Turkey\'s progress
Descrição do Produto
Radboud University Nijmegen Nijmegen School of Management 2014-2015 Academic Year
Conflict, Aid and Development
January 15th, 2015
Turkey’s progress
Costanza Maria Fileccia N° s4527704 Erasmus Programme MSc in Economics (Siena, Italy)
C. M. Fileccia
Radboud University Nijmegen
Introduction: historical perspective Turkey has been living a process of change since the nineteenth century, when the population and the urbanisation began to grow and the modern economy captured it. The country underwent profound economic but also institutional, political and social transformations. This process of development renovated the Turkey-country system from a traditional one into an industrial society. At the beginning of the nineteenth century and under the Ottoman Empire power, the Turkish region was an agricultural economy organised around a military regime. During the nineteenth century, the entire European continent experienced a structural transformation due to the industrial revolution that affected the entire socio-economic system and ramped international trade, whereas Turkey was still compelled to the Ottoman regime, which exerted a monopolistic control on every socio-economic development. However, the global arena around the Ottoman Empire was radically changing and for its survival the country was forced to transform the tenure of state lands and rent them out to contractors in order to increase the income to the treasury (Yücekok, 1968). Several reforms took place and the Western Europe began to intensify its commercial relationships with the Ottoman state in order to protect its strategic interests and contrast the growing Russian operations. Besides, with the end of the nineteenth century, the Ottoman Empire era was already coming to a conclusion; indeed the Kemalist movement1 was growing up driving a ‘bourgeois’ revolution, which embedded six fundamental principles as republicanism, populism, and laicism, reformism, nationalism and state centralism. This revolution brought to the birth of the Republic of Turkey in the 1923, entailing political and institutional sweeping changes. During the 1930s an industrialisation process started with the new state elite, assuming the strategy of etatism (Pamuk, 2010) with the state being the manufacturer and financier of the urbanisation programs. In a first moment, the purpose of defending the new and still weak Republic implied various protectionist policies against every outer development and accumulation. After the World War II, Turkey elected the Democratic Party, orienting itself economically to the Western capitalism; this indeed moved the economic and political power from the state to the private sector, and geographically from Ankara to Istanbul. The agriculture sector rose, improving the yields and productivity through the use of
mechanization, irrigation systems, fertilizers, and high-variety
1 Kemalism, as it was implemented by Mustafà Kemal Atatürk, was defined by sweeping political, social, cultural and religious reforms designed to separate the new state of Turkey from its Ottoman tradition and embrace a Westernized way of living, including the establishment of democracy, civil and political equality for women, secularism, state support of the sciences and free education, many of which were first introduced to Turkey during Atatürk's presidency in his reforms (Wikipedia).
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Radboud University Nijmegen
seeds (Pamuk, 2010). Together with the increasing migration from rural to urban areas, new low cost housing (gececonku) boomed. In 1960 the general C. Gürsel led a coup d’état and launched an austerity policy; and indeed during the 1960s and then after when the Import Substituting Industrialisation (ISI) was adopted, an era of protectionism began so as to defend the domestic market and to impose the national manufacturing sector, whereas the Turkish exportation was not encouraged. During all the 1980s, Turkey was characterised by a turbulent period full of coups d’état. The martial law was imposed. In the 1983, the Motherland Party, a conservative party, arose to the government; Turkey was getting better but the historical events of that period affected profoundly the Turkish system.
The Turkey transition after the 1990s Turkish history is underpinned by the drastic changes that this country has undergone over time, including in political economic and social matters. Today, it is one of the most dynamic
countries
strategic
relationships
international
that in
economic
takes the and
diplomatic scenario. The Turkish area is located exactly on the middle-line between the European and the Asian continent; for this reason, its geopolitical position allows this country to play a tactical role and to tie important alliances with both Western and Eastern sides of the world. In effect most of the social, political and economic reforms started by Turkey, are directly connected with its relationship with the European Union and its interest to be a full-member of the EU.
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C. M. Fileccia
Radboud University Nijmegen
Behind the Turkish transformation process: European Union Membership Turkey became a partner of the Council of Europe in 1949 and of the European Economic Community in 1963, and this has contributed to gradually integrate the country with the Western capitalism and the European institutional system. Today Turkey is part of the North Atlantic treaty Organisation (NATO), playing a fundamental role in this defence system. Moreover, it is part of the Organisation for Economic Co-operation and Development (OECD). In the 1987, Turkey asked to become a member of the European Community (EC), but the EC itself was living a transition period with the adoption of the ‘Single Act’ for its transformation into the European Union and it was not available to open new negotiations. Following this transitory period, and during the Helsinki Summit in 1999 the EU conferred Turkey the candidate status but the country was still too far to full-satisfy all the requirements. Turkey has undertaken and intensified several transformations in order to honour the Copenhagen criteria2 but the political criteria (which include a stable democracy, the compliance with human rights, the safeguard of minority groups’ rights and the observance of the rule of law) are still impeding the Turkish adhesion, e.g with regard to the Kurdish and Cyprus issues. Anyway, many EU member countries have voiced other preoccupations concerning the Turkish adhesion to the EU such as its socio-economic backwardness conditions, the uncontrolled migration but the most important argument regards the cultural diversity between the two subjects.
Cultural and political transformations Institutional changes A good institutional framework is an essential element for development and a trusty relationship within and between people and their institutions is an essential element for a country’s well functioning and the national well-being increase. After the transformation from an absolute monarchy into a Republic, Turkey’s institutional environment has seen a proper mutation. At the beginning of the 2000s, when the Justice and Development Party (Adalet ve Kalkınma Partisi, 2
The Copenhagen criteria involve political, economic and ‘communitarian’ criteria; the economic criteria include a reliable market-based economy, economic stability in order to engage competitive pressure within the Union market; the communitarian criteria, strictly linked with the political criteria, concern the system capability to respect the Union goals: political, economic and monetary goals (EU website).
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Radboud University Nijmegen
AKP) was elected, the government system shifted from a military and bureaucratic configuration to a more democratic one. The AKP has been able to transform the rigid military nationalism still inspired to the Kemalist principles into a more democratic form that also embraces Islamic beliefs. However, it appears that the institutional changes are not over yet; indeed the Prime Minister Erdoğan aspires to convert the parliamentary republic into a presidential one. For this and other reasons informed sources state there could be risks of an ad hoc governance that could delay the political program already undertaken (Economist Intelligence Unit, 2014). Harmonization Laws As already said, the Turkish interest to be a EU member has driven lots of the political and social reforms in Turkey. In the 2002, the Turkish Grand National Assembly issued a reforms’ package, the Harmonization Laws, concerning the anti-terrorism law and the Turkish penal Code for the purpose of making amendments to the Constitution. In particular, this revision “abolishes the death penalty except in times of war and imminent threat of war, in line with the European Convention on the Protection of Human Rights and Fundamental Freedoms” (Tanlak, 2002). Furthermore, the right of free expression has been reinforced, the activity associations has been encouraged and expanded and the safeguard policy against natural disasters has been implemented. Hereinafter, other constitutional principles have been introduced such as women’s rights and gender equality, antidiscrimination rights that involve language, race, colour, gender, disability, political opinion, philosophical belief, and religion; while other values still need to be improved as - the respect for the lesbian, gay, bisexual, transgender and intersex (LGBTI) rights – (EU Turkey Progress Report, 2014). The Islamic question and its political impact Since its foundation by Mustafà Kemal Atatürk, the Republic of Turkey has been a secular state, bearing a conflicting relationship with the Islamic movements, which were excluded from the political scene because considered a threat for the internal stability. The Kemalist principle of laicism has been used as a buffer over the influence of Islam in state matters; indeed the use of another language or other alphabetic letters was banded. However, the important role of the Islamic movements in the political, economic and social Turkish life, especially after the 1990, cannot be denied and neglected.
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C. M. Fileccia
Radboud University Nijmegen
In all cases, the notion of Islamic movements is a generic term that identifies all the Islamic organisations, therefore it should be distinguished into tariqas (religious orders) and the jama’ats (movements); the tariqas refers to a hierarchical and traditional structure concerning the ‘school’ or the ‘philosophy’ of Islamism, while the jama’ats is a non-organised congregation, in the meaning of community (Kyeşılmen and Özcan, 2014). The latter include young movements, which grew up around the 1980s when the Prime Minister of the time supported a political opening towards multiple Parties, including Islamic movements. In the 1996, Necmettin Erbakan leader of the Refah Partisi (Rp), a party based on Islamic ideology, got the majority and an ‘Islamic’ government was created for the first time. However, the influence of the Kemalism was still too strong and after only one year a military intervention (coup d’état) forced him out. Yet, after five years some Erbakan followers, among which the current president of the Turkish Republic, Abdullah Gül and the current Prime Minister, Erdoğan, founded the Justice and Development Party, which has been able to marry Muslim principles and those belonging to the Turkish nation. At one time, fitting with the new international context, assuming a pro-European position and originating, therefore, a new kind of nationalism more flexible than the Kemalist one. Indeed the AKP still governs the Turkey, still leads the democratisation process , and is able to withstand the pressures of the military. Furthermore, in order to respect the Copenhagen criteria with respect to the minority groups’ right (Kurdish community), Erdoğan has issued new dispositions, which include a reduction of the election threshold to the Parliament from 10% to 5% (EU Turkey Progress Report, 2014).
The economic changes The Turkey is one of the most dynamic countries, which displays unique economic and diplomatic affairs in the global scenario. Indeed, its geopolitical position allows to this country to play a strategic role and to get important alliances with both Western and Eastern sides of the world. Recently, the Turkey has reinforced an orientation of its foreign affairs towards the Middle-eastern countries and at the same time it is developing several partnerships with the Caucasian Republic and the Russian Federation, especially in the matters of energetic and security cooperation. Moreover, the country is constructing Balkan and African alliances in order to complete its multiregional scenario. Few analysts attribute this “eastern-wards” or “Western-centrifugal”
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Radboud University Nijmegen
renovated orientation to the delays and to the persisting Western scepticism of fully-adjoining Turkey into the EU. Since the end of the 1980s, the economic Turkish framework had been changing towards a Western capitalism, or better towards an Europeanization, in order to become a member of the European Union. Anyhow, indeed the internal political tensions and the existing divisions of responsibilities inside the political system, all influence the economic policymaking and make the budget coordination more complex (EU Turkey Progress Report, 2014). Moreover the economic processes aimed at the international integration have produced diverse regional phenomena, reducing the national poverty but also increasing several inequalities, especially income inequalities with the result of raising a dualism between the rural and urban areas. The human development According to the human development report 2014, the relative index and the factors that are comprised in it, show a strong improvement in the Turkish human condition, especially for all the constitutional amendments implemented. After the 1980, the HDI increased from 0.496 to 0.759 although the discount for inequality reduces the value of the human development index at 0.639 (HDR, 2014).
Tab.1: Turkish human development trend
Life expectancy at birth
Expected years of schooling GNI per capita (2011 $PPP) HDI value
1980
58,7
7,5
8,656
0,496
1990
64,3
8,9
10,546
0,576
2000
70
11,1
12,89
0,653
2010
74,3
13,9
16,587
0,738
2011
74,6
14,4
17,814
0,752
2012
74,9
14,4
18,011
0,756
2013
75,3
14,4
18,391
0,759
Source: UNDP database
As already said above, Turkey presents a consistent income inequality between the urban and the rural area. Although these inequalities began to decay in the 2000s, during the global financial crisis 15.01.2015
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Radboud University Nijmegen
period the inequality conditions took a reverse direction. According to UNDP data, the poverty indicators increase, the GNI per capita improves from $US 8,656 in the 1980 to $US 18,391 in the 2013 (2011 $PPP, UNDP database).
Tab. 1: Turkish inequality HDI
0.759
IHDI
0.639
IHDI (life expectancy adjustment)
0.757
IHDI (income adjustment)
0.616
IHDI (education adjustment)
0.56
Inequality in life expectancy %
11
Inequality in education %
14,1
Inequality in income %
21,8
Source: UNDP database
Health and education development In the last years Turkish government strongly invested in public sectors as education and health systems. Turkish education has improved since the 2003, especially in mathematics, reading and science according to the Programme for International Student Assessment (PISA). Additionally, the gross enrolment ratio3 in tertiary levels increase from 13% in the 1990 achieving a 69% in the 2012, while in the secondary level it achieved the 86%. The Turkish health system has also improved thanks to various reforms implemented such as the Health Transformation Program (HTP), which has created a new health public system in Turkey. Now all regions have access to health care. The public expenditures for health and also for education have increased; public health expenditure4 reached a 13% on government expenditure in 3
Gross enrolment ratio is the ratio of total schooling enrolment, regardless of age, and to the population of the age group that officially corresponds to the level of education shown. (Source: United Nations Educational, Scientific, and Cultural Organization (UNESCO) Institute for Statistics) 4 Public health expenditure consists of recurrent and capital spending from government (central and local) budgets, external borrowings and grants (including donations from international agencies and nongovernmental organizations),
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Radboud University Nijmegen
the 2013.
The economic development Today, Turkey is the eighteen largest economy in the world. Nevertheless, its macroeconomic scenario is pretty unstable. Indeed starting from the AKP’s success, the Turkish economy has fluctuated, defining three principal phases. The first phase started immediately successive to the deep currency and banking crises crossed at the end of the 1990s, during which the country GDP growth reached a -6% in the 2001, the unemployment rate was 8% of the total labour force, and the inflation achieved the 53% on the consumer prices. The 2002-2007 period evidenced a sharp recovery in which the GDP growth achieved an annual 9% and the inflation strongly decreased until the 9% in the 2007. The second phase began after the 2008 global financial crisis that determined a drastic decline in Turkish economy. During the 2010 and the 2011 the Turkish GDP growth increased and reached an annual 9% (from the -5% in the 2009), insomuch as it has been named a “Chinese” growth. This was pushed by “debt-fuelled private consumption and property investment, which included awarding big contracts to fast-growing and highly leveraged Turkish construction firms. Investment in the industry sector, on the other hand, has languished” (The Economist, Jan 2014). Graph. 1: GDP growth (%)
Graph. 2: Inflation, Consumer Prices (%) 120
12 10 8 6 4 2 0 -‐2 -‐4 -‐6 -‐8
100 80 60 40 20 0
Turkey
Source: The World Bank Database
EU
Turkey
EU
Source: The World Bank Databa
and social (or compulsory) health insurance funds (Source: World Health Organization National Health Account database (see http://apps.who.int/nha/database/DataExplorerRegime.aspx for the most recent updates).
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Radboud University Nijmegen
Graph. 3: Unemployment rate (% on total labour force) 16 14 12 10 8 6 4 2 0
Turkey
EU
Source: The World Bank Database
However, during the last two years the Turkish economy has slowed down again around the 2% with an increase in the net exports, determining a third phase in Turkish economic panorama. Tab. 2: Turkey’s macroeconomic scenario (with projections) GDP growth (%) GDP
2009
2010
2011
2012
2013
2017
-‐4.8
9.0
8.5
2.3
3.2
4.6
1.3
1.3
1.4
1.3
1.3
1.3
8,528
10,062
10,522
10,914
11,582
15,865
6.3
8.6
6.5
10.6
7.1
5.5
14.0
11.9
9.9
10.3
10.5
10.5
72,1
73,0
74,0
74,9
75,8
79,3
-‐13,4
-‐46,6
-‐77,1
-‐71,7
-‐71,7
-‐99,9
-‐2.2
-‐6.4
-‐9.9
-‐8.8
-‐8.2
-‐7.9
(% On the world GDP)
GDP ($US per capita)
Inflation Unemployment (% total labour force)
Population (In million)
Balance of Payments ($US billion)
Balance of Payments (% GDP)
Source: IMF elaborated data
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Radboud University Nijmegen
Turkish exports and imports are qualified by valid transport infrastructures, especially as regards air transports and logistic services. Indeed, Turkish Airlines is the fifth worldwide company, after Cathay Pacific Airways and Qatar Airways, Singapore Airlines and Emirates, in the World Airline Awards classification 2014; most important, it is the first European airline company. Moreover, “Turkish Airlines has a fleet of 261 aircraft (passenger and cargo) flying to 243 cities around the world” (World Airline Awards’ website). It also represents the hugest foreign network in Africa, adding 25 African destinations in the last three years and it is going to add six extra destinations in the 2015 (CAPA, Centre for aviation). However, few problematic trade factors still exist. The access to imported inputs at competitive prices, the high cost for international transportation and some tariff barriers imposed by the other countries affect the Turkish exports. The last two factors, along with burdensome import procedure have a negative impact on the Turkish imports as well. The main problem is a loss of investors’ confidence due to the Turkish dependency on the foreign finance that is creating a persistent deficit of the Turkish current account with an average value of 7% of the GDP.
Fig. 1: The most problematic factor for trade (2013)
Source: The global enabling trade report 2014-2015, The World Economic Forum.
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Radboud University Nijmegen
Financial aspects After the banking and financial crisis in the 2001, Turkey established a flexible exchange rate regime so as to uphold inflation and work the sovereign debt issue out. After that crisis, the Istanbul position as the central point for Turkey’s financial network reinforced. Since its geopolitical location, the so-called “Strategy and Action Plan for Istanbul as an International Financial Centre” has been conceived in the 2009, in order to make Istanbul the chiefly global financial centre by 2023, like a ‘Turkey’s Wall street’. One the one hand, even if the Turkish financial sector is principally structured as a pluralistic banking system (commercial banks, participating banks based on the Islamic finance 5 , and development and investment banks), in the last years, other financial institutions have emerged; indeed all the non-banking areas are developing, including financial, leasing, factoring, consumer financing, asset management and the insurance sector. On the other hand, the Islamic finance represented by participating banks is widely spreading in Turkish financial system. Furthermore the Sukuk6 market system has been evolving. This had started to take place in the mid-1980s and after a decade Islamic institutions came out with a regulatory framework that eventuated with the Banking Law in the 2005. In the late years the Islamic finance has grown also thanks to the government encouragement.
Conclusion Certainly, Turkey has crossed an important process of change, or better a process of development by converting the agriculture-based economic geography into a modern industrial and urbanised region. Analysing all key profiles: political, economic and cultural it is possible to highlight the tremendous ‘positive’ transformations, especially in the last twenty years, that have affected the Turkish region, driving it towards a modern democratic system. Actually, what makes unique this 5
The Islamic finance involves the sharia principle that prohibits taking any riba or interests for loans of money. Specifically, in Islamic finance money is not understood as a commodity that can be traded but it is merely an exchange tool (Wikipedia). 6 The Aribic name for financial certificates but commonly refers to the Islamic equivalent of bonds. Since fixed income, interest-bearing bonds are not permissible in Islam. Sukuk securities are structured to comply with the Islamic law and its investment principles (Wikipedia).
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Radboud University Nijmegen
country beyond its geopolitical location is its capability to have embedded the European values and principles with those of its tradition and more ancient culture, including the Islamic values , which had been repressed for very long time. However, the whole Turkish scenario is still unstable as the principal economic and political factors show. Key issues need to be solved as the Kurdish situation, the Cyprus question, and the controversial debate on the role religion plays in Turkish politics. However, even if Turkey’s transition cannot be considered over yet, the positive news is that the process is still ongoing. It is interesting to underline the linkage between this process and the relationship between Turkey and the European Union; indeed the expected admission of Turkey as member in the EU drove and is still driving most of the measures and amendments in the Turkish programme. The next decision about this admission is the most important factor in Turkey’s future. Turkey’s adhesion would carry benefits for both the sides. Turkey would insomuch confirm and guarantee the irreversibility of its belonging to the “free world” principles. The EU would embark another important political and economic partner. Should otherwise the EU response be negative, the current relationship would be compromised but it could also compromise the entire Turkish system and shock the country identity, and could eventually affect the entire global system.
References Articles The Economist (11th January, 2014). Turkey’s economy. The mask is off. The Economist, (Economics and Finance): “The $9 Trillion Sale. (Online version review). Papers Buhari, Didem (2009). Turkey-EU relations: the limitations of Europeanization studies. The Turkish Yearbook of International Relations, Vol. 40 pp. 91-121. Ankara University. Kirişman, Armağan and Özen, Çinar (2005). Changing patterns in Turkey-Eu relations: from eligibility to candidacy an beyond. The Turkish Yearbook of International Relations, Vol. 36 pp. 119-138. 15.01.2015
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Kyeşılmen, Nazir and Özcan, Arif B. (2014). Islamic movements and their role in politics in Turkey. Journal of Institute of Social Science, Vol. 31 pp.29-38. Pamuk, Sevket (2013). Economic growth and institutional change in Turkey before 1980. In: Çetin, Tamer and Yilmaz, Feridun, (eds.) Understanding the process of economic change in Turkey: an institutional approach. Economic issues, problems and perspectives. Nova Science Publishers, Hauppauge NY, USA, pp. 3-19. Tanlak, Pinar (October 2002). Turkey-EU Relations in the post Helsinki phase and the EU Harmonisation laws adopted by the Turkish Grand National Assembly in August 2002. First published in October 2002 by the Sussex European Institute, University of Sussex, SEI Working Paper n° 55. Yücekok, Ahmet Naki (1968). The process of political development in Turkey. The Turkish Yearbook of International Relations, Vol. 9 pp. 96-111. Ankara University. Reports Economist Intelligence Unit (January 2015). Country report: Turkey. London, United Kingdom. European Commision SWD (2014) 307 final. Turkey 2014 progress report. (Accompanying the document: communication from the commission to the European parliament, the council, the European economic and social committee and the committee of the regions). Enlargement strategy and main challenges 2014-2015. Commission Staff Working Document; COM(2014) 700 final. Independent Commission on Turkey (September 2004). Turkey in Europe: more than a promise? Report of the Independent Commission on Turkey. Human Development Report 2014. Sustaining Human Progress: Reducing Vulnerabilities and Building Resilience. Turkey. United Nations Development Programme (UNDP). OECD Report (July 2014). OECD economic surveys Turkey. Economic and Development Review Committee of the OECD. Turkey Islamic finance report 2014: fundamentals and the promise of growth. Thomson Reuters 2013. World Economic Forum (2006). Turkey’s competitiveness in a European context. Word Economic Forum, Committed to Improving the State of the World World Economic Forum (2014). The global enabling trade report 2014-2015. World Economic Forum. Editors Margareta Drzeniek Hanouz, Thierry Geiger, Sean Doherty.
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Other sources The World Airline Awards Website: www.worldairlineawards.com; The CAPA, Centre for Aviation Website: www.centreforaviation.com; The Organisation for Economic Co-operation and Development Website: www.oecd.org; The United Nations Development Programme Website: www.undp.org; The World Bank Website: www.worldbank.org; The World Health Organisation Website: www.who.int
Words count without references, footnotes and charts: 3059
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