docIntegration with the Global Economy: The Turkish Case Erol Taymaz
download 
Şikayet Transkript
Integration with the Global Economy: The Turkish Case Erol Taymaz
Integration with the Global Economy: The Turkish Case Erol Taymaz and Kamil Yilmaz Middle East Technical University - Koc University Commission on Growth and Development Workshop on Country Case Studies April 12-14, 2007 Turkey’s Integration with the Global Economy Policy background Macroeconomic background Performance of the automotive and consumer electronics industries Performance of the automotive and consumer electronics firms Macroeconomic policies and growth performance Political Economy of Reform Policy background Annual growth rate of GDP per capital, 1926-2005 (5-year moving averages) 10 Annual growth rate (%) 5 0 1925 -5 1935 1945 1955 1965 1975 1985 1995 2005 Policy background 1980-1985: Export orientation and elimination of quantitative restrictions 1985-1989: Foreign trade liberalization 1989: Capital market liberalization 1988-1989: Changes in FDI legislation 1996: Customs Union with the EU 1999: EU candidate country 1980-1987: Military rule 1987: Elections and civilian government Macroeconomic background Inflation rate, 1981-2006 1.2 1 Inflation rate (%) 0.8 0.6 0.4 0.2 0 1980 1985 1990 1995 2000 2005 Dramatic improvement in net public savings Sharp decline in interest rates… S e c o n d a ry M a rk e t R e a l a n d N o m i n a l I n te re st R a te s (%) 80 75 70 65 60 55 Re a l* 50 No m in a l 45 40 35 30 25 20 15 10 5 Jan -02 A u g -02 M ar -03 Oct-03 M ay-04 De c - 0 4 J u l- 0 5 Fe b - 0 6 Se p -06 *( 1 + n o m i n a l se c o n d a r y m a r k e t r a t e ) /( 1 +1 2 - m o n t h a h e a d i n f l a t i o n a r y e xp e c t a t i o n ) Macroeconomic background Reel effective exchange rate, 1980-2006 180 Index value (1995=100) 160 140 120 100 80 1980 1985 1990 1995 2000 2005 An impressive growth rebound… Annual growth rate of real gross domestic product, 1981-2006 0.08 0.04 0.00 1980 -0.04 -0.08 1985 1990 1995 2000 2005 External Trade Growth rates of exports and imports (1981-2006), manufactured products 0.8 Annual growth rates (%) 0.6 0.4 0.2 0 1980 1985 1990 1995 -0.2 -0.4 Exports Imports 2000 2005 How did this happen? Reforms – and what we’ve learnt the hard way -started paying off (e.g., banking reforms, adopting a flexible exchange rate, sticking to fiscal adjustment) A very benign international environment for emerging markets (e.g., easy monetary policy in the US, the China effect, strong growth in the world economy overall, low interest rates in advanced countries, etc.) A very pragmatic government that, despite some hesitation at the beginnings, has gotten on the right path, namely sticking to EU membership goal and the IMF program Two side effects emerged, though... High current account deficit and ext. debt ratios (adjusting, but still a key vulnerability) High rate of unemployment (good job growth since the crisis, but not enough…) Now we have two major challenges... Turkey is still a vulnerable economy: Relatively high debt ratios – public and external – combined with a large current account deficit. But, we need to grow 6%-7% p.a. (against a population growth of around 1.5%) to “catch up with the EU.” How do we do this while reducing these vulnerabilities? And, inflation seems stuck at high single digits… How do we get to “price stability”, i.e. 2%-3% inflation? One possible answer: Combine openness, financial soundness (i.e. what we have), with “supply-side” reforms, or further, major improvements in the “quality of institutions” (i.e. what we have yet to have) But, given this year’s politics, this is basically a job for the next government... Growth Industries 1980s: Labor intensive, low tech Textiles and Ready-made garments Iron & Steel Late 1990s and 2000s ICT- Consumer Electronics Automotive ICT industries Components Consumer Electronics Telecom. Equipment Other Prof. Instruments Defense Electronics Computers Total 1999 165 1,297 841 335 211 160 3,008 Production 2000 2001 136 88 1,365 13,850 924 935 340 305 216 204 200 205 3,180 3,034 2002 105 1,922 952 350 240 215 3,784 2003 125 2,411 912 415 279 236 4,378 2004 225 4,294 975 650 433 428 7,005 2005 300 4,726 1,250 965 450 460 8,151 ICT industries Components Consumer Electronics Telecom. Equipment Other Prof. Instruments Defense Electronics Computers Total 1999 67 781 347 120 66 65 1,446 Exports 2000 2001 64 50 873 904 400 535 122 148 28 19 55 41 1,542 1,697 2002 61 1,571 548 177 22 33 2,412 2003 72 1,938 537 203 51 32 2,833 2004 104 2,914 603 311 56 42 4,029 2005 131 3,084 766 352 56 57 4,445 ICT industries Components Consumer Electronics Telecom. Equipment Other Prof. Instruments Computers Total 1999 958 420 2,002 899 1,173 5,451 Imports 2000 2001 1,146 1,038 524 402 2,464 972 992 958 1,451 748 6,577 4,119 2002 1,417 406 901 835 880 4,439 2003 1,735 617 1,097 1,261 1,336 6,045 2004 2,310 992 1,911 2,183 1,545 8,940 2005 1,990 1,057 2,330 3,172 2,286 10,835 Consumer electronics Colour TV Audio Equipment Video Players Cash Registers Electronic Calculators Audio Video Casettes Radio and TV antenna trans. Electronic scales and equ. Total Imports (1000 USD) 2002 2003 2004 2005 91 119 194 218 79 142 220 216 29 6 55 0 58 6 113 99 10 9 20 19 89 83 143 164 41 139 23 243 9 1 16 20 406 62 992 1,057 Exports (1000 USD) 2002 2003 2004 2005 1,540 1,879 2,789 2,949 5 10 10 3 0 5 66 73 2 2 2 3 0 0 0 0 16 27 25 2 6 0 18 27 1 2 4 0 1,571 1,938 2,913 3,084 Industrial Production Index Manufacturing Cons. electronics Automotive 450 400 350 300 250 200 150 100 50 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Exports Cons. elect. (%) Manufacturing exports (bil.USD) 18 90 16 80 14 70 12 60 10 50 8 40 6 30 4 20 2 10 0 0 1989 1991 1993 1995 1997 1999 2001 2003 2005 Billion USD % share in m anufacturing exports Automotive (%) Automotive: Production, Dom. sales, Exports Total production Domestic sales 1200 1000 800 600 400 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Labor Productivity (per worker) Manuf acturing Cons. electronics Automotive 300 250 200 150 100 50 0 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Total factor productivity (2001-2006 imputed) Automotive Cons. Electronics Series2 Series4 2.8 total factor productivity (1989=1) 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Performance, firms Automotive Anadolu Isuzu Ford Otosan Karsan Otomotiv Otokar Tofaş Oto Fab Parts and components Bosch Fren Sistemleri Ditaş Doğan Ege Endüstri F-M İzmit Piston Mutlu Akü Parsan Consumer electronics Arçelik Beko elektronik Vestel Employees X rate M rate F/D 741 7722 957 988 4379 15.0 44.5 61.8 37.0 48.7 34.0 63.0 2.8 43.0 46.1 F F D D F 246 576 474 24 561 565 81.2 41.0 59.0 22.3 36.0 66.0 57.0 24.0 25.0 4.1 55.0 33.0 F D D D D D 9203 3907 5631 27.5 76.3 75.4 47.0 65.2 50.0 D D D Performance, firms Net sales, million YTL (1993 prices) 30 25 Net sales 20 15 10 5 0 1992 Isuzu Vestel 1994 1996 Ford Otosan Bosch 1998 Karsan Ditaş 2000 Otokar Ege Endüstri 2002 Tofaş F-M 2004 Arçelik Mutlu 2006 Beko Parsan 2008 Performance, firms Export rate, 1998-2005 1.00 0.80 Export rate 0.60 0.40 0.20 0.00 1997 Isuzu Vestel 1998 1999 Ford Otosan Bosch 2000 Karsan Ditaş 2001 Otokar Ege Endüstri 2002 2003 Tofaş F-M 2004 Arçelik Mutlu 2005 Beko Parsan 2006 Performance, firms Gross profit margin, 1993-2006 (gross operating profit/net sales) 0.50 0.40 Percent 0.30 0.20 0.10 0.00 1992 1994 1996 1998 2000 2002 2004 2006 -0.10 Isuzu Beko Mutlu Ford Otosan Vestel Parsan Karsan Bosch Average Otokar Ditaş Tofaş Ege Endüstri Arçelik F-M 2008 Performance, firms Net profit margin, 1993-2006 (net profit after taxes/net sales) 0.40 0.30 Net profit margin 0.20 0.10 0.00 1992 1994 1996 1998 2000 2002 2004 2006 -0.10 -0.20 -0.30 Isuzu Beko Mutlu Ford Otosan Vestel Parsan Karsan Bosch Average Otokar Ditaş Tofaş Ege Endüstri Arçelik F-M 2008 Macroeconomic policies and growth Automotive Well integrated within the international commodity chains Strong industrial base/strong supplier base Strong supplier-user links Fast adaptation to the EU rules and regulations Multinational firms, both in the final product and parts & components sectors Automotive Manufacturers Association Commitment to design and high quality commerical vehicles) (especially in the Macroeconomic policies and growth Consumer electronics Dominated by a few large domestic firms Right time, right place, right product (conventional televisions) Reliance on “on-the-shelf” components Weak domestic supplier industries Macroeconomic policies and growth The role of macroeconomic policies is questionable In the 1990s macroeconomic environment is inhibiting investment and growth Despite this, these two sectors grew rapidly through exports (to EU) Already existing private industrial base Customs Union with the EU in 1996 EU’s December 2004 decision to start membership negotiations with Turkey Political Economy of Reform “Once the political incentives and constraints are correctly taken into account, policies that appear to be mistakes are perfectly rational responses to distorted and imperfect political incentives. The political economy approach attempts to explain why apparent mistakes repeatedly occur. This approach underscores that one cannot correct the "mistakes" without addressing the institutional features which make these so-called mistakes likely to occur.” Alberto Alesina. Elites versus Civil Society Strong state – founded and later captured by military/civil bureaucratic elites Political Elites - As democracy takes a hold shares power and later dominates 1982 Constitution, Political party and Election Laws made it even more difficult for the civil society to control the political elites Political party and election laws give too much power to party headquarters and the leadership Political Economy of Reform Each political party is captured by a group of political elites who are involved in Patronage, Populism, Rent seeking Once captured never leave the party leadership to opposition The failure of Turkish political parties to replace unsuccessful cadres with potentially successful alternatives No room for within-party opposition Æ A plethore of political parties established In each election another party is given the chance General Elections since 1987 1987 Diğer 0.8% 1991 Bağ. 0.4% RP 7.2% SHP 24.7% Diğer 0.4% MHP 2.9% Bağ. 0.1% RP 16.9% SHP 20.8% DYP 19.1% DSP 10.8% DSP 8.5% DYP 27.0% ANAP 36.3% ANAP 24.0% 1995 Diğer 1.6% CHP 10.7% MHP 0.0% 1999 Bağ. 0.5% Diğer 4.9% HADEP 4.2% RP 21.4% CHP 8.7% Bağ. 0.9% FP 15.4% HADEP 4.7% MHP 18.0% DSP 14.6% MHP 8.2% DSP 22.2% DYP 19.1% ANAP 19.7% ANAP 13.2% 2002 DEHAP 6.2% Diğer 5.1% Bağ. SP 1.1% 2.5% AKP 34.3% CHP 19.4% DSP 1.2% ANAP 5.1% DYP 9.6% MHP 8.3% Genc 7.2% DYP 12.0% Institutional Reform Without political reforms that will overhaul the top-tobottom power structure in political parties, the political system will not function properly to create an environment suitable for sustain economic growth. Political party and election laws must be changed immediately so that members and delegates of the party can replace proven unsuccesful leaders by promising candidates. Political parties will become the pillars of the democracy and last long rather than disappear in a decade or so. If not, the current and future governments will continue to resort to populist policies and the use of state funds in order to be reelected in 2007. This in turn means that we are back to square one... Thanks...
