Turkey - Economic development





Economic policy is formulated by the State Planning Organization. In June 1961, an integrated fifteen-year plan was announced, consisting of three five-year plans designed to achieve a 7% yearly increase in national income. In March 1963, the first five-year plan was inaugurated; this 1963–68 program to some extent fell short of its goals, but its average annual increase of6.7% in GNP was still impressive. Two objectives of the second five-year plan (1968–72) were economic viability and social justice. The role of the public sector under this program was twofold: creation and expansion of the economic and social infrastructure and development of modern manufacturing industries. Economic policy, however, still sought the largest possible active role for private enterprise in the development of industries, and the government sought with limited success to encourage private activity through fiscal concessions, financial assistance, and state participation in mixed enterprises. The third five-year plan was inaugurated in 1973 with the objective of helping Turkey prepare for its future membership in the EC. The long-term goals were to increase the per capita GNP from $400 in 1972 to $1,500 by 1995, to reduce agriculture's share of the GDP to 12%, and to increase industry's share to 37%. One of the main aims of the third five-year plan, still largely unmet, was to increase the efficiency of the tax-collection service. In agriculture, the objectives were to increase food supplies for export and to feed a growing population through improved irrigation, technical advice to farmers, and the establishment of more cooperative farms.

All these efforts required large new investments and massive foreign loans which, coupled with the huge increases in the cost of oil imports after 1973, led to the financial crisis of 1977–78. Since 1980, Turkey has deliberately pursued a deflationary policy, allowing the international exchange rate of the lira to fluctuate on a daily basis from 1 May 1981. The government also delayed several ambitious development proposals, mainly because new foreign credits were not available. However, a number of smaller projects financed by the IBRD went forward. Meanwhile, the fourth (1979–83) and fifth (1985–90) five-year plans continued to stress industrial development, deflationary monetary policy, and export promotion. The creation of free trade zones, in the mid-1980s, was a major step in line with these policies.

Long-term economic programs adopted in 1991 and 1994 planned to reform social security and subsidy programs, implement tax reforms and improve tax administration, and restructure state enterprises, transferring certain inefficient ones to the private sector. By 1996, these plans had reduced the government's role in the economy, but huge budget deficits continued to plague the economy and further reforms are needed if Turkey is to solve its economic problems.

Turkey's geostrategic significance received a big boost in 1999 when its leaders, along with those of Azerbaijan, and Georgia agreed to the construction of an oil pipeline from the Caspian Sea port of Baku to the Turkish Mediterranean port of Ceyhan. Completion of the pipeline may come as soon as 2004.

Full membership in the European Union (EU) constitutes one of Turkey's chief aims. In December 1997 Turkey was effectively removed from the EU's list of candidates for entry. As a result, Turkey suspended its relations with the EU. However, the 1997 decision was reverse at the December 1999 EU summit in Helsinki as Turkey formally became a candidate for accession in the next round of EU enlargement. Turkey's chronic economic problems along with reservations about human rights preclude Turkish entry for at least a decade according to most observers. Nevertheless, Turkey's status as a candidate member provides clear goals for Turkish development.

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