Sustaining High Growth: Selected Issues April 10, 2008
Turkey's public policy program aims at improving the quality of life of its people. The country seeks to double the nominal per capita income of its population by 2013. It wants this rapid growth to be inclusive of all segments of society, regions, and economic sectors-especially through improved labor market performance leading to more and better jobs in the economy. At the same time, the authorities want to improve the quality of public services which they see as an important complement to economic growth in improving quality of life. They also believe that the potentially negative environmental consequences of the period of rapid growth ahead need to be managed so that the positive welfare gains from higher per capita income levels do not become eroded by environmental nuisances.
This Country Economic Memorandum (CEM), prepared in collaboration with the Turkish authorities, summarizes recent accomplishments in achieving high growth and analyzes remaining public policy challenges and options available to the authorities to meet these challenges.
Chapter 1: Ensuring Sustainability of Fast Growth
Turkey has restored macroeconomic stability and has greatly improved the resilience of its economy. Since 2001, the Turkish economy has bounced back from a sharp crisis and entered a period of high growth and significant structural transformation. Annual growth averaged 7.5 percent and output increased by more than 40 percent in 2002-2006. However, challenges remain.
Chapter 2: Promoting Productivity and Competitivenessv
The sustainability of high growth will eventually depend on the capacity of the Turkish economy to maintain and further improve its competitiveness. Sustaining rapid growth will be more challenging within a context of fast globalizing international markets and stiffer competition from low-cost producers - especially from China and India in traditional sectors.
Chapter 3: Improving Public Sector Governance
The public sector governance agenda is of crucial importance for a strong investment climate conducive to growth and job creation, and thus for meeting Turkey's long-term development challenges. The Government's medium-term program includes "increasing quality and effectiveness of public services" as one of the key development themes.
Chapter 4: Promoting Employment and Managing Migration
Broad access to productive jobs is essential for achieving the objective of inclusive growth and help Turkey converge faster to average EU and OECD income levels. Labor market reform could address the issue of creating more and better jobs. This part of the study addresses selected issues pertaining to employment generation and labor markets in Turkey namely migration, youth employment, and the impact of labor taxes on employment.
Chapter 5: Challenges for Regional Development Policy
The policy and institutional framework for regional development plays an important role in contributing to a more equal sharing of the benefits of high growth. By strengthening the policy framework and the institutional structure of regional development Turkey could address the issue of wide regional discrepancies.
Chapter 6: Environmental Protection - Prioritizing Efforts and Strenghtening Governance
Improving environmental quality and protecting the environment are major challenges facing a rapidly growing country such as Turkey irrespective of its status with respect to EU accession.
Chapter 7: An Integrated Food Safety Policy to Improve Competitiveness
Lack of strong legal and institutional framework in food safety standards has implications on both Turkey's competitiveness and growth, and living environment. Health hazards related to unsafe food cause high economic costs, because of the income foregone due to the limited competitiveness of the food products on the national and international food markets, diseases and deaths, and costs of medical treatment.