Turkey Economy

Economy of Turkey

The Turkish economy in the 1990s transformed from one state to a market-oriented economy led. As in most economies through market reforms, the process of change has caused serious internal turmoil. External “shocks” as the Persian Gulf War of 1991 and the resulting United Nations (UN) embargo against Iraq has complicated the transition.

The Turkish economy is constant and turbulent realignment, the economy, a study in contrasts of the left. Modern industries coexist with pockets of subsistence agriculture. The great cities of Western Anatolia are cosmopolitan centers of industry, finance and trade, while the eastern part of the country is relatively underdeveloped. Several decades of state planning by the liberalization of the economy followed the industry to have Turkey’s leading economic sector, as well as most Turks continue working on farms. The industry has been carried out a fairly rapid change as a result of far-reaching reforms in the 1980s and early 1990s are. Despite the reforms, however, continue to dominate public companies raw materials processing and manufacturing of heavy industrial and military goods. The smaller firms to produce the private sector to master intermediate and consumer goods for domestic and international markets. The services sector is perhaps the most diverse and comprehensive export-oriented large marketing groups and world-scale banks and small shops and individual domestic workers.

To a large extent the last 200 years in Turkey are tempted by their rulers, to transform it into a modern industrial nation European been highlighted. The Ottoman Empire encountered serious economic problems at the beginning of the eighteenth century with the introduction of the unequal treaties, the capitulations (see Glossary), which affected trade and taxation. The Tanzimat (reorganization) reforms from 1839 to 1878, an important component that was the reorientation of the economy towards development of its own industrial base, led to a deepening debt of the Western imperialist powers in the late nineteenth century. This dependence from the West, as one of the main reasons for Turkey “was seen backwardness”, created the framework for the economic policies of the new republic, founded in 1923. The other major influence on the new leadership of the republic was the example of state planning in the Soviet Union. was a result of these influences, public planning, the route of the new rulers of Turkey, took the country to modernize.

From the 1930s to 1980, the State Import-substitution industrialization pursued by public enterprises and development planning. This policy has a mixed economy, where industrial development was fast. But during the post-World War II era, the disadvantages of excessive state intervention has become increasingly clear to policy makers and the public. State enterprises, which came to about 40 percent of production by the year 1980 accounts were often overstaffed and inefficient, their losses were a significant burden on the state budget. State planning goals were often overly ambitious, but they ignored key sectors such as agriculture.The concentration on import substitution played down exports, which become chronic trade deficits and a pattern in which periods of rapid growth, partly financed by foreign loans, resulted in payments crises, savings programs necessary balance.

The rapid transition from an agricultural to an industrial society also produced distortions in the country, the labor markets and led to an unequal distribution of income. As was the case in most developing countries, there was a high birth rate, unemployment in the postwar period contributed by the workers to grow rapidly. In addition, the modernization of agriculture tended to make small farms economically viable. As a result, many people migrated from rural areas into urban areas. Who has the agriculture, but often lacked skills needed in modern industry and employment could only be in the informal sector of urban economies to be found.Meanwhile, industry was capital intensive, which increases productivity, but reduces the demand for unskilled labor. At the same time, firms had to difficulties in recruiting qualified employees.

In January 1980 the Turkish government undertook a major reform program to open the Turkish economy to international markets. Leading the reform was Turgut Özal, then Deputy Prime Minister and Minister of Economic Affairs. Özal became prime minister in 1983 after a three-year military regime, and served as president from 1989 until his death in 1993. Özal reform program included a reduced role for government in the economy, a realistic exchange rate and monetary policy realistic reductions of subsidies and price controls and promoting exports and foreign direct investment. During his early years, the liberalization program achieved considerable success in reducing external deficits and restoring economic growth. Despite significant foreign direct investment in the 1980s and early 1990s, but remained Turkey payments charged by an external debt of more than U.S. $ 65,000,000,000 at the end of 1993.A crisis of balance of payments in 1994 came in the wake of a domestic political crisis in the wake of the deep divisions within the administration on economic policy and a sharp decrease in exports to troubled neighbors Turkey, Iraq and Iran. This situation led to a sharp decline in Turkish lira (TL, for the value of the lira – see Glossary).

The success of the program was Özal on developing satisfactory relationships with the country testified economic partners and continued access to export markets. Rapid development requires huge capital, domestic savings as imports sufficient for necessary investments. Foreign investors, who by great economic potential of Turkey and attracted increasingly liberal economic policy, made major commitments to infrastructure projects in the mid-1980s. However, continued high inflation, and memories of the political instability of the late 1970s, causing investors to hesitate. These uncertainties have been following the Iraqi invasion of Kuwait in 1990 increased, the rise of the strong Islamist (sometimes seen as fundamentalist) parties in the early 1990s, and persistent macroeconomic problems.

Regardless of short-term difficulties of Turkey, most observers believe the country’s long-term economic prospects are good. Mining and agriculture provide raw materials for industry and the growing population and offers plenty of inventive work. Turkey is one of the few countries that is self-sufficient in food, yes it can food for European and Middle Eastern export markets.Economic reforms have led to a rise in exports of processed food, textiles, motor vehicles held and consumer goods. Substantial investment in tourism should be the revival of the banking, transportation facilities and modernized to allow Turkey to compete in the international market in the 1990s.

Turkey has made great strides towards building close economic relations with Europe, and the leadership of Turkey, the country promoted as an important link between the developed countries of Europe and the underdeveloped economies of the Middle East and Central Asia. On several fronts, but suffered a series of setbacks Turkey in the early 1990s. A critical was the embargo against Iraq. Because Turkey lost a huge export market and charges that Iraq’s oil pass through a pipeline on Turkish territory. In addition, reoriented Iran an important trading partner in the 1980s, its trade directly with Europe and Asia in the late 1980s and early 1990s.Early expectations for trade with Central Asian countries have gone unfulfilled, because the economic and social dislocation they have suffered in separation from the Soviet Union. Worst of all, have deteriorated to Turkey’s political relations with Europe, mainly because of the human rights of the Kurdish population and the increasing intolerance in Europe of Turkish immigrants.The result appeared to the accession of Turkey to the European Union is increasingly unlikely, based than in 1995, although this has been an associate member since 1963, the EU’s predecessor body, the European Community, Having regard to full membership in 1987, applied.