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U.S. DEPARTMENT OF STATE
TURKEY: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                              TURKEY

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                     1992      1993      1994 1/

Income, Production and Employment:

Real GDP (1987 prices)            104,440   112,254   107,988
Real GDP Growth (pct.)                6.0       7.5      -3.8
GDP (current prices)              158,735   174,144       N/A
By Sector:
  Agriculture                      23,784    25,045       N/A
  Energy/Water                      4,152     4,683       N/A
  Manufacturing                    34,346    37,539       N/A
  Mining/Quarrying                  2,170     1,986       N/A
  Construction                     10,817    12,357       N/A
  Dwelling Ownership                5,984     6,206       N/A
  Financial Services                6,314     7,145       N/A
  Other Services                   48,939    52,680       N/A
  Government/Health/Education      16,237    18,562       N/A
  Net Exports of Goods & Services  -4,687   -10,228       N/A
Real Per Capita GNP (USD 1987)      1,802     1,896       N/A
Labor Force (000s)                 21,015    20,196       N/A
Unemployment Rate (pct.)              7.9       7.6       8.3

Money and Prices:  (annual percentage growth)

Money Supply
  (M2/TL trillions at mid-year)     143.3     224.5     469.3
Base Interest Rate                    N/A       N/A       N/A
Personal Saving Rate                 21.3      21.3       N/A
Retail Inflation                      N/A       N/A       N/A
Wholesale Inflation                  62.1      58.4     116.0
Consumer Price Index                 71.1      66.0       N/A
Average Exchange Rate (TL/USD)      6,888    10,986    31,000

Balance of Payments and Trade:

Total Exports (FOB) 3/             14,715    15,349    17,500
  Exports to U.S.                     865       986     1,450
Total Imports (CIF) 3/             22,871    29,428    24,000
  Imports from U.S.                 2,601     3,351     2,280
Aid from U.S.                         528       578       526
Aid from Other Countries              N/A       N/A       N/A
External Debt                      55,592    67,360    65,000
Debt Service Payments
  (medium & long-term/paid)         6,494     8,085     6,895
Gold and FOREX Reserves (mid-year) 12,355    17,429    15,254
Trade Balance 3/                   -7,440   -14,079    -6,500
  Trade Balance with U.S.          -1,736    -2,365      -830


N/A--Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ GNP 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 1993, Turkey's seven percent real gross national
product (GNP) growth rate was the highest of any OECD country.

    The Turkish government's inability to limit burgeoning
fiscal deficits and high transfers to inefficient state
economic enterprises, however, led to an economic crisis in
early 1994.  From January to April, the Turkish Llra
depreciated 135 percent against the dollar and inflation rose
to a record 33 percent for the month of April.  Interest rates
also skyrocketed to record levels as the Central Bank of Turkey
attempted to combat exchange rate fluctuations by increasing
interbank rates.  The overnight rate briefly exceeded 1000
percent at the heart of the crisis.

    The Turkish government implemented an austerity program on
April 5 and signed a standby agreement with the IMF in July. 
The government curbed expenditures sharply and reduced
inflation in the months immediately following the program's
implementation.  Recession followed and real GNP will decline
by approximately four percent in 1994.  The Turkish government
has committed itself to structural reforms in the area of
privatization, social security and taxation, but had made no
progress in these areas by the end of October 1994.

    Inflation, Growth: Inflation, fueled by massive public
sector deficits, worsened in 1994.  In 1993 consumer prices
(CPI) increased by 71 percent, four points higher than in
1992.  The CPI rose 111 percent in the twelve months ending
September 30, 1994, with wholesale prices increasing by 130
percent during the same period.  

    The Turkish economy contracted by nearly eleven percent in
the second quarter of 1994 (compared to the second quarter of
1993) as the austerity program took effect.  The economy has
demonstrated a remarkable dynamism in the second half of the
year and a surge in exports indicated the economy was beginning
to recover.  The nine-month balance sheets of Turkey's large
companies also show high profit margins in apparent
contradiction of the contraction in national economic activity.

    Fiscal Policy: The Turkish government limited current
expenditures significantly in the months immediately following
the implementation of the austerity program.  As the end of
1994 approached, however, expenditures again outstripped
revenues and tax receipts.  In 1993 the public sector borrowing
requirement (PSBR) reached a record 16 percent of GNP.  The
PSBR includes the borrowing requirements of budgetary 
departments, state economic enterprises (SEEs), and off-budget
funds.  The government continues to incur sizable debt to pay
current expenses, finance major infrastructure projects, and to
support the SEEs.  Both major rating agencies have lowered
Turkey's country risk rating to below investment grade, forcing
the government to rely entirely on domestic borrowing and
advances from the Central Bank to finance its deficits.

    Monetary Policy: Turkey's Central Bank has not published a
monetary policy since 1992.  In early 1994, the Central Bank
focused on foreign exchange rates, attempting to limit exchange
rate volatility through regular interventions in the currency
and open money markets.  Since the implementation of the April
5 austerity program, the Central Bank has limited its
interventions in currency markets.  The Central Bank does not
use interest rates as a tool against inflation, conceding
control of interest rate policy to the Turkish Treasury.


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 (e.g. the
Gulf War and the January - April 1994 financial crisis).

    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
1993, the TL appreciated by about three percent in real terms. 
The TL declined by 135 percent against the dollar in the first
nine months of 1994.  The Government of Turkey expects real
depreciation of the TL in 1994 will be 19 percent.


3.  Structural Policies

    Since 1980 Turkey has made substantial progress in
implementing structural reforms and liberalizing its trade and
foreign exchange regimes.  In contrast, the Turkish government
has moved forward marginally in privatizing the SEEs, which
account for some 35 percent of manufacturing value added. 
Government transfers to SEEs constitute a substantial drain on
the economy.  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 increase.  The
April 5 austerity program, accompanied by the sharp devaluation
of the lira, dampened import demand in 1994.

    Turkey's largest source of imports in 1993 was Germany,
which accounted for 15 percent of total imports, followed by
the United States, with 13 percent.  In the first eight months
of 1994, total imports declined by 23 percent.  The Turkish
government estimates that imports will decline to $24 billion
in 1994, from $29 billion in 1993, although most analysts
anticipate a rebound in 1995 as the economy begins to grow
again.  Imports from the United States declined by 32 percent
during the same period, resulting in a U.S. trade surplus of
$633 million from January to August.

    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) by
January, 1996.  This should result in generally lower tariffs
and fees on U.S. imports than those currently in effect. 
Turkey will reduce its tariff schedule in two stages during the
course of 1995 in order to eliminate all customs duties for EU
countries and bring it in line with the CET.


4.  Debt Management Policies

    At year-end 1993 Turkey's gross outstanding external debt
was $67 billion -- an increase of $12 billion over 1992.  Debt
service obligations for 1994 increased from $6.8 billion in
1993 to $8.5 billion.  Turkey has had no difficulty servicing
its foreign debt, and the current account may achieve a surplus
of approximately $2 billion in 1994.  Turkey's official
external debt payments will only increase by about $500 million
in 1995, but total external debt payments will exceed $11
billion.

    The Turkish debt service ratio reached a high in 1988 when
it equaled 35.6 percent of foreign exchange revenues.  In 1994,
the debt service ratio was 26 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 in 1993.  Bilateral official lenders, principally OECD
member countries, accounted for approximately 27 percent of
Turkey's 1993 external debt.  World Bank committments to Turkey
total $3.6 billion, with $100 million in new credit approved 
in 1994.  The IMF standby agreement signed with Turkey is for
$720 million (SDR 509.3 million), which will be allocated in
five quarterly tranches.


5.  Significant Barriers to U.S. Exports

    Import Licenses: While there is generally no requirement
for government permission or licenses in the importation of new
products, there is sometimes a problem introducing new
foodstuffs and foodstuff ingredients.  The Turkish government,
however, does impose requirements for import licenses on
agricultural commodities, depending on the domestic supply of
various grains and foodstuffs.  The Turkish government also
requires certification that quality standards are 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.  In 1993 the Import Regime 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 government's 1994
Import Regime continued efforts begun in 1993 to reduce import
duties and harmonize Turkey's tariff system with that of the
EU.  Tariff 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.  In 1996, as Turkey enters
the Customs Union, tariffs for products from EU and EFTA
countries will disappear altogether; Turkey will lower tariffs
on third-country products to the EU's Common External Tariff.

    The Turkish Government has imposed restrictive non-tariff
barriers on agricultural commodities, particularly high value
livestock and meat products.  The representatives of U.S. food
industry companies which wish to expand their investment in
Turkey have expressed concern over this trend.

    Government Procurement Practices/Countertrade: Turkey
normally follows competitive bids procedures for domestic,
international and multilateral development bank-assigned
tenders.  U.S. companies sometimes become frustrated over
lengthy and often complicated bidding/negotiating processes. 
Some tenders, especially large projects involving coproduction,
are frequently opened, closed, revised, and opened again. 
There are often numerous requests for "best offers."  In some
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 United States and Turkey exists, this can
significantly add to the cost of U.S. bids, making them
non-competitive.  U.S. and Turkish negotiations on a bilateral
tax treaty are ongoing and an agreement may be reached in 1995.

    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-Turkey Bilateral Investment
Treaty entered into force in May 1990.  The treaty guarantees
MFN treatment on establishment, and the better of MFN or
national treatment after establishment, 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.


6.  Export Subsidies Policies

    Turkey employs a number of incentives to promote exports,
including export credits and a variety of tax incentives. 
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 VAT.

    In 1994, the government reviewed its subsidy programs for
consistency with the GATT and EU standards.  As a result, it
will phase out a number of programs, including one which
discriminates against foreign-flag shippers.


7.  Protection of U.S. Intellectual Property

    Turkey could strengthen its 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, 1993 and 1994 under the "Special
301" provision of the 1988 Trade Act.  The EU has made adequate
IPR protection a pre-condition to the Customs Union.  The
government has given assurances it will modernize its
legislation, but the process has been painfully slow.  The
government has said it will abide by IPR standards agreed to in
the Uruguay Round when the agreement goes into effect in 1995.

    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 passed a law prohibiting computer software piracy.  The
Turkish government has submitted bills amending both the
copyright and cinema and video laws to parliament, although
both contain provisions unsatisfactory to U.S. industry.

    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.  The Turkish government presented new draft patent
legislation to parliament in 1993, but as of October 1994 that
body was still considering it.  The draft legislation contains
a ten year delay before pharmaceuticals would be covered.

    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 more serious crimes, is not willing to
devote the effort necessary to prosecute offenders. 
Counterfeiters are generally small operations rather than large
companies.

    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.  The computer
industry claims its losses exceed $100 million annually.  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.  They cite loss of 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 officials to
prepare new intellectual property rights draft laws.


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.  Nonbinding
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
International Labor Organization (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.  The government has
presented legislation to parliament, where it is still under
discussion.  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 for children,
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 underaged children.  In the
informal sector, 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 nonwage 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--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                             (1)
Total Manufacturing                                   606
  Food & Kindred Products                   128
  Chemicals and Allied Products             142
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment             7
  Transportation Equipment                  113
  Other Manufacturing                        71
Wholesale Trade                                        23
Banking                                                98
Finance/Insurance/Real Estate                         (2)
Services                                              (1)
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                1,023      

(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000

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

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