development of national markets of member exchanges, and in addition to ensure cooperation for the establishment of adequate standards in exports, transactions and barter activities. WFE members have to abide by the Generally Accepted Rules Concerning the Transactions of Securities adopted by the WFE General Board.
A non-profit regional federation based in İstanbul and referred to as FEAS has been established with the efforts of the İSE. It is endeavoring to become an international financial center. The aim of this federation is to increase cooperation between the stock exchanges of member countries, to represent the FEAS member exchanges in other exchanges and federations, and to enable the integration of international exchanges in the region. The FEAS charter was signed on May 16, 1995, by the member countries heads of exchanges, and İstanbul was chosen as the FEAS center by the members.
Reorganization, especially in the fields of foreign exchange and foreign trade, was undertaken in order to open the economy to foreign markets and to sustain the industrialization effort based on exports. Policies were developed to follow a realistic exchange rate policy for the Turkish Lira and to enable the market mechanisms to determine the exchange rates. As of May 1981, foreign currency exchange rates started to be determined daily by the Turkish Central Bank by taking into consideration the changes in domestic and foreign price levels, the balance of payments and the developments on the international foreign currency markets. The exchange rates started to be determined on the foreign currency market after August 1988, and the gold market was opened by the Central Bank in April 1989.
The foreign exchange regime was liberalized to a great extent as of 1984. Various decrees issued concerning the protection of the value of the Turkish currency and related communiqués liberalized the foreign currency regime to a great extent and thus, the legal framework necessary for the convertibility of Turkish currency was formed by Decree No. 32 on the Protection of the Value of the Turkish Currency which went into effect on August 11, 1989. As of July 9, 1992, the Turkish Lira was accepted as foreign currency in the free zones and all payments may be made in these places in Turkish Lira corresponding to foreign currencies. The principles of the foreign currency regime in Turkey and the changes it has brought about can be summarized as follows:
Individuals living in Turkey are free
..To possess foreign currency; to buy foreign currency without any limitation, to transfer foreign currency abroad; and to open foreign currency savings accounts at banks.
..To obtain foreign credit as operating credit for their commercial financial needs.
..To transfer capital abroad for commercial activities and investments in foreign countries. The only restriction is for capital transfers exceeding certain limits which are subject to permission from either the Undersecretariat of the Treasury or the Council of Ministers.
..To export securities and sell them abroad.
..To send abroad guarantees and bonds in foreign currency.
Industrialists started to shift more towards foreign markets as a result of the new policies encouraging exports. Thus, costs were reduced as a result of the investments with modern technology, and the competitive power of the Turkish economy in international markets increased. In addition to the increase in quality in production and rise in exports, modern and effective management norms are being implemented. Foreign markets are closely monitored, relations with international financial organizations are developed, and new marketing methods and techniques are used.
Since 1984, when the first privatization implementations started, there have been many regulations in order to overcome the emerging problems of the privatization process. The extensive legal framework related to privatization was formed by Law No. 4046 enacted in 1994. The necessary legal arrangements for privatization in the telecommunications and energy sectors were realized in 1995 and 1997. Since May 2002, the public sector has gotten a 50% share in 24 of the 31 institutions within the scope of privatization. Six highways and two bridges (Bosphorus and F. Sultan Mehmet) are to be privatized within the scope of the Privatization Council Decision dated February 24, 2003. The preparations for these are made by the concerned ministry and the Directorate General of Highways. In short and long term periods, it is expected that privatization activities will gain impetus.
Gross National Product (GNP).
According to World Bank data, Turkey was in sixteenth place among 127 countries with its 2.9% rate in the average annual per capita GNP increase between 1980-1991. According to a report on the 1997 World Development Indicators published by the same organization, Turkey ranked among the 10 markets in the world that have the greatest development potential along with China, Brazil, Russia, India, Mexico, Argentina, Indonesia, Thailand and Pakistan, which have been qualified as the emerging giants of the world.
The GNP rose at an average rate of 5.3% per annum between 1980-1990, 3.2% between 1990-1995, and an average of 7.9% between 1995-1997, which is above the world average. However, from August 1998 until mid-1999, the Turkish economy which felt the negative impact of the Russian crisis in every sector, and especially in exports, was also hard pressed by the tax reform and the tight monetary and fiscal policies adopted within the context of the disinflation program. With the delaying of some of the liabilities in the Tax Law and the governments package to support the small and medium-size producers and exporters in the middle of 1999, the economic indicators showed signs of picking up; but with the earthquake disaster Turkey suffered yet another second shock. Even though the economy shrunk by 9.5% in 2001, the GDP rose by 7.8% in 2002.
Nevertheless, in accordance with the economic stability and disinflation policies adopted since 1998, Turkey initiated a comprehensive macroeconomic program in the beginning of 2000. The program, which was carried out with strong determination, was extended to 2004, following talks with the IMF and supported by another stand-by agreement. It has yielded positive results, and interest rates and inflation have taken a downward trend. The wholesale price index and the consumer price index decreased to 30.8% and 29.7%, respectively, as of the end of 2002. This trend continued in 2003 and as of the end of May 2003 the wholesale price index decreased by a rate of 0.6% and the consumer price index increased by 1.6%.
Growth Rate by Sector.
The share of agriculture in the GDP was 30% at the end of the 1960s, but declined to around 15% at the beginning of the 1990s. In contrast to this, the share of industry in the GDP increased from 19% to 25% in the same period. The services sector, in parallel with the developments in the world economy, has also increased its share in the national income. The share of the services sector in the GDP, which was under 50% prior to 1980, reached 58% in 1995 and 65.5% in 2002.
When the distribution of GDP is examined by sector, it is observed that the share of agricultural production is 13% while the share of industrial production is 21.5%. In 2001, the value added in the agricultural sector increased by 6.1% in a year, but the same figure decreased by 7.5% for the industrial sector. In 2002 both of them increased respectively by 7.9% and 5.8%. In contrast, while the share of the industrial sector in the gross domestic product (GDP) was 20% in 2000, this figure rose to 21.1% in 2001 and 21.5 in 2002.
The per capita GNP in 2001 decreased by 26.7%, dropping to 2,123 US dollars due to the economic recession and the decrease in the value of the Turkish Lira. It increased to 2,584 US dollars in 2002. According to the Purchasing Power Parity, the per capita non-financial GDP decreased to 5,830 US dollars from 6,211 US dollars in 2000 and increased to 5,974 US dollars in 2002.
The trade sector is the fastest growing sub-sector among all service sectors in terms of contribution to the national income. The rapid development of tourism in recent years has played a significant role in the increase of the share of the trade subsector in the GDP. The net tourism revenues which were 8,090 million US dollars in 2001, increased to 8,485 million US dollars in 2002.
Advertising and Public Relations
Advertising in Turkey, which is in accord with the globalization process in the world, displayed a very rapid development in quality as well as a steady increase in total advertising spending in recent years. This development illustrates that the market grows by 10-20% in non-financial terms every year. The structure of the sector is also moving away from traditional standards, to standards of the market economy. Today, it can be said that the Turkish advertising sector is ahead of many other sectors in terms of adopting and applying EU and USA standards.
The number of companies active in the advertising sector increased very rapidly especially after the 1970s, an extremely important indicator of the vitality of the Turkish market. Today, there are more than 100 advertising agencies operating in Turkey. Each of these employes more than 15 people, has customer relations, creativity and media departments and can serve the customers in every field. Furthermore, over 30 film production and photography companies carry out their activities in this field. In addition, there are approximately 3,000 people employed in advertising agencies. A total of 80% of the advertising expenses in Turkey are spent for newspaper, magazine and television commercials. The share of radio, cinema and outdoor advertising is around 20%. A total of 715 million US dollars in advertisement expenses comprised publication and broadcasting fees paid for specific measurable fields in 2002. When the expenses for advertise-ment production, printed materials, commissions of advertising agencies and local media revenues, which cannot be calculated, are added to this figure, the actual magnitude of the sector is estimated to be 953 million US dollars. Turkish advertising companies have become more popular with the awards they receive every year in various branches of advertising. In fact, the number of international awards they receive increases each year. The most prestigious domestic award in this sector is the Crystal Apple Advertisement Awards of Turkey. The 15th competition was held in 2003. Approximately 1,000 advertisements enter this annual competition which awards seperately advertisement film production, direction, music and advertisement photographs, in addition to TV, press, radio, cinema and outdoor advertisements.
The organization initiatives of individuals employed in public relations began in 1969. The Public Relations Association was established in 1972 in İstanbul. The association has around 200 members today and works in close cooperation with the International Public Relations Association (IPRA) and the Confederation of European Public Relations (CERP). The Association was made a member of CERP in 2002. A Council of Communications has also been established with the participation of associations and societies in the public relations sector. Especially in the 1990s, many organizations joined this sector. At present, numerous public relations consulting companies provide services in cities such as İstanbul, İzmir, Ankara, Bursa and Gaziantep. Almost all of the large companies have their own public relations departments. The public relations sector continued its rapid development at the end of the 20th century and has opened new horizons for the integration of Turkey and its economy with the world.