Turkeys EU Membership Dilemma

April 6, 2011

Agenda
Review History and Economy Economic Status GDP Performance Significant Economic Indicators Performance Evaluation Recommendations Q&A Work Cited

Turkeys EU Membership Dilemma

Kristin Schriver Prasant Chandran Sai Alaparty Roger Labeck

Turkey
Population 78,785,548 (est July 2011) Population: 0-14: 27%, 15-64; 67%, 65+ 6% Capital Ankara Capital: Language: Turkish Language Resources Textiles, Resources: Coal, Iron ore, Copper, Limestone, Hydropower GDP compensation: compensation Agriculture: 8.8% Industry: 25.7% Services: 65.5%

History of Turkeys Economy

The Republic of Turkey Mustafa Kemal - "Ataturk" or "father of the Turks Kemalism - Revolutions 1923 Founded Republic of Turkey Kemalisms Look West Policy NATO, Council of Europe, OECD, OSCE and the G-20, Organization of the Islamic Conference and Economic Cooperation Organization Location

Government
Executive Branch Prime Minister Recep Tayyip ERDOGAN - 2003 President Abdullah GUL 2007 State of the Current Economy Business investment high inflation, fiscal policy unknown, energy and commodity prices rising. Tax System is progressive Dominant Industries: Automobile, Construction, Electronics

Prasant Chandran
Economic Status and GDP

Turkey: Brief Economic History

Regular boom-and-bust economic cycles since the 1950s. Excessive budgetary expenditures and inflationary pressures were the norm Major economic crises in 1994, 1998 & 2000-01 Severe banking and economic crisis of 2000-01 devastated all sectors of Turkish economy and society:
    GNP fell 9.5% in 2001 Lira lost 51% of value against foreign currencies Spurt in unemployment (10%) Inflation soared to 54.9%

Economic Timeline
2010 GDP at 9.2% 2003 - 2004 Privatization Program 2001 Severe Financial Crisis

Recent Economic Policies

Since 2001, successive governments implemented a tough IMF program
 Underperforming banks seized, shut down or privatised: Number of banks slashed from 80 in 2000 to 48 in 2005.  Energy and telecommunications markets liberalized  Independent banking regulator created in 2001  Foreign investment and employment laws streamlined

Primary fiscal surplus target of 6.5% of GDP Turkish Lira made free-floating Privatization radically accelerated: $20 billion of state assets sold to private sector in 2005 Top rate of income tax cut from 40 to 35% in 2004. Corporate tax rate reduced from 30% to 20% in 2005

Recent Economic Policies: The Results

Economy grew an average of 6.0% / year from 2002 through 2007: one of the highest sustained rates of growth in the world Inflation and interest rates fell significantly, the currency stabilized, and government debt declined to more supportable levels Growth fell to 1.1% in 2008, and the economy contracted by 4.7% in 2009 due to the global economic slowdown and reduced exports Foreign direct investment (FDI): $18.3 billion in net FDI in 2008. Global market conditions reduced foreign capital inflows in 2009, and Turkey attracted $7.7 billion in net FDI in 2009

Turkey: GDP

Turkey: GDP per capita

Annual Average Real GDP Growth (%) Forecast in OECD Countries 2011-2017

Sai Alaparty
Significant Economic Indicators and Performance Evaluation

Significant Economic Data

GDP Growth Rate
Led the European growth pack in 2010 9.2% end of Q4 2010 China has reported faster fourth-quarter growth. Aim is to narrow the fiscal deficit

Debt-to-GDP ratio
Total debt = 45% of GDP (Dec 2010) EU average is at 79% Receded to 4% of GDP in year 2010 from 2.3% of GDP in 2009.

Current Account Balance

Heavy dependence on imported energy Need significant reforms to attract sufficient capital

Significant Economic Data

Exchange Rates
Appreciated during 2004-2007 Sharp downfall in 2008 Lost 25% of its value till October 2009 Appreciated 0.76% during the last 12 months

Government Spending and Revenue

Spending: 35.7% of GDP Revenue: 32.2% of GDP Net lending/borrowing: -3.5% of GDP

Significant Economic Data

Unemployment Rate 11.4 % in Dec 2010 Down from 13.5% in Dec 2009

Interest Rate Benchmark Interest Rate @ 6.25% Nov 2008 16.75 %; Mar 2011 6.25%

Significant Economic Data

Inflation Fell to historic low levels 6.4% in Dec 2010 (41- year low) Down from 10.1% in 2008 4.2 % in Feb 2011 Reduced economic burden

Major Burgeoning Industries Carpet Industry Marble Industry Packaging Industry

Significant Economic Data

Major Imports / Exports
2002 2007: Boom; 2008 2009: Beating Exports:

Imports:

Performance Evaluation - Comparison

Turkey GDP (PPP) GDP (Per Capita) GDP Growth Rate (Real) Literacy Rate Labor Force Education Expenditure (% of GDP) Death Rate (per 1000) Birth Rate (per 1000) External Debt/GDP Internet Users Military Expenditure (% of GDP) Unemployment Rate $958.3 B $12,300 9.2% 87.4% 31.38% 4.2% 6.10 17.93 45% 27.24 M 5.3 % 11.40 % Spain $1.374 T $ 29,500 -0.4% 97.9% 51% 4.4% 8.80 10.66 157% 28.12 M 1.2% 20.00 % Poland $721.7 B $ 18,800 3.8% 99.8% 44.21% 4.9% 10.17 10.01 47% 22.46 M 1.71 % 11.80 % USA $14.72 T $47,400 2.8% 99% 49.47% 6.0% 8.38 13.38 97% 245 M 4.06 % 9.70 %

CIA - World Fact Book

Roger LaBeck
Recommendation Rejection of EU membership

Turkey The European Union or the Asian twist?

Since 2002 Turkey has shifted from Western focused to an Asian economic sphere Timeline Timeline: 2001 U.S. and IMF bail out Turkey 2002 EU holds summit in Copenhagen 2004 EU determines that Turkey has made sufficient progress to be considered 2005 EU finally agrees to begin talks

Why all the delays?

France, Austria, Denmark and Cyprus are cool to the idea of Turkish membership Germany favors privileged partnership status Turkey refuses to open borders to Cypriot goods Turkish immigration The EU is a Christian Club

So do we or dont we?
Economic indicators would say that we do not want to join the EU GDP growth from -5% to 11.7% in last six months We have a falling debt/GDP ratio No EU economy has double digit GDP growth since 2001 The Lira remains stable Using the Euro would have resulted in $300 million deficit in trade in 2010.

Looking to Asian and Islamic Markets is great for Business!

Trade with the Russian republic is expected to expand Strategic benefits of the Bosporus Liquefied natural gas plant is being co-financed in cooperation with GazProm Trade with the Balkan countries increased by $14.7 billion from 2000 to 2008

Conclusion: Stability and Social Compatibility will allow for positive economic growth
We see only positive growth for the economy We are anxious to exploit our markets and strategic location. Working outside the EU will allow greater flexibility in choosing our trading partners. The value of the Euro is a detriment to our growth The Islamic and Asian markets are readily accessible Our strategic position will still allow us to maintain strong political and military ties with the EU and the US

Questions
Why would we want to ruin our present economic growth by joining the EU? Should Turkey abandon the EU membership? Leverage geographic location as the gateway to the East

TE EKKR EDERIM

Work Cited
"BBC NEWS | Europe | Q&A: Turkey's EU Entry Talks." BBC News Home. Web. 28 Mar. 2011. <http://news.bbc.co.uk/2/hi/4107919.stm>. "CIA - The World Factbook." Welcome to the CIA Web Site Central Intelligence Agency. Web. 28 Mar. 2011. <https://www.cia.gov/library/publications/the-worldfactbook/geos/tu.html>. The online Factbook is updated weekly. ISSN 1553-8133 Friedman, Milton. Capitalism and Freedom. [Chicago]: University of Chicago, 1962. Print. Gurra, Angel. "Economic Outlook." ECONOMIC OUTLOOK NO. 88. OECD Better Policies for Better Lives, 18 Nov. 2010. Web. <http://www.oecd.org/dataoecd/41/33/35755962.pdf>.

Work Cited
KALKAVAN, ZEYNEP. "Turkish Economy Rebounds with 11.7 Pct Growth Spurt in Q1." Today's Zaman, Your Gateway to Turkish Daily News. 1 July 2010. Web. 26 Mar. 2011. <http://www.todayszaman.com/news-214762-turkish-economyrebounds-with-117-pct-growth-spurt-in-q1.html>. "Minister Criticizes Turkish Currency as too Valuable - Hurriyet Daily News and Economic Review." Hrriyet Daily News and Economic Review, Bringing You Turkish Daily News. Web. 28 Mar. 2011. <http://www.hurriyetdailynews.com/n.php?n=minister-criticizes8216too-valuable8217-currency-2010-07-04>. Parkinson, By Joe. "Turkey Economic News: Government Lifts GDP Outlook - WSJ.com." Business News & Financial News - The Wall Street Journal - Wsj.com. Web. 28 Mar. 2011. <http://online.wsj.com/article/SB10001424052748703358504575543 980713816138.html?wwparam=1301346963>.

Work Cited
"Turkey GDP Data & Country Report | Global Finance." Global Finance - The Best Banks | 192 Country Reports | GDP Data. Web. 28 Mar. 2011. <http://www.gfmag.com/gdp-data-country-reports/157-turkeygdp-country-report.html#axzz1HsACvtKS>. Copyright Global Finance 1987-2011 V2.1 "Turkey - Economic News - Dervis - Turkey Financial News Worldpress.org." Worldpress.org - World News From World Newspapers. Web. 28 Mar. 2011. <http://www.worldpress.org/Europe/222.cfm>. "Turkey." U.S. Department of State. 19 Nov. 2010. Web. 28 Mar. 2011. <http://www.state.gov/r/pa/ei/bgn/3432.htm#econ>. "Turkey Uses Economic Clout to Gain Balkan Foothold." Today's Zaman, Your Gateway to Turkish Daily News. Web. 28 Mar. 2011. <http://www.todayszaman.com/news-238307-turkey-uses-economicclout-to-gain-balkan-foothold.html>.

Work Cited
Vellacott, Chris, and Raji Menon. "Policy Fears Hurt Turkey and China Funds in Dec| Reuters." Breaking News, Business News, Financial and Investing News & More | Reuters.co.uk. 10 Jan. 2011. Web. 28 Mar. 2011. <http://uk.reuters.com/article/2011/01/10/lipperperformance-idUKLDE7090VB20110110>. Bryant, Steve. "Turkish GDP Growth Accelerated to 9.2% in Fourth Quarter - Businessweek." Businessweek - Business News, Stock Market & Financial Advice. Web. 06 Apr. 2011. <http://www.businessweek.com/news/2011-03-31/turkish-gdpgrowth-accelerated-to-9-2-in-fourth-quarter.html>. "Mind The (Current Account) Gap In Turkey - Forbes.com." Information for the World's Business Leaders - Forbes.com. Web. 06 Apr. 2011. <http://www.forbes.com/2010/08/25/turkey-deficiteconomy-opinions-columnists-doctor-doom.html>.

Work Cited
"Turkey Economic Statistics, Turkey Economic Indicators for the Year 2010." World, US, China, India Economy, Investment, Finance, Credit Cards | Economy Watch. Web. 06 Apr. 2011. <http://www.economywatch.com/economicstatistics/country/Turkey/>. "Turkey Inflation Rate." TradingEconomics.com - Free Indicators for 231 Countries. Web. 06 Apr. 2011. <http://www.tradingeconomics.com/Economics/InflationCPI.aspx?Symbol=TRY>. "Turkey Map, Map of Turkey." World Map, Map of the World. Web. 06 Apr. 2011. <http://www.mapsofworld.com/turkey>.

APPENDIX

Significant Economic Data

Literacy Rate Total literacy 87.4% (95.3% M and 79.6% F) Rural sectors suffer from lack of education Turkey Literacy program

Labor Force Labor force during the quarter to Sep 2010 24.73 MM in 2010 Labor force participation rate @ 50.1%