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a
I.
ORGANISATION
ORGANISATION
FOR
DE
2.
ECONOMIC
COOPERATION
b.
3,
CO-OPERATION
ET
DE
AND
0 IS V E L 0 P P E M E N T
DEVELOPMENT
ECONOMIQUES
BASIC STATISTICS OF TURKEY
THE
LAND
Area (1 000 km')
781
Agricultural area (1 000 km*)
524
Istanbul
Forests (1 000 km!)
126
Ankara
Major cities,
THE
1 751
902
PEOPLE
33 795
Population, 1968 (1 000)
No. of inhabitants per knr
Net population increase :
(annual average 1964-1968)
per 1 000 inhabitants
1965 (1 000 inhabitants)
Labour force, 1968 (1 000)
Agriculture, forestrv. fishing
43
13 395
9 251
Industry
792
1 585
Construction
26
488
Services
2 071
PRODUCTION
103 420
GNP, 1968 (TL million)
per head (US dollars)
Gross fixed investment, average 19671968 (TL million, 1968 prices)
per cent of GNP
per head (US dollars)
Origin of NDP, 1968 (per cent)
Agriculture, forestry, fishing
337
18 430
18
Public
debt,
(per
current
cent
of central
revenue)
Internal
3 060
Illiteracy rate, 1965 (per cent of population
204
School attendance rates, 1967-1968 (per
cent of population aged 6-18)
Central government expenditure on edu¬
cation per head, 1968 (US dollars)
aged 1 1 or more)
No. of passenger cars in use, 1968 (per
4
use,
1968
(per
1 000 inhabitants)
88
STANDARDS
per head)
1968
202
114
External
Calorics per head, per day 1965-1966
143
use,
1967
(per
9
FOREIGN
Commodity exports, 1967-1968 (per cent
of GNP)
Main exports (per cent of total exports) :
26
Tobacco
21
Fruits and nuts
25
Livestock, fish, wool
TRADE
Commodity imports, 1967-1968 (per cent
4.5
Cotton
4.9
THE
: Turkish Lira.
6.4
of GNP)
Main imports (percent of total imports) :
Machinery and equipment, excl. trans¬
port equipment
Transport equipment
Base
metals
Mineral
Monetary unit
1968
government,
LIVING
No. of telephones in
I 000 inhabitants)
40
GOVERNMENT
(percent of GNP)
1 000 inhabitants)
No. of radio sets in
7
Services
Public consumption, 1968 (per cent of
GNP)
Central government current revenue, 1968
(kwh
33
20
Construction
60
THE
Electricity production
:
Industry
fuels
33.3
10.0
8.8
8.1
CURRENCY
Currency units per US dollars
9.08
OECD ECONOMIC SURVEYS A RCH|VESRéférences
- DOC
PRÊTÉ -
RETOUR BUREAU 70c
TURKEY
ORGANISATION FOR ECONOMIC CO-OPERATION AMD
DEVELOPMENT
The
Organisation
for
Economic
Co-operation
and
Development was set up under a Convention signed in Paris on
14th December 1960 by the Member countries of the Organisa
tion for European Economic Co-operation and by Canada
and the United States.
This Convention provides that the
OECD shall promote policies designed:
to achieve the highest sustainable economic growth
and employment and a rising standard of living in
Member countries, while maintaining financial stabi¬
lity, and thus to contribute to the development of
the world economy;
to contribute to sound economic expansion in Member
as well as non-member countries in the process of
economic development;
to contribute to the expansion of world trade on a
multilateral, non-discriminatory basis in accordance
with international obligations.
The legal personality possessed by the Organisation for
European Economic Co-operation continues in the OECD,
which came into being on 30th September 1961.
The members of OECD are: Austria, Belgium, Canada,
Denmark, Finland, France, the Federal Republic of Germany,
Greece,
Iceland,
Ireland,
Italy,
Japan,
Luxembourg,
the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland,
Turkey, the United Kingdom and the United States.
The Socialist Federal Republic of Yugoslavia is associated
in certain work of the OECD, particularly that of the Eco¬
nomic and Development Review Committee.
This document was approved
by the Economic and Development Review Committee
in July 1969.
SUMMARY
Part
I
Introduction
I
II
Economic Trends
7
(a)
Supply and use of resources
(b)
Prices and incomes
10
7
(c)
Foreign trade
12
Economic Policy
14
(a)
Budget and fiscal policy
14
(b)
Monetary policy
16
(c)
Investment policy
19
(d)
Balance of payments policy
(i) Exports
20
20
(ii)
Imports
24
(iii)
Invisibles
26
(iv)
Private foreign capital
26
Official capital
28
(v)
Part
II
Budgetary and Fiscal Policy
I
II
29
Developments aims of Budgetary and fiscal policy
30
(a)
Savings through the Budget
30
(b)
Allocation of ressource
38
(c)
Income distribution
40
Stabilisation policies
Conclusion
41
45
TABLES
(a)
In the Text
1
Supply and use of resources
2
Prices
11
3
Foreign trade
13
4
Central Government consolidaded budget
14
5
Money and credit
17
6
Recipients of commercial bank credits
1?
7
Balance of payments
25
8
Foreign private investment
27
9
Central Government revenues
33
10
Government revenues, Actual Level of Receipts as Percen¬
tage of Estimates
(b)
9
45
Statistical Annex
I
II
National product
53
National account statistics
54
III
Agricultural production
55
IV
Industrial production
56
Prices
57
Merchandises imports and exports
58
Merchandise trade by area
59
Money and banking
60
Sources and uses of Funds in the banking system
61
Financial position of the state economic enterprises
62
V
VI
VII
VIII
IX
X
XI
Summary
of assistance provided in the framework of
the Consortium
63
DIAGRAMS
1
Annual fluctuations in some economic aggregates
2
Annual changes in Wholesale and average consumer price
3
Foreign trade : The targets and actual outturns
22
4 The developments in consolidated budget receipts
36
index
8
10
INTRODUCTION
In 1968, despite a lower-than-average growth in the output of agri¬
culture, Turkey's GNP rose by 6.2 per cent in real terms.
There was a
marked acceleration of investment expenditures in the public and private
sectors which increased by 18.2 and just over 11 per cent respectively.
Private consumption is estimated to have risen by 5-J per cent and faster
than during the previous year when the rise was just over 4 per cent.
This
year, there is every likelihood that the increase in agricultural production,
will be larger than during the previous two years.
The rate of growth
of industrial production may also exceed the rate achieved in 1968.
In
these circumstances, the rise in GNP this year could well be higher than
7 per cent.
Trends in the balance of payments during 1968 were unfavourable as,
for the first time in some years, exports not only failed to rise but actually
fell by over 5 per cent compared with the previous year.
As there was
no improvement in net invisible items, the deficit of the balance of payments
on current account widened by about $ 115 million despite a somewhat
lower import bill than the one that had been planned.
Turkey's com¬
mitments to repay foreign debt were lower than in 1967 and gross disbur¬
sements of official loans were higher.
Nevertheless the country's official
gold and foreign exchange reserves declined somewhat.
The performance
of exports remained poor during the first quarter of 1969 but, since then,
there has been a recovery.
Until the export season begins next September
it will not be possible to assess the likely outturn this year but, as the fall
in the first quarter still has to be made good, a figure of S 550 million, or
10 per cent more than in 1968, would be quite an achievement.
Fortu¬
nately, prospects for receipts of foreign currencies remitted by Turkish
workers abroad are favourable this year.
As for tourism, gross receipts
have improved but expenditures abroad by Turkish citizens have risen pari
passu thus leaving no net contribution to foreign exchange earnings.
Fiscal and credit policies have been directed towards preserving shortterm stability, in particular since last December when the prospect of a
much larger budget deficit than had been expected, or than the economy
could bear, called for drastic measures to reduce expenditures.
The efforts
made between December 1968 and February 1969, the last month of the
fiscal year, brought the budget deficit down to a figure much less than
OECD Economic Surveys
what had seemed likely but was still too large for comfort.
Experience
in 1968 confirms the need this year, despite the extra revenue that is expected
from the higher taxes voted in March, for keeping the budget under conti¬
nued surveillance and for adjusting releases of funds to the various spending
agencies to developments on the revenue side.
In view of the increased
buoyancy of private business, credit policy has an important contribution
to make to preserving stability this year whilst continuing to satisfy the
legitimate credit needs of producers.
The task of the Central Bank will
be facilitated by the government's intention really to limit Treasury borrow¬
ing from this source to seasonal needs.
The success of Turkish economic policy in sparking-off an upsurge of
activity in the private industrial sector is evident.
More recently, the
agricultural sector has begun to respond to the new facilities for the use of
new seeds and fertilizers.
The primary task of economic policy is to pre¬
serve this new dynamism in the economy.
Turkey's hopes of reaching,
in a reasonible lapse of time, a position from which sustained growth can
be ensured with a greatly diminished recourse to foreign capital at con¬
cessional terms largely depend on this.
Continued vigilance is needed to avoid any return of inflationary con¬
ditions which by bringing the present boom in Turkey to a premature halt
could set back by a number of years the modernisation and diversification
of the country's economic structures.
The successful maintenance of
growth with stability is coming to depend increasingly upon the ability of
policy-makers in Turkey to introduce greater flexibility in the working of
the economy and greater efficiency in the allocation of resources.
Part
One of this survey is devoted to exploring some aspects of this theme rela¬
ted to short-term trends.
innovation
In Part Two a particularly necessary field for
budgetary and fiscal policy
is examined in some detail.
Part I
I
(a)
ECONOMIC
TRENDS
Supply and use of resources
1968 was a year of rapid growth with GNP in real terms rising by
6.2 per cent and slightly faster than in 1967 when it was 6.1 per cent (Table
1).
As the balance of payments deficit on current account widened, with
imports rising and exports falling below the previous year's level, total
available resources rose by 7.1 per cent.
Sector-wise, in 1968 agricultural
production rose by 0.4 per cent compared with 0.9 per cent in 1967 but by
less than the medium-term trend target in the Second Five-Year Plan which
is 4 per cent.
An underlying improvement in productivity is taking place
in agriculture, especially in cereal production on the coastal areas since the
introduction of new Mexican-type varieties of wheat, and in cotton and sugar
beet, the latter unfortunately now being in excess supply.
Despite this,
for the time being, the medium-term target for agriculture can only be
achieved it seems in years when weather conditions are particularly favour¬
able, as they were in 1966 for example.
The rate of increase of industrial
production was 10 per cent in 1968, only slightly below the rise in 1967 when
it was 12.3 per cent.
In some sectors, such as food products, tyres and
radios, excess stocks were worked off last year thanks to a slowing-down
in production increases.
But, on the whole, industry continued to increase
capacity and production at a rapid pace.
There was an acceleration of
activity in the construction sector.
Prospects for this year, in GNP terms, still remain problematical as
no firm data for the main agricultural crops have come to hand as yet.
Preliminary estimates suggest, however, that cereal production will be
higher than average and that industrial output is rising at an annual rate
of over 1 1 per cent, which is higher than last year.
Capacity in the indus¬
trial sector is increasing all the time as new plants come into production.
The possible bottleneck will not be insufficient capacity or domestic demand
but difficulties in procuring the required quantities of imported raw mate-
OECD Economic Surveys
rials arising from the tight foreign exchange position. Still, the prospects
are that GNP growth this year will be more than 7 per cent, which is the
medium-term target.
Diagram 1
Annual fluctuations in some economic aggregates
Percentages
Importe
"^»
mmmm
Investment
Industrial output
-20
-30*.
1961
Source:
1963
1964
1965
1966
1967
1968
Turkish Submission to the OECD.
Two special features of the use of available resources stand out in
1968.
The first is the acceleration of investment activity in the public
and private sectors from around 10 per cent in 1967 to about 15 per cent
in 1968. This figure reflects, as far as the private sector is concerned, the
vigourous efforts, described in paras.
tive investments.
23 to 25, to promote private produc¬
There is every reason to expect that the increase this
8
Turkey
Table 1
Supply and use of resources
1968
1967
1968
TL
billion
1968
percentage
vol. change
prices
from previous year
Output:
Agriculture, forestry and fishing
29.5
0.9
0.4
Industry
17.3
12.3
10.0
Construction
6.1
7.0
10.3
Transport and communications
Housing
6.2
7.0
8.0
3.3
9.0
9.2
8.6
8.0
8.3
Other
17.1
8.6
8.8
Domestic income (at factor cost)
GNP (market prices)
87.9
6.2
6.1
6.1
6.2
Commerce
104.0
Expenditure on GNP (at market prices)
Public consumption
Public gross fixed investment
Private gross fixed investment
Stock changes
Private consumption
Total expenditure
12.6
6.8
6.0
11.0
9.6
18.2
9.0
10.7
11.3
2.4
6.2
2.6
71.1
4.2
5.5
106.1
5.5
7.1
l.l1
2.01
6.1
6.2
less:
Net imports of goods and services
Gross National Product (at market prices)
1
2.0
104.0
As a percentage of GNP.
Source : State Planning Organisation, Ankara.
year will be of the same order of magnitude. In the public sector, the rate
of increase of over 18 per cent last year was well above the medium-term
target in the Second Five-Year Plan, 10 per cent a year, and it seems that
this year the rate of increase will be around 15 per cent.
There appears to
be a certain amount of bunching of investment activity in the public sector
at the present time as projects it was hoped to start earlier but which, for
various reasons, had to be delayed, are now being implemented together
with projects planned for the period since 1966.
The second feature of the use of resources in 1968 was the marked rise
in private consumption from 4.1 per cent in 1967 to 5.5 per cent in 1968.
Admittedly this latter increase, when related to the growth of population,
implies a rise of only 3 per cent.
Still it is faster than the target in the
Second Five-Year Plan, 5.1 per cent.
If such a rate of increase is consi¬
dered in the context of the overall balance between supply and demand
OECD Economic Surveys
for resources with, as was just noted, investment also rising much faster
than the target in the plan, the question arises whether the present rates
of increase in investment and private consumption, if they were to continue,
would really prove to be compatible with each other.
(b)
Prices and incomes
The performance of prices in 1968 was more satisfactory than during
the previous year and, in the case of the cost of living, markedly so (Table 2).
The fact remains that the rise in prices in Turkey has been more rapid
during the 1960's than in most countries of Western Europe.
From 1962
to 1968, wholesale prices in Turkey increased by an average of 4.2 per cent
a year and the cost of living by 5.2 per cent in Ankara and 6.7 per cent in
Istanbul.
During the same period, wholesale prices and the cost of living
in the Common Market countries and the United Kingdom rose by 1.7 and
3.5 per cent a year respectively.
So far this year,
that is up to May,
wholesale prices and the cost of living have risen at about the same rate
as during the corresponding period a year earlier.
Diagram 2
Annual changes in Wholesale and average consumer price index
Percentages
25 -
20
-
yk
/*
Wholesale price
Consumer price index
15
.
I
\
\
-4
I
4
r
/\
s.
s
0
L J
i
1955
I
1956
I
1957
i
1958
i
1959
i
1960
i
1961
i
1962
Source: Turkish Submission to the OECD.
10
'-V-1
1963
1964
l J
1965
1966
1967
1968
Turkey
Table 2
Prices
1966
1967
1968
1968
1969
January to May
Annual averages,
percentage
percentage changes
changes
4.8
Wholesale prices
Cost of living:
Ankara (total)
of which: food prices
Istanbul (total)
of which: food prices
7.6
4.6
5.3
6.4
4.2
4.3
7.5
4.9
8.7
14.0
6.0
9.0
15.3
5.1
1.3
0.6
-fl.9
0.4
1.2
0.3
-0.3
0.6
There are a number of factors at present that are tending to push up
prices and which imply that the price situation calls for careful watching.
The increase from 15 to 25 per cent in the stamp duty on imports came into
effect in March 1969 and will affect industrial costs across the board.
An
increase in the legal minimum wage comes into effect this summer.
On
1st June, the official purchasing prices for the main cereal crops during
the 1969-70 season were increased by an average of 3 per cent and, except
for wheat for bread-making, the increase was passed on to consumers.
The raison d'être for this increase, the first for three yearSj is not easy to
perceive.
On the one hand, the cereal crops this year will be higher,
farmers' incomes would have benefited without the
than in 1968, so
need for a price rise.
On the other, an increase of the order of 3 per
cent is hardly likely to be a significant stimulus to increased production if,
indeed, that was the intention.
More generally, as Turkey is now rapidly diversifying her economic
structures and, as a result, employment in manufacturing, in other indus¬
trial activities and in services is rising, the problem of maintaining a proper
relation between incomes and productivity in non-agricultural activities
presents itself.
In most sectors, skilled labour is actively demanded by
employers and as, for the time being, the existing facilities for training
skilled labour are quite inadequate, this situation tends to lead to a wide¬
ning of wage differentials as between skilled and unskilled occupations.
Skilled workers are also the best organised at the trade-union level, espe¬
cially in the State Enterprises.
Average daily wages of workers affiliated
to the State social insurance scheme, the only index of wages that is avail¬
able, rose by nearly 11 per cent in 1968.
last three years has been about 10 per cent.
The annual increase during the
On the other hand, in the civil
service salary levels are low, in part because of past inflation and the pro¬
hibitive cost to the budget of any attempt to restore previous differentials,
in part also because of overstaffing in government departments which
11
OECD Economic Surveys
overloads salary bills.
There has been some talk in Turkey of guidelines
for incomes and prices but, on the income side, little has been done as yet
it seems.
Improved management-labour relations and a linking of wage
increases to measures to raise efficiency will have to be found in both pri¬
vate and State-owned industrial enterprises.
As to the civil service, until
modern principles of organisation and methods in matters of staff policy
are adopted on a continuing basis, it will be difficult to remunerate adequa¬
tely properly qualified staff.
(c)
Foreign trade
Exports in 1968 were 5 per cent lower than in 1967 (Table 3).
The
fall was especially marked during the 1968-69 export season which began
in September last year.
Indeed, during the first three months of this year,
exports were 20 per cent below their level during the same period a year
earlier.
Since April 1969 there has been a recovery so that, during the
first five months, the latest data available, exports were at the same level as
during the corresponding period of 1968.
This year hazelnuts and olive
oil have done better but, so far, cotton and tobacco exports have been below
the previous year.
It is likely that, during the rest of this year, exports
will continue to pick up.
Tobacco exports are now being subsidized and
the hold-up early this year in shipments to the United States was only a
temporary one, and cotton prices are firmer.
exporting sugar again.
Turkey intends to begin
Prospects for newer lines of exports such as fresh
fruit and vegetables, meat and manufactured products are thought to be
good but it is too early as yet to measure the extent of the improvement.
Imports increased by 11.5 per cent in 1968.
The overall rise was
made up of an increase of $ 43 million, or 7 per cent, in imports under the
liberalized list, global quotas and bilateral agreement countries
called " programme imports "
the so-
and of much higher deliveries of invest¬
ment goods under aid. financed project agreements.
This latter phenomenon
was thus related to the large increase in disbursements of " project-aid "
referred to in par. 40 and to the boom in investment activity already
mentioned.
Imports of basic materials and fuels which make up over
half the total, rose by 9 per cent and deliveries of investment goods rose
by 1 3 per cent.
Two items weighed heavily in the import bill in 1 968.
They
were petroleum products which cost $ 10 million more and fertilizers,
S 1 1 million more than in 1967.
For the time being, there seems every
likelihood of petroleum imports continuing to rise.
As for fertilizers,
now that Turkish farmers are beginning to use them to an increasing extent
and unless plans for increasing fertilizer production can be accelerated or
expanded, the cost of imports will also grow.
A shortage of cereals last
autumn, at least as far as the stocks held by the official buying agency are
12
Turkey
Table 3
Foreign trade
US S millions
1968-1969
1964
1965
1966
1967
1968
First four
months
Exports, fob
411
464
491
523
496
192
172
139
Unprocessed agricultural commodi
311
351
377
416
403
160
Mineral
15
21
23
29
26
9
8
Processed agricultural commodities
48
48
39
46
29
12
13
Other commodities
37
44
52
42
38
11
12
537
572
718
685
764
263
269
296
313
365
380
420
148
154
67
57
55
52
64
26
17
197
197
289
260
294
97
96
44
62
64
45
50
18
19
31
29
17
ties
Imports, cif, total
Basic materials
of which: fuel
Investment goods
Consumer goods
of which: agricultural surpluses
Source : Ministry of Finance, Ankara.
concerned, called for exceptional imports of grain and edible oils, mainly
on concessional terms from the United States and some European coun¬
tries.
During the first five months of 1969 imports were at the same level
as in the corresponding period a year earlier.
Judging by trends during
those months it seems that the so-called " programme imports, " that is
imports of goods under the liberalized list and the quota system, have been
running below their level last year, though transfers of foreign exchange
have been higher, whilst imports of equipment financed by foreign loans
at concessional terms and, to a lesser extent imports from bilateral tradingaccount countries, have risen.
The trend in programme imports reflects
the fact that, for some time now, foreign exchange stringencies have limited
transfers of currency by the Central Bank to pay for current imports from
convertible-currency areas. The appearance in some sectors of industry
of difficulties in procuring sufficient imported raw materials is a conse¬
quence of this situation which illustrates the dilemma that now faces the
Turkish authorities. Indeed, if foreign currency earnings cannot be raised
significantly and in a sustained manner over the next few years, much of
the new investments now going forward could be insufficiently used be¬
cause of shortages of raw materials and other current imports.
13
OECD Economic Surveys
H
(a)
ECONOMIC
POLICY
Budget and fiscal policy
The budget for the fiscal year 1968, which ended on 28th February,
1969 including supplementary appropriations voted during the year, showed
a 26 per cent increase in expenditures
over the previous year.
As
revenue receipts were lower than the amount that had been estimated,
particularly indirect tax revenues, it became clear towards the end of the
year that the only way of keeping the budget deficit within manageable
Table 4
Central Government Consolidated Budget1
TL millions
1966
1967
1968»
Revenues, total
1969
as
Actual outturn
voted
14483
17 710
19 296
24 300
21249
of which:
12 464
14 882
16 232
Direct
4197
5 070
5 690
6 950
Indirect
8 267
9 812
10 542
14 299
2 019
2 828
3 064
3 051
770
910
624
785
571
719
738
972
678
1 199
1702
1294
8 641
9 736
10 948
11 808*
8 231
9 390
11135
14 262s
Tax revenues, total
Non-tax revenues, total
Compulsory saving bonds
Annexed budget and project credits
Other, incl. special funds
Current expenditures, total
Investment and transfers, total
of which:
Investment expenditures
4414
5 098
5 937
6 938
Interest payments
Debt repayments
528
623
716
1036
541
666
713
1 190
Transfers to SEEs
721
613
984
1524
Other transfer payments
Total expenditures
2 027
2 390
2 785
3 574
16 872
19 126
22 083
26 070
Overall deficit
-2 389
-1416
-2 787
-1770
Financed by:
Long-term domestic borrowing
Counterpart funds
Central Bank short-term advances to the Treasury
Change in Treasury cash balances, deferred pay
ments and other items
700
500
500
600
1 173
1 101
1321
1170
302
513
535
214
-698»
431
1
Fiscal years ending 28th February.
2
Provisional
3
Represents a running-down of outstanding deferred payments and other items and was thus an
data.
item to be financed.
4 Excluding appropriations for unfilled posts that are not intended to be used.
5 As from 1968, infrastructure expenditures for national defense purpose are included under current
expenditures.
Source : Ministry of Finance, Ankara.
14
Turkey
proportions was to cut back expenditures. This was not too difficult
where no commitments for spending the sums written into the budget had
been entered into and there were, it seems, a number of such instances
among the appropriations voted during the summer of 1968.
But more
than this was needed and, from December onwards, the Ministry of Finance
was making strenuous efforts to cut, cancel or postpone any items of expen¬
diture that offered prospects of saving the Treasury cash.
In the event,
the reductions as compared with budget appropriations appear to have
been borne in about equal proportions by current, investment and transfer
items.
One significant exception was transfers to the Monopoly Adminis¬
tration, the Sugar Company, the railways and the coalmines which exceeded
the budget estimates.
Efforts to cut back the investment programmes of
two administrations with annexed budgets
highway administration
the water authority and the
were not as successful as it had been hoped they
would be.
On the revenue side, receipts from direct taxation rose by 12 per cent
in fiscal 1968 which was a reasonable performance during a year in which
no changes in tax rates had taken place.
only just over 7 per cent.
But indirect tax receipts rose by
There were two reasons for this.
The Mono¬
poly Administration and the Sugar Company did not pay over to the Trea¬
sury the indirect taxes they had collected and the cost to the budget of
custom tax exemptions on imports of priority investment goods turned
out to be higher than had been expected.
An increase in the exemption
limit for compulsory contributions to savings bonds, which came into
effect in 1968, caused a fall in revenue from this source.
All in all, govern¬
ment revenues from domestic sources rose by under 9 per cent in the fiscal
year 1968, the lowest rate of increase observed in recent years.
The Mono¬
poly Administration and the Sugar Company were forced to use revenues
that should have been passed on to the State.
The budget deficit in the fiscal year 1968 was TL 1,466 million, after
allowing for releases of counterpart funds generated by foreign credits and
including in tax revenues receipts from compulsory savings bonds.
Thus,
despite the efforts just described to balance the budget, the deficit was
notably higher than in fiscal year 1967 when it was TL 315 million.
The
required funds were found in approximately equal proportions, one-third
each from the proceeds of a domestic loan taken up by the banks, from
borrowing from the Central Bank and the rest by running down Treasury
cash balances and accumulating arrears.
As a percentage of GNP the
budget deficit was 1.4 per cent which, in more developed countries would
not necessarily be considered a high figure.
However, in Turkey, where
the possibilities of the Treasury for borrowing are strictly limited by the
absence of proper money and capital markets, deficit financing has imme15
OECD Economic Surveys
diate repercussions on liquidity via borrowing from the Central Bank, or
on the amount of deferred payments vis-à-vis suppliers.
The budget voted for the present fiscal year calls for a substantial
increase in revenues
of 26 per cent
to meet without fresh recourse to
the Central Bank the appropriations which are shown as rising by 18 per
cent.
A large new item in the budget is some TL 500 m. for additional
transfers to the Monopoly Administration and the Sugar Company which
were not shown last year but which, as just noted, were in fact spent out
of government tax revenue.
As this is essentially an accounting exercise,
a similar amount has been added to the estimated receipts from indirect
taxes this year.
It is to be hoped that, from now on, the previous difficulties
in securing payment to the Treasury of these taxes will be avoided since
these products have been made subject to the usual production tax pro¬
cedure.
Some TL 500 million extra revenue are expected following the
increase last March in indirect taxes on monopoly products such as ciga¬
rettes and tobacco.
Tax revenues this year should also benefit to the
extent of some TL 300 million from an increase in company taxation.
the main extra source of revenue
TL 650 million
But
is expected to come
from the stamp duty on imports that has been raised from 15 to 25 per cent.
The amount of extra revenue collected in this way will depend upon the
extent to which it proves possible this year to finance a higher level of
imports.
The uncertainties surrounding the prospects for some govern¬
ment tax revenues taken in conjunction with the demand management
need for a less expansionary budget posture this year explain and justify
the decision of the Turkish authorities to release budget appropriations
on a quarterly basis in the light of actual revenue receipts and, in any
event, to reserve borrowing by the Treasury from the Central Bank for
purely seasonal purposes.
(b)
Monetary policy
The money supply rose by 14 per cent in 1968, which is in line with
the average rise during the 1960's (Table 5).
In the early months of 1969,
the usual decline in the money supply was observed but an increase may be
expected during the summer months for seasonal reasons, in particular
because of the activities of the official cereals purchasing agency.
A feature
of the monetary scene in 1968 was the quite large increase in bank deposits
of 24 per cent, nearly twice the rate of increase in 1967.
Although early
in 1969 the rise flattened out, it appears that there is a spread of the savings
habit among the population that is encouraging.
The tax exemption limit
on interest received by holders of bank deposits was raised in March 1969
from TL 200 to TL 500 a year in an attempt to reduce the present tendency
16
Turkey
Table 5
Money and credit
TL millions
Increases or decreases
Out
standing
Decemb.
1967
1968
1966
Dec-Apr. Dec.-Apr.
1968
1969
Central Bank:
6671
2105
1392
-308
293
Public sector, total
of which:
Treasury short-term advances
3 968
958
750
22A
734
1438
513
230
23
724
723
27
460
460
250
Soil Products Office
680
310
30
-298
-240
Sugar factories
434
170
50
50
693
-62
-20
-11
2 703
1 147
642
-532
-441
Monopoly administration
Other SEEs
Private sector, total
of which:
Agric. sales co-operatives
830
13
370
^152
-195
1637
1101
270
-80
-246
236
33
-6
Commercial banks, total
20191
3177
4 207
617
1452
Commercial credits
12 469
1669
2158
622
1203
Mortgages
Agricultural credits
1947
104
88
-41
-40
4 531
1020
1564
-115
124
Industrial credits
817
226
205
75
73
Other (artisans, small traders)
427
158
192
82
92
12 498
1743
2 610
664
1599
2902
3 286
-887
-420
Other
Bank liquidation fund
13 Commercial banks, total
19 780
Money supply
Source : Central Bank of Turkey.
of savers to split their deposits among several banks.
If more diversified
forms of savings, in addition to bank deposits, can be offered
notably a
postal chequing system and contractual savings for which the Army Fund
offers a particularly successful example
it seems that there are good pros¬
pects that savers would respond to them.
The credits extended by the commercial banks rose less during the
first half of 1968 than a year earlier but then rose faster during the next six
months.
So far this year the increase has been faster than in 1968.
Banks
have been relatively liquid but increasing delays in making transfers in
convertible currencies and, since the beginning of 1969, higher rates of
guarantee deposits requested from importers, have led to larger sums of
private credit being sterilised in the Central Bank.
The exceptional buoy¬
ancy of private industry at this time may soon call for some tightening
17
OECD Economic Surveys
of credit conditions whilst continuing to satisfy legitimate credit needs.
An analysis of the recipients of bank credit shows that over the last five
years there has been a welcome diversification with housebuilding taking
a smaller share and the shares of industry, mining and agriculture increasing
(Table 6).
Table 6
Recipients of commercial 'bank' credits
% of total
Sectors
1963
% of total increase
1968
1963-1968
Industry and mining
18
24
28
Agriculture
21
27
31
Foreign trade
14
12
10
8
7
6
21
12
6
Small business
Housing and construction
Distribution and services
18
18
19
100
100
100
Source: Central Bank of Turkey.
Within the framework of an overall restrictive credit policy vis-à-vis
the private sector the Central Bank has expanded its special credit scheme
for providing loans on soft terms for agriculture, in conjunction with the
Agricultural Bank's controlled credit system.
Since the spring of 1969,
easier and cheaper credits from the commercial banks at 9 per cent interest
the normal rate is 14 to 15 per cent
the budget
are available to exporters.
the difference being made up by
But the expected reforms in the
field of monetary and credit policy, notably more flexible interest rate
policy, encouragement to the commercial banks to go into the medium-
term financing business to help private firms satisfy their working capital
needs, and more flexible instruments for the control of commercial bank
liquidity, will have to wait for the new Central Bank Act to be passed by
Parliament which cannot be before the end of the year.
Central Bank lending to the public sector rose by TL 1 billion from
February 1968 to February 1969, one-half of the total increase in such
lending.
The links between the Central Bank and the Treasury are so close
that it is preferable to analyse credit-granting to the public sector in terms
of fiscal years. To the end of May 1969 the Treasury had drawn TL
750 million from the Central Bank since the beginning of the present fiscal
year on 1st March 1969 but the rest of the public sector decreased its bor18
Turkey
rowing by TL 417 million, against a decrease of only TL 58 million a year
earlier, mainly because the official cereals purchasing agency repaid larger
amounts of its seasonal borrowings during those months.
The new Cen¬
tral Bank Act, when it becomes law, will authorize the Treasury to borrow
up to 15 per cent of general budget appropriations from the Central Bank.
The present limit is 12 per cent since March 1969 and was previously 10
per cent.
But the text of the law states that the seasonal character of such
borrowing must be strictly observed.
As already this year the government
intends to apply this principle, a substantial contraction in such borrowings
will take place during the rest of the present fiscal year
(c)
Investment policy
The statement in the Annual Programme for 1969 that the respective
weights in the public sector's investment programmes of infrastructure
and irrigation projects, on the one hand, and of industrial and energy
sector projects, on the other, should be shifted in favour of the latter sug¬
gests that the need for a reconsideration of some aspects of investment
policy is now perceived in Turkey.
Pointers in the same direction are
the intention to devote more funds to programmes in agriculture that hold
out hopes for increasing foreign exchange earnings from fresh fruit and
vegetables, processed foods and meat.
The private sector is now seen as
the spearhead for new investments in the manufacturing industries
nical engineering, vehicles, chemicals and cement in particular.
mecha¬
The State
Enterprises are being encouraged to go into joint ventures with private,
local or foreign capital.
The Black Sea copper complex is a particularly
large investment project of this type.
Investment in hotels and motels is
a new and growing outlet for private funds.
Since 1967, the new procedures and incentives for authorising and
encouraging private productive investment have evoked a lively response
and it is noteworthy that, recently, the actual increases in such investments
have exceeded the forecasts made in the annual programmes.
Today a
special Department for Investment Implementation and Encouragement is
entrusted with the task of vetting applications received from Turkish busi¬
nessmen and foreigners, for authorisation to proceed with investment
projects.
The range of such incentives now includes loans at low interest
rates out of funds earmarked in the budget for that purpose, tax holidays
for approved investments, partial or complete exoneration from payment
of customs duties on imports of equipment, priority access to imports.
Foreign private investors can benefit from the same incentives except
cheap government loans.
19
OECD Economic Surveys
From 15th September, 1967, the date when the new Department for
Investment Encouragement and Implementation began to function, to
the end of 1968, 365 private investment projects for a total value of TL
7.7 billion were submitted and 183 for an amount of TL 3.7 billion were
approved.
In the first quarter of 1969, the corresponding figures were
TL 1.4 and TL 1.3 billion, representing 96 projects submitted and 79 appro¬
ved. The recent higher rate of approvals suggests that project preparation
by potential investors is improving. Whereas, a few years ago, the main
difficulty was finding sufficient valid investment projects in the private
sector, the reverse is now the case and this raises a new difficulty of ensuring
that available domestic and, more particularly, foreign resources do not
become overloaded by starting, in too short a period of time, an excessive
number of investment projects.
In any event, the figures just quoted
confirm the need already referred to for a more restrictive approach to
investments in the public sector so as to make room for the boom in the
private sector.
(d)
(i)
Balance of payments policy
Exports
Inadequate export performance now stands out as the major bottle¬
neck to the future development of the Turkish economy.
Unless a sustained
and rapid growth of exports can be secured, the country will be unable,
despite concessional loans from abroad, to finance the volume of imports
it requires for current needs and for investment and at the same time to
service foreign debts.
The poor record of exports in 1968 and early in
1969 no doubt owed something to exceptional circumstances affecting a
few traditional agricultural exports.
But there remains the underlying
handicap from which Turkish producers suffer when it comes to exporting,
namely insufficient quality and standardisation, inadequate marketing
techniques and the absence of a comprehensive policy oriented towards
exporting.
tradition.
The Turkish economy still has to build up a vigorous export
tobacco, hazel¬
Even as regards the basic agricultural crops
nuts, dried fruit and cotton
attitudes towards export sales have not
changed sufficiently to adapt themselves to the exacting conditions pre¬
vailing on world markets today. In the field of manufactured exports,
despite the ambitious aims set out in the two development plans, the coun¬
try has made no progress to date towards export diversification.
Unpro¬
cessed agricultural products made up 75 per cent of total exports in 1964
and over 80 per cent in 1968.
Meanwhile, demand for imports has run
20
Turkey
further and further ahead of exports in part because efforts to substitute
home production of industrial products for imports have tended to unde¬
restimate the true import cost of such " import substitution policies, "
notably the continued import needs of the assembly industries that have
been set up on an increasing scale, and in part also because the business of
importing has been, and continues to be, such a highly profitable one.
A number of measures have been taken over the last year to remedy
this situation and there now seems to be a better appreciation in official
and business circles of the importance of exports, in part because of the
disappointing performance of exports recently.
The list of goods bene¬
fiting from reimbursement of taxes on goods sold abroad has become
quite extensive and now includes a number of agricultural crops as well as
industrial products.
The rates on agricultural exports are lower, 5 per cent
of f.o.b. values for hazelnuts for example but, in an attempt to dispose of
old stocks, tobacco benefits from rebates starting at 12 per cent on the 1966
crop and going up to 33 per cent on stocks from 1962.
For industrial
goods the rebates go up to 50 per cent, on textiles for example.
Exporters
are eligible for bank credits at a preferential rate of 9 per cent and, to
encourage banks to grant this type of credit, the Central Bank stands ready
to rediscount paper in respect of these loans at 5.25 per cent.
Exporters
are eligible for priority in requesting licences, within a limit of 50 per cent
of their export earnings, to import materials they need for their business.
It has been announced that the government is studying ways and means
of providing proper export credits and insurance facilities for Turkish
manufacturers.
Indeed, for new export products in particular such assis¬
tance is indispensible.
Turkey is also taking a more active interest than
before in developing markets for her products in the Middle East.
There
would indeed appear to be scope here for sales of agricultural products
such as meat
and manufactured goods.
The prospects of Turkey entering very soon the transitional phase of
her association with the Common Market is providing a welcome addi¬
tional stimulus to efforts to promote exports and to improve business effi¬
ciency generally.
Increasingly businessmen are becoming interested in
getting familiar with European markets and the recently established Eco¬
nomic Development Foundation in Istanbul has been very active in orga¬
nising seminars and study-groups and in providing technical assistance
on market know-how for prospective exporters.
As the 1969 Annual
Programme stated, and the studies made so far by the Economic Develop¬
ment Foundation show, tariffs on most of Turkey's exports to Western
Europe are not a real handicap because they are either non-existent or
quite low.
research.
The real problems are of quality, standardisation and market
It is significant to note in this connection that, despite the special
21
OECD Economic Surveys
quota and tariff concessions already being offered by the Common Market
on a few industrial products from Turkey, the quotas are not fully taken
up.
The inescapable conclusion is that there is no short-cut to success in
building up a viable export potential short of a concerted policy oriented
towards the real needs of businessmen in a framework of price relationships
that will make exporting a profitable activity.
Diagram 3
Foreign trade: The targets and actual outturns
S US millions
1200
mt-------%*wm---m
Actual import»
Import
taraitm
1100
whhhb
Actuot wxports
Export torgttw
1000
900
too
760
,,'
600
*>-t''
500
300
k
B62
1963
1964
1965
1966
1967
1968
1969
1970
1971
1372
Source: Turkish Submission to the OECD.
A welcome change of orientation in policy towards building up such
an export potential is the increased attention now being devoted to agri¬
cultural products other than the traditional staple crops.
A number oj
such projects are now under active consideration with the assistance of
22
Turkey
the World Bank.
They concern exports of fresh fruit and vegetables,
food processing, livestock and, at a later stage, the lumber industry.
Com¬
petition around the Mediterranean in the production and export of citrus
fruits is now very intense and, according to some forecasts of supply and
demand, overproduction may appear in the early 1970's.
Also unfortu¬
nately, Turkey is a late-comer to this market despite her obvious natural
advantages for the production of citrus fruits.
However, there should be
room, if appropriate policies are followed, for a useful growth of conver¬
tible currency earnings from this source.
In addition, a number of pri¬
vate-sector food-processing projects are now being implemented, some of
them with the help of private investment from abroad.
In this field, as
in many others, there would appear to be obvious advantages for Turkish
firms in establishing relations with foreign firms so as to penetrate markets
abroad.
Diversification of exports is all the more necessary as the two major
crops
tobacco and cotton
sales in future.
hold out only modest prospects for increasing
Tobacco-growing is an activity in Turkey that calls for
radical reorganisation if a recurrence of the problem of large stocks that
can only be disposed of at cut prices is to be avoided.
Even so, as the
world market for tobacco is not expanding very rapidly, some 2 per cent
a year, and the competition for oriental-type tobacco from newly established
producers is severe so that price-trends are unfavourable, the level of sales
by Turkey will probably not change much compared with recent years.
Cotton has been the most dynamic export product during the period since
the late 1950's but there are now reasons to expect a more moderate rate
of growth from now on.
Indeed, likely trends in world supply and demand
position during the 1970's suggest a rather strong likelihood of over-produc¬
tion appearing with a consequent downward pressure on prices.
The
spread of textile industries in the developing countries, and the hoped-for
growth in demand for textile imports in the developed countries, hold out
an opportunity to those developing countries that can capture these mar¬
kets.
Turkey's performance in this field so far is not too encouraging as,
in 1968, only some S 4 million worth of cotton textiles were exported des¬
pite the existence of unused capacity in the textile industry, notably in the
State-owned
Siimerbank's factories.
The share of Turkey's exports sold to the USSR and other Eastern
European countries has been increasing in recent years, from less than
10 per cent in 1963 to 18 per cent in 1968.
A similar trend appeared in
the past as Turkey's exports became less competitive.
It is rather striking
to note that in 1968, whereas exports to convertible currency areas fell by
nearly 1 1 per cent, those to the Eastern countries rose by 3 per cent.
Whilst
export sales through special clearing accounts with this group of countries
23
OECD Economic Surveys
can offer at times a solution to the problem of excess stocks, for hazelnuts
and tobacco for example, the possible drawbacks must also be borne in
mind, in particular the higher prices of imports received in exchange com¬
pared with prices on convertible currency markets.
(ii)
Imports
Restrictions on imports have become more severe since 1968 due to
the increased rates of prior deposits that importers have to put up and to
the long delay before requests to import are granted which tend to empty
the concept of a liberalised list of imports of much of its meaning.
This
is however the reverse of the trend proposed in the 1969 Annual Programme
which put forward an unanswerable case for adding to the list of liberalised
goods some items such as tyres, pharmaceuticals, lorries, cars and tractors,
that would bring a new element of competition to the highly protected
home market.
The increased funds in foreign currencies that have been put at the
disposal of the Industrial Development Bank in Istanbul (TSKB) by the
World Bank, the European Investment Bank and a growing number of
countries who are members of the Turkish Aid Consortium provide a
valuable source of imports of capital goods for the private sector for which
TSKB funds are reserved exclusively.
The 1968 and 1969 import quotas
also set aside special amounts of foreign exchange allocations for approved
private sector investment projects.
Given the prospect that the foreign
exchange situation will continue to be tight for some time to come whilst,
as was noted earlier, a growing volume of productive investment in the
private sector is being authorised, there would appear to be a case for a
close scrutiny of all allocations of foreign exchange or import quotas to
public agencies so as to reduce the latter as much as possible.
In addition
to special import quotas such agencies can import on preferential terms as
regards advance bank deposits the goods that figure on the list of liberal¬
ised imports.
In 1967, $ 99 million of the total amount of liberalised
imports were imported in this way.
A special feature of private sector imports is the " imports with waiv¬
er " procedure whereby Turkish nationals working abroad may import
goods paid for out of their foreign currency earnings.
This year, the
regulations regarding such imports have been relaxed somewhat for imports
of automobiles in order to permit the importation of newer models thus
forcing down car prices on the home market.
In 1968 "imports with
waiver " reached $ 22 million, a substantial rise over 1967 when the amount
was $ 12 million (Table 7).
They thus represent a fairly important sum in
the balance of payments.
This being the case, it would appear to be
24
Turkey
Table 7
Balance of payments
US S millions
1st four
1965
1966
1967
1968
months
1968
1969
Actual outturn
Commodity trade
Imports cif
Exports fob
-108
-228
-162
-268
-71
-97
-572
-718
-685
-764
-263
-269
464
490
523
496
192
172
10
45
32
27
-A
11
-10
-14
-14
-9
-10
-9
Profit transfers
-15
-16
-25
-32
-13
-7
Interest payment (gross)
-32
-31
-35
-A\
-6
-5
Workers' remittances
70
115
93
107
24
31
Other services, net
-3
-9
13
2
20
19
14
10
Total current balance
-78
-164
-116
Capital transactions, net
Private, total
Workers's imports
161
172
27
41
5
11
Services and transfers, net
Foreign traveil net
Infrastructure and offshore receipts
1
4
3
-231
-71
-83
169
218
57
52
29
35
12
19
12
22
7
15
22
30
17
13
5
4
303
255
246
274
63
53
57
56
83
127
37
43
217
182
163
147
26
10
29
17
-169
-124
-106
-91
-18
-20
Balancing item
-55
-47
-36
-20
4
17
Official monetary position (
= increase)
Gold and convertible, currency
-28
39
-17
33
10
14
-7
33
-20
6
-6
6
-5
Direct investments
Official, total
Project assistance
Programme
assistance
incl.
European
Fund credits and debt relief
Agricultural surpluses
Debt repayments, gross
Non-convertible currencies
-15
Change in IMF net position
Source:
8
27
Ministry of Finance, Ankara.
appropriate to consider whether the foreign exchange involved is being
spent in the most productive manner.
possible for workers abroad
the country
Since March 1969, it has become
many of whom were farmers before they left
to bring back under the " import with waiver " scheme tools
and agricultural equipment they need for their professional activities.
It
remains, however, that practically all goods imported in this way are con¬
sumer goods.
25
OECD Economic Surveys
(iii)
Invisibles
Remittances in cash sent home by Turkish nationals abroad now
represent a major support for the balance of payments.
Such remittances
benefit, through a system of interest-rate premiums, from the same incentive
as foreign tourists when they exchange their currency in Turkey.
The
scope of this scheme was broadened somewhat in 1969 to include non-
manual workers and Turkish citizens in receipt of pensions or other income
payments from abroad.
But the main source remains the savings of the
Turkish workers in Germany.
There are a few thousand workers in Bel¬
gium and the Netherlands and, presumably, the coming into effect of the
transitional phase of Turkey's treaty of association with the Common
Market will facilitate the movement of Turkish citizens to other countries
among the Six as well.
Tourist receipts, on a net basis, continue to be disappointing despite
the new one-third bonus in force since 1968.
The rise of S 10 million
gross receipts from this source in 1968 reflected, to a large extent, the deci¬
sion to extend the scope of the bonus to United States civil and military
personnel stationed in Turkey and to members of other foreign diplomatic
missions.
During the same year, expenditures abroad in foreign curren¬
cies by Turkish tourists rose by $ 6.5 million.
During the first quarter
of 1969, the most recent period for which the figures are available, gross
official receipts from tourists as just defined rose to $ 5.4 million compared
with S 0.9 million a year earlier ; but expenditures rose by S 2.9 million.
The existence of a parallel market rate for the Turkish lira which is more
advantageous than the official tourist rate encourages some transactions
which thus bypass the official channels.
One way of tightening-up the
regulations, which would hardly be likely to inconvenience foreign tourists,
would be to reserve in principle to banks the right to exchange currency
for foreigners.
It is also disquieting to note how, each year, despite the
tax of 50 per cent on sales of foreign currency, the expenditure by Turkish
citizens travelling abroad for recreational or religious reasons continues
to rise sharply.
(iv)
Private foreign capital
The activities of the Department for Investment Implementation and
Encouragement
already referred to
encompass the scrutiny of applica¬
tions by foreign firms to invest in Turkey.
The more expeditious and
professional manner in which such applications are dealt with today stands
in sharp contrast to the system that was in force before 1967.
The old
system was too time-consuming and offered no guarantee that the projects
approved would really be profitable to the economy and in conformity
with Turkey's development aims.
26
Turkey
There has been no spectacular rise in the number of applications
that have been approved as Table 8 shows but, in 1968 and again during
the first four months of 1969, the amounts involved were much larger than
in earlier years.
This is a reflection of the policy of the Turkish Govern¬
ment to strengthen the economy's industrial base in branches such as
diesel engines, automobiles, trucks and tractors, for which a number of
large projects financed in part with foreign capital have been authorised.
Table 8
Foreign private investment1
1969
1966
1967
1968
January
April
Annual data
Number of investment authorizatio ns approved
18
27
22
8
187
462
405
TL millions
Amount of investment authorized. Total
260
of which:
In kind
54
27
213
90
In cash
143
159
63
87
1
9
12
7
60
116
175
221
66
68
93
23
In kind
33
31
23
15
In cash
33
37
68
8
Intangible assets
Credits
Actual inflows: Total
of which:
Intangibles
2
1. These data cannot be compared directly with those in the balance of payments which include
petroleum investments excluded here and which take account in addition of capital repatriations.
Source: Foreign Investment Encouragement Bureau, Ankara.
The inflow of capital in kind, cash and intangibles rose in 1968 by nearly
40 per cent but, despite this, remained at the modest level of $ 10 million.
During the first four months of 1969 the inflow was lower, at an annual
rate, than in 1968.
The fact that the total amount of foreign capital in
Turkey is not very large for a country of Turkey's size and stage of develop¬
ment shows that there should be scope in coming years for substantial
increases.
27
OECD Economic Surveys
(v)
Official capital
The major source of official capital flows is the Turkish Aid Consor¬
tium which operates under the aegis of the OECD.
Disbursements of
project aid rose substantially in 1968 by about $ 45 million to 5 127 million,
the highest figure to date.
tium sources.
This included a small amount from non-Consor¬
A large number of aid-financed projects
big and small
are now in an active phase of implementation in Turkey and it may be
expected that there will be a further increase this year in such disburse¬
ments.
In 1968, disbursements of programme aid were just under, and
in 1967 just over, $ 90 million.
Disbursements of debt relief were $ 46 mil¬
lion in 1967 and $ 25 million in 1968.
In both years, Turkey secured a
credit of $ 25 million from the European Monetary Agreement whilst her
net position vis-à-vis the International Monetary Fund showed net drawings
of J 8 million in 1967 and $ 27 million in 1968.
aid through the Turkish Consortium
A feature of programme
the only source as non-Consortium
countries are not providing programme aid
although total disbursements
have not changed very much, is the fall in total pledges between 1967 and
1968 following a reduction in United States' programme aid.
It is in line
with Turkey's own plans that over the years the share of programme assis¬
tance should decrease relatively to total concessional aid.
But the struc¬
ture of Turkey's balance of payments, in particular the need to service in
convertible currencies substantial amounts of foreign debt, implies for the
time being a continuing need for assistance in the form of programme aid
and debt relief.
28
Part II
BUDGETARY
AND
FISCAL
POLICY
In common with the more developed member countries of the OECD
area, achieving a high rate of growth of output from year to year has been
a major aim of economic policy in Turkey during the present decade.
In
the case of Turkey, a country whose level of development is below that of
other OECD members, this aim calls, among other things, for a sharp
increase in domestic savings to finance the investments that are required.
According to the Turkish development plans a notable part of the larger
volume of investments is expected to be financed out of public sector reve¬
nues, including the gross profits of the State Enterprises1.
As public
current expenditures are also following a sharply rising trend it is clear
that such revenues will have to increase substantially faster than GNP
over the next few years.
The Second Five-Year Plan estimated that the
contribution of the public sector to domestic savings should rise to about
12.5 per cent of GNP by 1972, a rise of 3.4 percentage points compared
with the actual outturn in 19682.
As to current expenditures through the
budget, it is hoped to limit their annual rate of incraese to below 9 per cent.
Although these estimates were made some years ago they give an indication
of the orders of magnitude involved.
The very considerable increases in
public sector revenues that are implied by these targets illustrate a funda¬
mental difference between Turkey's public finance problem and that being
faced by the developed countries of OECD as the latter envisage only
moderate increases in the share of public revenues to GNP.
The problem
is further aggravated by the fact that Turkey's fiscal and budgetary system,
as in many developing countries, is not well adapted to such a task.
So
much so that without some rather far-reaching changes in taxation policy
and in budgetary procedures it is difficult to see how even more modest
1 The implications of Turkey's Second Five-Year Plan for savings and investment
were analysed in last year's survey of Turkey: see OECD Surveys, Turkey, July 1968.
2 Including in public savings the amounts invested by the Social Security Scheme
and the State-run Pension Fund.
29
OECD Economic Surveys
targets than those written into the Second Five-Year Plan could be reached
by 1972.
In addition, the State budget has to assume the brunt of the task
of preserving short-term stability in the economy.
In the following para¬
graphs budgetary and fiscal policy is considered first from the point of
view of development strategy and then in relation to short-term demand
management policy.
I
DEVELOPMENT
AND
AIMS
FISCAL
OF
BUDGETARY
POLICY
The development aims of budgetary and fiscal policy in Turkey may
be summarized under three headings : to raise significantly the share of
savings through the budget ; to influence resource allocation through fiscal
measures and the distribution of public funds ; to modify the distribution
of incomes in line with the requirements of social justice.
In this connection
Turkey faces the dilemma confronting all governments, but which is per¬
haps particularly acute in developing countries, that these aims tend fre¬
quently in practice to conflict with each other.
The policy problem is
therefore one of finding an acceptable compromise between them.
(a)
Savings through the budget
The way the government accounts are presented in Turkey does not
make it possible to measure, except very approximately, the size of savings
through the budget.
Despite a revision in 1964, and some further pro¬
gress more recently, only a summary of the budget proposals according to
an economic and functional classification is available, and no such classi¬
fication is published showing current and capital items in terms of actual
receipts and expenditures.
This classification is not entirely complete,
particularly as regards transfer items that tend in some cases not to distin¬
guish between current and capital transfers.
Some work of an experimen¬
tal character has been done to improve the budget presentation but for
real progress to be made, it would have to be taken up on a regular basis
by the government departments.
A line of attack on this problem is
offered by the recent introduction of performance budgeting techniques in
some
ministries.
Although the amount is difficult to measure, it would seem that savings
through the budget during the years 1961-1963 were between 3 and 3-J per cent
of GNP and rose to some 5.4 per cent in 1968, which is in itself quite an
achievement.
It is not possible for definitional reasons, and because the
30
Turkey
way in which the total need for domestic savings would be met was not set
out in full, to link these estimates to those given in the Second Five-Year
Plan for the surplus on government account in 1972, the last year of the
Plan.
However, it would seem that a percentage of GNP at least of the
order of 7 to 8 per cent is implied by the Plan for savings through the bud¬
get.
As the Second Five-Year Plan has only three more years to run the
prospect for achieving such an increase must be considered difficult.
But
the fact remains that receipts of revenue through the budget must increase
substantially faster than GNP over the next few years if the indispensible
needs of government on current and capital account are to be financed.
For the share of government revenues in GNP to rise, such revenues
must be elastic with respect to the growth of incomes and output.
To
achieve this, apart from periodic increases in tax rates, direct taxes should
be broadly based and progressive, and indirect taxes should be linked to
the fastest growing components of national output and expenditure, in
particular the expenditure of households.
The existing structure of taxa¬
tion in Turkey does not fit these criteria very well as the following paragraphs
which deal first with direct taxes and then with indirect taxes show.
As during the 1960's receipts from indirect taxes have risen faster
than those from direct taxes, the share of the latter in total public revenues
has declined.
27.3 per cent of government revenues in 1968 came from
personal income tax, a smaller share than in 1961 when it was nearly 31 per
cent.
During the same period, the share of corporation tax receipts fell
from 6.6 to 6 per cent in 1968.
The number of taxpayers subject to income
tax is at present 3.6 million, a figure which has more than doubled since
1962.
The majority of these taxpayers are State employees or salaried
workers whose incomes are declared to the tax authorities by their emplo¬
yers.
Some half a million taxpayers are small-scale industrialists, traders
and members of the liberal professions.
The 1969 Annual Programme, published by the Turkish Government,
refers to the need to close the loopholes in the taxation of non-salary inco¬
mes.
Clearly it will be difficult to increase the incidence of income tax
until the tax system has been rendered more equitable as between taxpayers
subject to the payroll-tax system and others, including farmers.
Over
recent years improvements have been made in the tax administration
thanks to on-job training and more exacting recruitment standards.
But
a number of improvements call for legislation to put them into effect.
Draft bills on such subjects as the reorganisation of the tax administration,
the system of tax courts and tax accountants have been prepared but none
of them have been discussed as yet by Parliament.
For the time being, corporation taxation is bound to be a notably
less important source of government revenue than it is in the developed
31
OECD Economic Surveys
countries, because the corporate sector is still quite small, apart from the
State Economic Enterprises and the latter do not make much profits.
The
rate of tax on the profits of companies is 25 per cent since 1969 ; previously
it was 20 per cent which was not high compared with Western European
countries.
In addition a 20 per cent income tax rate is applied to profits
after payment of the corporation tax and whether profits are distributed
or not.
It is likely that profit margins are high in many branches of Tur¬
kish industry and commerce and this fact is frequently put forward as a
justification for increased taxation of companies.
Against this must be
set the desirability of encouraging the growth of limited companies if Tur¬
kish industry is to become more diversified and based on firms of a larger
size than the existing family concerns and partnerships.
The experience
of the already-industrialised countries shows that the growth of the cor¬
porate sector of industry was a major source for them of savings for pro¬
ductive investments and more recent examples of industrialisation confirm
this.
It is unlikely that Turkey will prove to be an exception.
The cause
of excessive profit margins in some branches must be sought in heavy
protection from foreign competition and sellers' market conditions at
home that are enjoyed by Turkish businessmen.
The measures needed to
combat this situation and, at the same time, to ensure that scarce resources
available for investment are put to best use, are a relaxation of the too
rigid prohibition of imports of goods that compete with the products of
Turkish firms, a re-structuring of the distribution system and a more active
approach to industrial pricing policy.
In this connection, the use of
" programme contracts " as in France to control prices offers an example
that Turkey could perhaps study with profit.
Direct taxation of agricultural incomes was first introduced into
Turkish tax legislation in 1961, but with such generous exemption limits
and other possibilities for avoiding payment, that the revenue secured is
still only just over 1 per cent of the total yield from income tax.
The
Second Five-Year Plan repeated earlier government pronouncements on
the need for effective taxation of agricultural incomes to procure for the
State a new and growing source of domestic tax revenues but so far to no
effect.
Turkey is not the only country where effective taxation of agri¬
cultural incomes is politically difficult.
If the legislative obstacles are
considered to be too great for the time being, there remain no doubt ways
and means of tightening up the present procedures for the assessment and
collection of taxes on agricultural incomes so as to increase receipts.
The present share of indirect taxes in government revenues is twothirds, a figure which has tended to increase since the early 1960's when
it was 60 per cent.
Indirect taxes on domestic production and expenditures
represent some 60 per cent of total indirect tax revenue, but nearly one-
third of such taxes is derived from the sales of a limited range of consumer
32
Table 9
Central Government revenues
TL millions in current prices and percentages of total revenues
1963
1961
TL
Income tax
Corporation tax
Other direct taxes1
Total direct taxes
Indirect taxes on domestic production and expenditures
Indirect taxes on imports
%
TL
1967
1965
%
TL
%
TL
1968
%
TL
%
2 051
30.7
2 240
26.7
2 670
26.1
26.9
4 413
27.3
443
6.6
415
4.9
521
5.1
828
5.6
974
6.0
38
0.6
36
0.4
116
1.1
153
1.0
179
1.1
2 532
37.9
2 691
32.0
3 307
32.3
4 974
33.5
5 566
34.4
37.7
39931
2 564
38.3
3 323
39.6
4 008
39.2
5 888
39.6
6107
1593
23.8
2 388
28.4
2 915
28.5
4 002
26.9
4157
27.9
Total indirect taxes
4157
62.1
5711
68.0
6 923
67.7
9 890
66.5
10 624
65.6
Total revenue
6 889
1
2
100
8 402
100
10 230
100
14 864
100
Excluding inheritance and gift tax more properly classified as a capital transfer to the government and savings bonds considered as borrowing.
Including, however, tax on foreign travel and the tax on motor vehicles, the latter being classified in Turkish statistics as a direct tax.
16190
100
OECD Economic Surveys
goods such as alcohol, tobacco and cigarettes, salt and sugar. From the
point of view of increasing tax revenues these goods are not very well
chosen as expenditure on them tends to rise less fast than the income of
households.
Until this year, the method of collection of taxes on monopoly
goods (essentially alcohol, tobacco and cigarettes) was subject to very severe
drawbacks.
The amounts of tax due by the monopoly administration
were mixed up with its own finances so that the government could not be
sure in advance what sums would actually be transferred to the Treasury.
Monopoly products are now subject to the production tax so that, in future,
the Treasury should receive taxes as these are collected.
But as the Mono¬
poly Administration and the Sugar Company are under an obligation to
buy tobacco and sugar beet in quantities, and at prices that reflect official
support policies whilst domestic prices for their finished products are
controlled by government decree, and foreign sales usually have to be
made at a loss, their financial margins are squeezed and the Treasury has
an open-ended commitment to provide any funds that are needed.
In
1968, non-payment of taxes by the Monopoly Administration and the Sugar
Company cost the State budget nearly TL 1 billion.
This year, for the
first time, an allocation has been written into the budget specifically to
meet the expected needs of these two bodies for external finance.
This
step is to be welcomed as bringing more clarity to the presentation of the
budget, but by itself it does nothing to solve the problem of the burden of
costly price-support schemes for agricultural products in excess supply.
Apart from a tax on motor vehicles, not a very significant source of
revenue to the State, consumer durable goods and services bought by
households escape taxation.
A proposal early in 1969 to introduce a tax
on sales of refrigerators was not accepted by Parliament.
However, it
is difficult to escape the conclusion that taxation of a wider range of con¬
sumer goods and services is now long overdue.
The Second Five-Year
Plan and the Annual Programme for 1969 both made this point quite
explicitly.
It is sometimes objected that such a scheme would be difficult
to administer and that it would be resisted by producers and retailers but
it is difficult to believe that such obstacles could not be overcome.
The present production tax is levied on a narrow range of products,
many of them semi-finished goods (textile yarns, metals, cement, electricity
and gas for example).
It produces less than one-quarter of total indirect
taxes on domestic production and expenditures.
A broader-based taxation
of domestic expenditure is needed to avoid the existing distortions due to
the working of the present production tax and to give the budget the extra
receipts it requires.
This could be done, in the first instance, by adding
more items to the goods and services subject to the production tax and by
revising the present rate structure which bears heavily on some items. A
more balanced taxation of consumer goods and a reform of the production
34
Turkey
tax on raw materials and finished products would constitute the first steps
towards a general reform of indirect taxation in Turkey that will no doubt
follow the same lines as the tax on value-added which is used by the Com¬
mon Market countries.
The existing tax on banking and insurance transactions alone pro¬
duces nearly half as much revenue as the production tax.
As it is the aim
of the Turkish authorities to encourage the growth, and reduce the cost,
of credit to the private sector this latter tax appears to be uneconomic and
to bear unduly on users of bank credit.
The decision taken this year to
exempt from the tax credits to exporters and inter-bank transactions could
hopefully be seen as the first step towards a substantial reduction of the
incidence
of this tax.
The taxes that bear directly on imports are the mainstay of Turkey's
indirect tax system.
They are varied and their impact has been increased
sharply during the present decade.
Customs duties proper were rather
low previously to 1964 when they were revised upwards.
The municipa¬
lities derive most of their income from a tax of 15 per cent of the amount
of customs duties which is added to the latter and paid by the importer.
There is a 5 per cent quay duty and a special stamp tax of 25 per cent which
is levied on the c.i.f. value of most imports.
The stamp tax was first intro¬
duced in 1963 at a rate of 5 per cent but has been revised upwards in several
steps, the last increase being from 15 to 25 per cent at the beginning of this
year.
There is also a special tax on imported petroleum and fuel-oil and
an import production tax which is levied at the same rate as the domestic
production tax on similar products.
From the point of view of increasing government revenues, such heavy
dependence on taxes on imports has serious drawbacks.
Unless there is
a substantial improvement in coming years in the growth of Turkey's own
earnings of foreign exchange, the growth of imports will be more moderate
from now on.
Extra revenue can be secured by increasing the rates char¬
ged, and this has been done in recent years through the device of the stamp
duty.
But this policy soon reaches the limits fixed by international agree¬
ments and by the unfavourable side-effects on the competitiveness of
domestic industry.
It was never intended that the stamp tax, that has now
become such an important source of revenue, should be permanent.
Also
Turkey is hoping soon to enter the transitional phase of her relations with
the Common Market and some customs and related duties will have pro¬
gressively to be lowered vis-à-vis the Six.
And, finally, Turkey is now
granting generous exemptions from payment of customs duties in respect
of imports of investment goods.
The conclusion appears inescapable
that from now on taxes on imports can no longer be counted upon to pro¬
vide more than very moderate amounts of extra revenues.
35
OECD Economic Surveys
Diagram 4
Developments in consolidated budget receipts
Pereanragms
25
First five-year
Second five-year
plan targets
plan targets
20
15
Consolidated Budget current revenues
as a percentage of GNP
Actual direct taxes as a percentage
f non- agricultural NNP
0
i-
1953
54
*
56
57
58
59
60
61
62
S3
64
65
66
67
68
69
70
71
72
Note Second Five-Year Plan target contains tax yields, savings bonds, revenue
other than taxes and half of the additional finance requirements.
Source:
Turkish Submission to the OECD and First and Second Five-year Plans.
The preceding paragraphs have been concerned with general budget
revenues.
However, given the increasing need to find ways and means of
increasing public revenues as a whole it would be unfortunate if the poten¬
tial contributions of the rest of the public sector, i.e. the annexed budgets,
units of local government and the State Economic Enterprises were neglec¬
ted.
Thus the annexed budget administrations
which include the Mono¬
poly Administration, the State Hydraulic Works responsible for irrigation
and water supplies generally, the Directorates of Highways, Forests, Air¬
ports and the Petroleum Administration
ments in recent years.
have undertaken vast invest¬
In the 1968 budget the annexed budget adminis¬
trations were allocated nearly TL 0.7 billion from the general State budget
to help meet their current expenditures and TL 3.6 billion as a contribution
to financing their investments estimated to reach TL 3.9 billion. The only
annexed budget from which the general budget received any return was
payment of indirect taxes on sales of monopoly products, plus the profits
of the Monopoly Administration. Even in this case, instead of the sum
of TL 1.7 billion that had been budgeted for only TL 1.3 billion were actually
36
Turkey
received.
There is scope for improving quite
receipts
through taxes, fees and other charges
substantially
the
own
of these administrations
and for ensuring that the vast investments they make produce a reasonable
financial return.
In this way, some of the strain could be taken off the
general State budget.
The financial position of local government units, in particular of the
large cities like Istanbul, is critical.
The development of the Turkish eco¬
nomy has now reached a stage where a vast movement of population from
the countryside to the towns has been sparked off with all its attendant
problems of urban renewal and the provision of light, water and drainage,
housing and other social investments.
There is little doubt that large
sums will have to be found over the next few years for these purposes.
The
local government units are at present incapable of taking on such a financial
burden and, if new sources of revenue cannot be found for them, they will
be obliged to call upon the central government for assistance, as indeed
they are already doing to an increasing extent.
One major item of the
revenues of the municipalities is the 15 per cent additional levy on customs
duties.
The drawbacks associated with this inelastic source
have already been noted.
of revenue
From 1969 onwards the municipalities will
receive 2 per cent of the proceeds of the new production tax on monpoly
products.
The provincial governments receive 5 per cent of income tax
collections and they would stand to benefit from changes in the tax base
and in collection procedures decided at the national level.
It remains
that a major weakness of local government finances is the small yield from
taxes on real property due to the notable undervaluation, at present-day
prices, of real estate.
A draft bill to correct this and to initiate a systematic
revaluation of real estate has been before Parliament for some time but has
not yet been debated.
As any thorough revaluation exercise would clearly
be a very time-consuming task, even if this bill is eventually passed, it
seems that some intermediate solution to raise tax revenues from this
source will be required.
A great deal has been written and said about the problem of the State
Economic Enterprises1, and there can be no doubt that their reform is a
major task that still awaits the Turkish authorities. From the point of
view of finding ways and means of increasing the volume of public savings,
the fact is that, despite the intentions set out in the Second Five-Year Plan
substantially to raise the profitability of these enterprises, the contribution
of the operational SEEs, considered as a group, to their net investments
in capital assets is nil or, as in 1968, even a negative amount.
To the
extent that this aim is not achieved the need for the central government to
1
See, for example, in the OECD Economic Surveys, " Turkey ", July 1968, p. 33.
37
OECD Economic Surveys
raise additional revenue from taxation in order to finance direct transfers
of budget funds to some enterprises is increased.
At the same time the
State Enterprises are allowed to absorb the lion's share of the annual
financial surplus of the social security scheme and the pension fund that
could otherwise be used for other purposes. Improving the profitability,
or reducing the losses, of the SEEs would appear to be a necessity both
from the point of view of raising additional funds for investment and be¬
cause of the misallocation of resources that results from the lack of a pro¬
per pricing policy for these enterprises.
(b)
Allocation of resources
Apart from the general problem raised by the low levels of efficiency
and profitability in the State Economic Enterprises which has already been
referred to, an urgent question for the Turkish authorities at present is to
find ways and means of reducing the losses of two of these enterprises, viz.
the railways and the coalmines.
It is estimated that in 1969 the latter will
cost the State budget TL 800 and TL 400 million respectively.
These
figures represent a substantial increase over 1968 when the corresponding
amounts were TL 388 and 125 million.
They may be compared with the
entire budget appropriations for the Ministry of Health and Social Welfare
(TL 0.9 billion) and the Ministry of Education (TL 2.7 billion) on both
current and capital account.
Such a disparity in the allocation of scarce
public funds, if it were to continue, could not fail to be prejudicial to Tur¬
key's developmental efforts.
As these heavy losses are compensated out of the budget, they repre¬
sent government subsidies to users of the railways and of coal.
impact is however haphazard and of doubtful economic value.
Their
The case
of the railways is complicated by competition from road transport, as it is
in many countries, but as road users in Turkey pay in taxes only a fraction
of what it costs to maintain the roads there is a particularly strong incentive
to the development of road transport.
In March 1969, the transportation
tax on passenger rail travel was reduced in an attempt to attract traffic back
to the railways but the effect of this measure is likely to be small.
It has
finally been decided to have a detailed study of the inland transport system
carried out with the financial support of the United Nations Industrial
Development Programme and the active interest of the World Bank.
But
such a study will take time to complete and any measures that may be
agreed to as a result even longer to implement whilst there is an urgent
need for some immediate action to cut back the deficit of the railways. In
the case of the coalmines, the pressure of overstating, of increases in
wages and fringe benefits that are unrelated to productivity increases, and
the maintenance of coal prices at an artificially low level represent a com38
Turkey
bination of factors that leads inevitably to growing losses.
The deficits
of the coalmines and the railways are linked to the extent that coal prices
are an important element in the costs of the railways and the latter's deficit
was worsened after 1967 in part because the railways were not authorised
to raise their charges to compensate for an increase in the price of coal.
The problem of the growing cost of agricultural price-support policies
is one that goes beyond the scope of an analysis of public finance but the
cost to the budget of support for the main two crops
tobacco and sugar
and to a lesser extent tea, has now come to represent a major burden that
seriously affects the amount of funds that can be made available for invest¬
ment.
Stocks of tobacco are high and some of them have been held by
the Monopoly Administration since 1962.
It is now hoped that a special
graduated export rebate will make it possible to dispose of part of these
stocks but the longer-term problem of the reorganisation of the tobaccogrowing industry (limiting the area under cultivation, improving qualities
and standardisation, adopting more vigourous selling methods) remains
to be solved.
A bill was approved by Parliament this spring that will
make it possible to reduce the area of land on which tobacco is cultivated
and which authorises private firms to manufacture tobacco and cigarettes
for export.
There remain however the problems of improving quality
controls and of modernising commercial methods.
In the case of sugar,
the stocks held at present amount to nearly two years' domestic consump¬
tion.
Given the heavy losses incurred on sales of sugar abroad, exports
were stopped in 1968 and although they have been started again the return
only covers the cost of the sugar beet.
The present system tends to produce
large surpluses of unsaleable sugar due to the absence of any limit to the
purchases of sugarbeet from farmers by the State-owned Sugar Company
that also offers highly-remunerative prices.
The 1969 Annual Programme
pointed out the inefficient use of resources implied by the present pricesupport system for sugarbeet.
A scheme at present under joint consider-
, ation by Turkey and the World Bank to convert land at present used for
the cultivation of sugarbeet to animal fodder, thus providing a basis for
the development on modern lines of a livestock industry, holds out hope
of a medium-term solution.
Budget and fiscal policies to promote private productive investments
have been used much more actively since 1968.
Investment allowances
of up to 80 per cent of the total cost of approved investments and complete
or partial exemption from payment of customs duties are now being gran¬
ted on a generous scale.
The cost of these two types of incentives in reve¬
nue foregone by the budget will be of the order of TL 500 million in the
current fiscal year.
There can be little doubt that these two policy instru¬
ments have evoked an active response from the business sector in Turkey
and they are to be welcomed for that reason.
39
It will be necessary to use
OECD Economic Surveys
them with discrimination however so as to keep a sufficient degree of selectiveness and to avoid creating excess demand conditions resulting from a
volume of private investment authorised in excess of existing non-inflat¬
ionary sources of domestic savings, and of foreign currencies to pay for
imports.
A new departure in budgetary policy in Turkey in 1968, but one that
has been practised regularly by other OECD governments for many years,
is the earmarking of funds in the budget to be lent on favourable terms to
the private sector and to joint ventures by public and private firms.
The
amount of TL 347 million set aside for such purposes in 1968 was not large
and, for various reasons, including the need to find appropriate institutional
arrangements for distributing the funds and the cuts in budget appropria¬
tions, less than TL 40 million were actually spent.
This year, an amount
of TL 650 million has been written into the budget for the same purpose.
It is to be hoped that last year's teething troubles have been overcome and
that this amount will be entirely disbursed.
The additional costs for the budget, either in the form of revenue
foregone or of new items of expenditure, resulting from these various
incentive schemes in favour of the private sector reinforce the conclusion
reached earlier regarding the urgency of a review of fiscal policy so as to
find new, more soundly based sources of State revenues, and of a careful
scrutiny of expenditures so as to bring about a significant reduction in the
cost to the budget of many transfer items of dubious economic and social
value.
(c)
Income distribution
The Second Five-Year Plan notes that whereas it is hoped to achieve
a 7 per cent annual growth of GNP, private consumption can only be
allowed to increase by 5.1 per cent a year which implies a rate of 2.5 per
cent per head of population.
This target is in line with the general philo¬
sophy of the plans according to which a sustained effort is called for during
a number of years to save and invest a larger share of GNP.
The Second
Five-Year Plan states however that " as a result of policies to be followed
to ensure a more equitable distribution of rising income, and to achieve
a balanced development between the various regions, the standard of
living of the low-income groups of the community will rise at a aboveaverage rate. "x
Questions relating to income distribution are the subject of lively
debate in Turkey, as they are in all countries to a greater or less extent.
1
Second Five-Year Plan, p. 4.
40
Turkey
There are no adequate statistics for evaluating the present situation and
past trends in Turkey and, no doubt, even if there were, they would not
suffice to settle a debate which is by its nature a political one.
It is unfor¬
tunate, nevertheless, that there is such a paucity of information on this
very important subject.
No statistics of income distribution are collected
and published in the framework of the national accounts.
reliable data on wages or profits or agricultural incomes.
There are no
An evaluation
of the impact of the fiscal system on income distribution is thus impossible.
Particularly as regards the poorer groups in the population, any assessment
of living standards would have to take account of the non-monetary aspects
of the latter such as the availability of educational facilities, medical care,
electricity, drinking water, roads as well as employment opportunities.
It is the case that the sums allocated through the budget for these purposes
in recent years have risen, in some instances notably so.
It remains that
the illiteracy rate of the adult population is about 50 per cent and is
improving only slowly, although the school attendance ratio of children
in the 7-12 age group has risen, from just over 80 percent in
1965 to
over 92 percent in 1968.
Some partial indicators suggest that the impact of taxation during
the 1960's has not tended to reduce disparities between income groups.
The present loopholes in the direct tax system, already referred to, intro¬
duce an inequality of treatment between those whose incomes are declared
by their employers and the group of self-employed.
Incomes derived
from agricultural pursuits go practically untaxed and thanks to the possi¬
bility of offsetting losses in agricultural activities against profits earned
elsewhere, mixed incomes earned partly outside of agriculture also benefit
from this situation.
Similar considerations apply to property owners
who are lightly taxed due to the undervaluation of real estate, and to all
wealth holders because of the insignificant impact, under the existing tax
system, of inheritance taxes.
As to indirect taxation, the whole range of
consumer durable goods and services that are now being sold in increasing
amounts, thanks to the growth of incomes among sections of the urban
population, is untaxed.
The adoption of a broader-based system of
indirect taxation of domestic expenditures would satisfy, at one and the
same time, the objective of reducing inequalities as between income groups
and of tapping a buoyant source of tax revenue.
n
STABILISATION
POLICIES
In common with most developing countries, short-term fluctuations
in GNP in Turkey tend to be dominated by swings in agricultural output
which contributes one-third of GNP.
41
As a large part of Turkish agricul-
OECD Economic Surveys
ture is still working in conditions of low yields and on land subject to wide
differences in rainfall from one year to the next, weather conditions are
the main single factor determining the volume of crops. Export receipts
are also affected from time to time by shortfalls in production of agricul¬
tural crops, which make up 80 per cent of the total, as well as by price
changes on international markets. Turkey depends upon a net inflow of
foreign capital at concessionary terms in order to balance her external
payments and this flow can be irregular during the year, despite the efforts
of the Turkish Aid Consortium and its members, who provide the over¬
whelming share of foreign aid, to ensure a smooth disbursement of funds.
These possible causes of short-term imbalance in the Turkish economy are
not easy to counteract in the framework of a domestic stabilisation policy
although they can be attenuated by appropriate measures such as building
up buffer-stocks of key agricultural crops and by keeping a level of gold
and foreign exchange reserves to be used to tide over short-term external
financing difficulties.
Unfortunately, Turkey ran down her foreign ex¬
change reserves in 1966 to a very low level and has not built them up again
since then.
Other causes of temporary imbalance in the economy are similar to,
and call in principle for the same kind of policy treatment as those expe¬
rienced by the more developed countries of OECD. Spontaneous defla¬
tionary trends have been rare in Turkey during the 1960's, the only signi¬
ficant examples of a decline in business confidence in 1961 and again in
1964 being associated more with political than with purely economic con¬
siderations. In common with most OECD countries, Turkey's shortterm demand management problem has been basically one of keeping ex¬
pansionary forces within the bounds set by the need to ensure reasonable
price stability and balance of payments equilibrium.
Studies of stabilisation policy in the developed countries of OECD
have concluded that, in modern conditions, governments are working
within a " narrow band " set by the limits to the volume of unemployment
public opinion will tolerate 1. Clearly, full employment is not at present
an operational concept in Turkey. There are no dependable statistics in
this field but it is likely that urban unemployment is around 10 per cent
at least and in the countryside there is a reservoir of labour ready to move
to the towns or abroad in greater or lesser numbers depending upon demand
conditions there. The dominant constraint upon governments in the
economic field is rather the need to keep the economy upon an upward
growth path, a preoccupation which is very understandable and which
Turkey shares with other OECD countries.
1
In the developed countries,
Fiscal Policy for a Balanced Economy, OECD, 1968.
42
Turkey
however, the medium-term trend in the growth of the " productive poten¬
tial " can be estimated within fairly narrow limits and thus used as a meas¬
uring rod for assessing the safe limits to the use of capacity in the frame¬
work of a policy for short-term demand management.
In Turkey this is
not the case as there is no means ofjudging, except within fairly wide limits,
what the underlying growth potential of the economy is.
In practice,
the Turkish authorities seem to use three indicators as warning signals
that corrective action is needed to check the growth of demand.
They
are the cash position of the Treasury, the trend in prices and the intensity
of demand for transfers of currency abroad by the Central Bank to pay for
imports.
It is usual for countries to aim at a balanced mix in the use of short-
term policy instruments, particularly as between monetary and fiscal ones.
Because it is without influence upon short-term capital movements in the
balance of payments, monetary policy is a weaker policy instrument in
Turkey than it is in developed countries.
However, the tight control of
rediscounts by the Central Bank, which sets ceilings for each bank and
firm, is a powerful instrument for influencing the volume of domestic
credit to the private sector.
It is to be hoped that, when the new Central
Bank law is passed, interest rate policy will become more flexible and that
greater use will be made of the power to vary the compulsory reserve ratios
of the commercial banks.
In this way, credit policy will come to rely more
upon market mechanisms and less upon administrative decisions.
In deciding upon restrictive measures to dampen the growth of domes¬
tic demand the Turkish authorities face a basic dilemma.
Stimulating
private productive investments is rightly a major aim of government policy
but, unlike the situation in developed countries, private industrial invest¬
ment in Turkey is still a fragile plant.
Restrictive credit measures, if they
were pushed too far, could spark off a recession that would probably hit
the most progressive firms hardest.
And, in general, the present struc¬
tural changes that are taking place in the private sector depend upon the
maintenance of a climate of confidence for their continuation.
There is
thus a need to shield private productive investment from the necessity,
which is bound to arise from time to time, to take corrective action to sta¬
bilize the economy.
At the same time, the absence of proper capital or
money markets means that the Treasury can only turn to the Central Bank
if the budget deficit goes beyond fairly narrow limits and Central Bank
advances have an immediate impact upon the money supply.
For this
reason the upper limit to Treasury borrowing from the Central Bank is
fixed as a percentage of each year's budget appropriations.
Although such
borrowing is, in principle, for seasonal requirements only this has never
proved to be the case and, starting from 1964, the outstanding debt of the
Treasury to the Central Bank has increased steadily.
43
Such borrowings,
OECD Economic Surveys
through their impact upon monetary conditions, render the task of mone¬
tary policy more difficult. The commendable aim of policy this year is
firstly to moderate such borrowings and secondly to ensure that they are
really seasonal in character.
The interaction of credit and fiscal policy during the year also raises
problems of timing.
Thus, in March and April, taxpayers not subject
to the payroll tax have to pay to the Treasury one-third of their annual
direct tax liabilities and corporations are settling their tax bills also.
About
the same time, the agricultural purchasing organisations are repaying their
seasonal borrowing from the Central Bank.
Thus a credit tightness appears
which cannot be alleviated until after July when the new cereal crop has
to be financed.
A better spacing out during the year of these contrac¬
tionary influences would render monetary conditions more even throughout
the year.
A conclusion from the above discussion of short-term demand mana¬
gement policy is that the major responsibility lies with the public sector.
Unfortunately, as regards government revenues this is a task the present
taxation system is not very well equipped to perform. Taxes on imports
even become a destabilizing factor when imports fall due to a shortage of
foreign exchange as this causes a deficit to appear in the budget accounts
whereas budget policy should be adopting a contractionary posture so as
to bring demand into line with the lower level of available resources.
Con¬
versely, increasing taxes on imports is undesirable in itself and has the
disadvantage, from a short-term demand management point of view, as
experience in 1969 has shown, of increasing industrial costs across the
board.
It is difficult both politically and socially at present to change
income tax rates to mop up excess demand, despite the existence of a payas-you-earn system for persons subject to the payroll tax, as the present
working of income tax bears much more heavily on this group of taxpayers
than on others.
Changes in the limited range of indirect taxes on consu¬
mers' expenditures are subject to similar drawbacks and are unlikely to
be sufficient to have a significant impact upon consumer demand.
In
general, short-term demand management policy would benefit from the
same kind of changes
more weight given to direct taxation and the adop¬
tion of a broader-based system of indirect taxation of domestic production
as were seen earlier to be needed to ensure that the development needs of
public finance are met.
Much could be done no doubt by improving the reliability of the
estimates made each year of likely budget revenues which, in the 1960's,
have frequently been overestimated (Table 10) thus encouraging the setting
of expenditure targets at too high levels.
Improvement in statistical
knowledge of the economy would help to remedy this situation but it
44
Turkey
should be borne in mind that one item, counterpart funds, is beyond Tur¬
key's control,
Table 10
Government revenues
Actual level of receipts as percentage of estimates
1963
1964
1965
1966
1967
1968
Direct taxes
93.5
85.4
94.0
101.5
107.4
Indirect taxes
93.4
91.1
93.0
96.8
94.1
95.6
92.9
Other revenues
104.7
94.6
78.8
63.3
103.7
119.7
Total
91.1
91.9
91.2
94.2
99.3
96.1
There remains the possibility of cutting back public sector expendi¬
ture when excess demand conditions begin to appear and this is in fact
what successive governments have resorted to during the 1960's, notably
in 1963, 1964, 1967 and 1968.
The drawbacks associated with emergency
cuts in public expenditure are well known.
Reductions in investment
items, including capital transfers for investment purposes, disrupt imple¬
mentation schedules and can lead to waste of resources.
Private firms
working on government contracts tend to guarantee themselves against
delays in payment by incorporating into their prices what amounts to a
risk premium.
A possible approach to avoid overspending during the
year is offered by the use now being made in Turkey of regular quartely
reviews of budget revenues and expenditures, so that the latter can be
adjusted in time to the trend in government receipts, thus avoiding emer¬
gency cuts in the closing months of the fiscal year.
But present methods
of control of public expenditures, in particular the expenditures of the ad¬
ministrations that come under the annexed budgets, will no doubt need
tightening up if short-term changes in budget spending for stabilization
purposes are to be any more than a rather hit-and-miss exercise.
CONCLUSION
It is the essence of good economic policy-making to ensure that tar¬
gets, and the policies designed to achieve them, are kept under continuous
review.
A vital element in this process is the feed-back from experience
gained in the past.
In broad terms it may be said that events during the
present decade have confirmed the presence in Turkey of a dynamic favou45
OECD Economic Surveys
rable to development which has now been sufficiently aroused to constitute
a relatively independent force in the economy.
This is true whether one
considers the striking boom in private industry in the main urban centres
or trends in the agricultural sector.
In terms of the attitudes and aspira¬
tions of the population and of the structures of production, Turkey is today
a different sort of economy from the one that prevailed as recently as a
decade ago.
It is natural and desirable that government policy should
adapt itself to these changed circumstances so as to facilitate the continued
development of the economy.
The immediate future tasks of the Turkish authorities in the field of
economic policy may be summarized under three headings.
a)
Firstly, there is a need to consolidate some of the gains of the last
few years :
To the extent that, for various reasons, many investment schemes
that it was planned to begin during the First Five-Year Plan got
only started during the last three years, there is at present a certain
bunching of investment in the public sector that needs to be diges¬
ted.
To do this means that, for the time being, new projects in
the public sector must be subjected to careful scrutiny to ensure
that only those with an early return or which are indispensable
as a foundation for the continued growth of output during the
1970's are approved ;
The aim of policy this year to secure a balanced budget without
net recourse, except for seasonal purposes, to the Central Bank
is clearly appropriate in present circumstances and should be
pursued energetically ;
The budget has become overburdened in recent years with a
number of support schemes and transfer items in the general
and annexed budgets whose contribution to economic and social
development is dubious or nil.
The urgent need to sharpen the
impact of the budget as an instrument of economic development
and demand-management policy calls for a thorough scrutiny
of such items of expenditure so as to free resources for purposes
with a higher priority.
In this regard the work being done to
introduce programme budget techniques provides a useful starting
point ;
The aim of the Turkish authorities is quite properly to avoid as
far as possible applying unnecessary checks to the further growth
46
Turkey
and diversification of productive activities in the private sector.
There exist now a number of incentives
in particular
favourably.
monetary and fiscal
to which private entrepreneurs are responding
Through its powers to grant, or to refuse, access to
such incentives the government can exert a powerful influence
over the course of industrial development.
It would appear an
appropriate time, now that a " take-off " in the field of private
manufacturing industry has begun to manifest itself, to envisage
a coordinated policy for industry based on the most promising
lines of development.
These lines would include in priority
boosting exports and meeting
from imports.
successfully more
competition
Such a policy would naturally encompass, in
addition to the existing incentives, ways of introducing technical
" know-how " and modern managerial techniques and effective
sales methods, and of improving training facilities for staff and
manual workers.
b)
Secondly, a certain redeployment of resources is indicated.
The more selective approach to the investment programmes of
the public sector that was announced in the 1969 Annual Pro¬
gramme provides a basis for such a redeployment.
Thus new
manufacturing projects could most appropriately be reserved, in
principle, for the private sector.
Infrastructure investments need
to be scrutinized with care over the next few years.
The railway
network is uneconomic on some lines and there is excess staff
that could be moved elsewhere, to the new port facilities for
example.
A similar redeployment of part of the labour force
in the coalmines will probably be needed also ;
In agriculture, shifting production away from sugar beet and
tobacco to livestock, fodder, fresh fruit and vegetables should
absorb from now on a growing share of resources.
These lines
would have the advantage of being strongly export-oriented ;
The same is true of the development of Turkey's natural resources
in mining
copper and other minerals
and forestry which are
only now beginning to receive the priority treatment they merit.
c)
Thirdly, a number of basic policy measures are called for to im¬
prove the efficiency with which economic resources are allocated.
Fiscal policy has been discussed at some length in this report.
The conclusion appears inescapable that a shift in the centre of
gravity of the Turkish fiscal system from indirect taxation, and
in particular taxation of imports, towards taxation of domestic
production and incomes is required.
47
The developmental as well
OECD Economic Surveys
as the short-term demand management aspects of budgetary and
fiscal policy would benefit from such a change ;
Monetary
and
credit
mechanisms
are becoming increasingly
important for the efficient collection of savings and their chan¬
nelling to those best able to make use of them.
The changes
introduced recently as regards credits for exporters and the en¬
couragement of more medium-term credit granting by the com¬
mercial banks are steps in the right direction.
The new law on
the Central Bank, which can hopefully be expected to come into
force before the end of the present year, will be an important
contribution to the modernisation of Turkey's monetary policy
instruments.
The
organisation of a capital
market and the
encouragement of new forms of contractual savings will also be
on the future agenda of economic policy-makers ;
Some aspects of the problem of the State Enterprises were stu¬
died in depth by the reorganisation committee whose report
contains many specific suggestions for reform and the introduction
of new methods.
There remains the stage of application of
these recommendations which seems to have got off to a slow
start.
Policies towards the three main deficit enterprises
railways, coalmines and sugar industry
the
have already been noted.
In addition, it may be that a new institutional set-up for the State
Enterprises that would be more conducive than the present one
to improved efficiency by giving managers more real freedom to
conduct day-to-day affairs will be required ;
The best hope for creating a viable economy in Turkey during
the 1970's lies in an increasing integration with the outside world.
The treaty of association with the Common Market offers one
way of opening the economy to the outside, the costs and benefits
of which cannot be measured solely in terms of hypothetical re¬
percussions of tariff and quota changes either on Turkey's export
or import trade.
Also Turkey is seeking to expand her economic
relations with her immediate neighbours in the Middle East
where new opportunities for Turkish exports undoubtedly exist.
For producers really to become export-minded, the help of the
government will be needed, firstly to provide a suitable climate
in which exporting becomes a profitable activity, secondly, to
assist Turkish exporters with the usual range of ancillary services
from which their counterparts abroad benefit already ;
Tourism is beginning to show results in terms of numbers of
foreign visitors but the net foreign exchange procured for the
official reserves is still negligible.
48
Turkey is the only OECD
Turkey
country with a Mediterranean coastline to be in such a position.
More energetic measures to collect the foreign currencies exchan¬
ged by tourists would be possible.
More generally, a better
articulated policy for the development of the tourist coastal areas
is needed as a matter of urgency to prevent the further spread of
haphazard schemes which are already threatening the natural
beauty of some areas.
49
LU
CD
<
<
CQ
STATISTICAL ANNEX
LU
CD
<
<
CQ
Table I
National product
TL millions
1969
Constant 1965 Prices
Current Prices
Pro
1964
1965
1966
1967
1968
1964
1965
23 378
23 040
27 314
28 395
29 545
23 814
23 140
10 251
11492
13 434
15 664
17 301
10 552
11492
Construction
3 375
3 716
4 462
5181
6066
3 506
3 716
Wholesale and retail trade
5 449
6131
6 988
7 820
8 551
5 739
6131
Transport and communications
3 908
4 307
4 719
5436
6165
4 025
4 307
Financial Institutions
4 319
4 854
5 595
6485
7 471
4 523
4 854
5 281
5 740
6 237
Ownership of dwellings
Government, health, education
2 075
2 295
2 548
2 841
3 263
2108
2 295
2 490
2 716
2 967
6111
6 772
7 897
8 724
9 583
6194
6 772
7 348
7 983
8 689
58 865
62 606
72 958
80 546
87 945
60460
62 606
68 978
73 267
77 735
94 330
-203
214
599
277
304
-208
214
571
262
286
160
6 393
7 090
8 471
10 324
11248
6 663
7 090
7 657
8 309
8 845
2 980
3 229
3 662
4083
4 554
3 080
3 299
3 540
3 802
4 089
68 035
73 209
86 589
95 230
104 050
69 994
73 209
80 746
85 640
90 956
983
704
1479
1046
2016
Agriculture, forestry, fishing
Industry
y,
w
Net domestic product at factor cost
plus: net income from abroad
plus: indirect taxes
plus: depreciation
Gross national product at market prices
plus: net imports of goods and services
Sources: Communication by the State Planning Organisation.
1966
1967
1968
gramme
25 663
25 906
26 022
31068
12 710
14 279
15 714
19 710
4192
4487
4 954
6664
7 200
7 801
4 630
4 956
5 354
6 323
37 229
111800
2100
Table II
National account statistics
TL billions
Second Five-Year Plan
In Current Prices
1962
1963
1964
1965
1965 Prices
1966
1967
1968
1968
1969
1970
1971
1972
1
GNP
55.2
63.3
68.0
73.2
84.9
95.2
104.0
91.1
97.4
104.3
116.6
119.4
2
Total consumption
49.9
55.9
58.4
61.9
71.3
77.2
83.7
74.1
78.4
82.8
87.0
92.4
6.4
7.2
7.8
8.6
10.7
11.5
12.6
13.0
13.9
15.0
16.6
18.3
43.5
48.7
50.7
53.3
58.6
65.7
71.1
61.1
64.5
67.8
70.4
74.1
Public Consumption
3
Private Consumption
Total gross investment
7.5
10.1
10.5
12.0
15.1
19.1
22.4
17.5
19.6
22.1
25.0
27.3
Public
4.0
5.1
5.7
6.5
8.2
9.0
11.0
9.4
10.3
11.6
13.3
14.0
Private
3.5
5.0
4.8
5.5
6.9
7.9
9.0
8.1
9.3
10.5
11.7
13.3
2.2
2.4
1.3
1.4
1.5
1.6
1.7
2.0
1.8
2.0
2.1
2.0
2.0
20.4
Changes in stocks
n.a.
n.a.
n.a.
n.a.
n.a.
4
Deficit on Current Account
2.2
2.7
1.0
0.7
1.5
1.0
5
Domestic Savings
5.3
7.4
9.5
11.3
13.6
18.1
17.0
19.0
21.5
24.6
27.0
Public
1.8
2.9
3.4
3.7
6.0
8.8
n.a.
8.6
9.7
11.4
13.8
15.2
Private
3.5
4.5
6.2
7.6
7.6
9.3
n.a.
8.4
9.3
10.1
10.8
11.8
Depreciation
2.4
2.7
3.0
3.3
3.7
4.1
6
4.6
Percentage Shares
1
GNP
2
Total Consumption/GNP
Public Consumption/GNP
Private Consumption/GNP
Total Gross Investment/GNP
3
4
5
6
7
8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
90.4
88.3
86.0
84.6
84.0
81.1
80.5
81.3
80.5
79.4
78.0
77.4
11.6
11.4
11.5
11.8
12.6
12.1
12.1
14.3
14.3
14.4
14.9
15.3
78.8
76.9
74.5
72.8
69.0
69.0
68.4
67.1
66.2
65.0
63.1
62.1
13.6
16.0
15.4
16.4
17.8
20.1
21.5
20.6
21.6
22.6
23.8
24.3
Public
7.2
8.1
8.4
8.9
9.7
9.5
10.6
10.3
10.6
11.1
11.4
11.7
Private
6.4
7.9
7.0
7.5
8.1
8.3
8.6
10.3
10.0
11.5
12.4
12.6
2.3
2.3
1.4
1.4
1.4
1.4
1.4
Changes in stocks/GNP
Current Account Deficit/GNP
n.a.
n.a.
n.a.
n.a.
n.a.
4.0
4.3
1.5
1.0
1.8
1.1
1.9
2.0
2.0
2.0
1.8
1.7
Domestic Sainvgs/GNP
9.6
11.7
14.0
15.4
16.0
19.0
19.6
18.7
19.5
20.6
22.0
22.6
Public Savings/GNP
3.3
4.6
5.0
5.1
7.1
9.2
n.a.
9.4
10.0
10.9
12.4
12.7
Private Savings/GNP
Depreciation
Central Government Revenue/GNP
Central Government Current Expenditure/GNP
6.3
7.1
9.0
10.3
8.9
9.8
n.a.
9.2
9.5
9.7
9.7
9.9
4.3
4.3
4.4
4.5
4.4
4.3
Note
Total Investment Includes changes in stocks.
4.4
15.0
16.0
16.3
16.6
17.0
18.6
18.7
19.5
20.0
20.4
20.8
21.3
10.5
10.5
103.
10.1
10.4
10.2
10.2
10.6
11.3
11.5
11.7
11.9
12.1
Table III
Unit
Agricultural production
Average
Average
1950-1955
1956-1962
1963
1964
1965
1966
1967
1968
Cereals:
5120
7 858
10 000
8 300
8 500
9600
10000
9 520
Barley
2 820
3 371
4 288
3 200
3 300
3 800
3 800
3 560
Maize
807
914
990
1000
945
1000
1050
1000
Rye
590
669
735
775
850
900
820
1001
1179
700
1 153
1 150
1 161
1 119
982
443
573
593
583
589
589
610
596
Wheat
1 000 tons
Other
Pulses
Potatoes
Sugar Beet
900
879
1367
1600
1700
1680
1750
1760
1805
1232
2 828
3 280
4 706
3 421
4422
5 253
4 714
Tobacco
101
116
132
194
132
164
182
161
Cotton
145
187
257
326
325
382
396
435
Oilseeds
480
554
418
529
527
611
634
35
43
43
43
43
44
46
1750
2 883
2 692
2 790
3 350
3 100
3 500
3 725
104
161
208
206
210
215
232
215
70
103
88
195
62
190
71
96
118
268
384
325
425
456
545
678
1027
1269
1335
1360
1479
1455
1536
Wool
740
n.a.
Fruits and Nuts:
Grapes
Figs
Nuts
Citrus fruits
Eggs
Milliods
n.a.
Livestock:
Cattle (incl. buffalo)
Sheep and goats
Poultry
11667
13 485
13 870
14414
14 419
15 022
15 413
15 066
46 413
55 043
53 784
53 816
54187
55 595
56 537
57 388
22 922
27 692
28 467
30 064
31023
30 245
32 160
34 000
Sources: Conjuncture, MinisUy of Commerce, Agricultural Statistics, State Statistical Institute.
Table IV
Industrial production
Unit
1963
1964
1965
1966
1967
1968
Index
107.4
119.9
136.2
156.0
184.3
n.a.
106.7
126.3
146.0
166.8
186.0
n.a.
107.3
118.8
135.2
154.7
184.9
n.a.
1115
124.3
133.9
154.3
174.1
n.a.
Coals
673.3
714.1
700.7
736.9
745.7
749.4
Lignite (ungraded product)
499.1
587.6
629.6
638.4
657.7
639.4
Total industrial production
Mining
Manufacturing
Energy
Mining, fuel, energy: selected products
Ut
1962 = 100
10 000 tons
Chrome ore
28.4
41.3
58.2
68.9
61.4
20,9
Iron ore
74.7
96.8
154.6
166.1
148.5
98.6
2.5
2.6
2.6
2.7
2.5
2.4
72.9
88.2
147.3
185.4
272.8
309.2
334.5
400.3
403.6
451.8
532.1
513.1
3.9
4.3
4,9
5.4
6.1
6.9
Copper
Crude petroleum
Petroleum products
Electric power
Manufacturing: Selected products
Billion KwH
1 000 tons
Pig iron
210.5
293.1
499.7
736.1
846.6
909.8
Steel ingots
331.3
404.7
581.2
842.0
993.0
1 109.8
34.2
41.8
117.7
217.0
287.6
353.6
Cement
2 685.5
2 936.5
3 239.0
3 858.2
4 238.2
4 727.2
Coke
1 065.0
1044.3
1 187.0
1440.0
1 362.2
1 431.0
179.9
155.0
221.3
222.1
205.1
187.1
Glass
22.2
33.9
34.9
35.2
47.0
51.8
Paper
94.4
98.5
97.9
106.2
108.6
115.8
Sugar
431.4
660.6
599.7
600.7
609.2
717.7
Olive oil
102.0
121.9
60.0
155.0
80.0
Woollen and cotton yarns
116.9
120.5
126.0
138.0
151.0
n.a.
566.4
591.6
623.9
666.0
727.0
n.a.
Sheets and pipes
Superphosphate
Woollen and cotton fabrics
Source: Turkish submission to the OECD.
Million meters
159.0
Table V
Prices
Indices 1963 = 100
1969
196$1
1964
1965
1966
1967
1968
1
n
III
IV
I
II1
Wholesale Prices:
Total
101
109
115
123
129
128
128
128
133
137
138
Food and feeding stuffs
100
110
116
124
129
128
129
126
132
138
139
Cereals
101
112
115
114
121
119
121
118
126
129
132
Livestock
111
117
127
153
155
165
165
149
141
156
161
Livestock products
102
112
122
138
135
132
130
132
144
142
140
103
108
112
122
130
128
127
130
133
134
135
Fuel
100
too
101
118
156
147
145
162
171
173
174
Minerals
103
110
116
126
129
129
129
129
130
130
130
Chemicals and pharmaceuticals
Building materials
102
111
130
140
141
141
141
141
141
142
143
Textiles
103
106
107
117
116
118
116
115
116
116
117
102
109
115
122
127
126
126
127
130
131
132
101
105
115
131
139
136
137
140
142
144
144
Food
100
106
115
133
139
137
138
141
144
145
146
Heating and light
Clothing
100
101
104
108
124
123
124
125
125
125
125
102
104
114
125
134
131
134
135
135
137
138
Other
101
103
110
132
140
139
140
143
142
145
144
Industrial and semi-manufactured
u,
"*->
The Cost of Living:
Ankara, total
Istanbul, total
1
April-May only.
Source: Turkish submission to the OECD.
Table VI
Merchandise imports and exports
US dollars millions
1964
1965
1966
1967
1968
763.7
Impots t If
Total
537.4
571.6
718.6
684.7
Basic materials
271.6
313.0
365.0
380.0
420.0
Investment goods
196.7
197.0
289.0
260.0
294.0
69.2
62.0
64.0
44.7
50.0
33.3
29.0
17.0
6.1
27.0
18.8
Fats and oils
27.3
5.0
17.0
5.2
3.2
Mineral fuels
57.1
56.7
55.0
53.5
64.0
Chemical
26.0
36.2
41.1
48.2
56.8
8.8
10.9
18.2
18.1
19.1
Rubber and products
Paper
14.2
15.3
16.0
19.4
19.2
6.7
11.2
10.4
20.7
21.2
Textiles
36.3
37.6
41.0
42.0
42.2
Consumer goods
of which:
Surplus agricultural commodities
Cereals
Plastic materials
Base metals
Machinery, electrical equipment
Transport equipment
Other
2.0
61.5
72,5
83.6
64.7
62.7
175.5
165.4
226.9
227.8
253.8
45.6
45.5
74.4
59.7
84.9
62.3
88.3
116.2
123.4
136.9
496.4
Exports fob
Total
410.7
463.7
490.5
522.7
Agricultural commodities
358.2
399.5
415.7
461.3
431.6
310.5
351.2
376.8
416.0
402.6
Unprocessed
Cotton
92.3
102.7
129.0
132.0
143.1
Tobacco
90.1
90.3
106.6
118.0
94.8
Hazelnuts
49.9
60.2
54.8
82.7
76.0
Figs, sultanas
22.8
28.3
28.7
29.9
29.8
Cereals, pulses
9.5
10.6
9.7
7.6
7.2
Citrus fruits
17
39
54
66
8.6
29.2
35.5
24.7
24.2
26.3
Livestock, fish, wool
Other
15.0
19.7
16.9
15.0
47.7
48.3
38.9
45.3
29.0
Animal feeding stuffs
17.4
20.8
20.9
25.4
20.3
Sugar and products
Processed
19.9
8.9
8.1
7.8
2.3
Olive oil
3.7
11.5
2.2
6.7
0.8
Hides and skins
6.7
7.1
7.7
5.4
5.6
14.7
21.0
23.2
20.7
26.5
Mining Products
Chrome ore
7.0
9.5
10.4
7.2
9.6
Other
7.7
11.5
12.8
13.5
11.9
37.8
43.2
51.6
40.7
38.3
10.2
17.2
24.8
16.0
13.8
9.4
5.6
4.4
0.5
1.7
Cotton textiles
2.8
2.5
0.5
0.5
7.0
Glas: products
0.7
0.6
0.2
0.3
1.1
Ferrochrome
1.6
1.7
2.2
1.5
2.5
13.2
15.6
19.5
21.9
12.2
Other Exports
Copper
Petroleum products
Other
Source: Turkish submission to the OECD.
-58
Table VH
Merchandise Trade by area
US S millions
1964
1965
1966
1967
1968
764.0
Imports cif
542.9
576.7
724.7
690.7
OECD countries
412.5
437.5
561.4
521.9
588.4
European OECD countries
248.5
262.0
368.7
379.1
445.6
EEC
Total
155.8
164.4
238.6
240.0
284.4
of which: Germany
Italy
80.9
84.7
113.7
134.8
157.0
32.2
36.9
54.3
50.5
67.7
EFTA
90.5
95.7
127.7
136.6
158.1
of which: United Kingdom
56.2
55.9
79.4
88.8
99.3
2.2
1.9
3.4
2.5
3.1
North America and Japan
164.0
173.7
192.8
142.8
142.8
Third countries
Other
129.5
141.1
163.2
168.8
182.0
Eastern Block countries
42.0
57.6
84.9
91.3
99.0
Middle East
44.5
56.8
48.2
44.3
52.8
Other
43.0
26.7
30.1
33.2
23.8
496.4
Exports fob
410.8
458.9
490.5
522.3
OECD countries
324,2
337.4
370.4
396.1
353.8
European OECD countries
248.5
250.0
281.1
275.4
263.5
EEC
137.7
155.4
171.4
176.3
164.1
52.1
71.5
76.5
83.9
86.4
28.8
30.0
31.8
36.2
24.1
Total
of which: Germany
Italy
EFTA
97.1
82.6
92.1
88.1
85.1
of which: United Kingdom
44.6
41.2
46.8
34.2
33.9
Other
13.7
12.0
17.6
11.0
14.3
North America and Japan
75.5
87.4
89.3
120.7
90.3
Third countries
86.7
121.4
120.1
126.2
142.6
Eastern Block countries
37.8
69.0
74.5
87.9
91.1
Middle East
37.0
36.4
34.6
30.6
38.9
Other
11.9
16.1
11.0
7.7
12.6
Source: Turkish submission to the OECD.
59
Table VIII
Money and banking
TL millions, end of period
1967
1964
1965
1968
1969
1966
I
11
III
IV
I
II
III
rv
1
Money:
Supply of money, total
Notes and coins
Commercial sight deposits1
Saving sight deposits
Supply of quasi money, total
Public sight deposits
Private time deposits
Deposits with the Central Bank
13 999
16 434
19 780
19 345
19 147
20 236
22 682
21 880
22 443
23 278
25 968
25 391
5 835
6 326
7 164
7 282
7 208
7 971
8 714
7 995
8 086
8 412
8 237
9 811
2 230
2 580
3 206
2 575
2 501
2 867
3 578
3171
3 397
3 693
4 931
4 098
5 934
7 528
9 410
9 488
9 438
9 398
10 390
10 714
10 960
11 173
12 800
12 878
5 135
5 637
6 634
7 122
7 391
7 423
7 927
8 544
8 758
8 712
9 595
10140
1 535
1 536
1650
1832
1810
1 850
1979
2 193
2138
1928
2182
2 405
2 334
3 163
4 245
4451
4 682
4 773
5 084
5 317
5 608
5 774
6 207
6420
1266
938
739
839
899
800
864
1034
1012
1010
1 206
1 315
1 289
963
764
852
918
814
880
1044
1077
1025
1211
1 319
301
250
265
354
353
331
311
488
481
319
339
475
41
81
41
41
102
34
34
33
35
41
35
36
493
358
358
363
365
362
434
433
405
558
676
687
Central Bank:
Deposits, total
Public authorities
Counterpart of aid
IMF
8
Banks
Lending, total
Treasury
454
274
100
94
98
87
101
90
156
107
161
121
4140
4 665
6 671
6 884
6 813
7 892
8 776
8 825
8 753
9 445
10168
10 600
951
1484
1786
1967
1773
1 897
2 299
2 319
2 323
2 522
2 529
3 175
SEEs and State Monopolies
Banks' liquidation fund
1583
1495
2182
2 214
2 039
2 645
2 627
2 902
2 894
3 261
3 147
3 224
118
205
236
236
241
256
269
269
264
264
263
263
Private sector
1488
1481
2 467
2 467
2 760
3064
3 581
3 335
3 272
3 398
4 229
3 938
25 801
Banks:
12 010
14 782
18 486
18 333
18 412
18 874
21015
21 385
22 038
22 553
26115
Public
2 071
2 048
2 233
2 422
2 429
2 476
2644
2 853
2 875
2 688
2 959
3 163
Private
9 939
12 734
16 253
15911
15 983
16 398
18 371
18 532
19163
19 865
23 156
22 638
13 454
16 100
20191
20 538
21391
21 820
23 368
23 681
24 488
25 508
27 575
28 703
1961
2 539
2 574
2 642
2 699
2 618
2 777
2 742
2 621
2 750
2 671
2 694
11493
13 561
17 617
17 896
18 682
19 202
20 591
20 939
21867
22 758
24 930
26 009
17 594
20 765
26 862
27 422
28 204
29 712
32144
32 506
33 241
34 953
37 743
39 303
4 613
5723
6 778
7 059
6 752
7 446
7 972
8 232
8 102
8 797
8 610
9 093
12 981
15 042
20 084
20 363
21452
22 266
24172
24 274
25 139
26156
29 133
30 210
Less: Central Bank advances to the Banks -1 599
-1583
-2 578
-2 598
-3 081
-3 173
-3 777
-3 504
-3 433
-3 749
^1427
-AVrl
15 995
19 182
24 284
24 824
25 123
26 539
28 367
29 002
29 808
31204
33 316
34 961
Deposits, total
Lending, total
Public
Private
Total Bank Lending:
Gross lending, total
Public
Private
Net lending
1
Including commercial sight deposits with the Central Bank,
Sources: Monthly Bulletin and Summary of Money and Credit Statistics, Central Bank of Turkey.
Table IX
Sources and uses of funds in the banking system
Consolidated Balance-Sheets of the Central Bank and Banks
All banks excluding the State Development Bank
TL millions
Amounts
I Sources of Funds:
Money held by the public
Banknotes
Coins
Deposit money
held by the public sector
held by the private sector
Quasi money and other liabilities
to public sector
to private sector
Reserves (compulsory or not)
II
1964
1965
1966
1967
1968
1963
1964
1965
1966
1967
1968
12167
13 999
13 434
19 780
22 682
4 772
5 664
6174
6 990
8 513
25 968
1203
1832
2 435
3 346
2906
3 286
8 010
404
892
510
816
1523
154
171
152
174
-503
201
227
-5
17
-19
22
27
7 241
8 164
10108
12 616
26
13 968
17 731
804
923
1944
2 508
1352
3 763
352
587
545
518
660
1007
-22
235
-42
-27
142
347
6 889
7 577
9 553
12 098
13 308
16 724
826
688
1986
2 535
1210
3 416
14 611
15 994
18 023
20 376
22 566
26 559
1 194
1383
2 029
2 353
2190
3 993
5 069
4 978
5 455
5 929
6 602
7 437
-434
-91
477
474
673
834
9 542
11016
12 568
14 447
15 964
19122
1629
1474
1552
1879
1 517
3 158
1 972
2 580
3 385
4 573
5 243
7 386
517
608
805
1 188
670
2143
28 750
32 573
37 842
44 729
50 491
59 913
2 914
3 823
5 259
6 887
5 762
9 422
13 751
15 967
19 170
24 277
28 360
33 313
2 509
2 216
3 203
5 107
4 083
4 953
3 613
4 376
5 404
6424
7 500
8146
1314
753
1038
1020
1076
646
by Central Bank
1792
2 405
2 865
3 850
4 723
5 474
966
613
460
985
873
752
by banks
1821
1961
2 539
2 574
2 777
2 671
348
140
578
35
203
-106
10138
11 601
13 766
17 853
20 860
25 167
1 195
1463
2 165
4087
3 007
4 307
1359
1735
1800
2 821
4 053
4 693
361
376
65
1021
1232
640
8 779
9 866
11966
15 032
16 807
20474
835
1087
2 100
3 066
1775
3 667
Assets = Liabilities
o\
Changes
1963
Uses offunds :
Credits
To public sector
To private sector
' by Central Bank
by banks
Net gold and foreign exchange reserves
(convertible or not)
Other claims (Central Bank and banks)
From public sector
From private sector
Counterpart of reserves
Currency held by the banking system
Deposits of banks with Central Bank
Compulsory reserves
cash reserve requirements
import guarantee deposits
336
466
759
403
546
636
-375
130
293
-356
143
90
12 691
13 560
14 528
15 476
16 342
18 578
263
869
968
948
866
2 736
9 678
10136
10 987
11438
12 247
12 098
-197
458
851
451
809
-149
3 013
3 424
3 541
4 038
4 095
6 480
460
411
117
497
57
2 385
1972
2 500
3 385
4 573
5 243
7 386
517
608
805
1 188
670
2143
877
1013
1245
1429
1500
1984
77
136
232
184
71
484
228
434
455
562
522
990
-38
206
21
107
-40
468
867
1 133
1685
2 582
3 221
4412
478
266
552
897
639
1191
591
616
1 101
1741
2 084
2 935
216
25
485
640
343
851
276
517
584
841
1137
1477
262
241
67
257
296
340
Source: Central Bank or Turkey; cf. Annual Report 1967 and 1968.
Table X
Financial position of the State Economic' Enterprises
Outcome
Programme
1965
1966
1967
1968
1968
1969
2171
3 068
3 083
3 837
3 496
4000
Investment finance:
Total investments by the SEEs
By Pension and Insurance Funds (self283
334
176
403
111
210
1888
2 734
2 907
3 434
3 385
3 790
Own sources
212
878
69
-60
-383
-1266
State Investment Bank
723
927
2 075
2 230
2 407
2 820
Government Budget
Counterpart loans
Direct project financing from abroad
726
721
613
807
861
1536
55
37
172
171
150
457
500
700
fined.)
By productive SEEs
Financed by:
Net cash position:
260
448
656
641
899
752
State Railways
-262
-256
-468
-480
-454
-470
Coal industries
-52
-90
1
-105
10
-154
Nitrogen industry
Other productive SEEs
-50
-41
-48
-46
-55
624
835
1171
1272
1398
1376
Depreciation allowances
727
782
918
1036
1042
1 152
Net balance of shortterm flows
117
652
7
-55
-417
-602
1106
1882
1581
1622
1524
1302
direct taxes
220
215
280
364
338
351
debt repayment
674
657
1232
1318
1569
2 217
212
878
69
-60
-383
-1266
Current gross profits or losses (
Total ressources
)
Less:
Net cash position
Source : Ministry of Finance.
62
Table XI
Summary of assistance provided in the framework of the consortium1
From 1963 to the end of 1968
Agreements signed, disbursements and pipeline
1964
1963
Pipeline
Total
financial
Programme assistance
Project assistance
1
as of
ments
end-1962
signed
Disbur
sements
Agree
ments
1965
Disbur
sements
signed
Agree
ments
sements
signed
Agree
ments
1967
Disbur
sements
signed
Agree
ments
1968
Disbur
sements
signed
Agree
ments
sements
signed
Agree
ments
63-68
Disbur
sements
Pipeline
as of
end-1968
signed
206
246
298
200
339
271
340
239
258
263
334
269
1774
1488
38
151
138
158
134
116
128
103
106
126
126
109
111
763
743
59
183
29
82
104
41
50
56
204
60
132
89
193
124
712
452
428
26
26
36
25
173
87
33
73
48
32
34
299
293
5
Includes assistance provided through the European Fund (E.M.A.) in the form of programme assistance ($35 m in 1963, $20 million in
480 deliveries.
6 yr total
Disbur
221
$25 million in 1968) and debt relief (915 million in 1963. 910 million in 1964,
On
1966
Disbur
assis
tance
Debt relief
Agree
950 million in 1965 and 920 million in 1966)
1964 and $25milIion in
492
1967 and
but excludes technical assistance and PL
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