Turkey: geography, history, and contemporary culture

Turkey's Economy

The Republic of Turkey is a state situated in South-Western Asia and South-Eastern Europe, covering approximately 779,452 sq m. The state is inhabited by 57,326,000 people and the capital is Ankara. In 1993, the medium income was of approximately $1,630 per inhabitant.

The two parts that compose Turkey, the European and the Asian one, have different natural conditions. The European part, that covers about 3% of Turkey's territory, presents two lines of medium height mountains enclosing a plain. The Asian area, which is called Anatolia, is consisted of a central plateau surrounded by mountain chains.

As mentioned above, Turkey has a 57,326,000 population, of which 48% lives in the urban area. The most important cities in Turkey are: Istanbul, Izmir, Adana, Konya, Bursa, Samsun, Manisa, and Antalya. The country's population is consisted of 90% Turkish people, 7% kurds, and the rest of 3% is represented by Arabs, Greeks, and Armenians. An important number of Turkish citizens work abroad, especially in European Union member countries. 90% of Turkey's population inhabits the Asian part of the country, but the highest density can be found in the European part of Turkey.

Regarding the economy, Turkey has various underground resources, like: oil, earth coal, iron ore, chrome ore, bauxite ore, magnesium ore, borax ore, mercury ore, sulfur ore, salt ore, and others. However, production volume in these areas is not significant, except for chrome, magnesium, and borax. In the 1980s, Turkey's economy has started to remarkably expand, especially where industry is concerned. Diversified industry (including steel, non-ferrous metals, cars, chemical fertilizers, cement, textiles, olive oil, beer, sugar, and others) contributes about 30% to the country's GDP and can be found in both important urban areas and specialized centers.

Turkey's agriculture involves over 50% of the active population and is specialized on cereals culture, with exceeding volume for exports, citrus fruits culture, and vine (for raisins, Turkey is the second largest producer in the world). Also, Turkey is one of the world's largest apricots, nuts, pistachio, almonds, and olives producers. The country's traditional animal rearing (sheep, goats, horned cattle) excels the vegetal production.

Turkey's communications network is in a full process of development. Tourism's contribution (which has a very valuable and diverse potential) is also increasing. In Turkey's balance sheet, a very important role is played by the 1 million Turkish people working in the European Union, especially in Germany and the external financial aid.

Turkey's economy evolution over the past decades

During war World I and coinciding with the collapse of the Ottoman Empire, Turkey's economy was in a deplorable stage of underdevelopment. The country's poor industry was consisted of only a few factories that only produced basic products, like sugar and flour. Even more, these factories were controlled by the world's greatest states at that time. Agriculture itself was in no better situation, as it was depending on obsolete techniques and poor-quality livestock (Chapin Metz, 1995). The greatest economic development process that Turkey went through took place between 1923 and 1985, when the economy was growing at an annual rate of 6% on average. This economic development was mostly due to government policies and resulted into creating a complex economic system preoccupied with developing both industry and agriculture in order to best serve internal markets as well as international ones.

The greatest period of economic development was between 1923 and 1926, right after the war ended, when agricultural output rose by 87%, and industry and services rose by over 9% each year until 1929. However, this development process only lasted until 1930, when the world depression forced Turkey's external markets for agricultural exports to collapse. This is when the government decided it was time to take the initiative and promote economic recovery. Between 1935 and 1939 economic growth still reached 6% each year. Due to World War II this development period was followed by a stagnation period for Turkey's economy during the 1940s.

The period between 1050 and 1970 was characterized by several economic crises. The most important of these crises took place in the late 1970s. The crises were especially related to balance payments. As a consequence, Turkey's external accounts were somehow improved through a set of measures that included: devaluations of the Turkish lira, austerity programs implemented in order to dampen domestic demand for foreign products. These actions followed the International Monetary Fund guidelines. This great crisis led to three-digit inflation by 1979, the increase of unemployment with approximately 15%, only half of the industry's capacity was in use, while the government was proving to be unable to pay the interest on foreign loans.

The crisis period was followed by a reforms period. Therefore, in 1980, the government started the implementation of a reform program that was supposed to orient Turkey's economy towards export-led growth. The artisan of this reform program was Turgut Ozal, the Deputy Prime Minister at the time. This program consisted in replacing import-substitution policies with exports that could finance imports. The program consisted in a set of actions that included: "the devaluation of the Turkish lira and institution of flexible exchange rates, maintenance of positive real interest rates and tight control of the money supply and credit, elimination of most subsidies and the freeing of prices charged by state enterprises, reform of the tax system, and encouragement of foreign investment" (Chapin Metz, 1995).

This program was followed by a liberalization program that overcame the balance of payments crisis. The Iran-Iraq War that took place in the 1980s was actually beneficial for Turkey's economy and its development. Turkey's economy went through a new crisis in 1994.

Turkey's economy overview

Generally speaking, Turkey's economy can be considered a complex mixture of traditional agriculture and craftsmanship on the one hand, and modern industries on the other hand. However, although there is such a balance combination between the two, modern industries and commerce are significantly increasing their dominance. Although traditional agriculture may not seem to be a preferred practice for most of the civilized countries nowadays, it seems to be a very suitable scenario for Turkey, as the country's large agriculture sector ranked 7th in the world in 2005 as production output is concerned. In addition to this, Turkey's agriculture sector is responsible for providing the largest amount of employment that reaches approximately 30-35% of all jobs (Wikipedia, 2007).

Although the Turkish government continues to be an important actor that significantly influences sectors like basic industry, banking, transport, and communications, the private sector has shown a strong and rapid increase in the recent past, which is a very positive signal for potential foreign investors. Foreign investors might consider the largest industrial sector which is represented by textiles and clothing. This sector is responsible for providing about 30% of jobs in Turkey.

Other sectors that foreign investors might want to take into consideration are the automotive and electronics industries. These industries' importance within Turkey's export mix is rising (CIA, 2007). Although Turkey's real GNP has had a great evolution over the past 17 years, this series of economic success was interrupted several times by sharp declines in output in 1995, 1999, and 2001. However, due to the successful implementation of economic reforms, the GDP increased up to 9% in 2004 and up to 5% in the following years. Also, inflation fell to 7.7% in 2005 but increased again in 2006 when it reached 9.8%.

The most important economic indexes had the following values recently: GDP (purchasing power parity) - $635.6 billion in 2006; GDP (official exchange rate) - $358.5 billion in 2006; GDP (real growth rate) - 5.3% in 2006; GDP (per capita PPP) - $9,000 in 2006; GDP (composition by sector) - agriculture 11.2%, industry 29.4%, services 59.4% in 2006; labor force - 24.8 million, 1.2 million Turks work abroad in 2006; labor force by occupation - agriculture 35.9%, industry 22.8%, services 41.2% in 2004; unemployment rate - 10.2%, underemployment 4% in 2006; population below poverty line - 20% in 2002; household income or consumption by percentage share - lowest 10%: 2.3%, highest 10%: 30.7% in 2000; distribution of family income (Gini index) - 42 in 2003; inflation rate (consumer prices) - 9.8% in 2006; investment (gross fixed) - 20.1% of GDP in 2006; budget - revenues $112.3 billion, expenditures: $121.6 billion in 2006; public debt - 64.7% of GDP in 2006; agriculture products - tobacco, cotton, grain, olive, sugar beets, pulse, citrus, livestock; industries - textiles, food processing, autos, electronics, mining (coal, chrome, copper, boron), steel, petroleum, construction, lumber, paper; industrial production growth rate - 5.5% in 2006; electricity production - 143.3 billion kWh in 2004; electricity consumption - 140.3 billion kWh in 2005; electricity exports - 1.1 billion kWh in 2004; electricity imports - 500 million kWh in 2004; oil production - 50,000 bbl/day in 2005; oil consumption - 715,100 bbl/day in 2005; oil exports - 46,110 bbl/day in 2001; oil imports - 616,500 bbl/day in 2001; oil proved reserves - 288.4 million bbl in 2002; natural gas production - 688 million cu m in 2004; natural gas consumption - 22.6 billion cu m in 2005; natural gas export - 0 cu m in 2004; natural gas imports - 21.73 billion cu m in 2004; natural gas proved reserves - 8.495 billion cu m in 2005; current account balance - -$25.99 billion in 2006; exports - $85.21 billion f.o.b. In 2006; exports commodities - apparel, foodstuffs, textiles, metal manufactures, transport equipment; imports partners - Germany 11.7%, Russia 11%, Italy 6.5%, China 5.9%, France 5%, USA 4.6%, UK 4% in 2005; reserves of foreign exchange and gold - $53.42 billion in 2006; external debt - $193.6 billion in 2006; exchange rates - Turkish liras per U.S. dollar: 1.4286 in 2006, 1.3436 in 2005, 1.4255 in 2004, 1.5009 in 2003, 1.5072 in 2002 (CIA, 2007).

Turkey's agricultural sector

Turkey's agriculture is not one of the modernized sectors of the country's economy. In fact, agriculture is the traditional part of Turkey's economy that combines so well with modern industries. Although Turkey's agricultural sector is a traditional one, it has proven to be quite successful this way, since Turkey is one of the largest producers in the world of several types of fruits. If such great successes have been obtained in the traditional, old-fashioned way, one can only imagine what the results would be if this sector benefited from investments for its development and modernization. Even if the traditional method has worked successfully for Turkey's agriculture, it is time for progress, it is time that things evolve in this sector. This is why specialists consider that agriculture is one of the sectors that would be most profitable for foreign investors, especially from the perspective of Turkey's accession to the European Union. If major investments would be made in turkey's agricultural sector, the potential outputs would definitely excel the outputs obtained so far, which would be of significant importance for both the investors and the country.

As a matter of fact, Turkey's agriculture was ranked seventh worldwide in 2005. Also, it is the most prosperous agriculture of all Muslim countries. This is a good sign for potential investors. With the right investment, there is practically a great chance of success of any of the country's agricultural sub-sectors.

Some current facts about Turkey's agriculture show that any investments in this sector would be more than profitable, helping the country exceed its current possibilities, on the one hand, and repay the investor, on the other hand. These facts are: Turkey is currently the world's producer of hazelnut, fig, apricot, cherry, quince, and pomegranate; the second largest producer of watermelon, cucumber, and chickpea; the third largest producer of tomato, eggplant, green pepper, and lentil; the fourth largest producer of onion and olive; the fifth largest producer of sugar beet; the sixth largest producer of tobacco, tea, and apple; the seventh largest producer of cotton and barley; the eighth largest producer of almond; the ninth largest producer of wheat, rye, and grapefruit; and the tenth largest producer of lemon. These results were achieved in 2007 (Wikipedia, 2007).

Turkey's food production has always allowed the country to be self-sufficient. Even more, agricultural production has been increasing, slowly but in a stable, sufficient manner, covering the country's needs. Even so, compared to the entire economy's situation, Turkey's agricultural sector seems to be situated in a declining period. This situation is partly due to the fact that the agricultural sector is interfering with certain institutions established between 1930 and 1980, and the fact that agricultural loans are issued with negative interest rates.

However, the future looks bright for Turkey's agriculture because of the perspective of Turkey's European Union accession process. This process is expected to change these old agricultural traditions, attitudes, and perspectives. This fact will definitely encourage foreign investments in this field. Foreign investment will also be encouraged by certain planned projects implemented by the Turkish government. One of these projects is the G.A.P. project (Southeastern Anatolia Project). This project is a sign that Turkey's agriculture has taken a new direction, a direction of development, modernization, evolution, and success.

Another aspect related to Turkey's agriculture that the investors might want to take into consideration is agricultural extension and research services, which seem to be under-organized. These issues have determined that lack or shortage, in the best case, of qualified advisors, transportation, and equipment. If invested in these problem areas, things would definitely improve for both Turkey's agricultural sector and for the investor. Foreign investors interested in these aspects might want to start with the investment in human resources, especially into training them, given the lack of specialized Turkish personnel for this field. The next step regarding the subject would be the investment into transportations, which is quite defective in Turkey and is one of the negative factors that have led to Turkey's agricultural sector's state.

The many crises that Turkey had to go through over its history are considered to be due to the inability to exploit the country's agricultural potential. In order to maintain adequate supplies for both industry and exports, agricultural production needs to be expanded. Turkey's agriculture must evolve and develop in accordance with the rest of the country's economy. Foreign investors should take this aspect into consideration when deciding what region of the world they could direct their financial forces to. Turkey's agriculture seems to be just the right solution right now, given the fact that its entire potential is not even close to being exploited in its totality. As mentioned above, foreign investments into Turkey's agricultural sector would be beneficial for both the country and the investors. First of all, the country could use some investment in this field, which would lead to agriculture's development, it would increase outputs, it would expand current markets and create new ones. As a consequence, the investor would have a lot to profit from this, so things would be positive for everyone involved.

Turkey's industrial sector

Turkey's industrial sector is in much more advanced conditions than the agricultural one is. The country's industry is acknowledged as the twenty-first worldwide and the third within the Muslim countries, given the country's industrial production output in 2005. Turkey's industrial sector is characterized by several indexes, like:

It had a 19% share in employment

29% share in national production

94% share in total exports

These facts prove Turkey's industrial's sector improvements that were made over the past decades due to several reforms programs implemented by the Turkish government.

The industrial sector in Turkey presents low risks for investors. One of the fields of Turkey's industry that investors should take into consideration is the textiles and clothing, which is the largest industry in Turkey, mostly because of cheap labor and outsourcing. This industry covers about 16.3% of Turkey's total industrial capacity. Textiles and clothing produced in Turkey are exported all over the world. Along with China, Turkey covers most of the textiles and clothing production in the world. The negative part of this sector is represented by the poor quality of Turkish textiles and clothing. This is another reason for which this sector would need certain investments. Given Turkey's potential EU accession, the textiles and clothing sector will have stricter rules regarding quality. This will require serious investments. Although prices in this sector will rise in accordance with these investments and profits might not be as significant as before, this sector still represents an important one that foreign investors might benefit from.

The textiles and clothing industry is followed by: oil refinery 14.5%, food 10.6%, chemicals 10.3%, iron and steel 8.9%, automotive 6.3%, and machinery 5.8%. The exports structure is the following: textiles and clothing 19%, automotive 18%, iron and steel 13%, white goods 10%, chemicals and pharmaceuticals 9%, and machinery 7% (Wikipedia, 2007).

Regarding Turkey's automotive industry, it is worth to mention that this sector is currently in a development process, as the Turkish automotive industry and market are significantly increasing. This is another industrial aspect that investors should take into consideration. Turkey's cheap labor force encourages investments in production related fields, like automotive industry. In 2006 this industry was ranked 6th largest in Europe, after Germany, France, Spain, UK, and Italy. In 2006, the Turkish automotive industry produced approximately 1,024,987 motor vehicles. All the developments made over the past decades in this sector have led to this industry's present evolution. However, there is still room for improvements and for outputs, as this industry is not yet working at its potential. With the help of foreign investors and combined with the country's cheap labor force and strategic positioning, Turkey's automotive industry might become a very serious competitor for Germany, which is Europe's largest automotive producer. The size of Turkish motor vehicles and components exports reached over $14 billion in 2002.

Turkey's service sector

Other sectors that require investments are transportations and communications. Although these sectors went through significant development process over the past periods of time, there is still room for improvements. Also, developments in Turkey's industrial sectors and development of Turkey's tourism sector are in a continuous need of modernization of the transportations and communications systems. Actually, the transportation system is closely related to the country's agriculture, which has had a lot to suffer from defective transportations. Therefore, investments in both agriculture and transportations will have significant positive impacts on medium term and long-term, even if these sectors require serious amounts of money to be invested. In addition to this, Turkey's potential EU admission will attract EU funds for financing infrastructure, like transportations and communications.

Turkey's tourism sector

Tourism is the sector with the most significant positive evolution for Turkey. The country's tourism potential is granted by "Turkey's long and varied sea coast, high mountains and lakes, and many historical, religious, and archaeological sites" (Chapin Metz, 1995). However, before the 1980s, Turkey's tourism was in not a very good condition, as not so many tourists visited Turkey, and those who visited it spent little time and little amounts of money here. But things started to change when the Ozal government started to promote Turkey's tourism. The number of tourists visiting Turkey significantly increased over the following decade. Business tourism also increased. As a consequence, the average spending per day by tourist has increased since that period. In 2005, tourism brought Turkey revenues that reached $18.2 billion.

And the future of the Turkish tourism seems to be even brighter, as Turkey is acknowledged as the first European destination of 2007, which will significantly increase the number of tourists and the value of revenues. This seems to be the best time for investing in Turkey's tourism, as any investment, no matter how important, has very high expectancy to be a success. In addition to this, Turkey's accession to the European Union will attract a series of funds that could be used for developing the Turkish tourism and help investors who choose to act in the shortest period of time.

Conclusions

The information presented above certainly qualifies Turkey as a country with a developing economy that foreign investors should take into consideration. The moment seems to be very suitable for such investments because Turkey is in great economic shape, but the country's economy has not yet reached its full potential. In other words, there is still plenty to exploit at reasonable costs.