Return to: Index of "1993 Country Reports on Economic Practice and Trade Reports" ||
Index of "Economic and Business Issues" || Electronic Research Collections Index || ERC Homepage



                     Key Economic Indicators
     (Trillions of Turkish lira (TL) unless otherwise noted)

                                  1991      1992      1993 1/
Income, Production,
 and Employment

Real GDP (1987 prices) 2/            86.5      90.7      97
Real GDP growth (pct)                 1.0       5.5     7.0
GDP (at current prices) 2/          618.2   1,072.1   1,800
By sector:
  Agriculture                        97.2     163.4     n/a
  Energy and Water                   12.9      26.6     n/a
  Manufacturing                     136.4     230.2     n/a
  Mining & Quarrying                 11.6      17.8     n/a
  Construction                       41.6      68.9     n/a
  Dwelling Ownership                 23.2      41.2     n/a
  Financial Services                 26.1      46.2     n/a
  Other Services                    183.8     311.2     n/a
  Government, Health
    and Education                    61.1     111.8     n/a
  Net Factor Income
    from Abroad                       4.3      10.5     n/a
Real per capita GNP
 ('87 TL 000s)                    1,509.5   1,564.8   1,640.0
Labor Force (000's)               19,967    20,196      n/a
Unemployment Rate (pct)             7.8       7.9       n/a

Money and Prices
 (annual percentage growth)

Money Supply (M2,  mid-year)       86.1     143.3     224.5
Personal Saving Rate (pct.)        23.7      21.3      21.3
Wholesale Inflation                59.2      61.4      60.0
Consumer Price Index               71.1      66.0      68.2
Exchange Rate (TL per US$)         4,169.9   6,882.0  11,096.0

Balance of Payments and Trade
 (Million U.S. dollars)

Total exports (FOB)3/             13,593.4  14,714.7  15,200.0
  Exports to U.S.                    913.0     865.0     900.0
Total Imports (CIF)3/             21,046.9  22,870.9  28,500.0
  Imports from U.S.                2,255.0   2,601.0   2,970.0
Aid from U.S.                        755.0      75.0     125.0
Aid from Other Countries                              
External Debt                     50,489.0  55,592.0  59,381.0
Debt Service Payments 
  (Med & LT Paid)                  6,494.0   8,085.0  6,895.0
Gold and FOREX Res. (mid-year)    10,932.0  12,355.0  17,429.0
Trade Balance 3/                  -7,440.0  -8,156.2  13,300.0
  Balance with U.S.               -1,328.0    n/a       n/a


1/ 1993 figures are all estimates based on available monthly
data in October 1993.
2/ GDP at producer's value.
3/ Merchandise trade.

1.  General Policy Framework

    From the establishment of the Republic in 1923 until 1980,
Turkey was an insulated, near autarkic, state-directed
economy.  In 1980, however, the country embarked on a new
course.  Increased reliance on market forces, decentralization,
export-led development, lower taxes, foreign investment, and
privatization became the basis for the new economic
philosophy.  These reforms have brought Turkey impressive
benefits:  in 1992, Turkey's 5.9 percent real gross national
product (GNP) growth rate was the highest of any OECD country. 
Real GNP should increase by seven percent in 1993.

    Inflation and Growth:  Inflation, fueled primarily by
massive public sector deficits, continues to be a serious
problem.  In 1992 consumer prices (CPI) increased by 67
percent, somewhat less than in 1991.  The CPI rose 68 percent
in the twelve months ending September 30, 1993.  The Turkish
economy, fueled by a huge increase in demand, led in part by
heavy government spending and foreign borrowing, grew by more
than nine percent in the first half of 1993.  Although growth
in the second half of the year is likely to be more modest,
this figure has sparked fears that inflation rates may be much
higher in 1994.

    Fiscal Policy:  The Turkish government continues to spend
far more than it receives in revenues and tax receipts.  In
1992 the public sector borrowing requirement (PSBR) reached 9.6
percent of GNP, down only slightly from 1991's record 10.4
percent.  The PSBR, which includes the borrowing requirements
of budgetary departments, state economic enterprises (SEEs),
and off-budget funds, may increase to as much as 11 percent in
1993.  The government continues to incur sizable debt to pay
current expenses, finance major infrastructure projects, and to
support the SEEs.  Deficits are financed primarily through
domestic borrowing and advances from the Central Bank.

    Monetary Policy:  In 1992 Turkey's Central Bank instituted
a comprehensive monetary policy that targeted items on its
balance sheet rather than macroeconomic variables.  This
program assumed a fiscal policy based on substantial declines
in inflation and the government budget deficit, and a limit to
short-term advances provided to the Treasury by the Bank.  By
the second quarter of the year it became clear that none of
these conditions were pertinent, and the Bank shifted its focus
to the foreign exchange market, where it tried to limit
"excessive" exchange rate fluctuations and maintain the value
of the lira in real (inflation-adjusted) terms.  In 1993 the
Bank did not issue a monetary program.  Long-term deposit
interest rates are slightly positive in real terms;  deposits
have been growing faster than inflation.

2.  Exchange Rate Policy

    The Turkish Lira (TL) is fully convertible and the exchange
rate is market determined.  The Central Bank intervenes in
money markets to dampen short-term exchange rate fluctuations
and to provide liquidity during extraordinary events, such as
the Gulf War.

    The TL appreciated significantly vis a vis the dollar in
real terms (adjusted by relative CPI changes) in 1989 and 1990,
and depreciated slightly in real terms in 1991 and 1992.  In
the year through September 1993 the TL appreciated by about
three percent in real terms.

3.  Structural Policies

    Since 1980 Turkey has made substantial progress in
implementing structural reforms and liberalizing its trade and
foreign exchange regimes.  Privatization of state economic
enterprises (SEEs), which account for some 35 percent of
manufacturing value-added, continues, but difficulties in
reorganizing these massive enterprises have slowed the pace. 
SEEs constitute a substantial drain on the economy, accounting
for 2.2 percent of the PSBR in 1992.  SEE inefficiencies in
production and product pricing continue to distort the market
and contribute to high inflation rates.  Policies related to
SEEs, however, do not have a direct effect on U.S. exports.

    After a liberalization of the import regime in 1989,
imports climbed dramatically, rising some 41 percent in 1990. 
Strong economic growth plus further liberalization of the
regime in 1993 resulted in another dramatic rise this year. 
Turkey's largest source of imports in 1992 was Germany, which
accounted for 16 percent of total imports, followed by the
United States, with 11.4 percent.  In the first eight months of
1993, total imports grew nearly 31 percent.  Imports from the
U.S. were up 32 percent during the same period, resulting in a
U.S. trade surplus of $1.7 billion.

    By the terms of its Association Agreement with the European
Union (EU), Turkey is scheduled to form a customs union with
the EU and to adopt the EU's Common External Tariff (CET) in
1995.  This should result in generally-lower tariffs and fees
on U.S. imports than those currently in effect.  On January 1,
1994, Turkey will reduce its tariff schedule further to bring
it in line with the CET.

4.  Debt Management Policies

    At year-end 1992 Turkey's gross outstanding external debt
equalled $55 billion.  Debt service obligations for 1993 have
declined from $8 billion to $6.8 billion.  Turkey has no
difficulty servicing its foreign debt, but a growing current
account deficit is a cause for concern.

    The Turkish debt service ratio reached a high in 1988 when
it equaled 35.6 percent of foreign exchange revenues.  In 1992,
the debt service ratio increased from 26.8 percent in 1991 to
27.5 percent.  The public sector, including state economic 
enterprises and local governments, remains the major borrower,
accounting for about 78 percent of total outstanding debt and
96 percent of medium and long-term debt.  Bilateral official
lenders, principally OECD member countries, accounted for
approximately 27 percent of Turkey's 1992 external debt. 
Foreign commercial banks hold 17 percent of total Turkish
obligations and multilateral agencies hold 16 percent.  The
World Bank's portfolio in Turkey was a substantial $4.9 billion
as of October 1993, with $491.5 million in new credits signed
during the Bank's 1993 fiscal year.  Turkey completed payments
in 1990 on its last IMF standby agreement, which was reached in

5.  Significant Barriers to U.S. Exports

    Import Licenses:  In general, there is no requirement for
government permission or license in the importation of new
products.  The Government of Turkey requires certification that
quality standards have been met in the importation of human and
veterinary drugs and certain foodstuffs.  Import certificates
are necessary for most products which need after-sales service
(e.g. photocopiers, EDP equipment, diesel generators).

    Import Regime:  The Turkish government is progressively
reducing import duties.  The government's 1993 Import Regime
continues efforts begun in 1973 to reduce import duties and
harmonize Turkey's tariff system with that of the EU.  The 1993
Import Regime also introduced a new tariff system that
streamlined a confusing array of duties, taxes, and
surcharges.  There are now only two tariffs -- one for EU/EFTA
and one for other countries -- and one fund charge on imports,
whereas imports faced eight types of duties and six types of
fund charges in the past.  The resulting rates are now lower
for EU/EFTA-origin goods than for goods from the U.S. and third
countries.  U.S. firms exporting to Turkey may now find
themselves disadvantaged compared to European competitors.  As
Turkey enters the Customs Union, tariffs for products from EU
and EFTA countries will disappear altogether, and Turkey will
lower its tariffs on third-country products to the EU's Common
External Tariff.

    Government Procurement Practices/Countertrade:  Turkey
normally follows competitive bid procedures for domestic,
international and multilateral development bank-assigned
tenders.  U.S. companies occasionally become frustrated over
lengthy and often complicated bidding/negotiating processes. 
Some tenders, especially large projects involving co-production
and those based on the BOT model, are frequently opened,
closed, revised, and opened again.  There are often numerous
requests for "best offers."  In several cases, years have
passed without the selection of a contractor.

    The Government of Turkey withholds 15 percent of the total
amount of services (including any work performed in the U.S.)
in government contracts for taxes.  As no bilateral tax treaty
between the U.S and Turkey exists, this can significantly add
to the cost of U.S. bids, making them non-competitive.

    Investment:  The Foreign Investment General Directorate of
the Undersecretariat for Treasury and Foreign Trade evaluates
all non-petroleum foreign investment projects and can
independently approve foreign capital investments up to a fixed
investment value of $150 million.  Investments in excess of
$150 million require the permission of the Council of
Ministers.  The United States-Turkish Bilateral Investment
Treaty entered into force in May 1990.  The treaty guarantees
national treatment for investors of both countries, assures the
right to transfer freely dividends and other payments related
to investments, and provides for an agreed dispute settlement
procedure.  The Turkish government provides a variety of
incentives to investors of all nationalities to encourage
investment in certain regions and sectors.

    Although Turkey's foreign investment law is liberal, and is
generally liberally applied, in some BOT, revenue-sharing
projects, and joint ventures involving the Turkish Government,
American investors have been forced to submit to protracted
negotiations with the government.  The government's positions
in these negotiations have frequently been ill-defined, leading
some investors to feel that there is a lack of transparency in
these processes.

6.  Export Subsidies Policies

    Turkey employs a number of incentives to promote exports,
including export credits and a variety of tax incentives.  The
Turkish Eximbank provides exporters with credits, guarantees,
and insurance programs.  Foreign-owned firms, including several
U.S. companies, make use of TurkExim's programs, especially for
trade with the republics of the former Soviet Union.

    Turkey eliminated its export tax rebate system in 1989 in
conjunction with its accession to the General Agreement on
Tariffs and Trade Subsidies Code.  A partial deduction for
corporate tax purposes allows exporters to deduct eight percent
(down from 16 percent in 1991) of their industrial export
revenues above $250,000 from their taxable income.  Exported
products are not subject to the value-added tax.

7.  Protection of U.S. Intellectual Property

    Turkey needs to improve copyright and patent protection as
well as institute greater penalties and enforcement of existing
legislation.  As a result of inadequate protection for
intellectual property, the United States placed Turkey on the
"priority watch list" in 1992 and 1993 under the "Special 301"
provision of the 1988 Trade Act.  Turkey has given assurances
it will modernize its intellectual property laws to conform
with European Union standards, but the Government of Turkey has
still not presented legislation which could resolve this issue
to the Turkish parliament.

    Copyrights:  Turkey's copyright law ("Intellectual and
Artistic Works Law") dates back to 1951.  Unauthorized copying
and sale of U.S.-origin books, videos, sound recordings, and 
computer programs by local producers is widespread.  The 1987
Cinema, Video, and Music Works Law provided greater protection
for these artistic works through a registration system.  It has
helped reduce piracy, but enforcement has been problematic and
penalties are not harsh enough to act as a deterrent.  In 1991
Turkey finally passed a law prohibiting computer software
piracy.  A new copyright law has been drafted, but as of
October 1993 it has not been presented to Parliament.

    Patents (Product and Process):  Turkey's 1879 Patent Law
does not provide protection for human or veterinary drugs or
for the processes for making them.  Nor are biological
inventions, including plant varieties, patentable.  Turkey's
Seed Registration, Control, and Certification Law does not ban
unauthorized propagation of foreign firms' proprietary seed. 
The patent term in Turkey is only 15 years from the date of
filing.  New draft patent legislation was presented to
Parliament in 1993, but as of October 1993 it was still under
consideration.  The draft legislation contains a five-year
delay before pharmaceuticals would be covered, as well as
compulsory licensing provisions which would limit the economic
value of a patent in any case.

    Trademarks:  Counterfeiting of foreign trademarked
products, such as jeans, perfumes, and spare car parts, is
widespread.  Trademark lawyers generally believe that the
relevant laws are adequate, but that the criminal justice
system, overwhelmed by far more serious crimes, is not willing
to devote the effort necessary to prosecute offenders. 
Counterfeiters are generally small operations rather than large

    It is difficult to assess the amount of U.S. export loss
attributable to lack of adequate protection for intellectual
property.  The U.S. motion picture industry estimates a loss of
$35 million per year.  It claims the home video market is 45
percent pirate in large cities and between 60 to 65 percent
elsewhere, where enforcement is less strict.  U.S.
pharmaceutical company representatives hesitate to put a dollar
value on potential sales lost due to the lack of patent
protection for U.S. pharmaceuticals.  Instead, they stress lost
market share, inability to launch new products, and limits on
new investments due to the lack of protection.  One U.S. firm
estimates losses range from $30 to $40 million annually.  The
United States has worked closely with Turkish government
officials in preparing new intellectual property rights draft

8.  Worker Rights

    a.   Right of Association

    Most workers have the right to associate freely and form
representative unions.  Teachers, military personnel, police
and civil servants (broadly defined as anyone directly employed
by central government ministries) may not organize unions.

    Except in stipulated industries and services such as public
utilities, the petroleum sector, protection of life and
property, sanitation services, national defense and education,
workers have the right to strike.  Turkish law and the labor
court system require collective bargaining before a strike. 
The law specifies a series of steps which a union must take
before it may legally strike, and a similar series of steps
before an employer may engage in a lockout.  Non-binding
mediation is the last of these steps.  Once a strike is
declared, the employer involved may respond with a lockout.  If
the firm chooses to remain open, it is prohibited from hiring
strikebreakers or from using administrative personnel to
perform jobs normally done by strikers.  Solidarity, wildcat,
and general strikes are illegal.

    In 1993, the Turkish Parliament ratified seven ILO
Conventions, including Convention 87 on labor's freedom of
association and right to organize.  The government of Turkey
has drafted legislation to permit civil servants to organize,
but has not yet submitted that legislation to Parliament,
pending consultations between the government, employers, and
unions.  Permission for civil servants to form trade unions
will require amendments to the Constitution.  Constitutional
amendments that would grant all categories of employees the
right to form unions and would also expand the right to strike
were submitted to Parliament for consideration in late 1992.

    The 1984 law establishing free trade zones forbids strikes
for ten years following their establishment, although union
organizing and collective bargaining are permitted.  The High
Arbitration Board settles disputes in all areas where strikes
are forbidden.

    b.   Right to Organize and Bargain Collectively

    Apart from the categories of public employees noted above,
Turkish workers have the right to organize and bargain
collectively.  The law requires that in order to become a
bargaining agent a union must represent not only 50 percent
plus one of the employees at a given work site, but also 10
percent of all workers in that particular branch of industry
nationwide.  After the Ministry of Labor certifies the union as
the bargaining agent, the employer must enter good faith
negotiations with it.

    c.   Prohibition of Forced or Compulsory Labor

    The Constitution prohibits forced or compulsory labor, and
it is not practiced.

    d.   Minimum Age of Employment for Children

    The Constitution prohibits work unsuitable to the age of a
person, and current legislation forbids full time employment of
children under 15.  The law also requires that school children
of age 13 and 14 who work part-time must have their working
hours adjusted to accommodate school requirements.  The
Constitution also prohibits children from engaging in
physically demanding labor, such as underground mining, and
from working at night.  The laws are effectively enforced only
in organized industrial and service sectors.  Unionized
industry and services do not employ under-aged children.  In
practice, many children under 13 work as street vendors, in
home handicrafts, on family farms, and in other enterprises.
    e.   Acceptable Conditions of Work

    The Labor Ministry is legally obliged, through a tripartite
government-union-industry board, to adjust the minimum wage at
least every two years and has done so annually for the past
several years.  Labor law provides for a nominal 45-hour work
week and limits the overtime that an employer may request. 
Most workers in Turkey receive non-wage benefits such as
transportation and meal allowances and some also receive
housing or subsidized vacations.  In recent years fringe
benefits have accounted for as much as two-thirds of total
remuneration in the industrial sector.  Occupational safety and
health regulations and procedures are mandated by law, but
limited resources and lack of safety awareness often result in
inadequate enforcement.

    f.   Rights in Sectors with U.S. Investment

    Conditions do not differ in sectors with U.S. investment.

         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (Millions of U.S. dollars)

Category                                    Amount

Petroleum                                                 D
Total Manufacturing                                     469
    Food & Kindred Products                    37
    Chemicals and Allied Products             125
    Metals, Primary & Fabricated                D
    Machinery, except Electrical                D
    Electric & Electronic Equipment             D
    Transportation Equipment                   77
    Other Manufacturing                        53
Wholesale Trade                                          10
Banking                                                 114
Finance and Insurance                                     *
Services                                                  D
Other Industries                                          D

TOTAL ALL INDUSTRIES                                    705

(D)-Suppressed to avoid disclosing data of individual companies
(*)-Less than $500,000

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis, unpublished data.

To the top of this page