How is the economic situation in Turkey

Turkey: economic prospects after the earthquake / Rainer Hermann. - [Electronic ed.]. - Bonn, 1999. - 17 pp. = 68 Kb, text. - (FES analysis)
Electronic ed .: Bonn: FES Library, 2000

© Friedrich Ebert Foundation

The earthquake of August 17th will not throw the emerging country Turkey back to the level of a developing country, nor will it have any lasting negative effects on the prospects of its economy. In just a few months, the earthquake damage will be repaired and the economy will return to a growth path. The chances will be better than for a long time that Turkey will be the last of the large countries on the northern Mediterranean to shorten the distance to other Mediterranean countries. However, Turkey will not catch up with the per capita income of other countries along the same latitude for the foreseeable future.

In the 1990s Portugal, and most recently Greece, implemented structural reforms and then improved their macroeconomic data significantly. Their efforts have been rewarded with a boom in the real economy and a bull market. In terms of price-earnings ratio, the Athens Stock Exchange is three times as expensive as the undervalued Istanbul Stock Exchange.

The category of Emerging markets Portugal and Greece no longer belong, and in Egypt, the only serious "emerging market" in the Arab world, developments are rather disappointing. Turkey would be the only one Emerging market in the region - after the divestments made in 1998 in all Emerging markets was made, possibly one of the most interesting emerging markets around. The few foreign investors in Turkey did not withdraw their funds out of panic after the earthquake, unlike local investors. They demonstrated their confidence in the future of the country.

The trust is justified by the Structural reformswhich the Ecevit government brought through parliament in the summer of 1999. They correct old mistakes in economic policy. In the fall, the International Monetary Fund will grant Turkey a backup loan, a possible three billion dollars. Foreign investors will take this as a signal and place more funds in Turkey. First, they will buy high-yield government bonds in Turkish lira on a large scale for the first time, which will contribute to the decline in interest rates. So far, the international rating agencies have deterred them from entering the bond market. Their ratings do not necessarily correspond to the actual country risk. Because Turkey has always fulfilled its national and international obligations on time.

If inflation falls as a result of structural reforms and interest rates continue to fall, foreign investors will also make portfolio investments on the stock exchange. Falling interest rates will also attract more domestic investors to the stock market, so that the demand side will widen further. On the supply side, privatization, which is expected to pick up speed again in early 2000 after a temporary halt, is extending the price list. With the depth, the market could mature. A growing market will lead domestic investors to view the stock market as a long-term "win winSituation "and to get rid of the still prevailing casino mentality, which the stock market understands as a short-term zero-sum game.

Might also be interesting Reconstruction bonds become. Turkey is expected to issue such in Europe. They have the advantage that foreign donors are pushing for earthquake-proof buildings to be built.

The economic damage caused by the earthquake will be repaired faster than the political one. The psychological suffering that speaks of the 15,000 dead and 30,000 missing has a negative effect on the economy. The material damage, however, is less than the high number of victims suggests. On the positive side, the earthquake will accelerate the conclusion of an agreement with the International Monetary Fund. In addition, the acceptance of private companies continues to rise, also as operators of infrastructure projects. Three factors contribute to this higher acceptance: the low presence of the state in dealing with the disaster, the negligence of the state authorities in monitoring building regulations, and the efficiency of private aid.

In terms of the economy as a whole, the recession that began in mid-1998 will initially worsen. Due to a good first half of the year, the gross domestic product closed with real growth of 2.9 percent over the whole of 1998. After the earthquake, analysts revised the original growth forecasts for 1999 downwards from zero percent to minus between one and three percent; above all, they expect a significant decline in private consumption. For the year 2000, as a result of the reconstruction, they have doubled their forecasts to values ​​between four and six percent; the growth will be carried by the investments.

The earthquake will temporarily suspend the ongoing consolidation of public finances. Because of the "force majeure" and the reform laws that have already been passed, the International Monetary Fund does not want to withhold the prospect of the assistance loan from Turkey. Inflation will not fall below 50 percent from the end of 1998 to the end of 1999, but will rise to around 70 percent before it ends Decreased to below 40 percent in 2000. In 1999, the public sector deficit increased from a forecast of 12 to 13 percent of gross domestic product to as much as 15 percent, and in the coming year it could fall to a value of ten percent.

The economic damage is less than initially assumed. The estimates range from five to seven billion dollars (central bank) to ten billion dollars (United Nations) to 20 billion dollars (industrial association Tüsiad). Most numbers now assume no more than $ 10 billion; they contain the actual costs of reconstruction, lower tax revenues and lower revenues from tourism. The gross national product, which only includes the registered economy, was $ 209 billion in 1998. The International Monetary Fund has provided $ 325 million and the World Bank has provided $ 220 million as emergency aid.

Tüsiad's estimate includes a number of items that are not immediately reflected as the cost of reconstruction. The damage amount of 20 billion dollars is made up of: 10 million square meters of destroyed living space (five to six billion dollars including the destroyed household effects), 200 damaged production facilities and 1,000 shops razed to the ground (four billion dollars), damage to the infrastructure (one to $ 2 billion), a loss of production ($ 100 to $ 200 million per day), private supplies and donations (at least $ 2 billion), a deterioration in the balance of trade ($ 1.5 billion), and a temporary increase in interest rates affecting the state budget burdened.

The material damage is lowest in industry. Most of their buildings are earthquake-proof. In the Izmit region, many factories resumed production within a week of the earthquake. The loss of production in the highly industrialized province of Izmit, which contributes five percent to Turkey's gross domestic product, is therefore limited. Most of the damage that has occurred is covered by insurance companies. The state-owned Tüpras refinery, where the greatest damage occurred, was also insured against earthquakes. The entire facility was built to withstand a 9.0 magnitude earthquake. However, one of the ten oil depots collapsed and caught fire. Most recently, seven depots with a diameter of up to 42 meters were on fire. The repairs are expected to be completed by the end of 1999.

State funds and international aid will flow into the repair of the infrastructure. The greatest need, at $ 100 million, is for the water and sewer systems along the earthquake fold. Transformer stations and a number of telephone exchanges also need to be renewed. Broken roads were provisionally restored in the first few days after the earthquake.

The earthquake left 600,000 people homeless. Since some have migrated back to their places of origin in Anatolia, no more than 20,000 new homes may need to be built. The cost of this will not exceed four billion dollars. Most of the destroyed apartments were privately owned and not insured against earthquake damage. The owners have to finance the new building themselves. The state could step in by providing loan guarantees for housing construction for low-income earners, along the lines of the United States. If permanent solutions are not found immediately, it is to be feared that those affected - as in the last earthquake locations Dinar and Adana - will still live in a makeshift arrangement after years.

The overall economic development in the nineties is unsteady. The years with high growth rates of six to eight percent were followed by short but deep recessions that lasted no more than a year. The growth was driven by the dynamic private sector and private consumption; external and home-made reasons triggered the recessions.

In 1991 the Gulf War had increased the gross national product by only 0.3 percent. In 1994, the year of the recession, it then fell by 6.1 percent in real terms. The sharpest crisis since the proclamation of the republic was triggered by the attempt by then Prime Minister Ciller to lower high interest rates without first consolidating public finances. Funds that were released were no longer invested in government bonds, funds were also withdrawn from the speculatively inflated stock market, and investments in tangible assets continued to be unattractive due to the high interest rates. On the other hand, the trade balance closed in a record deficit in 1993 and the Turkish lira was "Hot Money"to attract, has been revalued over the years. At the beginning of 1994 all liquid funds forced their way onto the foreign exchange market in order to forestall a more likely devaluation The austerity program, announced on April 5, 1994, exacerbated the recession, but did not improve public finances.

A mixture of external and internal factors sparked the recession that started in mid-1998. The devaluation of the ruble had made the import of Turkish goods so much more expensive in Russia that most of the customers there sent the articles back to Turkey. The private economy in Turkey likes to flirt with the fact that - like in Italy - it has decoupled from the state. But this is only partially true: it is still a prisoner of the high level of interest rates. In 1998 the 500 largest industrial companies in Turkey earned 88 percent of their profits from external activities, mainly from interest income from government bonds. Because companies have invested in bonds rather than investments for years, they have become less competitive. The 30 to 40 percent high returns are a poorly disguised subsidy. The crisis was exacerbated by the government's attempt, later withdrawn, to cover the unregistered economy with a temporary tax amnesty. Since the measure was announced in September 1998, many have been holding back their money. They do not want to expose their funds to the control of the tax authorities, on the other hand they fear coercive measures against their unregistered funds.

The share of taxes in the gross national product remains low. In 1998 the Tax rate at just 17 percent, based on total economic output below ten percent. On the other hand, the structure of public spending hardly allows for investment in human capital, infrastructure and public administration. In 1997, 8.4 percent of the gross domestic product flowed into interest payments, 0.8 percent into state-owned enterprises to cover their deficits, a further 3.0 percent into financing the shortfall in state social security and 2.2 percent into agricultural subsidies that affect expenditure. As a result, the net new public debt had doubled between 1995 and 1997 to 11.6 percent of the gross domestic product. For 1999, analysts had forecast a value of 12 to 13 percent before the earthquake.

Debt service is increasing like an avalanche. In the 1999 budget, 72 percent of the income was earmarked for interest payments; in 1998, only 52 percent of the income was used for interest. Between 1985 and 1998, the interest budget item rose from nine to 40 percent of all expenditure. For 1999 the government set a decline to 38 percent, but in the first five months the proportion had climbed further to 43 percent. Three factors are responsible for this interest rate avalanche: The high real interest rates of 30 to 40 percent; the short maturities which at times forced the Treasury to revolve the entire domestic debt of 20 percent of gross domestic product twice within a year; and a number of black holes in the budget that further increase the state's borrowing needs.

The government has recognized that the state car would hit the wall within a few years without structural reforms. For decades, wrong economic policy decisions have increased the financial needs of the state; if the course had been continued unchanged, it would not have been possible to raise it in three to four years. As the first government of the 1990s, the Ecevit cabinet, formed in May 1999, had the insight and a parliamentary majority to implement structural economic reforms. The most important reforms were the amendment of the Banking Act, an amendment to the constitution to introduce international arbitration and a comprehensive reorganization of state social security. Accelerating privatization and reducing high agricultural subsidies remain on the reform agenda.

The banking reform passed on June 18 comes into effect on January 1, 2000. It introduces independent banking supervision for the first time and makes the core principles of the Basel Committee on Banking Supervision binding, for example with regard to the formation of reserves and accounting. The supervisory authority can in future order mergers of banks that are in financial difficulties. For the first time, the amendment restricts lending to companies that belong to the same group of companies as the bank. However, the banking reform does not limit the state's guarantee that it will pay for 100 percent of private deposits in the event of a bank becoming insolvent. This guarantee has led to a significant outflow of deposits, away from the big, reputable banks and towards more vulnerable small financial institutions offering very high deposit rates.

It is uncertain whether the government is actually ready for independent banking supervision. Previously, this supervision had been with the Treasury, which was thus in a conflict of interest. Because the treasury issues the government bonds; Most of them are bought by the banks, which raise the funds to a large extent abroad, where they take out foreign currency loans. This creates the risk for banks to hold excessively high positions in liabilities in foreign currencies. Against this "Overexposure"The treasury never intervened in its own interest.

A breakthrough in improving investment conditions was the Constitutional amendment that introduced international arbitration on August 13th. At the same time, the State Council's say in the award of infrastructure projects to private foreign companies, which is not favored by privatization, has been considerably restricted. The discussion about these points had lasted for over a decade and had been largely emotional.

With the constitutional amendment, the government hopes to attract the foreign investors it needs for the upcoming infrastructure projects. You should tackle these projects on the basis of the BOT model: build the project yourself, operate for an agreed time and, if necessary, later cede it to the state. The total volume of the upcoming investments is 50 billion dollars. By 2002 investments of $ 30 billion will be required in the construction of new power plants alone. The demand for electricity is growing by 12 percent every year. The state cannot finance other infrastructure projects either, such as highways, large bridges and railways.

The reform of the three national social security systems, decided on August 27, 1999, will relieve the public finances considerably. An amendment made in 1992 had reduced the number of bonus days to such an extent that the retirement age was lowered to 43 years for men and 38 years for women. The change at that time meant that the budgets of the social security funds, which were still balanced in 1992, showed a deficit of 3.6 percent of the gross domestic product in 1999. Without a change, the shortfall would have risen to a shortfall of 7.4 percent of GDP by 2010. Nevertheless, the pensions paid are hardly enough to pay the rent, only 1.7 contributors pay for a pensioner. The reform has raised the retirement age to 60 and 58 years with a transition period of ten years.

The reform process is not over with these three major projects. There is additional need for action in the area of ​​privatization and agricultural policy.

Privatization is proceeding more slowly in Turkey than in comparable countries; since the discussion began in 1986, hardly any state-owned companies have been sold to any significant extent. State-owned companies still produce tractors or make underwear for the army, but the army does not take them off. Politicians are still arguing about filling positions on the supervisory board and assigning jobs to followers in state-owned companies. A political will to break away from the numerous state-owned companies has only been apparent since 1997. State banks have always been excluded. As early as 1998, the economic and government crises slowed down the drive again, and the earthquake set privatization back again.

With the exception of the Tüpras refinery, the earthquake did not damage any facilities pending privatization. The major privatizations planned for the second half of 1999 - which were supposed to raise $ 1.5 to two billion dollars - have been postponed to the first quarter of 2000. The privatizations of Turkish Airlines (30 percent as IPO or block sale), the petrol distributor Petrol Ofisi (20 percent IPO or 51 block sale) and the petrochemical plants Petkim (IPO and sale of individual plants) will then be put out to tender. Thereafter, the state wants to give 49 percent of the Türk Telekom (29 percent to a strategic partner and 15 percent IPO). The sale of Tüpras to a strategic partner has been postponed for the time being.

Turkish agriculture employs 45 percent of the total labor force and 80 percent of all employed women. However, it only contributes 16 percent to the gross domestic product. For 1996, the World Bank calculated a share of direct and indirect subsidies for agriculture of 7.7 percent of GDP; it has presumably increased further since then due to new subsidies. More than half of the 13.8 billion dollars that the World Bank cites as agricultural transfers are fiscal transfers, such as guaranteed purchase prices, low-interest loans or subsidies for fertilizers. In addition, there are transfers that consumers have to provide via increased prices, which are often significantly above the level of the world market.

While agricultural subsidies in the OECD countries almost halved from 2.5 percent of GDP to 1.4 percent between 1986/88 and 1995/96, they tripled in Turkey from 2.5 to 7.7 percent. The World Bank criticizes the fact that the system of price support that is practiced is fiscally expensive and economically inefficient, fosters waste and abuse, but does not contribute to the fight against rural poverty or to the promotion of regional development. Many of the instruments used are hurdles on the way to integration with the European Union and could be challenged by the provisions of the World Trade Organization.

Turkey has had double-digit inflation rates since 1970, and since 1988 they have fluctuated between 60 and 125 percent. Three economic factors and one political reason cause this persistently high inflation: First and foremost is the high financial needs of the state, which leads to a Crowding out leads in the credit market and makes the printing press run faster. The high inflation is also favored by the persistently low level of competition, which makes it easier for the increased costs to be passed on to customers, as well as the low degree of integration of the Turkish economy, which is reflected in a considerable price differential between the various regions.

On top of these economic factors comes a little political will add, to fight inflation effectively. Because many profit more from the causes of inflation than they lose from inflation. They benefit from the high national debt with the high-yield government bonds and from the inflation, which acts as a market entry barrier for foreign companies. However, the shortening of planning and decision-making horizons has a negative effect on long-term investments.

The Turkish state emerged from the War of Independence before there was a Turkish nation. To shape this nation, the founders of the republic carried out a series of hasty reforms and created taboos that persist to this day, such as the hereticization of religion, denial of minorities, and denial of classes. To this day, the state is dominant and takes precedence over society. The state is still trying to determine the development of society as much as possible.

Reformers like Prime Ministers Adnan Menderes and Turgut Özal introduced the market economy in the 1950s and 1980s. But they have not eliminated the statist thinking in the minds of Ankara's bureaucratic and political elite. It is still trying to stabilize its power and to bind society to itself by giving individuals access to state resources. The transformation mechanism takes place through the parties. They are only guided by ideas and programs to a very small extent; to a much larger extent, they owe their existence to the establishment of client relationships.

In exchange for political support, politicians provide access to government resources for an influential clientele. They can bind entire regions to themselves by setting the state purchase price for certain agricultural products high. You can benefit individuals who have their own client networks. Preferences can be given in tenders or through insider knowledge, which leads to the timely purchase of a property or foreign currency before its value changes after an administrative decision. Beneficiaries can receive material advantages such as a low-interest loan paid out by a state bank, which the latter - not infrequently - has to write off. With these interventions, politicians and bureaucrats overrode the market's sanctioning mechanism.

The military also belongs to the state elite. In the past few decades the generals have expanded their political power and also created a military-industrial complex. Oyak, the officers' pension fund founded in 1961, has risen to become one of the largest conglomerates in Turkey. His stakes in 25 companies range from the automotive, construction and food industries to financial services. In addition, the "Foundation for the Strengthening of the Armed Forces" (TSKGV) has stakes in 13 companies, most of which are industry leaders. One is Aselsan, a manufacturer of communications electronics. It joins the highly specialized defense industry that is emerging in a belt around Ankara. The General Staff has announced that it will spend 150 billion dollars on the modernization and expansion of the armed forces over the next 25 years. The share of imports in expenditure on military equipment is to be reduced from 79 percent to 57 percent in 2000 and to 40 percent Percent by 2020.

The military are increasingly present in the economy, but have no economic policy program. They have repeatedly intervened in the political fortunes of Turkey, most recently on February 28, 1997. However, they have given no impetus to the discussion about structural economic reforms. For the first time in 1998 they invited trade associations to hear their views on ways out of the crisis. The three direct interventions by the military in 1960, 1971 and 1980 were each preceded by an economic crisis and an austerity program that had been worked out with the International Monetary Fund. Due to the political crises, however, they could not be implemented, which was only possible under the military governments.

Turkey's per capita income, which is calculated on the basis of the registered economy, rose 5 percent in 1998 to $ 3,224. It has tripled since 1980, but it is still only a third of the EU average. The figure of 3,224 dollars belies the great disparities in personal and regional income distribution. The World Bank ranks Turkey among the 17 countries with the most unequal income distribution. In Turkey, the per capita income of the richest fifth of the population is 11.2 times higher than that of the poorest, while in Germany it is only 5.7 times. In addition, Turkey's economic strength lies in the west of the country. The ten richest of the 80 provinces account for 59 percent of the gross domestic product, the ten poorest, all in Eastern Anatolia, together one percent. The per capita income in Izmit, the richest province at $ 7,782, exceeds that of the poorest, Agri, by more than ten times.

Industrialization has started in the traditionally rural areas of Anatolia. The attribute "Anatolian Lions ", which has shaped the Turkish media for some up-and-coming provinces, arouses too high expectations. In central and eastern Anatolia Gaziantep, Kahramanmaras, Corum and Kayseri belong to this group, in western Anatolia Denizli and Konya. Industrial development in these provinces has not been faster since 1980 than in the economically more developed regions of Turkey. The distance just didn't increase any further. That was already enough to stop the exodus from these provinces.

The economic environment for companies is not encouraging: inflation remains high and real lending rates are well above 50 percent; there is no bond market for private companies, and weak governments, often changing twice a year, continue to hold back private momentum. So it is almost a miracle that the Turkish private sector is still alive.

The hostile environment in Turkey has created a new type of entrepreneur who has become immune to economic and political instability. He no longer makes a pilgrimage to Ankara's now empty subsidy pots, but goes his own way, is also pushing for new markets abroad. While German entrepreneurs tend to ask about the risks of a project, their Turkish colleagues investigate the opportunities.

Two factors favor the dynamic: the unregistered economy, which contributes half of the economic output, and the Tax ethics. In the Islamic world, the rich have always determined the amount of their taxes to the needy; Quite a few companies see the state as the needy of today and set their own taxes. With the evaded taxes, they finance social institutions that work incomparably more efficiently than those of the state, and thus accumulate capital for their investments that they cannot otherwise raise either on the financial or on the capital market. The money they evade does not flow out of the country, but is invested in Turkey.

Tax morale is just one point where the "mentality" in Turkey differs from that in Central Europe - even if there is an obvious convergence with the situation in Turkey. Another point is the short-term horizon of many Turkish companies The more so, the smaller they are. They are not interested in a long-term, secure position in the market, but in quick profits, even if they conflict with the company's long-term interests. On the one hand, private entrepreneurship in Turkey is still young Holdings are still ruled by the second generation, and the third is in the starting blocks, and on the other hand, high inflation hardly allows long-term planning horizons.

The big holdings are handing over more and more decisions to professional managers. Families also remain present in them, and even dominate in the smaller companies. Retreating into the family is a result of the legal uncertainty that had shaped the Ottoman Empire for centuries. Trust existed only within the family; in order to survive in uncertain times, it had to be as materially equipped as possible. Even earlier generations of the founding families often received their training abroad. For them, what the former German ambassador in Ankara, Sonnenhol, said, is still true: "The Turk is educated like the European, he speaks like a European, he argues like a European, but he makes oriental decisions." For the younger generation on the other hand, which is strongly Americanized, this no longer applies.

On January 1, 1996, Turkey acceded to the customs union of the European Economic Community, as provided for in the 1963 Association Treaty. In the first three years, Turkish imports from the EU countries increased by 43 percent to 24.1 billion dollars, while the EU's share of total imports rose from 47 to 53 percent. On the other hand, Turkish exports to the EU countries rose from 1996 to 1998 by only 22 percent to 13.5 billion dollars. At the same time, the share of EU countries in Turkish exports fell slightly from 51 to 50 percent. The total Turkish export corresponds to 24 percent of the gross domestic product, the import as much as 30 percent. Turkey, which was isolated two decades ago, is today to a large extent integrated into the world economy.

In connection with the customs union, Turkey has further adapted its economic legislation to those in the EU states, above all with the introduction of competition law and the protection of intellectual property. Customs laws have also been harmonized. However, the implementation of these laws is still not always satisfactory. Moreover, since the entry into force of the customs union, no progress has been made in terms of macroeconomic stabilization. Turkey is still a long way from fulfilling the second Copenhagen criterion and the Maastricht criteria. Major disagreements between Brussels and Ankara are the creation of greater transparency in public procurement, the dismantling of the high Turkish agricultural subsidies and the inclusion of services in the customs union. Brussels does not want to grant the latter due to the associated free movement of workers at the moment.

After the Customs Union removed the customs barriers, Ankara is building new ones non-tariff barriers to tradeto throttle the import. Before an electrical or electronic device can be imported, the TSE must have certified the device. The TSE itself admits that the elaborate procedure only fulfills the political mandate of reducing imports. Another example: Before importing a drug, an official from the Ministry of Health has to check whether the production facility complies with Turkish regulations. However, the number of officials assigned to this test is too small to be able to carry out this task.

Another peculiarity of Turkish trade is that Turkish companies often process their imports and exports via their accounts in Switzerland, and to a certain extent also in Great Britain, but not in Germany since the introduction of the withholding tax under Federal Finance Minister Stoltenberg. This procedure minimizes the bank charges incurred; the foreign exchange with these companies no longer flows into Turkey and also not from Turkey. Due to the high interest rates, few Turkish companies can take out loans. In order to still have some financial leeway, they extend the supplier credit that is customary in practice from 60 to 180 days and thereby pass their problems on to their suppliers.

The customs union has not sparked the hoped-for influx of foreign investment. Your level is disappointingly low. From 1980 to 1998, foreign companies invested only $ 23.5 billion in Turkey, half the amount of FDI in a year in the People's Republic of China. Since the Customs Union, foreign direct investment in Turkey has even declined again and in 1998 was only $ 573 million. Companies that have been in Turkey for a long time continue to expand and modernize their facilities; however, there are hardly any new investors. In contrast, portfolio investments had reached around 1.6 billion dollars in the record year 1997.

The Association of Foreign Investors, Yased, believes foreign direct investment of four to five billion dollars a year is possible. As He lists political instability and high inflation as the most important obstacles, then legal uncertainty, cumbersome bureaucracy, ongoing corruption, as well as poor market transparency and insufficient protection of intellectual property. Another reason, the lack of international arbitration in cases of conflict, was eliminated by the legislature in August 1999 with an amendment to the constitution.

The high inflation requires price adjustments, which are often made monthly. The foreign - like almost all Turkish - companies calculate and calculate on the basis of foreign exchange. It is therefore crucial for them that the price increases are not exceeded by the devaluation of the Turkish lira during the same period.

A Legal uncertainty persists in a number of areas. In recent years city administrations have drawn up new general development plans, arguing that this has increased the value of the developed and undeveloped land. Since the city administration is responsible for the increase in value, it is entitled to a third of a property that has experienced the increase in value free of charge for public purposes. The municipal authorities in and around Istanbul have offered the domestic and foreign companies affected to buy back the right of co-ownership claimed by the municipalities. This type of hidden corruption has been documented several times. Civil lawsuits take a long time because the courts are overloaded, but they are generally fair. The decisive factor is the expert who is appointed by the responsible judge and whose opinion he adheres to in his judgment.

The Turkish authorities insist that foreign companies enter for an employee to be posted before he leaves the country Work visa apply for. The issuance of such a visa can take up to six months. This is especially the case if the law stipulates that the profession can only be exercised by Turkish citizens. This list includes over 50 professions. Exceptions are possible for approved foreign investments. Long delays recently occurred with electrical engineers. This delay is intended to encourage the recruitment of Turkish employees, even if they do not have the same qualifications and aptitude.

Problems are often caused by automobiles which employees of foreign companies are allowed to import duty-free temporarily. Several arrests were made recently because these employees had the customs certificates (“blue Carnet") have not renewed it in time for another year. This is a violation of the very restrictive Turkish law. However, that does not justify the police officers having to treat these people like criminals.

Unions are weak in Turkey for three reasons. First, the Turks are a self-employed people. Of the 25 million employees, no more than 10 million are wage earners, and of these, only one million are unionized. Second, the laws restrict the unions' freedom of action; the 1980 coup had completely cut union activity. Third was the first trade union confederation Turquoise Founded in 1952 when there were almost all state-owned companies. Türk-Is was therefore under the influence of the government from the beginning, and until today the umbrella organization organizes almost exclusively public sector employees. The class struggle "Bund Revolutionary Workers' Unions" (DISK) split off from Türk-Is in 1967. It also has a strong political mission and is mainly represented in private companies.

In the past few years, DISK's willingness to engage in prolonged strikes has decreased. The companies - especially the foreign ones, in which the employees are mostly unionized - had largely met the wage demands since 1995. For a union to be entitled to collective bargaining rights for a company, at least 50 percent of its employees must be members of the union.

In recent years, the wages and salaries of employees and civil servants as well as workers in the public sector have fallen in real terms, but in the private sector they have risen considerably - with differences from company to company. The gross annual cost of an unskilled worker is $ 14,000 to $ 20,000. For the Czech Republic, where labor productivity does not quite reach the level of Turkey, the figure is $ 12,000. In order to maintain the competitiveness of their operations in Turkey, foreign companies are investing in increasing labor productivity. Turkey is less and less a country for contract processing as it was still the case in the 1980s. On the other hand, he had minimum wage before the last adjustment it was only 47.3 million TL gross, i.e. 205 DM. It is increased every year on August 1st. A large number of unorganized ordinary workers receive the minimum wage.

The three most important branches of industry in Turkey - textiles and clothing, automobiles and tourism - have been hit by the recession, albeit for different reasons.

Between 1993 and 1996 the Turkish textile industry greatly expanded its capacities with a view to the customs union. She was the biggest buyer at the textile machinery fair in Milan. Some German manufacturers of textile machines survived in those years, mainly because of the large orders from Turkey. However, the customs union did not bring the textile industry the expected increase in exports to the EU countries. After the outbreak of the crisis in the Far East, even Turkish manufacturers of fibers and textiles made from plastics came under considerable pressure. Their production costs were long above the import prices from the devaluation countries. In order to stop a further expansion of capacities, the government stopped subsidizing investments in equipment for the textile industry in March 1999. A third of all non-performing loans from Turkish banks currently come from the textiles and clothing industries.

Companies that manufacture low-quality products at low prices have been particularly hard hit by the crisis. You can no longer compete with competitors from Asia. However, those textile companies that have relied on quality products with high added value in good time will survive the crisis well. Manufacturers' own creations and brand names prevail. Because of these segments, Turkey will distance itself from the production of "cheaper" goods and will in future compete more with manufacturers from Italy. The Turkish textile and clothing industry will also hold up because Turkey is the sixth largest producer of cotton. With the conclusion of the "Southeast Anatolia Project" (GAP), cotton production will double to at least 1.2 million tons per year.

The two industries will remain the most important of the Turkish economy for the foreseeable future. They contribute eight to ten percent to the gross domestic product, they employ a tenth of all employees and a fifth of all those employed in the manufacturing industry. In 1998 they contributed around 10.4 billion dollars to registered exports, which is 40 percent. Eleven percent of European imports of textiles and clothing come from Turkey.

The macroeconomic importance tourism is hardly inferior to the textile and clothing industry. Every eighth job is directly or indirectly dependent on tourism. In 1998 the industry had foreign exchange revenues of $ 7.2 billion, which was 27 percent of total exports. The industry's share of the gross domestic product is estimated at four to five percent, indirectly it should be as much as 17 percent. In 1980 Turkey only had 56,000 beds and one million vacationers visited the country; in 1998 there were 830,000 beds and 9.7 million foreign tourists. Since 1980 Turkey has quintupled its share of the world tourism market.

The industry fell into a crisis in 1999. Instead of the expected 11 million holidaymakers from abroad, no more than 7 million come. The external reason for the decline were the clashes after the arrest of PKK boss Öcalan. The subjectively perceived very differently security has triggered a wave of cancellations. In addition, the industry has been troubled by a number of developments for years. It has no influence on the political image, which is related to the different views of minority rights in Turkey and in Europe. On the other hand, the gold rush mood that has gripped the industry in recent years has worsened the price-performance ratio compared to the main competitors for the Mediterranean. Those providers who rely on quality did not suffer any losses. For ideological reasons, Turkey is missing the chance to benefit from the religious tourism of the year 2000.

The Turkish market for automobiles is attractive. This is indicated by the fact that the two largest foreign investments in this branch took place in 1999 and that Turkey's motorization density is still low. The number of cars per 1000 inhabitants quadrupled between 1985 and 1998 per 1000 inhabitants. But this ratio still only reaches 102. In Germany it is 556 and even in Poland 259. The local car industry has been in a deep crisis since 1994. How dramatic it is is shown by the low utilization of its capacities. In the first half of 1999 it ranged from nine percent (Toyota) to 37 percent (Ford) for the major manufacturers; the 66 percent for Oyak Renault was an outlier.

Before the earthquake, manufacturers had hoped for a turnaround in the third quarter of 1999. There were two signals of this towards the middle of the year: increasing orders for spare parts and automotive stocks, which gradually emptied as demand grew. However, expectations had a negative effect on the fact that many new cars have been sold in recent years and the need for replacement can thus be postponed. Negative effects were also noticeable in commercial vehicles: the crisis in tourism caused demand for buses to collapse, and the recession considerably dampened orders for new trucks. Now the earthquake is triggering a reluctance to buy in durable consumer goods, especially passenger cars.

Even without the earthquake, the car industry would not have overcome its crisis in the medium term. There are three reasons for this. Firstly, manufacturers are burdened with excess capacities; they are a consequence of the investments that were created in connection with the above-average growth in demand in the years up to 1993. Second, the customs union with the EU, which came into force on January 1, 1996, made imports of automobiles much cheaper; their share of the market has quadrupled since 1995 to 35 percent. Third, in the mid-1990s, suppliers did not invest and modernize as much as automakers did; There are not enough local suppliers for the new models that have since been acquired through the licensors.

Despite the crisis and the earthquake, Ford and its Turkish partner Koc are sticking to building the Izmit plant together. The volume is the largest foreign investment in Turkey in 1999 at $ 530 million.

The two largest car manufacturers, Tofas-Fiat and Oyak Renault, had long profited from the high import tariffs and neglected to make timely modernization investments. They only took place in connection with the customs union. Tofas-Fiat has since replaced a series of automobiles from the sixties and seventies, but there are not enough suitable suppliers for the new models. On the other hand, the quality of the Fiat factories in Bursa is higher than that in southern Italy. Most of the new models produced by Fiat (Palo) and Renault (Megane) are exported.

Foreign investors, too, who like Toyota, Opel and Hyundai only assemble imported kits with a low level of vertical integration, want to export more to Europe in the future. Investors from the Far East in particular are hoping to open up a new sales market there. Before doing this, they must have increased the proportion of locally produced supplies to at least 70 percent.

So far, the local suppliers have mostly concentrated on a customer and their mostly outdated model with a product. They have seldom developed their own, and their outdated technology will make it difficult for them to keep up with the competition. Foreign investors in the industry are mostly export-oriented. You bring that Know-how to Turkey and also run their own developments for their customers. Bosch makes it clear how strong the growth potential is. Its plant in Bursa has doubled its turnover in the first three years since the Customs Union, a further doubling is expected by 2001. In 1999, Bosch is the second largest investor in Turkey with investments of DM 300 million.

© Friedrich Ebert Foundation | technical support | net edition fes-library | September 2000