Economy of Turkey

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Economy of Turkey
Currency	Turkish lira (TRY)[1]
Fiscal year	calendar year
Trade organisations	G-20 major economies, OECD, EU Customs Union, WTO, ECO, BSEC
Statistics
GDP (PPP)	$937.143 billion[2] (2008 est.)
GDP growth	4.5%[3] (2008 est.)
GDP per capita	$13,447[2] (2008 est.)
GDP by sector	agriculture: 8.5%, industry: 28.6%, services: 62.9%[4] (2008 est.)
Inflation (CPI)	10.2%[5] (2008 est.)
Labour force	23.21 million[4] (2008 est.)
Labour force by occupation	agriculture: 29.5%, industry: 24.7%, services: 45.8%[4] (2005)
Unemployment	7.9% plus underemployment of 4%[4] (2008 est.)
Main industries	textiles, food processing, autos, electronics, mining (coal, chromite, copper, boron), steel, petroleum, construction, lumber, paper
External
Exports	$141.8 billion f.o.b.[4] (2008 est.)
Export goods	textiles, foodstuffs, metal manufactures, transport equipment, electronics, home appliances
Main export partners	Germany 11.2%, United Kingdom 8.1%, Italy 7%, France 5.6%, Russia 4.4%, Spain 4.3%[4] (2007)
Imports	$204.8 billion f.o.b.[4] (2008 est.)
Import goods	machinery, chemicals, semi-finished goods, fuels, transport equipment
Main import partners	Russia 13.8%, Germany 10.3%, China 7.8%, Italy 5.9%, United States 4.8%, France 4.6%[4] (2007)
Gross External Debt	$294.3 billion[4] (31 December 2008)
Public finances
Public Debt	37.1% of GDP[4] (2008 est.)
Revenues	$164.6 billion[4] (2008 est.)
Expenses	$176.3 billion[4] (2008 est.)
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars
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Turkey's economy is a complex mix of traditional craftsmanship and modern industries, increasingly dominated by the latter. Turkey has a strong and rapidly growing private sector, yet the state still plays a major role in industry, banking, transport, and communications. In recent years, the Turkish economy has expanded strongly, registering growth rates of 8.9% and 7.4% for the 2004 and 2005 fiscal years, respectively.

Contents 1 Macro-economic trends 1.1 Agricultural sector 1.2 Industrial sector 1.3 Construction and contracting sector 1.4 Service sector 1.4.1 Tourism sector 1.4.2 Financial sector 2 Largest companies 3 External trade and investment 4 Natural resources 4.1 Energy 5 Labor 6 Environment 7 References 8 External links

[edit] Macro-economic trends

The CIA classifies Turkey as a developed country.^[6] Turkey is often classified as a newly industrialized country by economists and political scientists, and is a founding member of the OECD (1961) and the G-20 major economies (1999). Since December 31, 1995, Turkey is also a part of the EU Customs Union. Turkey's per-capita GDP places it among the upper-middle income countries. According to Forbes magazine, Istanbul, Turkey's financial capital, had a total of 35 billionaires as of March 2008 (up from 25 in 2007), ranking 4th in the world behind Moscow (74 billionaires), New York City (71 billionaires) and London (36 billionaires), while ranking above Hong Kong (30 billionaires), Los Angeles (24 billionaires), Mumbai (20 billionaires), San Francisco (19 billionaires), Dallas (15 billionaires) and Tokyo (15 billionaires).^[7]

[edit] Agricultural sector

The country's large agricultural sector accounted for 11.2% of the employment in 2006.^[8] As of March 2007, Turkey is the world's largest producer of hazelnut, cherry, fig, apricot, quince and pomegranate; the second largest producer of watermelon, cucumber and chickpea; the third largest producer of tomato, eggplant, green pepper, lentil and pistacchio; the fourth largest producer of onion and olive; the fifth largest producer of sugar beet; the sixth largest producer of tobacco, tea and apple; the seventh largest producer of cotton and barley; the eighth largest producer of almond; the ninth largest producer of wheat, rye and grapefruit, and the tenth largest producer of lemon.^[8] Turkey has been self-sufficient in food production since the 1980s. The agricultural output has been growing at a respectable rate. However, since the 1980s, agriculture has been in a state of decline in comparison to the total economy. Agricultural loans are issued with negative interest rates. Today, many of the institutions established between 1930 and 1980 continue to play important roles in the practices of farmers.

Historically, Turkey's farmers have been fairly fragmented. According to the 1990 Census, "85% of agricultural holdings were under 10 hectares and 57% of these were fragmented into four or more non-contiguous plots."^[9] Many old agricultural attitudes remain widespread, but these traditions are expected to change with the EU accession process. Turkey is dismantling the incentive system. Fertiliser and pesticide subsidies have been curtailed and remaining price supports have been gradually converted to floor prices. The government has also initiated many planned projects, such as the Southeastern Anatolia Project (G.A.P project). The advent of the G.A.P promises a very prosperous future for the southeastern agriculture.

Given all the efforts of the government, agricultural extension and research services are, in relative terms, inadequately organized in Turkey. This has been attributed to shortages of qualified advisers, transportation, and equipment. Agricultural research is distributed among nearly 100 government institutions and universities. The inability to spread the use of new technologies has been attributed to a reluctance of trained personnel to work in the field. The pay disparity in this sector is traditionally very high and incentives to train people do not cover this gap. Research is organized by commodity, with independent units for such major crops as cotton, tobacco, and citrus fruit. Observers note that coordination of the efforts of different research units and links between extension services are inadequate.

The livestock industry, compared to the initial years of the Republic, showed little improvement in productivity, and the later years of the decade saw stagnation. However livestock products, including meat, milk, wool, and eggs, contributed to more than ⅓ of the value of agricultural output. Fishing is another important part of the economy.

[edit] Industrial sector

The largest industry is textiles and clothing (16.3% of total industrial capacity in 2005 according to the State Institute of Statistics), followed by oil refinery (14.5%), food (10.6%), chemicals (10.3%), iron and steel (8.9%), automotive (6.3%), and machinery (5.8%). Textiles and clothing also constitutes the largest share in total exports (19% in 2005), followed by automotive (18%), iron and steel (13%), white goods (10%), chemicals and pharmaceuticals (9%), and machinery (7%). Turkish companies made clothing exports worth $13.98 billion in 2006; more than $10.67 billion of which (76.33%) were made to the EU member states.^[10]

Turkey's Vestel Electronics is the largest TV producer in Europe, accounting for a quarter of all TV sets manufactured and sold on the continent.^[11] By January 2005, Vestel and its rival Turkish electronics and white goods brand BEKO accounted for more than half of all TV sets manufactured in Europe.^[12] Another Turkish electronics brand, Profilo-Telra, was Europe's third largest TV producer in 2005.^[13] EU market share of Turkish companies in consumer electronics has increased significantly following the Customs Union agreement signed between the EU and Turkey: in color TVs from 5% in 1995 to more than 50% in 2005, in digital devices from 3% to 15%, and in white goods from 3% to 18%.

Turkey also has a large and growing automotive industry, which produced 1,024,987 motor vehicles in 2006,^[14] ranking as the 6th largest automotive producer in Europe; behind Germany (5,819,614), France (3,174,260), Spain (2,770,435), the United Kingdom (1,648,388), and Italy (1,211,594), respectively.^[15] The automotive industry is an important part of the economy since the late 1990s. The companies in the sector are mainly located in the Marmara Region. Existing motor vehicle production capacity of the automotive industry in Turkey is 1,024,987 units per year, as of 2006. The combined capacity of the 6 companies producing passenger cars stood at 726,000 units per year in 2002, reaching 991,621 units per year in 2006.^[16] In 2002, FIAT/Tofas had 34% of this capacity, Oyak/Renault 31%, Hyundai/Assan and Toyota 14% each, Honda 4%, and Ford/Otosan 3%. With a cluster of car-makers and parts suppliers, the Turkish automotive sector, the 17th largest producer of passenger cars (991,621 units) in the world in 2006,^[16] has become an integral part of the global network of production bases and now exporting over USD 14 billion (2002) worth of motor vehicles and components.

Turkey is also one of the leading shipbuilding nations; in 2007 the country ranked 4th in the world (behind China, South Korea and Japan) in terms of the number of ordered ships, and also 4th in the world (behind Italy, USA and Canada) in terms of the number of ordered mega yachts.^[17]

[edit] Construction and contracting sector

The Turkish construction and contracting industry is one of the leading, most competitive and dynamic construction/contracting industries in the world. In 2007 a total of 22 Turkish construction/contracting companies were selected for the Top International Contractors List prepared by the Engineering News-Record, which made the Turkish construction/contracting industry the world's 3rd largest, ranking behind those of the USA and China.^[18]

[edit] Service sector

Telecommunications were liberalised in 2004 after the creation of the Telecommunication Authority. Private sector companies operate in mobile telephony and Internet access. There were 19 million fixed phone lines, 36 million mobile phones, and 12 million Internet users by the August, 2005.

For more details on this topic, see Communications in Turkey.

The road network was an estimated 382,397 km in 1999, including 95,599 km of paved roads and 1,749 km of motorways. The rail network was 8,682 km in 1999, including 2,133 km of electrified track. There are 1,200 km of navigable waterways. There were 118 airports in 1999, including six international airports in Istanbul, Ankara, İzmir, Trabzon, Dalaman and Antalya.

For more details on this topic, see Transport in Turkey.

[edit] Tourism sector

Tourism is one of the most dynamic and fastest developing sectors in Turkey. According to travel agencies TUI AG and Thomas Cook, 11 of the 100 best hotels of the world are located in Turkey.^[19] In 2005, there were 24,124,501 visitors to the country, who contributed $18.2 billion to Turkey's revenues, with an average expenditure of $679 per tourist.^[20] In 2007, the number of visitors rose to 27,214,988, who contributed $18.5 billion to Turkey's revenues.^[21] Over the years, Turkey has emerged as a popular tourist destination for many Europeans, often competing with Greece, Italy and Spain. Resorts in provinces such as Antalya and Muğla (which are located in the Turkish Riviera) have become very popular among European tourists.

[edit] Financial sector

The Central Bank of the Republic of Turkey (Türkiye Cumhuriyet Merkez Bankası) was founded in 1930, as a privileged joint-stock company. It possesses the sole right to issue notes. It also has the obligation to provide for the monetary requirements of the state agricultural and commercial enterprises. All foreign exchange transfers are exclusively handled by the central bank. The bank has 25 domestic branches, as well as branches in New York, London, Frankfurt, and Zurich.

In 1998 there were 72 banks. In late 2000 and early 2001 a growing trade deficit and weaknesses in the banking sector plunged the economy into crisis. There was a recession followed by the floating of the lira. This financial breakdown brought the number of banks to 31. Currently more than 34% of the assets are concentrated in the Agricultural Bank (Ziraat Bankası), Housing Bank (Yapı Kredi Bankası), Isbank (Türkiye İş Bankası) and Akbank. The five big state-owned banks were restructured in 2001. Political involvement was minimized and loaning policies were changed. However, over-staffing remains a problem. There are also numerous international banks, such as Citibank, Merrill Lynch, J. P. Morgan, HSBC, ABN Amro, Fortis, ING Bank, BNP Paribas, Société Générale, Banca di Roma, UniCredit, WestLB, Deutsche Bank and Commerzbank, which have branches in Turkey. A number of Arabian trading banks, which practice an Islamic (without interest rates) type of banking, are also present in the country.

The Istanbul Stock Exchange opened in 1985, while the Istanbul Gold Exchange was established in 1995. The stock market capitalisation of listed companies in Turkey was valued at $161,537,000,000 in 2005 by the World Bank.^[22]

Government regulations passed in 1929 required all insurance companies to reinsure 30% of each policy with National Reinsurance Corp. In 1954, life insurance was exempted from this requirement. The insurance market is officially regulated through the Ministry of Commerce.

After years of low levels of foreign direct investment (FDI), in 2007 Turkey succeeded in attracting $21.9 billion in FDI and is expected to attract a higher figure in following years.^[23] A series of large privatizations, the stability fostered by the start of Turkey’s EU accession negotiations, strong and stable growth, and structural changes in the banking, retail, and telecommunications sectors have all contributed to the rise in foreign investment. Turkey has taken steps to improve its investment climate through administrative streamlining, an end to foreign investment screening, and strengthened intellectual property legislation. However, a number of disputes involving foreign investors in Turkey and certain policies, such as high taxation of cola products and continuing gaps in the intellectual property regime, inhibit investment. Turkey has a number of bilateral investment and tax treaties, including with the United States, that guarantee free repatriation of capital in convertible currencies and eliminate double taxation.

In recent years the economic situation has been marked by erratic economic growth and serious imbalances. Real GNP growth has exceeded 6% in many years, but this strong expansion has been interrupted by sharp declines in output in 1994, 1999, and 2001. Meanwhile the public sector fiscal deficit has regularly exceeded 10% of GDP - due in large part to the huge burden of interest payments, which in 2001 accounted for more than 50% of central government spending - while inflation has remained in the high double digit range. Since 2003, the inflation has lowered to single digits, and the economy is showing an average growth of 7.8%, between 2002-2005. Fiscal deficit is benefiting (though in small amount) from large industry privatizations. Banking came under stress beginning in October 2008 as Turkish banking authorities warned state-run banks against the pullback of loans from the larger financial sectors ^[24].

In recent years, the chronically high inflation has been brought under control and this has led to the launch of a new currency, the "New Turkish lira", on January 1, 2005, to cement the acquisition of the economic reforms and erase the vestiges of an unstable economy.^[25] On January 1, 2009, the New Turkish lira was renamed once again as the "Turkish lira", with the introduction of new banknotes and coins.

[edit] Largest companies

In 2008, 14 Turkish companies were listed in the Forbes Global 2000 list - an annual ranking of the top 2000 public companies in the world by Forbes magazine.^[26] The 10 leading companies are:

World Rank	Company	Industry	Revenue (billion $)	Profits (billion $)	Assets (billion $)	Market Value (billion $)
371	Türkiye Is Bankasi	Banking	12.53	1.26	61.19	12.89
384	Akbank	Banking	8.17	1.56	61.54	16.26
405	Garanti Bankasi	Banking	8.13	1.85	65.48	12.69
639	Koç Holding	Conglomerates	34.84	0.40	40.12	6.69
690	Sabanci Holding	Conglomerates	11.95	0.35	47.60	8.27
879	Turkcell	Telecommunications Services	4.75	0.90	5.95	22.03
893	Halk Bankası	Banking	3.52	0.61	24.51	8.07
909	VakıfBank	Banking	4.23	0.57	27.35	5.96
990	TUPRAS	Oil & Gas Operations	14.19	0.58	4.93	6.48
1185	Enka Insaat	Construction	4.06	0.41	5.38	13.85

[edit] External trade and investment

Turkey is one of the largest sources of foreign direct investment in central and eastern Europe and the CIS, with more than $1.5 billion invested. Of this, 32% has been invested in Russia, primarily in the natural resources and construction sectors, and an additional 46% in Turkey’s Black Sea neighbours, Bulgaria and Romania. In addition, Turkish firms have sizeable recorded FDI stocks in Poland ($100 million).

The Turkish Construction/Contracting Industry has been a significant player (e.g. Enka, Tekfen, Gama and Üçgen İnşaat, etc) as well as the three industrial groups, namely Anadolu Efes Group, ŞişeCam Group and Vestel Group.

Turkey's exports reached $115.3 billion in 2007, but imports rose to $162.1 billion, mostly due to the country's rising demand for energy resources like natural gas and crude oil.^[4] Turkey targets exports of $200 billion in 2013, and a total trade volume of at least $450 billion.^[27] Turkish export mix has changed considerably in the last two decades. Share of natural gas decreased from 74% in 1980 to 30% in 1990 and 12% in 2005. Share of mid/high technology products has increased from 5% in 1980 to 14% in 1990 and 43% in 2005.

Turkey's main trading partners are the European Union (59% of exports and 52% of imports as of 2005),^[28] the United States, Russia and Japan. Turkey has taken advantage of a customs union with the European Union, signed in 1995, to increase its industrial production destined for exports, while at the same time benefiting from EU-origin foreign investment into the country.^[29]

[edit] Natural resources

Turkey ranks tenth in the world in terms of the diversity of minerals produced in the country. Around 60 different minerals are currently produced in Turkey. The richest mineral deposits in the country are boron salts and Turkey’s reserves amount to 72% of the world’s total.

Turkey is an oil producer, but the level of production isn't enough to make the country self sufficient. As a result, it is a net oil and gas importer.

The pipeline network in Turkey included 1,738 km for crude oil, 2,321 km for petroleum products, and 708 km for natural gas in 1999. Several major new pipelines are planned, especially the Baku-Tbilisi-Ceyhan pipeline for Caspian oilfields, the longest one in the world, which recently opened in 2005.

According to the CIA World Factbook, other natural resources include coal, iron ore, copper, chromium, uranium, antimony, mercury, gold, barite, borate, celestine (strontium), emery, feldspar, limestone, magnesite, marble, perlite, pumice, pyrites (sulfur), clay, arable land, hydropower, and geothermal power.

The ore borax, from which boron is extracted is very abundant in Turkey. Turkey is by far the world's largest producer of boron.

[edit] Energy

To cover the increasing energy needs of its population and ensure the continued raising of its living standard, Turkey plans several nuclear power plants. Nuclear power proposals were presented as early as in the 1960s, but plans were repeatedly canceled even after bids were made by interested manufacturers because of high costs and safety concerns. Turkey has always chosen Candu nuclear reactors because they burn natural uranium which is cheap and available locally and because they can be refueled online. This has caused uneasy feelings to Turkey's neighbors because they are ideal for producing weapons grade plutonium.

Turkey has the 5th highest direct utilization and capacity of geothermal power in the world.^[30]

[edit] Labor

Turkey's workforce is flexible, with a wide spectrum of skills from the unskilled to highly qualified. Turkey is obliged to apply EU (European Union) employment and social laws to qualify for membership. In January 2007, Eurostat calculated the minimum wage in Turkey as €298, which was higher than the minimum wage in nine European Union member states, namely Bulgaria (€92), Romania (€114), Latvia (€172), Lithuania (€174), Slovakia (€217), Estonia (€230), Poland (€246), Hungary (€258) and the Czech Republic (€288); while lower than the minimum wage in Portugal (€470).^[31] Average wages in 2007 hover around $32-39 per day.^{[citation needed]}

[edit] Environment

With the establishment of the Turkish Environment Ministry in 1991, Turkey began to make significant progress addressing some of its most pressing environmental problems. The most dramatic improvements were significant reductions of air pollution in Istanbul and Ankara. The most pressing needs are for water treatment plants, waste water treatment facilities, solid waste management and conservation of biodiversity. On average, the environmental performance of private corporations is much better than the large number of state owned enterprises.

[edit] References

[edit] External links

• Turkish-U.S. Business Council (TAIK)
• OECD's Turkey country Web site and OECD Economic Survey of Turkey
• Deutsche Bank Research
• A Guide on Doing Business in Turkey
• Invest in Turkey
• Core Indicators of Turkish Economy-Association of Treasury Controllers
• Turkey Economic Development at the Open Directory Project

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