Select Committee on Trade and Industry Ninth Report


The Trade and Industry Committee has agreed to the following Report:—




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 and manufacturing.

  • 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%.[2] 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.[3] 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.[4] We decided to visit Turkey in November 2000 due to its unique status in the EU application process and growing trade links with the UK.

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 Project.[5] 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.

1  Ev p 1 Back

2  European Commission Regular Report: Turkey 2000, p 25 (hereafter Regular Report) Back

3  Industrial and Trade Relations with Central Europe, Twelfth Report, 1997-98, HC 893 Back

4  Industrial and Trade Relations with the Baltic States, Twelfth Report, 1999-00, HC 835 Back

5  See Annex Back

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