13. Turkey is positioned between Europe and Asia.
It now has a strong Western outlook. Over the past 40 years it
has changed from an agricultural economy to one dominated by services
- Turkey's population is 64 million, almost half
under twenty years old. GDP is $185 billion, although estimates
suggest this grossly underestimates the actual income of the country.
It is ranked as a middle income country, with GDP per capita at
$3,000. There has been consistent growth over the past three decades,
and average GDP growth of 4.5% per annum.
- Politically, Turkey has a history of short lived
governments, fundamentalist parties and uneasy coalitions. The
current coalition government under Prime Minister Bülent
Ecevit has been in power since 1999 and is proving successful
and stable. This has allowed the implementation of a sustained
economic reform programme and increased international dialogue.
However, in February 2001, a public dispute between Mr Ecevit
and President Sezer shook the economy, and the government, leading
to the flotation of the lira and the resignation of the head of
the national bank. A new Minister of the Economy was forced to
abandon the IMF reform programme which had been progressing well
until February. In March a new rescue package was announced; a
key feature is the rationalisation of the state-owned banks under
a single supervisory board. On 19 March 2001, Turkey announced
that a new economic programme had been agreed with the IMF. The
IMF now will consider bringing forward $6.25 bn of their scheduled
loans. In April 2001 Turkey will submit a letter of intent to
the IMF detailing their policies. We have delayed the publication
of this Report on account of the current instability of the Turkish
economy; we recognise that the situation is liable to change.
- Turkey faces the same problems as many developing
economies. As in many Latin American countries, the inflation
level is very high it had been reduced to around
60% by the end of 2000. Unemployment is a growing problem; the
rate stood at 8.3% in the first quarter of 2000, and there was
an employment participation rate of only 47%.
There is a large national debt, which Turkey has spent the last
two decades addressing, and in December 2000, following a banking
crisis the IMF lent the country $10 billion.
- Turkey stands alone in the EU application process.
It is the one of the few applicant nation which has not emerged
from communist socialist rule; there is therefore no easily measurable
date from which to assess changes. The population is twice the
size of Poland, the next largest applicant state.
- More than other European nations, Turkey has
a dramatic regional divide. The north west corner of the country,
containing Istanbul, attracts most of the investment and generates
most of the wealth. The capital, Ankara, sits on the edge of this
more prosperous area. The rest of the country has a lower income,
and is mainly employed in the agricultural sector. We were told
in Brussels in February 2001 that west Turkey has a GDP per capita
of $7000 and east Turkey $700. There are real problems between
Ankara and the Kurdish population in Anatolia, which, although
improving, hinder regional development.
- It has an awkward strategic position in Europe,
with countries of instability to its south and east; however Turkey
has been a member of NATO since 1952.
14. In the last two years we have made two visits
to EU applicant countries. In June 1998 we visited Poland, Hungary
and the Czech Republic as part of our inquiry into Industrial
and Trade Relations with Central and Eastern Europe and reported
in November 1998.
In June 2000 we visited Latvia, Lithuania and Estonia as part
of an inquiry into Industrial and Trade Relations with the Baltic
States and reported in July 2000.
We decided to visit Turkey in November 2000 due to its unique
status in the EU application process and growing trade links with
15. While in Turkey we visited Istanbul for a day
and Ankara for three, and had useful meetings with TUSIAD (CBI
equivalent), YASED (the foreign investors asssociation), the Istanbul
Stock Exchange, HSBC and Commercial Union, the British Council,
the Ministers for Energy, Foreign Trade, Transport and Telecommunications
and Economy, and officals from the Ministry of Foreign Affairs
and the Privatisation Administration. We also divided for a day;
one group visiting Diyarbakir, Batman and Hasankeyf to see those
involved with the Ilisu Dam project, and the other looking at
the earthquake reconstruction work in Yalova and the Izmit Water
We were able to have interesting discussions in Ankara regarding
the Ilisu Dam project. On our return, we had informal meetings
with Nick Raynsford MP, Minister for Housing; John Redman of Balfour
Beatty and the British Earthquake Consortium (BECT) for Turkey
and Professor Howells of South Bank University, which concerned
the BECT plans for reconstruction in Yalova. We are grateful to
all those who took time to meet us and provide written information
to this inquiry.