Turkey is one of the largest middle-income partners of the World Bank Group (WBG), and the 18th largest economy in the world. In less than a decade, per capita income in the country has nearly tripled and now exceeds $10,000.
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In a previous post I argued that European economic integration remains a key driver for Turkey’s future economic prospects. Specifically, the Customs Union agreement between the EU and Turkey, which t... Show More +urns 20 at the end of this year, could give Turkey’s competitiveness a new boost if it was extended to cover services, agriculture and procurement. But to do so, the Customs Union itself would require a facelift. An agreement originally designed as a stepping stone towards full EU membership needs to be modernized to take into account changing trends in world trade and in EU-Turkey relations.Widening the Customs Union to include services and agriculture would produce welfare gains of up to USD 2 billion, even without taking into account the significant dynamic gains from greater investment and faster productivity growth. By liberalizing trade in services in particular, Turkey could boost its overall competitiveness because the cost and quality of services matter as an input into manufacturing as well. Including procurement in the Customs Union or accession to the WTO’s General Procurement Agreement would open new markets to Turkey’s highly competitive contractors and experienced civil engineers.But a widening of the Customs Union would require that asymmetries in its design are addressed. One concern is that Turkey needs to adopt EU Law without participating in its design. Indeed, sometimes Turkey may be informed only with significant delay about a change in Common Market rules. Improved information sharing and consultation mechanisms are critical to ensure the Customs Union functions smoothly. While Turkey cannot be granted voting rights, it could be invited as an observer to more of the EU’s committees, including to key policy bodies such as the Trade Policy Committee or the General System of Preferences Committee. Informal information sharing mechanisms, such as “Friends of Turkey” groups could also be considered. A second concern, which has received much attention in Turkey, is that Turkey needs to open its markets to countries with which the EU has signed Free Trade Agreements without a clause guaranteeing reciprocal market access. Turkey is especially worried about the prospect of exclusion from the Transatlantic Trade and Investment Partnership (TTIP). Because some tariff peaks still exist between the EU and the USA in sectors such as textiles and clothing for instance, Turkey could lose from preference erosion. For the case of a “shallow” TTIP considering only the elimination of all bilateral tariffs between the EU and the USA, we estimate welfare losses from preference erosion to be around USD 130 million. However, there is a flipside to this: to the extent that TTIP includes liberal rules of origin and that the EU and the USA agree on a system of mutual recognition of quality standards, Turkey through its Customs Union with the EU could obtain significantly improved access to the US market which would more than compensate the losses from preference erosion. Conversely, Turkey’s losses would be far greater if TTIP was to include regulatory harmonization, without recognizing Turkish quality certificates.However, the real risk of exclusion from TTIP lies in services. This is the area where the gains from greater cross-Atlantic trade would be highest. Because Turkey’s own services trade has not been opened, however, the country would not be in a position to benefit from this trade creation effect. Turkey is a big trader in traditional services such as transport and tourism, but in modern services, including finance, legal services, accounting, design and IT services, it punches well below its weight.A widening of the Customs Union to services would allow Turkey to capitalize on its competitive strengths, e.g. in retail and transportation services, while creating welcome competitive pressure on modern service industries. The result could be an upgrading of service quality and competitiveness similar to what happened in manufacturing as a result of the Customs Union some 20 years ago. At the same time, this would prepare Turkey for the opening of its services sector in the context of potential accession to TTIP.A final conclusion can be drawn. To the extent that modernization of the Customs Union would lay a sound foundation for Turkey’s accession to TTIP, a clear commitment by the EU and the US that TTIP will be open to the accession of third countries could provide encouragement for the work on the Customs Union to proceed without delay. One virtually unanimous conclusion from the Brookings workshop that motivated this sequence of blogs was that the resulting deeper economic integration between Turkey, the EU and the USA would be a good thing for all three parties. -------------------------Blog originally published on 16 March, 2015 on Brookings: http://www.brookings.edu/blogs/future-development/posts/2015/03/16-turkey-europe-raiser Show Less -
Turkey is a winner of globalization and economic integration. Opening up to trade and capital flows provided both the engine and the lubricant for Turkey’s economic modernization. In particular, the c... Show More +ustoms union with the EU, followed by the opening of EU accession negotiations, ensured that Turkey became part of the “European convergence machine.” Just as it has been the driver of progress in the past, economic integration is also central to Turkey’s future prospects. This was the topic of a session at Brookings on Turkey’s trans-Atlantic integration and its prospects to escape the “middle-income trap.” In a previous blog I wrote about that middle-income trap, now let me address the former topic.Since the early 1980s, Turkey’s share of global exports and imports has increased fourfold and the share of trade to GDP has risen from barely 10 percent to over 50 percent today (see Figure 1). Turkey’s increasing global economic heft is comparable to developments in other large emerging market economies such as Brazil, India, and Russia, although it does not quite match the performance of China or Eastern Europe.Source: World Bank staff calculations based on World Development IndicatorsSeveral key policies have contributed to Turkey’s successful integration.1. First, in January 1980, Turkey introduced comprehensive economic liberalization, around one decade before the start of transition in the former Communist bloc. After an initial surge in trade activity, the 1990s were characterized by inconsistent macroeconomic management, culminating in the 2001 financial crisis. Since then, however, liberal economic policies and sound macroeconomic management have allowed Turkey to resume the process of economic convergence and benefit from abundant global liquidity.2. Second, Turkey’s customs union agreement with the EU, in effect since January 1996, has been a catalyst for the technological modernization of Turkey’s manufacturing by forcing the adoption of European quality standards and encouraging the integration into European production networks. Intra-industry trade—one summary measure of the extent of trade within integrated value chains—rose from 30 percent to 50 percent of Turkey-EU trade between 1990 and 2012. Moreover, the World Bank estimates that because it avoided the need for costly rules of origin, the customs union agreement boosted Turkey’s exports to the EU by up to 7 percent relative to a free trade agreement.3. Third, Turkey’s investments in infrastructure have kept up with the needs of a growing economy. Thanks to substantial public and private investments in roads, airports, seaports, and customs facilities, for instance, Turkey’s logistics performance is on par with many high-income countries; Turkey is ranked 31st in the world, ahead of competitors such as Poland, the Czech Republic, Mexico, Romania, or Brazil. Good logistics are essential for an effective participation in global value chains, which is where much of the recent growth in trade has taken place.Yet in the last three years, Turkey’s economic engine has started to sputter. Some believe that the reason is over-reliance on a weak EU economy, and that group thus favors a diversification by Turkey to other markets. Indeed, as EU markets have slumped, Turkey’s trade with the Middle East has increased and Turkey is successfully expanding to markets in Africa and Latin America. However, it would be wrong to deduce from this that further integration with the EU is unnecessary. Our analysis shows that it is precisely the firms that have successfully established themselves in the EU market that are best at diversifying to third markets. The same firms also have higher productivity growth and pay higher wages than firms without exports to the EU. The European market may not be the most dynamic in the world, but it is still a standard setter for quality that cannot be ignored.Others argue that Turkey needs to reduce its reliance on imports to close a chronic trade deficit. Once again, this may be reversing cause and effect. Exporting firms with higher import content in production and firms producing higher quality goods are more likely to survive in export markets (see Figure 2). Turkey needs more integration, not less, to upgrade quality and move up the value chain.-------------------------------Blog originally published on 11 March, 2015 on Brookings: http://www.brookings.edu/blogs/future-development/posts/2015/03/11-europe-turkey-raiser Show Less -
ANKARA, March 9, 2015─A three-day Regional Workshop on Natural Capital Accounting (NCA) opened in Istanbul today to introduce more than 50 experts from twelve countries to the rationale for and tools ... Show More +to better monitor, manage, and enhance the productive use of natural assets in their respective countries. The workshop will present the methodology for NCA, and will illustrate it with the cases of water and forest accounts.Bringing together experts from Albania, Azerbaijan, Belarus, Bosnia and Herzegovina, Georgia, Kazakhstan, Kyrgyz Republic, Moldova, Tajikistan, Turkey, Turkmenistan, and Uzbekistan, the workshop aims to stimulate discussion among countries on next steps for incorporating NCA into policy and development planning in their respective countries. The Workshop is organized jointly by Turkey’s Ministry of Development, the Turkish Statistical Institute, and the World Bank under the auspices of the Wealth Accounting and Valuation of Ecosystem Services (WAVES) Partnership Program, in cooperation with Statistics Netherlands, the U.N. Economic Commission for Europe, and the UNDP.In opening the Workshop, Martin Raiser, World Bank Country Director for Turkey, said, “Sustainable economic growth requires that countries build on and maintain their natural capital. Natural capital accounting is a key tool to facilitate better decision-making, oriented towards greater economic resilience and a more efficient use of a country’s natural endowments.”In his opening remarks, Mehmet Aktaş, Vice President of the Turkish Statistical Institute (TurkStat), stated that at its 44th Session in 2013 the UN Statistical Committee recognized the System of Environmental Economic Accounts Central Framework (SEEA-CF) as a useful measurement framework to inform several policy frameworks, including green growth, green economy, and sustainable development.Aktaş stated: “In addition, the current discussion on the development of Sustainable Development Goals (SDGs) as a part of the Post 2015 Development Agenda presents another important opportunity to place the SEEA together with the System of National Accounts at the core of the monitoring framework of the SDGs. Within this scope, NCA would be beneficial for making policies on the natural resources of our country.”The World Bank launched the Global Partnership for WAVES in 2010, providing technical support to developing countries to implement NCA. The partnership aims to promote sustainable development by ensuring that natural resources are mainstreamed in development planning and national economic accounts. This global partnership brings together a broad coalition of UN agencies, governments, international institutes, non-governmental organizations, and academics to implement Natural Capital Accounting (NCA) where there are internationally agreed standards, and develop approaches for other ecosystem service accounts.For more information on WAVES go to www.wavespartnership.org For more information on the World Bank’s work in Turkey, please visit: http://www.worldbank.org/turkeyVisit us on Facebook: http://www.facebook.com/worldbankBe updated via Twitter: http://www.twitter.com/worldbankFor our YouTube channel: http://www.youtube.com/worldbank Show Less -