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CIAO DATE: 03/05
Winter 2004 (Volume 3, Number 4)
Turkey and the EU; A New Era by Ali Babacan
Turkey has passed a very critical threshold after the December 17 European Council Summit decision. Accordingly Turkey is promoted from a candidate country to an accession country status. The negotiations for full membership will start in October 2005. The Government’s most important priority in the coming period will be ensuring and maintaining the convergence of Turkey to the European Union. By the time the whole process is completed, Turkey’s economic structure will be substantially changed.
How Can the New Members Catch Up? by Leszek Balcerowicz
Since the early 1990’s, the prospect of eventual admission to the EU led to important economic progress in the 10 new EU member states. The author outlines this progress as well as the positive effects that membership itself will have on the mentioned economies. However, there are challenges involved in these countries catching up with the EU’s leaders. According to the author, good domestic policies as well as strong and well-targeted EU policies are necessary for the gap to be closed.
Relative Income Growth and Convergence by Kemal Derviş , Daniel Gros , Faik Öztrak , Fırat Bayar and Yusuf Işık
This paper assesses the growth prospects for the Turkish economy over the next decade. It implicitly asks whether Turkey can start closing the gap with the EU in terms of income per capita when it has achieved macroeconomic stability and when the negotiations with the EU provide an anchor for overall economic policy-making. Viewed from this perspective, the outlook is promising. Turkey is still poor, compared to most of the existing EU members, but is also more dynamic. The fact that most of the so-called ‘periphery’ is now growing more strongly than the ‘core’ confirms that within an enlarged EU the poorer member countries are likely to prosper and thus they cause fewer problems than widely anticipated. The analysis starts by relating the record of Turkey over the last years, which is a story of ‘ups’ and ‘downs’, with most recently a very strong ‘up’. This is then followed by a comparison of two different metrics: GDP per capita and per worker, which leads us to the issue of demographic trends, which differentiate Turkey from both old and new member states. Some of the structural and regional peculiarities of the Turkish economy are next examined, followed by an evaluation of the factors that should determine growth in the longer run. Finally, two upbeat growth scenarios are drawn.
The Future of Turkish-EU Trade Relations by Sinan Ülgen and Yiannis Zahariadis
Owing to the EU-Turkish customs union, there is already a considerable degree of convergence between Turkey and the EU in the area of trade. In fact, Turkey is the only candidate country that has a customs union with the EU. At least with respect to the trade in goods, Turkey is almost part of the Single Market. The challenge of enhancing the present state of trade integration could be approached in two ways. First, the customs union could be deepened by refining the arrangements and addressing its shortcomings. Secondly, the degree of trade integration could be enhanced by incorporating areas such as services and agriculture—thus widening the customs union—which is also explored in detail. The paper concludes that the Turkish-EU customs union has been a technical success overall and functioned on a sound basis. Nevertheless, both parties should work flexibly towards eliminating trade defence measures and forging a more comprehensive framework of trade integration.
The Turksih Gate: Energy Transit and Security Issues by John Roberts
This paper sets out Turkey’s current and potential role in the supply of gas to Europe, starting with the EU’s need for gas, the geography of global gas disposition and Turkey’s importance as a natural funnel through which the EU can access gas from many of the world’s leading gas suppliers. It also places Turkey’s role in the context of EU reliance on Russia as its largest single supplier of gas. It deals with the existing and potential pipeline infrastructure for gas supplies to Europe via Turkey and discusses what role the EU is already playing, and might be expected to play in the future, with regard to ensuring its energy security by means of pipeline development to carry gas to the EU market via Turkey.
Member-State Building in Turkey Part Two by Gerald Knaus
This article explores the nature of the member-state building process that has taken place in the past decade in Central and South Eastern Europe. It notes the importance of the Helsinki European Council decision in 1999 to treat all candidate countries within a single framework, and highlights how this has led to parallel transformations of the political landscape in Romania, Bulgaria and Turkey. In all three countries opponents of reforms associated with EU membership were marginalised and a broad social and political consensus emerged that transformed domestic politics. However, in the case of Turkey the focus of member-state building has until now been largely on the political criteria for membership. As Turkey prepares for real negotiations in the wake of the December 2004 decision, issues of economic and social cohesion, which have been central in the case of all other candidates until now are coming to the fore. The issue of Turkey’s internal lack of cohesion will become a central issue in the adoption of the acquis, and will likely become the focus of the member-state building effort in the coming decade. It was therefore crucial that the negotiations with Turkey will be similar to those with all previous candidates, and that cohesion will also be a central concern for the EU itself, something that proponents of schemes for a “privileged partnership” had unsuccessfully opposed. One crucial issue will be whether the Turkish state is able and willing to undertake the vast administrative and policy reforms required for an effective regional policy in the near future.
Growth and Immigration Scenarios: Turkey-EU by Refik Erzan, Umut Kuzubaş and Nilüfer Yıldız
This study estimates the probable magnitude of immigration from Turkey to the EU when Turkey becomes a full member and restrictions on movement of labor are removed. Alternative methods and scenarios are scrutinized in forecasts for the period 2004 to 2030. The analyses are based on the experience of countries that have already joined the EU. Special attention was paid to the experiences of the southern “cohesion” countries - Greece, Portugal and Spain - and Turkey’s own emigration record. Potential emigration from a slower growing Turkey without membership is also examined, and the result is that this yields greater numbers of immigrants.
Anti-Corruption in the Turkey’s EU Accession by Bryane Michael
Anti-corruption will feature prominently in Turkey’s talks on EU accession. Despite claims to the contrary, the data show that corruption levels in Turkey are not radically different than those in many other accession countries. While Turkey already meets many of the requirements for negotiating and completing accession, Turkey will need to bolster its anti-corruption programme. Key elements will include increased public sector co-ordination and the design and implementation of a credible anti-corruption programme. Yet, accession should not be the main motivator for such a programme. Anti-corruption will be necessary to strengthen fragile government institutions and forestall the radicalization of the political process.
M&A Controls in Turkey and in Turkish–EU Relations by Ural Aküzüm
This article examines the law and practices related to merger and acquisitions (M&A) in Turkey. An overview of the strengths and weaknesses of the Competition Board is carried out with a set of suggestions as to how it may be possible to prepare for the needs which may arise in light of the anticipated changes in Turkey–EU relations. The importance of domestic constituency building and the priority of SMEs, as well as the importance of judiciary reform are emphasized. The article touches upon critical issues such as the weak level of consumer organization in Turkey as well as the insufficient level of respect of the Board’s advice by political actors. The interaction between development of Turkey–EU relations on other fronts and the issue of M&A is outlined and certain scenarios are analyzed in this framework.
The International Position of Turkey Regarding FDI Policies by Angelo Santagostino and Andrea Fornari
Foreign direct investments (FDI) are a crucial variable in economic development. Presently they are the most important source of external finance for developing countries and the type of external resource that offers the highest probability of promoting sound growth. Turkey has not yet been able to attract a significant amount of FDI flows for a country with an economy of its size. In an international comparison the country demonstrates low performance and potential. This fact is partially due to the macroeconomic instability of the country in past years. From a microeconomic point of view the unattractiveness of the Turkish economy for FDI is related to the inadequacy of both its legal infrastructure and its privatization and liberalization policies. This climate is already changing and will change further in the coming years, when accession negotiations begin. Accession negotiations will produce positive changes in the macro and micro economic framework, thus stimulating the inflow of FDI.