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International Political Economy 

Turkey's Economy and Challenges 

Introduction 

This paper will explore the causes of Turkey's economic development and the challenges it faces. First, some important general data; Turkey is a country of 79.8 million people, a current GDP of 863 Billion dollars in 2016, which increased from 275 Billion in 1998. Life expectancy in Turkey is 74 as of 2016 rose from 68 in 1998, a sign of medical development. 

Inflation in Turkey's economy was 8.1 percent  a significant decrease from 58.2 percent in 1995. Tax revenue of its GDP is 18.2 percent was 11.6 in 1995, military expenditure went down from 3.7 percent in 1995 to 1.7 percent. Merchandise trade increased in the last two decades by 16 percent of the GDP from 23 in the mid-1990s to 39 in 2016. Foreign direct investment in Turkey saw a great growth from 684 million dollars in the mid-1990s to 12.3 billion dollars (World Bank).

Turkish Economy

The main sectors in the Turkish economy are industry, tourism, and automotive, agriculture and services. Agriculture employs 25 percent of the Turkish workforce. An assertive privatization program has reduced state rule in industries such as; automotive, banking, transport, energy, and tourism (Forbes). This paper will explore in depth the development in each of these mentioned sectors.

Automotive industry in Turkey

One of the largest vehicle manufacturing counties internationally is Turkey. Three-quarters of cars produced in Turkey are small cars and light commercial vehicles.  The efficiency of new cars and light commercial vehicles comparable to the efficiency of cars produced in Germany and other EU countries. This is based on the facts that that the fuel consumption and CO2 emission level is comparable also, vehicle weight, size, and engine power are equal to those produced in Germany and the EU.

In total, 700 thousandth cars were produced locally in 2014 (27% of total registrations), In contrast, in Germany this about 40% of cars registered are produced locally (Mock, 2016). In addition, Turkey's ranks 14th internationally in car production. Furthermore, 250 global suppliers of car parts use Turkey as a production base. Major car-producing companies like; Ford, Toyota, Mercedes Benz, Honda, Hyundai and another large companies produce around 1.8 million cars in Turkey annually (Turkish Investment agency).

The Agricultural Sector in Turkey

The agricultural sector was Turkey's main creator of jobs and a key supplier to the country's GDP, although it has decrease in the decades. In 1999 the agricultural sector it generated 15 percent of the GDP and 50 percent of jobs. Yet, Turkey is one of the very few countries that have food self-sufficiency. The main element to that sufficiency is the country's; fertile soil, sufficient water, climate, and hard-working farmers. Based on The Economist 's world rankings, Turkey ranks in top 10 producers of fruit, wheat, and cotton in the worldwide. Furthermore, it ranks Turkey is among the top 5 producers of vegetables, tea, and raw wool. Turkey possesses a comparative advantage products of agriculture, and a positive trade balance, that contributes significant aid to an overall trade deficit.

The main markets that it exports to are the EU the United States, and the Middle East. The Amount of agricultural exports had rose to $2.4 billion 9 percent of Turkey's exports from 60 percent in 1980 (Encyclopedia of the Nations).  

The Turkish Banking System

The sector of the international business race worldwide in the banking system, the importance of is tremendously crucial in that regard.  It has a direct or indirect effects on successes and failures of businesses in any given country in the world, in additional to an economic importance as well. Its main role in to be the go-between those suppliers of funds and those who demanders of funds.

For example, the modest financial structure of the banking sector, during the crisis in November 2000 and in February 2001, Turkey's economy lost of about US$45 billion.

There were great structural reforms to the banking sector in Turkey between 2000 and 2010. The effect of the November 2000 and February 2001 crises damaged the financial conditions and the profitability indicators. To create a stable structure of banks with a lower profitability and efficiency, a program named “Banking Sector Restructuring Program” was created in 2001. Some of the goals of this program were the reorganization the state-owned banks, analyzing the banks controlled by the Savings Deposit Insurance Fund (SDIF), also rising the effectiveness in the sector by recovering the private banking system by supporting the supervisory and regulatory framework. In June 2014, the number of banks in Turkey was 50. In the Turkish banking sector 33 of them were deposits banks, 13 development and investment banks, and 4 participation banks.

With around 12 thousandth branches and employing 215 thousandth, assets were about US$700 billion, with US$25 billions of interest income and US$14 billion of interest expense.

Net profit of the banking system in June 2014 was about US$5 billion. The total sum of loans was US$4.1 billion. A large number of local and international studies tested the measurement of bank performances. Most of them were conducted by the data envelopment analysis (DEA). Furthermore, some studies that used other methods than DEA. For example, there are models used multi-criteria decision making (MCDM) and statistical methods (Özbek, 2017).

Truism in Turkey

Turkey's goal as a developing county is benefit as much as possible from truism. Turkey has well planned truism strategies. First, its strategy in planning is: “To exhibit a planning approach that supports economic growth, is physically applicable

and socially oriented and fairly reflects the principle of sustainable tourism.”

Second, Investment: “To boost tourism investments by designing incentive schemes that would make tourism investment projects economically feasible and viable.” Third organization: “To achieve institutionalization through councils to be established at national, regional, provincial and local levels within the context of “Good Governance‟, to ensure full and active participation of tourism sector as well as all related public and private entities and NGOs in relevant decision-making process.” Forth domestic tourism:

“To provide an alternative tourism products based on acceptable quality and affordable

prices to various groups in the society.” Fifth Researched development: “To ensure top prioritization of R&D efforts in tourism industry among public and private

sector and tourism organizations.” Sixth transportation and infrastructure: “To eliminate transportation and infrastructure problems of densely populated and fastest

growing tourism centers.” Seventh promotion and marketing: “To commence with marketing and promotion activities at each destination, in addition to

the national marketing and promotion campaigns with the ultimate objective of branding

on a national, regional and local state.” Eighth education: “to set up and introduce an education program in tourism, which would yield measurable

outcomes.” Ninth quality of service: “to activate Total Quality Management in every constituent of the travel industry.” Tenth city branding: “Manage branding of cities rich of

cultural and natural heritage and thereby convert them into a point of attraction for travelers.” Eleventh truism divarication: “To develop means for alternative tourism types led particularly by health, thermal, winter, golf, sea tourism, ecotourism and plateau tourism, conference and expo tourism activities.” In the period 1963-2018 tourism in turkey has grown rapidly, form 362 thousand tourists annually in the begging of that period to 32 million 812 thousand tourists last year. Furthermore, revenues from foreign tourists rose from $10.6 million in the beginning of the mentioned period to $23 billion 69 million in the end of the period (Polat, 2017).

Energy in Turkey

Most of the energy in the world, is produced and non-sustainable methods if technology rests constant and if overall quantities increase significantly. The need of regulating atmospheric emissions of greenhouse and other gases and substances will progressively need to be efficient based in energy production, transmission, distribution and consumption in the Turkey. Electricity supply's infrastructures in the developing countries are being quickly expanded as policymakers and investors around the world started to strongly focus electricity's essentiality of its role to develop living standards and sustaining economic growth.

From the beginning of the 21th century Turkey's energy consumption grows at an average rate of 5.9% per year, it increased from 65.5 MTOE (Million Tons of Oil Equivalent) in 2000 to around 250 MTOE in 2018. On the other hand, Turkey is an energy importing country around 50 percent of its energy need is imported. Total estimated reserves of oil in Turkey are 30 billion tons of gas, and a total of 8.0 billion ton of lignite coal reserves.

Furthermore, Turkey with its young population, its precipitously growing urbanization and economic development it is estimated that the demand of electricity will reach 580 billion kWh by the year 2020 an average of 7 percent annual growth which creates an energy challenge in that regard. Moreover, the production of MTOE in Turkey reached 28 million tons (Arman, 2016).

Turkey's challenges

The second part of this paper will explore some of the challenges Turkey faces explicitly: terrorism, poverty and the welfare system, refugees and Democratization these challenges effect and are effected by the economic condition of Turkey, whenever a country thrives economically it becomes more competent to handle such issues.

Terrorism

The Kurdistan Workers' Party (PKK) is the main terror threat to the county. The group is a Marxist-Leninist and a nationalist militia (BBC, 2016).  The PKK is in conflict for three decades with a total death toll of 30000 people. The Syrian conflict has change and added more complications to the conflict as its Syrian branch BYD (Turkish Union Party) is operating right next to the Turkish border are part of the ongoing 7-year conflict the group confrontation with ISIS made it possible to have a certain level of relationship with the United States as a relationship of necessity for the US. Moreover, the group is operating actively in the northern part of the bordering state Iraq. On the other hand, there was an attempt to settle the bloody three-decade war. Two rounds of peace talks that included the Turkish government, the PKK and the diaspora in the periods: 2005-2009, 2009-2011 which collapsed in 2011. In 2012 a new stage  of the conflict was when the government of Turkey reached out to the jailed leader of the PKK Abdullah Ocalan  stage identified as  “solution process”. The nine-year pace process, dispute many obstacles achieved an unprecedented level of difference the counties 79 million people 15 percent identity themselves to be Kurdish. There are three paths of the peace process that must be defined and approached separately.

First the contracts between the two sides. In march 2013 a one-sided PKK's seaside the ninth in the history of the long conflict, those decisions have succeeded due two interventions from the two “strong and charismatic” leaders of both sides President Tayyip Erdogan and PKK leader Ocalan, that being said shows clearly that negotiation is possible and solutions can be implemented at least in short-term deals. The existence of the two powerful leaders Erdogan and Ocalan creates a strong possibility for the continuation of negotiation and implementations of deals whenever they want to.

Many if Erdogan representatives and pro PKK parliament members visit Ocalan. When it comes to the second of the three paths, the efforts are to cut the roots of the conflict Turkey without any doubt is by far in a better palace in comparison to the very bloody years in the 1990s. Five central points began first full mother language education for the Kurds, second full admission of certain Kurdish parties like Kurdish National Movment to the Turkish parliament, third a rewriting of discriminatory articles in the Turkish constitution and, fourth a state-run Kurdish language TV, fifth a change in the counterterror law (Düzgit, 2014).

Furthermore, the Kurdish dilemma in Turkey is not limited to the PKK problem. The issue is deeply rooted since the Ottoman empire era before the establishment of the Turkish republic in the year 1923. More than approximately 25 Kurdish uprisings took place. The PKK is the latest and the most violent episode of this long, complicated issue. The PKK as part of the lest wave era of the cold war and the non-state actors global phenomena. The PKK emergency to the scene was in November of 1978 in the southeastern part of Turkey. The Ocalan strategy planned the PKK going into a guerilla fight were all Kurds to be involved politically, militarily in a fight for independence. There was no political effort until the bloody years of the early 1990s. The Kurds could be divided into two main categories traditionalist who are integrated into the politics and economy of Tukey and socialists who claim that they were colonized by Turkey. Violence of the PKK in last few years due to the government negotiation and reforms have rapidly decreased, on the other hand the attacks of the PKK were focused on provocation and attrition aimed for policy change then in a future stage self-control or self-governance.   

ISIS is another terror challenge to Turkey and its economy. A part of the Turkish society believe that the government strategy in Syria ended up strengthening ISIS in the attempt to assist the overthought if the Syrian dictator Bashar Al Assad the Turkish government allowed to the flood of foreign volunteer fighters transiting to join the fight with extremist elements in Syria. In contrast Turkey allowed the use of airbases for the anti ISIS coalition.

 On the other hand, Erdogan did not fully support the extermination of Jihadist group it is obvious that is it to not let the Kurdish rebels have strong holds in Syria in its fight with the radical groups mainly ISIS. With the recent deadly attacks of ISIS in Turkey that to a cartain extent effected Turkey tourism one the main bloodlines of the economy change the government position on ISIS threat? The rhetoric of Erdogan seems that he sees The Kurdish rebel as the main threat facing Turkey's security and stability (Taşpınar, 2016).

Poverty and Welfare in Turkey

20 percent of the population control around 45 percent of income the bottom 20 percent have less than 6 percent of income. In addition, one fifth of the people which is around 15 million live under the poverty line. Moreover, 6.3 million households with a total 23 million people receive aid and payments from charities and other institutions so it is possible to state that there are 23.667 million people who are suffer from poverty and in the same context 70 percent of females receive aid which is an indicator of gender gap in income. 43 percent of the people receiving aid voting for Erdogan that is an indicator that the poor in Turkey relay on the AKP party to improve the living conditions of the people and the develop the economy (BENMAYOR, 2014).

Furthermore, the welfare system of Turkey benefits only certain groups 41 percent of the population only, citizen older than 65 only are entitled to pensions. More than one third of the population have no income pension at all. The heath system covers only 67 percent of the population. In addition, half of the nation work in the informal market.  

The government made several reforms of the welfare system in the last decade. In 2008 the parliament passed a bill to create major changes within the health and pension system the changes led to a reduction of expenses for the social security institution with an introduction to universal health care system becoming more visible. The government wants to intensify the role of family in welfare provision, also backing new players that include private insurance companies and non-governmental organizations. In theory workers in the private sector and the self-employed will get pensions and will be covered in the future with healthcare. The government claims that 84.5 of its citizens are covered by the universal healthcare the World Bank estimates 67 percent only are covered. About 80 percent of agricultural seasonal workers are not entitled to any health coverage.  Likewise, 58 percent of the poor have no medical protection 68 percent of the extremely poor have no access also. In comparison to other counties Germany for instance covers 90.9 of its people under a public health system. Turkey spent for example 11.6 of its GDP in 2003 on social measures of protection. Healthcare expenditure counts for 4.8 percent of the Turkish GDP, where it is 20% in the UK, in Italy 24.2%, Spain 20.3%, Germany 27.6%.

Turkey is a necessary “cognitive” change that takes it to a new reality of social security as a central duty of the central government. Every society that is modern, welfare must not be in the hand of the family and private sector only, it must be grounded on citizenship and assured by as a right. Without a change in approach Turkey will not challenge the great social tasks of the era.

 The Question of Democracy

The AKP ruling party has been in power since winning the Turkish elections in 2002. The support of democracy for the ruling party in a matter of existence, due to the existing domestic and international restrains. Locally restrains are include demands for larger rights and freedoms. The AKP that has roots of Political Islam must be careful in dealing with the military, which is a very secular institution of the government. The international political conditions successful for both the AKP and USA. The United States idea of spreading democracy in the Middle East in in context of stopping the rise of more radicalism. The biggest obstacle facing the Turkish democracy is the military. The US policy of a democratic middle east was to approval the need for the inclusion of political Islam. Turkey was rich ground for the implementation of the US policy. Moreover, the AKP changed to become a “pro-western” democracy party. Thus, the the AKP received the support of the United States. However, that is no indication of US direct negotiation or aid. Nursel Aydogan the people's Democratic party MP in Turkey said in 2012: “The US wanted to redesign the ME on the basis of its BMENA project, which was being discussed before the AKP obtained power in Turkey. BMENA requires the establishment of the moderate Islam in the region. In this regard, the US helped the moderate Islamists, the AKP, obtain power in Turkey… The actor that helped the AKP obtain power is also the actor that is trying to redesign the ME. The US is now presenting the AKP to the ME as the representatives of the moderate Islam. Also, regionalization is an important component of globalization. By bringing the AKP to power, the US also got rid of the ethnic nationalist Ergenokon group (Turkey's deep state). As the strong opponent of Kurds and Arabs, Ergenekon would prevent the regionalization in the ME.

Regionalization was an important element of the BMENA project.”

In addition, the AKP is in need of proving to the US that it is a credible partner. The AKP is committed to westernize the country for an EU membership was a significant part of constructing an environment of faith between the Islamist AKP and the US. Including participating with the US military in Afghanistan, that shows that the US became aware that of the military of Turkey does not restrain the Turkey's AKP government will be cooperative.  In the last few year the reality has change to with an increased authoritarianism, when the Arab Spring reached the neighboring Syria the government assisted and sided with opposition against the dictator of Syria Bashar Al-Assad. The conflicts in Neighboring Syria killed several Turkish citizen leaving in the areas close to the Syrian border, that caused a communal unrest. Moreover, protest rose Turkey, Turkish Alawis (supporters of Assad who is Alawi) protested against the government interference in Syria. In addition, environmental protests took place in Gezi Park turned to anti-AKP protests six Allawi protesters were killed. Additionally, protest against Islamists in Syria, Egypt, and Tunisia. The AKP started to assume that there is behind the scenes a alliance of international capital owners, in cooperation with western diplomats and the media to undermine the AKP government (Ciplak, 2014). A turning point in the Democratization of Turkey was the military failed coup attempt  that took place in July 2016. The Prime Minister, Binali Yıldırım said a month after the coup attempt, that 40,029 state employees were detained since the night of the coup attempt. In addtina the government claims 2,131 judges and prosecutors with suspected ties to the Gülen movement that the government accusing of creating a deep state that is responsible for the coup. 44 journalists were arrested after the coup. Moreover 80,000 civil servants including thousandths teachers and professors (Letsch, 2016).

Furthermore, Hişyar Özsoy a Turkis MP said to the EU parliament: ““The declaration of emergency rule … has turned Turkey into a cemetery for human rights and fundamental freedoms,” and also said: “Currently there is no rule of law, no separation of powers, and no independent judiciary in the country.” He in the same regard demanded the EU to suspend the negations of Turkey's AKP government. Turkey's relationship with the US currently in decline due to the support of the US to the Kurdish militant in their fights in Syria with ISIS in Raqqa (Shaheen, 2017).

Refugees

The revolution in the neighboring Syria started in march 2011. The fist flow of refugee was on April 2011 the number of refugees entering the county was 252 via Cilvegözü border

entrance. The number of refugees increased rabidly due to the indiscriminate attacks on civilians from the Syrian regime. In June 2016 the United Nations declared that the number of Syrian refugees was 2,739,336, that makes Turkey the country that hosts the larger number of Syrian refugees. The Turkish Republic signed in in 1951 the Convention Relating to the Status of Refugees and the 1967 Protocol of geographical limitation, these agreements grant refuge for only those who come from Europe. In the 1980 most of the immigration movements coming to Turkey came from Europe, this lead the government create new regulations in regard to immigration. In 1994 Turkey passed a regulation called Regulation No.1994/6169 on an agreement titled “‘Procedures and Principles Related to Possible Population Movements and Aliens Arriving in Turkey either as Individuals or in Groups Wishing to Seek Asylum either from Turkey or Requesting Residence Permission in order to Seek Asylum From Another Country.” Moreover, Turkey had stated what individuals requesting refuge are considered asylum-seekers therefore receive temporary protection. Based on the mentioned local and international agreements the government did not identify Syrians as refugees as they did not come from European countries.

 The first Syrians who came to Turkey in early 2011 were considered as “guests” this term was not legally outlined. Additionally, the Interior Ministry of Turkey in March of 2012, through Directive 62, that was titled “Directive Regarding the Admission and Accommodation of Nationals of the Syrian Arab Republic and Stateless Persons Residing in the Syrian Arab Republic Arriving Turkey in Order to Seek Mass Asylum,” the legal definition of Syrian guests in Turkey was below the temporary protection regime. From April of 2013 in the efforts to improve coordination the mass immigration from Syrians to Turkey, a law was approved by the Grand National Assembly No. 6458 observing foreigners and international protection; the law was announced by the official gazette in April 2013, and implemented. The most important effects of the new law is the establishment the Ministry of international Affairs Directorate General of Management, that improves regulations and programs exclusively for the migration and asylum systems, this institution works as a civil organization in under the EU membership conditions. This law's article number 62, substitution of the term asylum-seekers that was used in the 1994 regulation an open border policy was applied, with automatic grant of temporary protection, without any forced expulsion to the Syrian refugees. Moreover, in October 2014 in context of determining Law No.6458, and Article 91, an introduction of a “Temporary Protection Circular” this circular made health, educational, translation social services, and access to the labor market open for Syrian refugees. Although, the government did not lift the 1967 Protocol geographical limitations. In contracts, the Turkish government implemented local and international law in regards to the Syrian refugees, the government confirmed their status in contexts of whether they will be subjected to a course of registration. Even though, the Syrian refugees are in Turkey since April of 2011 the government decided to postpone any registration of them, the government was hoping the war in Syria would come to an end soon, leading Syrians to return home. Furthermore, when the government started the registration process, many refugees where hesitant to register, due to their belief that it is of no benefit for them. The unwillingness of Syrian refugees to register made it almost impossible to calculate the exact number of them in Turkey. In the year 2013 Directorate General of Migration Management created a biometric registration system which working with the coordination of the foreigners department of the national police. In that process Syrian were fingerprinted and given tomportary protection Identification cards. This process is important due to the fact that is helps the government uphold public safety. The Identification cards are not legal residency or work permits.

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