tepavEconomic Policy Research Foundation of Turkey
Güven Sak
12 February 2010, Yerevan
Turkey’s regional integration: Is it economic transformation or shift of axis?
Overview
What is TEPAV? How Turkey is changing?
1980s, 1996, 2001.
Is there a shift of axis? Turkey being aware of her neighbours An era of rapprochement everywhere?
What TEPAV has been doing for regional integration and cross‐border cooperation ? Israel‐Palestine; Afghanistan‐Pakistan; Border Management; Capacity
building in Central Asian Republics. Strengthening connections between Turkey and South Caucasus?
• Georgia, Armenia
Conclusions
Slide 2
Economic Policy Research Foundation of Turkey (TEPAV)
Established in 2004, with the support of the Union of Chambers and Commodity Exchanges of Turkey (TOBB) as an independent, non partisan think tank in Ankara
Assistance to decision‐makers by contributing to evolving political, economic and academic debates shaping Turkey’s future orientation
Establishment of regional platforms and dialogue mechanisms
www.tepav.org.tr
Slide 3
TEPAV’s interdisciplinary approach Three major disciplines:
Economic policy Governance Foreign policy
Cross‐cutting themes: Competitiveness Regional integration EU accession process
Modus operandi: Policy oriented research, issue
based advocacy Project design implementation,
capacity building Needs analysis
GovernanceStudies
Economic Studies
Foreign Policy Studies
Slide 4
What makes TEPAV unique in Turkey and surrounding region? Knowledge production
A strong in‐house research capacity (35+15) An extensive network with academics and experts (based in the campus
of TOBB Economics and Technology University) Strong ties with the international organizations (The EU Comission,
World Bank Group, OECD, GMFUS, Brookings, CSIS) Knowledge distribution / dissemination
Close contact with TOBB’s grassroots organizations (364 chambers all around Turkey)
Network with the public administration Strong impact on the media (daily columns, press releases and briefings)
Diversified financial resources to sustain activities
Slide 5
How Turkey is changing?: Transformation of Turkish economy
after 1980Liberalization and increasing role of the private sector transforms Turkey
into a regional economic power
Slide 6
An overview of the recent progress of Turkish economy
1980 2008Number of companies 90,000 640,000
GDP (billion $) 70 700Per capita GDP (USD) 1,500 9,000
Exports (USD billion) 3 132Exports per worker (USD) 65 1,800Industry share in exports %10 % 92 (60% to EU and US)Number of exporters 1,000 47,000
Tourism revenue (billion $) 0,3 21
Ranking in the world 25th 17th(in terms of GDP)
Slide 7
Post 1980s transformation as a result of economic reforms
Before 1980s: Import‐substitution industrialization Major industrial centers: İstanbul, İzmir, Adana, Bursa• Peripheries: Kocaeli, Manisa, Mersin, Eskişehir
After 1980s: Export‐oriented industrialization New emerging industrial cities (Anatolian tigers): Denizli, Gaziantep, Kayseri, Konya, Ankara
Slide 8
Mass urbanizationMigration from rural to urban areasReversal of 75 to 25 percent distribution
Proliferation of industry in AnatoliaGaziantep, Denizli, Konya, Kayseri, Kahramanmaraş
Organised industrial zones experienceGebze as the manufacturing base of Istanbul
Transformation in retail sectorShopping malls and new urban life
An Unintended consequence: Political transformation “Look who is in power now!”
It is a process of total transformation:
Slide 9
Emergence of a new(?) middle class
1999 2003 2006 2008
Automobile Sales (in thousands) - 359 622 494
White Good Sales (in millions) 4 3 5.5 5.2
Airline Passengers (in millions) 30 34 59 75
Mobile Phone Network Subscribers (in millions) - 26.6 51.4 64
# of People Getting House Loans (thousands) 14 43 268 237
Consumer Credit + Credit Cards (billion TL) - 12.8 67.7 114
Slide 10
It is a process of total transformation: “Still under construction” Transformation process in Turkey is yet to be
completedIt should be seen as a process where Turkey has
started to come to terms with her past history and her geography.
There is a long list of domestic items that are under intense discussion.
EU process is important within this context important for a smoother transformation.
It is not shift of axis but being aware of your geography due to growing business interests.
Caucasian Future Slide 11
Turkey’s growth performance
Average annual GDP growth rate for selected periods, 1970-2009, %
43.6
3.2
6.8
4.5
0
1
2
3
4
5
6
7
8
1970-2001 1980-2001 1990-2001 2002-2007 2002-2009
Slide 12
Integration into the global economy: EU Customs Union met political and economic stabilityTurkey’s import and export volumes, 2001-2009, billion USD
Source: Turkish Statistical Institute
31 36 47 63 73 86107
13210241
5269
98117
140
170
202
141
0
50
100
150
200
250
300
350
400
2001 2002 2003 2004 2005 2006 2007 2008 2009
Import
Export
Slide 13
Rapid growth in manufacturing after mid-90’s
Export indicators of the countries in the region (1996)
Slide 14
Country’s share in total manufacturing exports of the region (%)
Share of manufacturing in Country’s total exports (%)
Algeria Azerbaijan
BulgariaEgypt
Greece
Israel
Romania
Russia
Saudi Arabia
Turkey
0%
5%
10%
15%
20%
25%
30%
35%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Today Turkey is the largest manufacturer in the region
Export indicators of the countries in the region (2008)
ArmeniaAzerbaycan
BulgariaEgypt
Georgia
Greece
Israel
Jordan
Kazakhstan
MaltaQatar
Moldovaa
Romania
Russia
Sırbistan
Tunusia
Turkey
UAE
0%
5%
10%
15%
20%
25%
30%
35%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Slide 15
Country’s share in total manufacturing exports of the region (%)
Share of manufacturing in Country’s total exports (%)
Rediscovery of neighbours: economic impact of political rapprochement?
Improvement of political relations with neighbours, 2000‐2010 EU dimension: Greece and Bulgaria Russia : bilateral rapprochement sustained by energy cooperation Syria : better understanding on security related issues Practical effects of the ‘zero problem with neighbours’
approach Trade follows the flag? To a certain extend but mostly… Trade facilitation and border crossing improvements
Lifting of the visa : ie. immediate impact on cross‐border tourism with SyriaModernization of border crossings
Importance of the neighbourhood in period of crisis
Slide 16
Sectoral diversification of exports to bordering countries
Slide 17
0
5
10
15
20
25
30
35
40
Georgia Iran Iraq Syria Russia
3
64
17
24
29
36
26
37
Number of sectors above $10 million exports
2000
2008
Regional employment trends during the crisis
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
2009Q1 2009Q2
Change in registered employment in different regions of Turkey, y-o-y, 2009 Q1-Q2
Growth in region‐focused Turkey’s cities: role of the border tradeChange in registered employment and share of cross-border exports in different cities of Turkey, 2009 Q1-Q2
ADIYAMAN
AFYON
AĞRI
AMASYA
ARTVİN
AYDIN
BATMAN
BOLU
BURSA
ÇANKIRI
ÇORUM
DENİZLİ
DİYARBAKIREDİRNE
ELAZIĞ
ERZİNCAN ERZURUM
GAZİANTEPGİRESUN
HAKKARİ
HATAY
IĞDIR
ISPARTA
İSTANBUL
KASTAMONU
KAYSERİ
KİLİS
KIRKLARELİ
MALATYA
MANİSA
MARDİN
MERSİNMUĞLA
NEVŞEHİR
NİĞDEORDU
OSMANİYE
RİZE
SİNOP
TEKİRDAĞ
Ş. URFA
VAN
YALOVA
ZONGULDAK
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Employment Change
Share of MENA Exports
Geographic composition of Turkey’s exports: EU‐Turkey Customs Union brings Turkey closer to her region
54% 56% 56%48% 44%
11% 7% 10%
12%12%
11%9%
14%19%
19%
4%4%
4% 4% 8%7% 12%
4% 4% 3%
12% 12% 12% 13% 13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1996 2000 2007 2008 2009
Other
NorthAmerica
North Africa
Near andMiddle East
Non-EUEurope
EU-27
Slide 20
TEPAV’s support to regional integration and cross‐border cooperation
Monitoring and supporting the Turkish private sector in reaching out to neighbouring countries
Design private sector driven regional development projects
Establishment of business dialogue mechanisms Confidence‐building devices Capacity building mechanism at the local level Development of joint initiatives to support regional development and cross‐border cooperation
Slide 21
Strengthening connections between Turkey and South Caucasus – work in progress
How to improve trade?: Improvement of physical movement of goods between Turkey and the South Caucasus
Trade facilitation : modernization of border crossings with the Caucasian neighbours
Feasibility study on the rehabilitation of the existing transportation network as a practical business oriented confidence‐building project
Feasibility study on cross‐border economic complementarities to design private sector driven regional development projects
Socio‐economic impact of the opening of Armenian‐Turkish border
Rediscovering through economically relevant projects for the Turkish‐Armenian borderland
Slide 22
Meaning of border openingWhy good for TR?Increased penetration to the CIS market:
complementarityTransport routes to Russia and Central AsiaRegional development problem tackled.Short term impact: more trade from border provinces;
job creation
Why good for Armenia?Increasing the feasible set of economic operations is
good.Competition brings welfare enhancement
Caucasian Future Slide 23
Still need for confidence building steps? Preparing the Road for the Restoration of the
Medieval Bridge at Ani Cultural Corridor across Arpaçay/Akhourian River for Rebridging Turkey‐Armenia Divide
Slide 24
The project aims at preparing the ground for the joint restoration of the Ani Silk Road bridge
Raise awareness for the need to protect the cultural heritage, to develop across‐border political willingness for the renovation of Ani Silk Road Bridge,defined as a cultural corridor between the two nations.
An advocacy with the participation of officials, experts, businesscommunities and civil society actors to trigger a momentum supportive ofthe initiative.
Channel resources for collaborative scientific research and investigation ofinternational examples of multiple stakeholder restauration of the Ani Bridge
Support the decision‐making process by setting cross‐border governancestructure and the joint restoration task elaborate recommendations for theestablishment of operational mechanisms for consultation and consensus‐making
Look for potential investors
Slide 25
Cross‐border tourism cluster
Slide 27
Conclusions
Private sector development in the region should be considered as a key component of the regional transformation process It is not only about governments but direct communication among
peoples to do business
Linkage between cross‐border economic relations and regional development Regional disparities among provinces could be tackled through development
of cross border economic clusters: Good for everybody. The more the value chain divided between the two sides of the border, the
more the complementarity: Solid basis for regional stability.
Turkish‐Armenian border opening and regional integrationA new opportunity and a new challenge for us all.