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Economy of Turkey

Turkey is a large, middle-income country with relatively few natural resources. Its economy is currently in transition from a high degree of reliance on agriculture and heavy industry to a more diversified economy with an increasingly large and globalized services sector. Coming out of a tradition of a state-directed economy that was relatively closed to the outside world, Prime Minister and then President Turgut Ozal began to open up the economy in the 1980s, leading to the signing of a customs union with the European Union in 1995. In the 1990s, Turkey's economy suffered from a series of coalition governments with weak economic policies, leading to high-inflation boom-and-bust cycles that culminated in a severe banking and economic crisis in 2001, a deep economic downturn (GNP fell 9.5% in 2001), and an increase in unemployment. Turkey's economy recovered strongly from the 2001 recession thanks to good monetary and fiscal policies and structural economic reforms made with the support of the International Monetary Fund and the World Bank.

Turkey's economy grew an average of 6.0% per year from 2002 through 2007--one of the highest sustained rates of growth in the world. During this period, inflation and interest rates fell significantly, the currency stabilized, and government debt declined to more supportable levels (39.5% of GDP in 2008). However, booming economic growth contributed to a growing current account deficit (-5.6% of GDP or $41.6 billion in 2008). Growth fell to 1.1% in 2008, and the economy contracted by 4.7% in 2009 due to the global economic slowdown and reduced exports. Growth was expected to pick up to 6.8% in 2010, based on strong first and second quarter growth rates. Continued implementation of reforms, including tight fiscal policy, and securing independent Central Bank monetary policies is essential to sustain growth and stability.

After years of low levels of foreign direct investment (FDI), Turkey succeeded in attracting $18.3 billion in net FDI in 2008. Global market conditions reduced foreign capital inflows in 2009, and Turkey attracted $7.7 billion in net FDI in 2009. This amount was expected to fall to around $5 billion in 2010. A series of large privatizations, the stability fostered by the start of Turkey's EU accession negotiations, strong and stable growth, and structural changes in the banking, retail, and telecommunications sectors contributed to the 2008 rise in foreign investment. Turkey has taken steps to improve its investment climate through administrative streamlining, an end to foreign investment screening, and strengthened intellectual property legislation. However, a number of disputes involving foreign investors in Turkey and certain policies, such as high taxation and continuing gaps in the intellectual property regime, inhibit investment. Turkey has a number of bilateral investment and tax treaties, including with the United States, which guarantee free repatriation of capital in convertible currencies and eliminate double taxation.

EU Accession. Turkey and the then-European Economic Community (EEC) entered into an Association Agreement in December 1964. Turkey and the EU also formed a customs union beginning January 1, 1996. The agreement covers industrial and processed agricultural goods and has prompted Turkey to harmonize its laws and regulations with EU standards. Turkey adopted the EU's Common External Tariff regime in 1963, effectively lowering Turkey's tariffs for third countries, including the United States. In 1999 the European Council granted the status of candidate country to Turkey, and accession negotiations with Turkey were opened in October 2005.

Accession talks include a process known as the acquis communautaire that determines to what extent an applicant meets the EU’s rules and regulations. The acquis is divided into 33 chapters that range from free movement of goods to agriculture to competition.

As of late November 2010, Turkey had opened 13 chapters, including the provisionally closed chapter on Science and Research. Most recently, in June 2010, the chapter on Food Safety, Veterinary & Phytosanitary Policy was opened. Seventeen chapters are blocked. Three chapters remain unblocked and have yet to be opened. One of the key stumbling blocks to opening new chapters is that Turkey has yet to fully implement the Ankara Protocol, which requires normalizing bilateral relations with EU member Cyprus, something Turkey has said it will not do until both Greek and Turkish Cypriot communities on the island are reunited.

Energy. In 2009, total electricity supply in Turkey reached 194 terawatt-hours (TWh), up by 51% from 2000. Natural gas fueled 49% of power generation, while coal provided 28%, hydropower 19%, oil 3%, and other sources 1%. Electricity demand in Turkey has an annual growth rate of approximately 7.5%, which is higher than the average rate of GNP growth over the last few years. This, combined with the lack of investment in the sector, mainly due to the Government of Turkey's (GOT) control over prices and slow progress in market liberalization, increased concerns regarding electricity shortages. Official data indicated that Turkey would face electricity shortages as of 2009; however, the Government of Turkey revised its projections after experiencing reductions in demand in late 2008, due to the global economic crisis and relatively mild weather. The Ministry of Energy declared a 4.5% annual growth in electricity demand in 2009, half the amount of demand growth in previous years. In 2008, the Government of Turkey passed new legislation to encourage investment in the sector, which introduces incentives for companies bringing their facilities online by 2012. Turkey is currently undertaking privatization of its electricity distribution. Sixteen of 21 electricity distribution facilities have already been tendered.

In 2008, fossil fuels accounted for 90% of total primary energy supply (TPES) in Turkey. Oil, coal, and natural gas each provided 30% of the total, while renewable energy sources provided the remaining 10%. On an energy basis, oil provided 37% of total final consumption, electricity and natural gas 18% each, coal 17%, biomass and waste 7%, and other sources 3%. Coal is the only energy source with significant domestic availability; around 90% of both oil and natural gas is imported. Domestic oil and gas production is mostly from small fields in the southeast, although major exploration projects are active in the Black Sea. TUPRAS, the largest refiner in Turkey, was privatized in 2005. Turkey has a refining capacity of 714,275 barrels per day (b/d).

Turkey acts as an important link in the East-West Southern Energy Corridor bringing Caspian, Central Asian, and Middle Eastern energy to Europe and world markets. The Baku-Tbilisi-Ceyhan pipeline, which came online in July 2006, delivers 1 million barrels/day of petroleum, and in 2007, the South Caucasus Pipeline (from Shah Deniz) started bringing natural gas from Azerbaijan to Turkey. Turkey's interconnector pipeline to Greece, an important step in bringing Caspian natural gas to Europe via Turkey, came online in November 2007. In July 2009, Turkey signed the Nabucco Intergovernmental Agreement, along with Austria, Bulgaria, Romania, and Hungary, which includes plans for a 2,000-mile natural gas pipeline running from Erzurum, Turkey to Baumgarten, Austria with a 31 billion cubic meter capacity. Alternative proposals to Nabucco include the Trans-Adriatic Pipeline (TAP) and the Italy-Turkey-Greece Interconnector.

Telecommunications. Parliament enacted legislation separating telecommunications policy and regulatory functions in January 2000, by establishing an independent regulatory body, the Telecommunication Authority. The authority is responsible for issuing licenses, supervising operators, and taking necessary technical measures against violations of the rules. Most regulatory functions of the Transport Ministry were transferred to the authority, and the regulator is slowly gaining competence and independence. The Electronic Communication Law passed in 2008 gave greater autonomy to the Telecommunication Authority. The authority realized some important projects in 2008. Introduction of number portability was a big step forward, encouraging more competition among the GSM mobile phone operators. The authority also held a 3G License tender in 2008, where all the GSM operators participated and started implementing this new technology in Turkey.

The long-expected privatization of the state-owned fixed-line telecommunications company was accomplished by the sale of 55% of Turk Telekom to the Saudi-owned Oger Group in November 2005. The company remains as a monopoly in fixed lines, but the GSM operators' competition against Turk Telekom has been increasing. With liberalization and growth in the economy, there is growing competition for Internet provision, but Turk Telekom remains the sole provider of ADSL wide band Internet.

Environment. With the establishment of the Environment Ministry in 1991, Turkey began to make significant progress addressing its most pressing environmental problems. The most dramatic improvements were significant reductions of air pollution in Istanbul and Ankara. However, progress has been slow on the remaining--and serious--environmental challenges facing Turkey.

In 2003, the Ministry of Environment was merged with the Forestry Ministry. With its goal to join the EU, Turkey has made commendable progress in updating and modernizing its environmental legislation. However, environmental concerns are not fully integrated into public decision-making and enforcement can be weak. Turkey faces a backlog of environmental problems, requiring enormous outlays for infrastructure. The most pressing needs are for water treatment plants, wastewater treatment facilities, solid waste management, and conservation of biodiversity. The discovery of a number of chemical waste sites in 2006 has highlighted weakness in environmental law and oversight.

After long years of silence, Turkey signed the Kyoto Protocol in 2008 and ratified it in 2009. Turkey will not be obligated to reduce its greenhouse emissions until 2012, when the agreement’s second commitment period goes into force.

Transport. The Turkish Government gives special priority to major infrastructure projects, especially in the transport sector. The government is in the process of building new airports and highways, thanks to an increased public investment budget. The government will realize many of these projects by utilizing the build-operate-transfer (BOT) model.

GDP: (2005) $481.5 billion; (2006) $526.4 billion; (2007) $658.8 billion; (2008) $680 billion; (2009) $618 billion; (2010 forecast) $641 billion.
Annual real GDP growth rate: (2005) 8.4%; (2006) 6.9%; (2007) 4.5%; (2008) 1.1%; (2009) -4.7%; (2010 forecast) 6.8%.
GDP per capita: (2005) $6,681; (2006) $7,500; (2007) $9,333; (2008) $10,436; (2009) $8,590; (2010 forecast) $9.000.
Annual inflation rate/CPI: (2005) 7.7%; (2006) 9.7%; (2007) 8.4%; (2008) 10.1%; (2009) 6.5%; (2010 forecast) 7.5%.
Natural resources: Coal, chromium, mercury, copper, boron, oil, gold.
Agriculture (9.3% of GDP): Major cash crops tobacco, cotton, sugar beets, hazelnuts, wheat, barley, grain, olives, and citrus. Provides about 29.5% of jobs and 2.7% of exports.
Industry (25.6% of GDP): Major growth sector, types--automotive, electronics, food processing, textiles, basic metals, chemicals, and petrochemicals. Provides about 24.7% of jobs and 95% of exports.
Trade: Exports (merchandise)--(2005) $73.5 billion; (2006) $85.5 billion; (2007) $107.2 billion; (2008) $132 billion; (2009) $102.1 billion; (2010 as of August) $72.9 billion: textiles and apparel, industrial machinery, iron and steel, electronics, petroleum products, and motor vehicles. Imports (merchandise)--(2005) $116.8 billion; (2006) $139.6 billion; (2007) $170.1 billion; (2008) $201.8 billion; (2009) $140.4 billion; (2010 as of August) $114.9 billion: petroleum, machinery, motor vehicles, electronics, iron, steel, plastics precious metals. Major partners--Germany, U.S., Italy, France, Russia, Japan, China, Iran, U.K.

Geography of Turkey

Area: 766,640 sq. km. (296,000 sq. mi.). Cities: Capital--Ankara (pop. 3.7 million). Other cities--Istanbul (9.2 million), Izmir (3.2 million), Bursa (1.9 million), Adana (1.7 million). Terrain: Narrow coastal plain surrounds Anatolia, an inland plateau becomes increasingly rugged as it progresses eastward. Turkey includes one of the more earthquake-prone areas of the world. Climate: Moderate in coastal areas, harsher temperatures inland.

Government of Turkey

The 1982 Constitution, drafted by the military in the wake of a 1980 military coup, proclaims Turkey's system of government as democratic, secular, and parliamentary. The presidency's powers are not precisely defined in practice, and the president's influence depends on his personality and political weight. The president and the Council of Ministers, led by the prime minister, share executive powers. The current president, who has broad powers of appointment and supervision, was elected by Parliament in August 2007 for a 7-year term. Pursuant to a constitutional amendment package approved by voters in an October 2007 referendum, the president is directly elected by the voters for a term of 5 years and can serve for a maximum of two terms. The prime minister administers the government. The prime minister and the Council of Ministers are responsible to Parliament.

The 550-member Parliament carries out legislative functions. Pursuant to the October 2007-approved constitutional amendment package, members of Parliament are directly elected by the voters for a term of 4 years, although general elections may be called at any time. Election is by the D'Hondt system of party-list proportional representation. To participate in the distribution of seats, a party must obtain at least 10% of the votes cast at the national level as well as a percentage of votes in the contested district according to a complex formula. The president enacts laws passed by Parliament within 15 days. With the exception of budgetary laws, the president may return a law to the Parliament for reconsideration. If Parliament reenacts the law, it is binding, although the president may then apply to the Constitutional Court for a reversal of the law. Constitutional amendments pass with a 60% vote, but require an additional popular referendum unless passed with a two-thirds majority. The president may also submit amendments passed with a two-thirds majority to a popular referendum.

In the November 2002 election of Turkey's 58th government, the Justice and Development Party (AKP) captured 34.3% of the total votes, making Abdullah Gul Prime Minister, followed by the Republican People's Party (CHP) with 19.39% of the vote, led by Deniz Baykal. A special general election was held again in the province of Siirt in March 2003, resulting in the election of AKP's chairman Recep Tayyip Erdogan to a seat in Parliament, allowing him to become prime minister and solidifying AKP’s position in Parliament.

The Turkish Grand National Assembly was to have elected in May 2007 a new president to succeed President Sezer, whose term ended on May 16. Opposition parties led a Constitutional Court challenge to the electoral procedures, which resulted in a series of proposed constitutional amendments and early general elections on July 22, 2007. In the general elections, AKP won 46.6% of the vote, followed by CHP (20.9%), MHP (14.3%) and independents (5.2%). The new Parliament, which was sworn in on August 4, 2007 included 341 AKP members, 97 CHP members, 71 Nationalist Movement Party (MHP) members, 20 Democratic Society Party (DTP) members, 13 Democratic Left Party (DSP) members, one Freedom and Democracy Party (ODP) member, one Grand Unity Party (BBP) member, and five independents. Following the election, Sezer reappointed Erdogan as Prime Minister and then-Foreign Minister Gul again declared his presidential candidacy. The Parliament then elected Gul in the third round of voting on August 28, 2007. Following Gul's move to the presidency, AKP seats in Parliament totaled 340. An MHP deputy died in August 2007, bringing the number of MHP members to 70, and the ban on a DTP deputy expired in July 2008, raising the number of DTP members to 21. President Gul approved Erdogan's proposed cabinet on August 29, 2007, and the new government received a vote of confidence on September 5.

Nationwide local elections for provincial general assemblies, municipal assemblies, and mayoral positions were held March 29, 2009. AKP received 38.39% of the votes in provincial general assemblies and a similar percentage in municipal assemblies. CHP and MHP followed AKP with 23% and 15% respectively. AKP won 10 of 16 metropolitan municipality mayoralties. Though AKP won the elections, party leaders had hoped for a larger percentage of the vote. Prime Minister Erdogan reshuffled his cabinet on May 1, 2009. The next general elections are scheduled for June 2011.

The Judiciary. The judiciary is declared to be independent, but the need for judicial reform and confirmation of its independence are subjects of open debate. Internationally recognized human rights, including freedom of thought, expression, assembly, and travel, are officially enshrined in the Constitution but have at times been narrowly interpreted, can be limited in times of emergency, and cannot be used to violate what the Constitution and the courts consider the integrity of the state or to impose a system of government based on religion, ethnicity, or the domination of one social class. The Constitution prohibits torture or ill treatment; the current government has focused on ensuring that practice matches principle. The law provides most but not all workers with the right to associate and form unions, subject to diverse restrictions.

The high court system includes a Constitutional Court responsible for judicial review of legislation, a Court of Cassation (or Supreme Court of Appeals), a Council of State serving as the high administrative and appeals court, a Court of Accounts, and a Military Court of Appeals. The High Council of Judges and Prosecutors, appointed by the president, supervises the judiciary.

In March 2008 the Constitutional Court agreed to hear a case to close down the AKP because of alleged "anti-secular" activities that contravene the Turkish Constitution. Seventy-one AKP members, including President Gul and Prime Minister Erdogan, were named in the case and could have been barred from politics for 5 years. On July 30, 2008 the court voted six in favor and five against closing down AKP; seven votes were required to close down the party. The court decided to cut the party's state funding, worth about $58 million, in half. None of the AKP members were banned. On December 11, 2009 the Constitutional Court closed the DTP party for its association with the PKK terrorist organization and imposed a 5-year ban from politics on 37 of its members. The remaining elected officials reunited under the Peace and Democracy Party (BDP).

Principal Government Officials
President of the Republic--Abdullah Gul
Prime Minister--Recep Tayyip Erdogan
Minister of Foreign Affairs--Ahmet Davutoglu
Ambassador to the United States--Namik Tan
Ambassador to the United Nations--Ertugrul Apakan

Turkey maintains an embassy in the United States at 2525 Massachusetts Avenue NW, Washington, DC 20008, tel. (202) 612-6700. Consulates general in Chicago (360 N. Michigan Ave., Suite 1405, Chicago, IL 60601, tel: 312-263-0644, ext. 28); Los Angeles (4801 Wilshire Blvd., Suite 310, Los Angeles, CA 90010, tel: 323-937-0118); New York (821 United Nations Plaza, New York, NY 10017, tel: 212-949-0160); and Houston (1990 Post Oak Blvd., Suite 1300, Houston, TX 77056, tel: 713-622-5849). The Permanent Representative of Turkey to the United Nations is located on 821 United Nations Plaza, 10th floor, New York, NY 10017, tel: 212-949-0150.

Type: Republic.
Independence: October 29, 1923.
Constitution: November 7, 1982. Amended in 1987, 1995, 2001, and 2007.
Branches: Executive--president (chief of state), prime minister (head of government), Council of Ministers (cabinet--appointed by the president on the nomination of the prime minister). Legislative--Grand National Assembly (550 members) chosen by national elections at least every 4 years. Judicial--Constitutional Court, Court of Cassation, Council of State, and other courts.
Political parties with representatives in Parliament: Justice and Development Party (AKP) (337 seats), Republican People's Party (CHP) (97 seats), Nationalist Action Party (MHP) (69 seats), Peace and Democracy Party (BDP) (20 seats), Democratic Left Party (DSP) (8 seats), Democrat Party (DP) (1 seat), Turkey Party (TP) (1 seat), eleven independents, and six vacant seats.
Suffrage: Universal, 18 and older.
National holiday: Republic Day, October 29.

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History of Turkey

Mustafa Kemal, celebrated by the Turkish State as a Turkish World War I hero and later known as "Ataturk" or "father of the Turks," led the founding of the Republic of Turkey in 1923 after the collapse of the 600-year-old Ottoman Empire and a three-year war of independence. The empire, which at its peak controlled vast stretches of northern Africa, southeastern Europe, and western Asia, had failed to keep pace with European social and technological developments. The rise of national consciousness impelled several national groups within the Empire to seek independence as nation-states, leading to the empire's fragmentation. This process culminated in the disastrous Ottoman participation in World War I as a German ally. Defeated, shorn of much of its former territory, and partly occupied by forces of the victorious European states, the Ottoman structure was repudiated by Turkish nationalists brought together under the leadership of Mustafa Kemal. The nationalists expelled invading Greek, Russian, French and Italian forces from Anatolia in a bitter war. After the proclamation of the Republic of Turkey the temporal and religious ruling institutions of the old empire (the sultanate and caliphate) were abolished. The leaders of the new republic concentrated on consolidating their power and modernizing and Westernizing what had been the empire's core--Asian Anatolia and a part of European Thrace. Social, political, linguistic, and economic reforms and attitudes decreed by Ataturk from 1924-1934 continue to be referred to as the ideological base of modern Turkey. In the post-Ataturk era, and especially after the military coup of 1960, this ideology came to be known as "Kemalism" and his reforms began to be referred to as "revolutions." Kemalism comprises a Turkish form of secularism, strong nationalism, statism, and to a degree a western orientation. The continued validity and applicability of Kemalism are the subject of lively debate in Turkey's political life. The current ruling AK Party comes from a tradition that challenges many of the Kemalist precepts and is driven in its reform efforts by a desire to achieve EU accession. Turkey entered World War II on the Allied side until shortly before the war ended, becoming a charter member of the United Nations. Difficulties faced by Greece after World War II in quelling a communist rebellion and demands by the Soviet Union for military bases in the Turkish Straits prompted the United States to declare the Truman Doctrine in 1947. The doctrine enunciated American intentions to guarantee the security of Turkey and Greece and resulted in large scale U.S. military and economic aid under the Marshall Plan. After participating with United Nations forces in the Korean conflict, Turkey in 1952 joined the North Atlantic Treaty Organization (NATO). Turkey is currently a European Union candidate.

People of Turkey

Modern Turkey encompasses bustling cosmopolitan centers, pastoral farming villages, barren wastelands, peaceful Aegean coastlines, and steep mountain regions. More than 70% of Turkey's population lives in urban areas that juxtapose Western lifestyles with more traditional ways of life. The Turkish state has been officially secular since 1924. Approximately 99% of the population is Muslim. Most Turkish Muslims follow the Sunni traditions of Islam, although a significant number follow Alevi and Shiite traditions. Questions regarding the role of religion in society and government, the role of linguistic and ethnic identity, and the public's expectation to live in security dominate public discourse. Turkish citizens who assert a Kurdish identity constitute an ethnic and linguistic group that is estimated approximately 12 million in number. Nationality: Noun --Turk(s). Adjective --Turkish. Population (July 2010 estimate): 76.8 million. Annual population growth rate (2010 estimate): 1.312%. Ethnic groups: Turkish, Kurdish, other. Religions: Muslim 99% (majority Sunni), Christian, Bahai, and Jewish. Languages: Turkish (official), Kurdish, Arabic, Armenian, Greek. Education: Years compulsory --8. Attendance --97.6%. Literacy --87.4%. Health: Infant mortality rate --25.78/1,000. Life expectancy-- 71.96 yrs. Work force (24.74 million): Agriculture --29.5%; industry --24.7%; services --45.8%.