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1. Background Information
1.1. Economic Developments
High inflation rates have been one of the most important problems of Turkey’s economy for 25 years. This problem has weaken the performance of economy in many respects and caused an unstable economic structure to get continuity. In this period, economic growth has been under the potential generally and followed an unstable progress. Besides the economic costs of inflation dependent on the loss of growth there are also significant social costs of inflation. By causing economic units to adapt to the situation, chronic and high inflation has made people to be in the habit of indexing backwards. This habit has transformed the inflation into a fact which feeds itself. İn this framework the main objectives of the economic policies being followed are to establish a stable and continuable economic structure and to decrease the inflation permanently.
For the last 10 years there has been a fluctuating growing process in Turkey. In this process, the main developments characterizing Turkey’s economy are high reel interest rates, the deterioration in the balance of public expenditures, fluctuating process of inflation, unstability in economy, Asia and Russia crises, the earthquake occured in 1999, financial crises occured in 2000 November and 2001 February in Turkey. In this scope, it is seen that there aren’t any appropriate conditions in economy in the respect of continuable growth. There has been a slowing down in the increase of productive capacity of economy. When analizing the potential production and the deficit of production in Turkey’s economy, it is seen that the production which decreased significantly under potential because of the economic crisis in 2001 has started to approach the productive level again with the economic movement starting in 2002 and 2003. With macroeconomic policies transformed into a new economic programme having a three-year term and applied in the beginning of 2002 after the 2001 economic crisis and with structural reforms an active process has started in the economy. In the increase of GDP which is 7.9 % in 2002, stock change and foreign demand were effective. From the polint of view of sectors, the increase speed of added value was 6.9 % in agriculture, 9.4 % in industry and 7.5 % in service sector. The movement in economy had continued in 2003 too. In the programme carried out to overcome the financial crises some measures related to exporting, small and medium-sized enterprises and financial problems of business enterprises were taken. When evaluating the GNP per capita; while the figure per capita was 2965 $ in 2000, it decreased to 2123 $ in 2001 and increased to 2598 $ in 2002 and it was 3383 $ in 2003.
One of the most important problems of Turkey, inflation, had been stated with three-division figures sometimes, after the economic crises lived in 1980, 1994 and 2001, been tried to decrease gradually in the result of economic policies but the decreasing level aimed had not been possible up to 2002. the economic programme put into practice with determination and structural reforms carried out were effective in the struggle with inflation in 2002. According to the annual average figures; the inflation figure was 84.6 % in 2000 December, 54.4 % in 2001 December, 45 % in 2002 December and 25.3 % in 2003 December.
Table 1: Sectoral Growth Rate, (2000-2004(II.Quarter))
(%)
2000 / 2001 / 2002 / 2003 / 2004(I.Q) / 2004(II.Q)Agriculture / 4.1 / -6.5 / 6.9 / -2.5 / 7.5 / 3.4
Industry
(Manufacturing) / 5.6
5.9 / -7.5
-8.1 / 9.4
10.4 / 7.8
8.6 / 10.3
11.3 / 14.9
16.1
Service / 5.9 / -7.7 / 7.5 / 6.7 / 11.4 / 13.9
Construction / 5.8 / -5.5 / -5.6 / -9.0 / 2.9 / 0.2
Trade / 11.6 / -9.4 / 11.0 / 8.1 / 16.3 / 19.1
Transportation / 5.1 / -5.3 / 6.0 / 8.4 / 4.3 / 10.7
Import Duty / 27.3 / -25.1 / 24.7 / 22.6 / 33.8 / 33.2
GDP / 7.2 / -7.5 / 7.9 / 5.8 / 10.1 / 13.4
GNP / 6.1 / -9.5 / 7.9 / 5.9 / 12.4 / 14.4
Source: State Statistics Instittute of Turkey.
In the second quarter of 2004, GNP has shown 14.4 % of growth rate, while GDP has shown13.4 % of growth rate. Rises in GNP and GDP have been realized in high percentages within the scope of the positive developments in industrial production index and the other economic indicators. High growth rates in industry, in import duty and in trade sectors have been effective in this development.
Privatization
The first legal regulation related to the privatization program, which came on the agenda after 1983, came into effect with the public economic enterprises founded in 1984 and the Law No. 2983, which gave the opportunity either to make natural or legal persons a partner by means of share certificate issuance for the foundations that belong to these enterprises or to turnover the right of exploitation of these foundations for the specific time intervals.
Today privatization implementations are being realized within the legal framework of Privatization Law No 4046, Law No 4971, related public acts, Petroleum Market Law, Public Tender Law and the Right of Information Procurement Law along with the legal amendments and regulations that have come into effect in the course of time.
In Turkey, privatization works started in 1984 with the turnover implementations carried out in the private sector in order to complete the incomplete foundations that belonged to public or establish a new foundation instead of the incomplete one. Privatization program has been accelerated by taking public shares of the fully public-owned or public participation enterprises into privatization scope, especially since 1986.
As a result of the privatization implementations realized up until now, share certificate or asset purchase/turnover transaction has been made in 176 enterprises and there has been no public share left at all in 164 enterprises out of the subject enterprises. On the other hand, the other 12 enterprises, which have partially realized privatization transaction by means of block purchase, public offering, international offering, purchase in ISE (Istanbul Stock Exchange) or asset purchase, are still holding public shares.
The total amount of the privatization implementations, which have been realized since 1985, has reached to USD 8.9 billion, some of which include share certificates issued by instalment and in accordance with the exchange rate. USD 8.2 billion net intake has been provided out of the asset purchase transactions.
PRIVATIZATION TRANSACTIONS CARRIED OUT BETWEEN 1986 - 2004
Block Purchase 3.737.568.478.-USD
Foundation / Asset Purchase 1.394.338.317.-USD
Public Offering 1.642.407.726.-USD
International Corporate Offering 1.026.332.982.-USD
Purchase in ISE 800.819.126.-USD
Pending Foundation Puchase 4.368.792.-USD
Conditional Turnovers 302.657.488.-USD
TOTAL 8.908.492.909.-USD
USD 2.1 billion dividend income and USD 1.9 billion intake from other resources have been provided out of the corporations under privatization, and total resources have reached to the level of USD 11.2 billion. USD 11 billion has been used related to the same period. 97% section of this usage was comprised of the amount which was transferred to the Treasury, and which was transferred as a loan of privatization bonds as well as capital participation, credit loans and personnel payments into the corporations concerned.
A compensation payment of USD 79.822.756 has been made to 7.113 personnel in the corporations, which were found appropriate to be sold or closed down within the framework of the privatization program and within the scope of privatization social support project which has been carried out by İŞKUR (Turkish Job-creating Agency) and KOSGEB (Small and Medium Industry Development Organization) and in cooperation with the Privatization Administration in order to diminish unemployment by providing support.
Since the start date of the project, 19.185 people have utilized and kept utilizing from the re-placement service, for which USD 15.065.801 has been spent.
Small And Medium Sized Enterprises (Sme’s)
Deemed as the basis of economic development and sustainable growth, small and medium size enterprises have a pivotal significance in Turkey along with their dynamic structures. They contribute to the economy on one hand by producing final products and services individually in a competitive atmosphere in which large size undertakings present, and on the other hand by producing half product inputs that large size undertakings utilize.
In Turkey, SME’s constitute %99.8 of all business enterprises and %76.7 of the total employment. Within the total investments, the quota of SME investments reaches to 38%, and 26.5% of the total added value is created by such enterprises. The quota of SME’s in total export is 10%. Its quota in bank credits is around 5%. SME’s have an important place in industry. In consideration of the work description mentioned in the Law No. 3624 on KOSGEB (Small and Medium Industry Development Organization) dated 12th April 1990, the enterprises which employ 1 to 150 employers are considered as SME, and according to the 2002 industry census, 208.183 people have been working in the manufacturing industry in total, and 922.715 people have been employed in such enterprises. SME’s constitute 99.2% of all manufacturing enterprises and meet 55.6% employment in this sector.
362 small scale industrial estates, in which 83.383 working premises are found, were constructed until 2003 in order to let the manufacturing industry enterprises work under sanitary conditions and well-planned organisation. 400.000 employers are still being employed in these industrial estates which have an employment capacity of 500.000 people. There are apprenticeship schools and vocational education centers in 275 of the Small Industrial Estates that are active.
Production was started in 10.582 working premises out of 13.344, which are located in the 65 organized industrial zones formed under Law No. 4562 in 2000. A sum of 351.299 employers have been employed in these working places that have an employment capacity for 1.159.754 employers. There are 2.258 working premises in 118 Organized Industrial Zones, which are still under construction, and 466.000 more employer are able to be employed in these working places.
A few problems emerge in Turkey as far as the activities and the competition conditions of the SME’s are concerned. Low level of technology, deficiency in know-how as a result of inadequate use of consultancy and R&D (Research and Development) activities, limited credit facilities in such levels that are incomparable with the added value production and the contribution provided to the employment, besides the lack of capital market instruments which may serve to SME’s emerge within the basic problems.
1.2. Labour Market
(000 Persons)
Year / 2000 / 2001 / 2002 / 2003 / 2004 (II. Q)Total Population / 64.059 / 65.038 / 66.039 / 69.340 / 70.417
Non-institutional Civilian Population(15+Aged) / 44.765 / 45.702 / 46.650 / 48.912 / 49.694
Labour Force / 22.031 / 22.269 / 22.699 / 23.640 / 24.457
Employment / 20.579 / 20.367 / 20.287 / 21.147 / 22.188
Unemployment / 1.452 / 1.902 / 2.412 / 2.493 / 2.269
Underemployment (%) / 6.9 / 6 / 5.4 / 4.6 / 4.1
Population growth has continued in Turkey in spite of the decrease of its speed. The increase of population in working age has not reflected to labour force. So, labour force participation rate has decreased and the figure of persons not in labour force has increased. The negative effects of crisis in 2001 reflects the figure of people employed in 2001 and 2002. The figure of unemployed people has increased related to this development. Another important indicator in the table is the figures of underemployment. İn spite of its decrease from the year 2000 to 2004, it is stil at high levels. The high rates of underemployed people shows that the usage of potential capacity of people employed is not enough. This situation makes underemployment problem as important as unemployment.
1.2.1. Employment
The sectoral distribution of the people who have been employed in the manpower market as of 2003 is 33.9% in the agriculture sector, 22.8% in the industry sector and 43.4% in the services sector. In Turkey, a decline has been observed in the employment quota of the agriculture sector as per years. The ratio, which had been 49.7% in 1985, declined in 33.9% in 2003. However, when compared with the developed countries, this ratio is quite high. The employment ratio of the agriculture sector in the developed countries has been receded down to 3-4%. On the contrary, the employment in the services sector keeps increasing. The ratio, which had been 29.5% in 1985, rose by 43.4% in 2003. A significant part of the rise, which can be seen in the employment ratio of the sectors apart from agriculture sector, emerges in the services sector. Today, the rise in employment in the services sector can be observed to realize much faster than the industry sector.
On scrutinizing the people employed within the framework of urban and rural difference, 11.287.000 of the employment realized in urban residential areas and 9.860.000 of the employment realized in the rural residential areas.
The distribution of the people employed according to their work conditions as of 2003 is such: 50.6% of the people employed are wage earner and daily paid, 29.8% of the people employed are working on their own account and by bearing the employer status, 19.6% of the people employed bear family worker status without any remuneration.
The distribution of the people employed according to their education levels is such: 7.6% of the people employed are illiterate. The ratio of the people can be ranked as follows: 2.8% people are literate but not graduates, 48.8% people are primary school graduates, 0.8% people are elementary education graduates, 10.4% people are secondary school graduates, 0.09% people are secondary school eguivalent vocational school graduates, 10.5% people are high school graduates, 8.2% people are high school equivalent vocational school graduates and 11.0% people are higher education graduates.