ANKARA, March 22, 2022 – The World Bank has launched a report titled Leveraging Global Value Chains (GVC)s for Growth in Turkey. The report, which assesses how Turkey can boost its participation in global production networks to achieve and sustain robust economic growth, is part of the Country Economic Memorandum (CEM) series of reports regularly issued by the World Bank on key development topics.
The latest report finds that rising participation in global value chains (GVCs) has gone hand-in-hand with an increase in value-added exports from Turkey. It also finds that Turkish exporters who are part of a GVC tend to be highly productive and large employers – they are twice as productive and employ four times as many employees, compared to the average domestic firm.
While participation in GVC supply chains has expanded, Turkish GVC suppliers can do more to realize productivity gains. Turkey’s participation in GVCs remains relatively low compared to other countries specialized in advanced manufacturing and services, its products are of limited sophistication and innovation is limited.
The report stresses that Turkey has high potential for exports and increased participation in GVCs. Even though exports are sizeable, they are still 50 percent below potential export levels, with higher technology products and GVCs being particularly promising. To facilitate GVC growth, Turkey needs to improve market access globally and deepen economic integration with major partners such the European Union (EU), especially by reducing barriers to trade in services. Leading firms, which often receive GVC-linked foreign direct investment (FDI), are key to increasing GVC participation and enhancing productivity.
“Turkey’s propitious geographic location, investment in economic infrastructure, and diversified private sector, have been strong factors in securing a solid presence in manufacturing GVCs. Additional investments in IT infrastructure, research and development, strengthening of science and technology curriculum and greater emphasis on STEM education for girls, will provide the impetus for achieving a higher level of insertion in high-tech and high value-added GVCs,” said Auguste Kouame, World Bank Country Director for Turkey.
The report also underlines that entrenching economic and regulatory stability and a committed and consultative approach to business regulation can increase FDI and other GVC-linked investments, and support GVC upgrading process.
“Government support can help by facilitating the availability of market information, supporting firm capability development, workforce development, and improved frameworks for access to finance,” said Hans Beck, Lead Economist and co-author of the report.
“But market-distorting measures like import barriers, domestic content requirements, and incentives are less effective as Turkey moves up the value chain,” added David Knight, Lead Economist and co-author of the report.”
GVCs could extend domestically, creating more jobs and raising the productivity of local firms by improving the capabilities of firms to join GVCs.
GVC growth has been associated with improving employment outcomes in several regions in Turkey. But activity is still concentrated in major centers, and women are underrepresented.
