Anaysis Of Turkey Essay, Research Paper
Analysis of Turkey 1999
Political Stability: (4)***(3) Probably the most unpredictable facet of Turkey at this time. It remains to be seen if the instability will level out and stabilize.
A recent election has brought a new president to power Suleyman Demirel.
Consequently, the next few months are likely to prove beneficial for political critics in Ankara as well as elsewhere but perhaps less so for those who have been waiting patiently for a strong and decisive government to tackle Turkey’s many pending problems. The country of Turkey has a population where more than One-Half of the people are under the age of 35, the consensus is too bring a leader with new ideals and sense of urgency.
Public Policy: (2)***(2) Turkey will continue to be conscience of how they are perceived by NATO and the EU.
Turkey has gone through a series of events to make foreign direct investment more opportunistic. Since the 1980?s policy makers have looked to the Middle East for regional integration. It seems that Turkey want?s to become more active in the international market and that the hindrances to do so are more on the external side of the equation. Turkey has entered NATO, which was a big help; they are trying to enter the European Union. That will be decided in the next few months. Many European countries frown upon the soaring inflation rates and high unemployment. Direct foreign investment averaged only US $70 million from 1980 to 1985, as foreign investors hesitated to put money into the country. Turkey had received debt relief during the early 1980s, but after 1984 most long-term capital came in the form of project credits or adjustment loans arranged by the World Bank.
Views of Political leaders on Foreign Direct investment: (
Since 1963, Turkey has been pursuing the aim of developing its relations with the European Union, then the “European Economic Community?. Prime Minister Turgut Ozal was working hard to improve Foreign direct investment, during his second stint in office in 1983. The current leaders are not doing as well of a job as they could be. The elections in April may be the better avenue to pursue foreign direct investment. Major strides have been taken to revamp conditions for entry, operations and exit for both national and international business by completely dismantling bureaucratic barriers and streamlining procedures based on a thorough deregulation effort. Turkey offers many advantages to foreign investors, its large domestic market of 57 million people desiring high quality products, a qualified manual and technical labor force with low labor costs and high productivity, developed utility and transportation facilities along with a geographic and economic location close to nearby major markets of the world are only some of the many advantages. , Turkey has been a leader in pursuing trade and economic cooperation with the largest of the New Independent States, the Russian Federation. It has initiated a number of programs of education and training in the Caucasus and Central Asia, aimed at encouraging and assisting those countries in the development of the kind of secular democratic system that has served Turkey so well for most of this century.
Major Political Events: (5)***(4) Turks can only hope that things will stabilize, A new leader has been elected recently.
Yilmaz came to power in a three-party coalition in July 1997, after the collapse of the previous WP-TPP coalition that had brought Turkey to the brink of a military coup. For most of the year following his surprise elevation to the job of Prime Minister, Yilmaz and the MP had repeatedly claimed that the government would stay in office until 2000.
On November 25, the Turkish Grand National Assembly (GNA) voted 314 to 214 in favor of a motion of no confidence against the government over corruption allegations, prompting Prime Minister Mesut Yilmaz, the leader of the Motherland Party (MP), to resign. In a separate vote, the GNA voted 315 to 214 for the dismissal of Minister of State Gunes Taner. It is far from clear how the current political crisis will be resolved.
Degree of democracy: (4)***(4) The country must look at it?s Criminal justice system first as to what role it encompasses.
Turkeys domestic and foreign policies have not improved its image to its neighbors. The Turkish Criminal justice system appears to be very harsh to say the least. In a Recent article in The (New York Times Dec.5, 1999), 33 individuals where sentenced to death for their part in a major criminal case. Many Authors and writers are serving lengthy sentences for writings that deter from the secular form of government. Writers of these publications are subject to a minimum 5-year sentence. A lawyer for one of the prisoners was quoted in the English News Wire with the following statement, ?Turkey for the good and freedom of her citizens should reform the whole judicial and political structure or the prisons will soon be flooded with thousands who simply dare express their opinions.”
Tensions with the U.S.: (2)***(2) Look for the U.S. to be a groundbreaker in the technology aspect of future Turkey.
The Truman Doctrine of 1947 marked the beginning of a new era in Turkish-American relations. Close working ties were developed between Turkey and the US in the political, military, economic, technical, social, and cultural fields since that time.
A new chapter in Turkish-American relations opened in the 1980s and cooperation increased significantly. In 1991, Turkey and US elevated their cooperation to the status of Enhanced Partnership. Since then, bilateral relations have continued to prosper and diversify.
Post-Cold War developments have clearly shown that Turkey and the US continue to share a set of common strategic, security and economic concerns and interests.
In this connection, Turkish-US cooperation in the field of energy and on regional issues have recently gained special importance. Both countries have worked well together; the U.S. has and is playing a large role for rebuilding the devastated cities after the earthquakes this past year.
Support for Government: (4)***(3) New leadership is promising but previous instability dictates a subtle change.
The general consensus of Turkish people seem to be that they know that the Government will never be fully embraced, and that they must accept stability over a seemingly impossible ideal system. Turkey, not alone among nations, seems to have a political corruption problem. Politicians often see the dispensing of patronage (with its associated deficits and inflation) to be more important than securing the welfare of citizens. And if April?s elections are any evidence, Turks understand this quite well. The MHP and DSP did well because their leaders seem like reliable guys who don?t steal, says Emre Oral, a member of The Media Group?s executive board. ?That?s the only qualification you need in Turkish politics right now.? Even if their coalition does not succeed, ?I know the country is going well.? (The Wall Street Journal June, 16,1999).
Anti Business forces: (3)***(3) Turks will work with people that can contribute to capital.
Bureaucratic red tape, high interest rates, high inflation, and frequently changing policies hinder private sector business activity. Tax evasion is rampant. The government admits that around one-quarter of total taxes go uncollected, and this figure is probably conservative. Turkey’s tax revenues equal about 22% of GNP, well below the OECD average of 39%. Overhaul of the tax system is a top priority of the current administration and the IMF. The World Bank is preparing a multiyear project to assist in the effort.
Turkey is a member of the World Trade Organization and signed a free trade agreement with the European Free Trade Association (EFTA) in 1991. Turkey signed a trade agreement with Israel in March 1996 and is negotiating free trade agreements with several Central European countries.
Threats of War Internal: (6)***(5) This is a crapshoot it will be up to the newly found leaders to calm this internal conflict.
In 15 years of fighting in Turkey nearly 40,000 lives have been lost. These wars involve the Kurds. The country of Turkey has a powerful military and spends 7 Billion dollars a year fighting these wars. Turkey has intensified its persecution of the Kurds living in the country. One could think of this war as almost a civil one, the Kurds make up 15% of the entire country. The war in Turkey represents the largest use of U.S. weapons anywhere in the world by non-U.S. forces.
Economic Growth: (4)***(3) Large amounts of F.D.I. will aid in building the economy.
Turkey has an economy that is a complex mix of modern industry and commerce along with traditional village agriculture and crafts. It has a strong and rapidly growing private sector, yet the state still plays a major role in basic industry, banking, transport, and communication. Its most important industry?and largest exporter?is textiles and clothing, which is almost entirely in private hands. The economic situation in recent years has been marked by rapid growth coupled with partial success in implementing structural reform measures. Turkey’s economy is a chronic under performer, but growth could accelerate to 8 per cent a year in a stable environment, fostering social stability by creating more jobs, raising living standards and reducing the widening gap between rich and poor.
Turkey’s government is faced with a long-standing problem of controlling high deficit spending and high inflation, which has limited the growth of the economy. Deficit spending through August 1996 amounted to some $9 billion. Given low savings rates in the country, government spending for debt service and social benefits programs has commanded a major share of the budget, restricting available investment funds for badly needed infrastructure improvements. GDP?real growth rate: 2.8% (1998 est.) Economic growth will remain about the same in 1999; inflation should decline further, according to where this information came from. (The Government Fact book Publication, 1998).
Inflation: (6)***(5) Figures have been erratic through the 90?s.
Based on various reports inflation has been an inherent problem all throughout the 1990?s 1n 1991 it was at 70 % and in 1992, 66%.
Turkey has battled with chronically high inflation caused by previous governments’ emphasis on growth. The situation in recent years has been marked by rapid growth coupled with partial success in implementing structural reform measures. Inflation declined to 70% in 1998, down from 99% in 1997. Although inflation came down 29% the numbers are still staggering. The government somewhat unsuccessfully has been utilizing monetary measures instead of fiscal to reduce inflation. Lowering inflation would make the treasury’s debts more manageable and bring down interest rates, so that companies would invest more. Deregulation and privatization would further cut government deficits, boosting productivity and growth as well.
Unemployment: (4)***(3) New opportunities regarding technology will help.
Unemployment is estimated at 6.4 percent. Unfortunately, rates are expected to be higher by the end of next year. Due to some political uncertainty in the earlier 1990?s many factories shut down. An excess labor supply relative to industrial work is responsible for a 10-12 percent rate in those areas. In more rural areas rates as high as 25 percent can be noted. Similar to Canada in that the rate is much higher in such rural zones. Inversely, Rates are much lower in the free-trade zones where industries are found at a much denser rate.
Government Incentives: (2)***(2) Turkey has worked hard to provide incentives for F.D.I. will continue the same path.
Turkey offers many advantages to foreign investors: its large domestic market of 57 million people desiring high quality products; a qualified manual and technical labor force with low labor costs and high productivity.
Since the 1980s, the Turkish government has followed liberalized out-ward-oriented economic polices. There were rapid changes in the economic and social structure of Turkey. Deregulation of interest rates, the establishment of organized markets for money, foreign exchange, stocks and securities, the liberalization of capital movements, and reforms in the banking sector, were just some of the changes. The most significant provisions foreign investors are subject to are:
· Approval obligation
· Foreign participation is permitted up to 100%
· Forms of business entities can be limited liability or corporation
· Employment of expatriate staff is permitted
· Equal treatment is the basis for foreign and domestic investors.
The Government of Turkey annually issues a list of investment incentives. In order to take advantage of such incentives, a special “Incentive Certificate” has to be obtained together with the investment approval from UT. According to the current incentive regime, a minimum investment of 6 billion TL is necessary for priority regions and 12 billion TL for other regions. Incentives for 1996 are as follows:
· Tax Allowances (30-100% according to location)
· Refund of VAT+10% for locally purchased machinery
· Customs exemption on imported machinery
· Customs expenditure on raw materials (in accordance with the specifications mentioned in the regime).
· VAT Deferral on Imported Machinery and Equipment.
· Allocation of land
· Discounts on electricity charges
Fiscal policies: (4)***(3) Government looks promising to make this a focus of reform.
Turkey?s enforced commitment by the IMF to tight fiscal policy next year is the key condition for Turkey to secure a stand- by accord with the International Monetary Fund. But some bankers believe the Fund may support Turkey with a stand-by loan even if Ankara fails to draw up a fully satisfactory budget for 2000 in view of the enormous damage caused by August’s earthquake. Turkey has had difficulty putting together a 2000 budget and the talks with International Monetary fund are being delayed. The task of computing the costs of the earthquake is going to dictate when decisions will be made regarding loans from the IMF. The IMF pledged financial resources in July if Turkey makes reform progress. The government has moved quickly on structural reforms, pushing banking, pension, and international arbitration laws through parliament. But government sources say Turkey?s lack of commitment to a tight fiscal policy for 2000 have raised concerns about the fate of the talks. (WASHINGTON, Sept 09,Reuters)
Foreign Debt: (4)***(4) Funds will continue to be needed.
Tansu Ciller swept into the Prime Minister’s office in Ankara. She was confident and full of ideas, epitomizing a new generation of politicians whom, many hoped, would transform Turkey into a key player in Europe and Asia. Ciller’s policies were intended to restore faith in Turkey?s public finances, but continued government borrowing and her inattention to the $66 billion foreign debt undermined lenders’ confidence. Both Moody’s and Standard & Poor’s, the influential U.S. rating agencies, downgraded Turkey?s credit standing, which further scared off potential private investment. Ciller inherited an economy overheated by inflation and a government structure groaning under the weight of Red tape and beurocrocy.
Infrastructure: (5)***(4) The slow process begins to make Turkey a fluid country again.
The government is giving special priority to major infrastructure projects, especially in the transport sector. Although most state investments were put on hold in 1994, the government has resumed planning and construction of many airport, port, and highway ventures, in large part through project finance with private capital. As of 1987, Turkey had 106 usable airports, 62 of which had paved runways. Turkish Airlines (Turk Hava Yollari–THY), plagued by a poor safety record in the 1970s, fought its way back to profitability during the 1980s and was considered a candidate for privatization
Some 20 undertakings involving project finance, worth about $14 billion, have been proposed or are under development. The government planned to build 3,000 kilometers of highways by the year 2000 and to upgrade existing roads. The Ozal administration began a major highway project that, when completed, would give Turkey highways that traversed the country, making it possible to handle increased levels of freight between Europe and the Middle East. This project, along with the second bridge across the Bosporus, would form 3,600 kilometers of a Trans-European motorway, a 10,000-kilometer route from Gdansk on the Baltic Sea to cities on the Caspian Sea and the Persian Gulf.
The recent earthquakes have destroyed many entities of travel; it will be a long recovery period before the Country rebuilds from the disastrous 1999.
Remittance of Earnings: (2)***(2.5) must remain stable in order to remain an incentive for F.D.I.
Turkey has created a Foreign Investment Directorate (FID) has passed legislation to promote and encourage foreign much needed investment, especially in technological and know-how sectors, job creation, export promotion, tourism and capital investment. If investors go through the procedures of starting a venture, a good experience is likely. Turkey has no set rules for reinvesting capital unless it is stipulated in the venture. The planning stage is of crucial importance, in that you should clarify and obtain all the necessary documentation. Otherwise, subsequent rectification is not possible and an investment without permission will create problems for taxation and the repatriation of capital. The legislation, which regulates the investment establishes the ground rules for the remittance of foreign capital and simplifies this process to further Turkey?s open-door policy with the world markets.