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Sustaining Growth with Jobs and Better Services in Turkey

February 8, 2012

From 2002 to 2006, Turkey undertook wide-ranging financial, economic, and public sector reforms. As a result, growth accelerated and public finances improved, with public debt in 2006 at 48% of GDP, down from 78%. Poverty rates declined sharply. Yet, sustained progress was threatened by challenges in reforming public finances, and outdated regulations hindered investments. Unemployment remained high, and the labor market was largely unskilled. The sharp deterioration in the global economy in 2008 added to these challenges.

The first Restoring Equitable Growth and Employment Development Policy Loan (REGE DPL 1) in 2010 streamlined World Bank support to Turkey at a critical time when unemployment was 16% and GDP had contracted by 4.7%. The loan financed crisis mitigation measures and World Bank advice. It also continued longtime support for Turkey's employment and growth agenda, which was investing in job creation while reforming social security and health care.

The second Restoring Equitable Growth and Employment Development Policy Loan (REGE DPL 2) loan supports ongoing reforms of public finances, commercial law, and civil procedures. In the past few years, Turkey has improved the transparency of its budget and how much information it shares with the public. It is pushing forward to overhaul institutions as well as laws and regulations governing commercial enterprises.

Through its health care and education reforms, Turkey has reached almost universal health insurance coverage, enrolled more children in pre-school, and dramatically increased vocational training.

" Preschool enrollment is low in Turkey given the country's income level, and highly inequitable, with fewer opportunities for children from disadvantaged backgrounds...investing in early childhood education is crucial for improving skills and reducing inequalities "

Ahmet Ülkü Özden

Headmaster, Özyurt Basic Education School in Ankara

Meliş Bozkurt has been earning her living cleaning houses for the past 25 years. She is insured under the Universal Health Insurance program, which now covers 97% of the Turkish population, thanks to the reforms supported by the World Bank.

With chronic asthma and shortness of breath, the 47 year old frequently goes to hospital and admits that she never received good quality healthcare—until this year. "I used to take a couple of days off from work when I had to go to the hospital in the past," she says. "I had to stand in line and wait literally for hours to receive health services from doctors. Now it only takes me an hour maximum to get the services and prescription from my doctor."

The Ministry of National Education has made substantial progress towards achieving their goal of universal preschool education by 2014. When students start school ready to learn, they have a better chance of getting a good education and finding a job that pays well. And they have a better chance of encountering a level academic playing field. In the first phase, enrollment of 5-year olds in kindergarten increased in 32 provinces from 71% in 2008 to 92% by the 2010/2011 school year. The program was expanded to 25 new provinces at the beginning of 2010-11.

Özyurt Basic Education School in Ankara is one of the pilot schools where kindergarten has become compulsory.

"Preschool enrollment is low in Turkey given the country's income level, and highly inequitable, with fewer opportunities for children from disadvantaged backgrounds. However, development of the child during the early years—cognitive and non-cognitive skills as well as physical growth and well-being—lays the foundation for future learning, work, and life. Therefore, investing in early childhood education is crucial for improving skills and reducing inequalities," says headmaster Ahmet Ülkü Özden.

While it educates children to be prepared to enter the workforce, Turkey is also working hard to create jobs in the immediate term and for the future. Thanks in part to reforms of laws regulating business, effects of the global crisis on unemployment were mitigated in Turkey. At the height of the crisis, unemployment stood at 16%. It had dropped to 10% by early 2011.

Prof. Dr. Serdar Sayan, from TOBB-ETU University in Ankara says: "Turkey bounced back from the recent global downturn much faster than many other countries in the world. With a reform program in place right on time, long-term fiscal sustainability of the health and social security systems were ensured, and the Public Financial Management system was enhanced."

The second Development Policy Lending series supports the development of small and medium size enterprises (SME). Professor Sayan says: "A good climate for business growth, productivity, and job creation was created, and to date the other results of the reform program have been very positive. The share of credit to SMEs in total credit has increased from 21.2% in 2009 to 23.8% in 2010. Vocational training programs that SMEs benefit the most from have reached more than four times the population they reached in 2008."

These ongoing reforms are expected to reduce poverty and inequality in Turkey over the long run.

Total kindergarten enrollment of 5 year-old-children in 32 provinces during the 2010-11 school year - up from 71% in 2008