Turkey: Investment Climate Assessment (ICA)

December 11, 2007

Istanbul, December 11, 2007 — More flexible labor markets can help increase the number of regular full-time workers employed by the private sector in Turkey by as much as 60 percent or more.  This is one of the many conclusions of the new Investment Climate Assessment (ICA) for Turkey prepared by the World Bank and the Economic Research Foundation of Turkey (TEPAV) in collaboration with the Turkish Government.

The report Turkey: Investment Climate Assessment was launched with a workshop at TOBB Plaza in Istanbul today, Minister of State Mehmet Şimsek gave the keynote address and participants included government officials, business representatives, think-tanks, academia and media.

The Investment Climate Assessment (ICA) for Turkey is one of 45 ICA studies the World Bank Group has prepared or has helped implement in various countries. It examines opportunities for and constraints on investment and private sector growth in Turkey.

The ICA for Turkey focuses on the impact that microeconomic factors have on business development and growth, while acknowledging the importance of a stable macroeconomic framework. The report identifies four crucial determinants to improve Turkish firms’ productivity and employment: reducing informality; increasing the flexibility of the labor market; improving the skills of workers; and enabling the private sector to adopt modern technologies and innovate. The report also concludes that increasing productivity is crucial for sustained exports and FDI growth.

The report finds that labor productivity is responsible for 80 percent of the income per capita gap between Turkey and the EU-15 countries. Despite recent economic growth, employment in Turkey remains low, at 48 percent, below the EU average. Increasing employment will be essential to reduce Turkey’s income gap with the EU and other emerging economies.

The ICA considers a list of possible measures to strengthen private sector productivity and employment including initiatives to improve access to long-term financing and the efficiency of infrastructure services.

The Director for Financial and Private Sector Development of the Europe and Central Asia Region of the World Bank, Fernando Montes-Negret, stated: “We hope that the policy options offered by ICA for consideration by the authorities will be useful to continue improving Turkey’s investment climate and raising the living standards of its citizens.”

“I see a bright future for Turkey as it pursues her vision of raising incomes and living standards by increasing productivity and competitiveness. In this vision, Turkey moves up in the value chain by producing more capital and knowledge intensive goods with a better-trained labor force and more advanced technologies.” said Ulrich Zachau, the World Bank’s Country Director for Turkey, in his opening remarks.  Highlighting the importance of flexible labor markets and education, Zachau continued: "Circumstances have blessed Turkey with an unprecedented opportunity to advance her ambitious reform agenda and realize the vision of the Turkish people—the vision of a highly productive and competitive Turkey with more and better jobs and higher incomes for this and future generations.”

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