INSTITUTIONS IN TURKISH
ECONOMY
Onur Alten
Kaan Arslan
Çağla Babaoğlu
Ilgım Coşar
Görkem Ulumeriç
1
Institution
• Set of written or non-written rules, set-ups and applications of these,
which shape and direct the relationships between people, various
groups and segments in a society (Şevket Pamuk).
• Law, taxes, bureaus, agencies, private and public organizations,
policies, contracts, ministries, associations, cooperatives, syndicates
and unions, and so on
• What is the foremost institution? The STATE.
2
Turkish State
• As the Turkish state adopted different political and economic
approaches throughout its history, institutions emerged and already
existing ones restructured or transformed accordingly.
• 1923-1930: Relatively liberal stance
• 1930-1950: Etatism
• 1950-1960: Liberal attempts but not successful
• 1960-1980: ISI policies
• 1980 onwards: Adoption of neoliberal economic model
3
Period of 1923-1930
• After the Izmir Economic Congress (1923), banks were established to
finance the trade and industrial sectors in Turkey:
İş Bank (1924)
Türkiye Sınai ve Maadin Bank (1925)
Türkiye Sanayi Kredi Bankası
Emlak ve Eytam bankası (1926)
Ziraat Bankası (Restructured)
Central Bank (1930)
4
Period of 1923-1930
Teşvik-i Sanayi Kanunu - Legislation of Industrial Encouragement:
• Passed as a law in 1927 in the aftermath of Izmir Economic Congress
• Liberal in stance but interventionist in execution
• Subsidies and incentivizing policies
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Period of 1930-1945
Türkiye Ekonomi Kurumu - Turkish Economic Association:
• Initially named as National Economy and Savings Association (1929)
• Its objective: Minimizing the destructive effects of Great Depression
• Encouraging savings and domestic good consumption
6
Period of 1930-1945
1st Five-Year Industrial Development Plan (1934):
• Reign of etatism
• Aimed to organize industrial investments made by the public sector
• Gov’t initiative in domestically demanded consumption goods
7
Period of 1930-1945
1st Five-Year Industrial Development Plan (1934):
• Focus on products that Turkey has (or can attain) the raw material of.
• Textile, sugar, cement, glass, mining, iron and steel
• Establishment of sector specific banks: Sumerbank, Etibank and
Denizbank, Belediyeler Bankası, Türkiye Halk Bankası, Türk Ticaret
Bankası and Ziraat Bankası (restructured)
8
Period of 1930-1945
Milli Korunma Kanunu - Legislation of National Protection (1940):
• Legal ground for state’s interference during the Second World War
• Appointed extraordinary power to the central government:
Temporary appropriation of businesses, rationing, wage and price
setting, and assigning mandatory work load to citizens
• Various taxes and institutions were established within the framework
of this legislation
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Period of 1930-1945
Milli Korunma Kanunu - Legislation of National Protection (1940):
• Taxes: Varlık Vergisi, Yol Vergisi, Toprak Mahsulleri Vergisi
• Ticaret ve İaşe Müsteşarlığı (Undersecretariat of Trade and Provision)
• Petrol Ofisi and Et Balık Kurumu
10
Period of 1930-1945
Köy Enstitüleri - Village Institutions (1940):
• Self sufficiency and development of the rural population were the
main targets of these institutions
• Based on vocational training and practical knowledge
• Program ended due to the accusations of communist propaganda
11
Period of 1930-1945
Çiftçiyi Topraklandırma Kanunu - Legislation of Land Provision to
Farmers (1945)
• Government playing Robin Hood: A reform aiming reallocation of
“excess” farming areas from large landlords (ağalar) to the farmers
who did not own land.
12
Period of 1945-1960
Karayolları Genel Müdürlüğü - General Directorate of Highways (1950):
13
Period of 1945-1960
TOBB – Turkish Union of Chambers and Commodity Exchanges (1950):
• Government passed the code regarding TOBB in 1950
• TOBB was established to act as the highest level representative of the
Turkish private sector
• Its mission was to lead and guide the Turkish businesses, submit
opinions and comments to the political power in line with the
requirements of the private sector, and expand private sector.
14
Period of 1945-1960
Yabancı Sermayeyi Teşvik Kanunu- Legislation of Foreign Capital
Encouragement (1954):
(Avni Zarakolu - Yabanci Sermayeyi Tesvik Kanunu - Mukayeseli Hukuk Tarihi)
15
Period of 1945-1960
Petrol Kanunu – Petroleum Law (1954)
• Its 2nd article states the purpose of this legislation as the rapid,
continuous and efficient exploration, development and utilization of
national petroleum resources.
• In the 5th chapter, article 12 suggests a nationalization of petroleum
resources by prohibiting foreign ownership on Turkish petroleum,
excavation and any other operation.
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Some of the Significant SEE’s (1923-1960)
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PTT (Turkish Postal Service)
THY (Turkish Airlines)
Petrol Arama (Administration of Petroleum Discovery and Management)
Altın Arama İşletme Idareleri (Administration of Gold Discovery and
Management)
Türkiye Petrol Anomin Ortaklığı (TPAO) (Turkish Petroleum Corporative)
Türkiye Cumhuriyeti Devlet Demiryolları (State Railways)
Devlet Hava Meydanları (State Airports Administration)
Toprak Mahsulleri Ofisi (Turkish Grain Board)
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Period of 1960-1980
1961 Constitution:
• Came into affect in the
aftermath of the coup
d’etat.
• Fundamental law of Turkey
from 1961 to 1982
18
Period of 1960-1980
Economic Aspects of the 1961 Constitution:
• Foundation of SPO
• Enables demonstrations and unionization without notice and the
term social state was added.
• Emphasis on social state
19
Period of 1960-1980
State Planning Organization (SPO):
• Founded as an autonomous institution
• Investments of SEEs and private sector investments
20
Period of 1960-1980
State Planning Organization (SPO):
• Its approval was required for all private sector investment projects
which sought to:
Benefit from subsidized credit,
Tax exemptions,
Import privileges,
Access to scarce foreign exchange
21
Period of 1960-1980
SEEs:
• With the resumption of ISI, state economic enterprises (SEEs) once
again began to play an important role in industrialization.
• Their role, however, was quite different in comparison to the earlier
period.
• Intermediate good industries those that requires huge investment
such as such as iron steel, petroleum chemicals, etc., relied on SEEs.
22
Period of 1960-1980
List of a number of SEEs founded after 1960:
TC Turizm Bankası (1960)
Ereğli Demir Çelik
Anadolu Bankası (1961)
Süt Endüstrisi Kurumu (1963)
Petrokimya Endüstrisi (1965)
23
Period of 1960-1980
List of a number of SEEs founded after 1960:
TUMOSAN (Türk Motor Sanayi ve Tic AŞ)
TAKSAN (Takım Tezgahları Sanayi)
TEMSAN (Türkiye Elektromekanik Sanayi)
TESTAŞ (Türkiye Elektronik Sanayi)
Türkiye Elektrik Kurumu (1970)
Çay Kurumu (1971)
24
Period of 1960-1980
Flourishing of Big Holding Companies:
• Big Turkish conglomerates like Koç and Sabancı had space to grow
• Urbanization and industrialization in Istanbul and Marmara region
• The SPO and the holding companies represent the most influential
economic institutions during the era
25
Period of 1960-1980
A Unique Institution: OYAK
• It was established in 1961
• Assurance and pension fund for army members (retired and on active
service)
• A major safety net for army members
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Period of 1960-1980
TÜSİAD- Turkish Industrialists and Businessman Association (1973)
• Reaction to the leftist movements and power of the labor force
• TÜSİAD brought together the leading industrial figures
• TÜSİAD became more effective on the government and public opinion
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Period of 1960-1980
“Turgut Özal ne derse ben aksini söylerdim. Türkiye’nin bu sistemde
ekonomisinin çıkmazda olduğu, ekonominin liberalleşmesine gerek olduğu
tartışması hep Turgut Özal ile yaşanırdı. Bu toplantıların birinde
zannediyorum 1969 yılında, sonradan IMF’nin başına gelen Anne Krueger de
vardı. Ya ben ona ya o bana söyledi, ’Turgut Özal’ı alıp sabaha kadar
konuşalım ve onu bu sistemin ne kadar yanlış olduğuna ikna etmeye
çalışalım’... Sabaha kadar Turgut Bey ile bu meseleyi konuştuk ve
zannediyorum serbest piyasa mekanizmasına ikna ettik. Sonra Turgut bey
Dünya Bankası’na gitti ve o fikirleri orada kaldığı sürece büsbütün
perçinlendi, başka bir Turgut Özal olarak geldi ve 24 Ocak kararlarına
imzasını attı. 24 Ocak kararlarına bakarsanız, TÜSİAD ilanlarında ne varsa
24 Ocak kararları da beş aşağı beş yukarı aynıdır.”
Feyyaz Berker (Founder member of TÜSİAD)
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29
Period of 1960-1980
1961 Constitution granted labor significant organizational power:
• The right to strike
• The right to collective bargaining
• These rights were removed in 1970
30
Period of 1960-1980
Stronger workers’ unions helped increase wages significantly.
The Confederation of Revolutionary Workers' Unions of Turkey or
DISK was founded in 1967.
Wages: production cost, but also increase domestic demand.
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Year:
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
# of Strikes, Rallies, Demonstrations:
4
15
15
97
57
74
129
88
123
150
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Period of 1980- 2015
33
Period of 1980- 2015
• Markets and private actors  Larger say in the allocation of resources
• Economic institutions have evolved through two main stages:
1. Before 2000-2001 crisis
2. Post 2000-2001 crisis
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Period of 1980- 2015
•
•
Governmental control over public expenditures
Discretion to the extent that non-transparent off-budget
expenditures were restricted
35
1980-2001
• Neoliberal era
• Instead of the etatist, interventionist policies; open, marketoriented, export-oriented.
• Liberalization of international trade
• Trade barriers have decreased.
• Interest rates and exchange rates are freed.
• Decision making within the government became more centralized.
• Increased discretion at the expense of rules.
• Privatization – unaccountable and non transparent ways
• Central Bank  primary task of maintaining price stability
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2002 and Onwards
• Crisis (2001)  the path towards EU accession, pressures
from IMF and the World Bank
• Delegation of decision making power to relatively
independent agencies
• level of transparency in the policy-making process
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REGULATORY AGENCIES
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RAs
• Main logic: Solution of a credibility problem / Insulation the
regulatory process from a political influence
• Financially autonomous
Their budgets rely on earmarked revenues
• Decisions  Subject to well-defined appeal mechanisms, often
through judicial review
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RAs
• RTÜK
• Telekomünikasyon Kurumu
• Sermaye Piyasası Kurulu
• Bankacılık Düzenleme ve Denetleme Kurumu
• Enerji Piyasası Denetleme Kurumu
• Kamu İhale Kurumu
• Rekabet Kurumu
• Tütün, Tütün Mamülleri ve Alkollü İçkiler Piyasası Düzenleme Kurumu
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Capital Markets Board of Turkey (1982)
• First independent RA
• Regulation of securities market and restoration of confidence in
financial system
• Counter-example to the centralization of policy-making authority in
80s and 90s
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Turkish Competition Authority (1997)
• Competition Law (1994)
“Bu Kanunun amacı, mal ve hizmet piyasalarındaki rekabeti engelleyici, bozucu veya
kısıtlayıcı anlaşma, karar ve uygulamaları ve piyasaya hâkim olan teşebbüslerin bu
hâkimiyetlerini kötüye kullanmalarını önlemek, bunun için gerekli düzenleme ve
denetlemeleri yaparak rekabetin korunmasını sağlamaktır.”
• Involved in privatization process
• Example: Privatization of Türk Telekom
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Banking Regulation and Supervision Agency
(2000)
• Anti – inflationary program punctuated by crisis
• The powers of the BRSA were strengthened as part of the post –
Crisis recovery program
• Capitalization and the stability of the banking system
• High quality of supervision and regulation  Resilience of the
banking system of Turkey in the recent global crisis
• Financial stability
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A Different Case in the History of Turkish
Institutions:
47
TOKI -Housing Development Administration(1984)
• Directly attached to the Prime Ministry
• Builds public housing jointly with private contractors on public land,
to which it has free access
• urban regeneration projects in cooperation with local government
• According to OECD reports (2010), TOKI’s assets have reached about 2
% of GDP
• Non transparent: income statements and balance sheets are not published.
• Regulator, policymaker, service provider at the same time
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Private Institutions:
• Banks: Highly competitive environment. Banks are not
profitable nowadays. Lots of FDIs in banks. Garanti, Akbank,
ING
• Conglomerates: Koç, Sabancı, Zorlu, Anadolu Group
• Global Firms: All types of FMCGs.
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Central Bank
• 1930-1945
 Established as a joint stock company
 Issuer of bank notes
 Acted as the treasurer of the government
• 1945-1970:
 Policies to offset the public finance deficit
 Financed growth and development
 Expansionary monetary policies (after 1960)
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Central Bank
• 1970-1980:
Authorization to conduct open market operations
• 1980-2001:
 Management of gold and foreign exchange reserves
 1990: First monetary program
• 2001 Crisis: Exchange rate bases stability program and free floating exchange rate
• Late 2010: Interest rate corridor, reserve requirements and the reserve option mechanism
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CONCLUSION
• Success on the fiscal front  Due to institutional changes or a
consequence of political preferences?
• The changes in economic institutions  Result of economic crisis, and
international influences
• Movement in the direction of a “regulatory state” Not uniform,
and the process is far from complete
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CONCLUSION
How Turkey can achieve its growth targets?
Importance of Institutions: Countries, in which institutions are well
established and of high quality, are more capable of increasing their
physical and human capital as well as utilizing them more efficiently
and effectively. Furthermore, it is known that highest technologies are
used and being developed also in the aforementioned countries.
(Hall ve Jones, 1999; Helpman 2004)
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CONCLUSION
Acemoğlu & Robinson: “.. one should not try to
understand or manipulate economic institutions
without thinking about the political forces that created
or sustain them.”
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