Conference on
“Privatisation, Employment and Employees”
PRIVATIZATION IN TURKEY: ISSUES REGARDING PUBLIC
BALANCE, SOCIAL SECURITY AND EMPLOYMENT
Gülsüm YAZGANARIKAN
10-11 October 2002
Ataköy, Istanbul
Turkey
OUTLINE:
• THE PRIVATIZATION PROCESS IN TURKEY:A BRIEF
OUTLOOK
• EFFECT OF PRIVATIZATION ON PUBLIC BALANCE,
MARKET EFFICIENCY AND PENSION FUNDS
• OBSTACLES TO PRIVATIZATION IN TURKEY
• CONCLUSION
THE PRIVATIZATION PROCESS: A BRIEF OUTLOOK
• Privatization implementations have started in
1984.
• Since 1985, 219 companies have been put into the
privatization portfolio.
• 166 companies have been completely privatized.
• Total sales since 1985 have amounted to 8 billion
dollars.
• Out of this amount 2.7 billion dollars were
realized in 2000.
TARGETS OF PRIVATIZATION
• With privatization, it is aimed to reduce the role of
the state in the market, establish a market
mechanism based on competition, improve
productivity and service quality and diminish the
role of the SOEs in the economy.
EFFECT OF PRIVATIZATION ON PUBLIC BALANCE
PUBLIC SECTOR BORROWING REQUIREMENT
(Share in GNP, %)
1985-1989 1990-1994 1995-1997 1998-2001
TOTAL PUBLIC
4,7
9,6
7,1
13,5
TOTAL PUBLIC (EXC.INTEREST PAY.)
1,7
4,7
-1,2
-2,6
SEE'S
2,5
2,8
-0,4
1,5
-Nonfinancial SEEs
2,5
3,0
-0,2
1,4
-Financial SEEs
0,0
-0,2
-0,2
0,1
SOCIAL SECURITY INST.
-0,3
0,3
0,2
0,4
OTHER
2,5
6,5
7,3
11,6
(1) 2001 figures are estimate
Source: SPO
DISTRIBUTION OF PRIVATIZATION REVENUES
1986-1989
1990-1994
1995-1997
1998
1999
2000
2001
1986-2001
2.0
21.9
16.8
20.8
0.5
36.4
1.6
100.0
Source: Privatization Administration
EFFECT OF PRIVATIZATION ON PUBLIC BALANCE
USES OF THE PRIVATIZATION RESOURCES
(In Percentage Of Total Expenses, %)
1986-2001
EXPENSES
100.0
Payments to the Organizations Within Priv. Adm. Portfolio
50.0
Capital Participation
34.7
Debt payments as credits
10.1
Social Aid Payments
0.6
Severance Payments for Job Losses
0.4
Severance Payments After Privatization
0.7
Premium Payments for Early Retirements
0.2
Transfers From Privatization Revenues to Related Organizations
3.3
Transfers To Treasury
35.2
Debt Payments
11.2
Other Expenses
Source: Privatization Administration
3.6
CONSOLIDATED BUDGET REVENUES
(In percentage of total budget revenues)
1991-2001
100
78.0
21.3
0.7
TOTAL REVENUES
TAX REVENUES
NON-TAX REVENUES
REVENUES FROM PRIVATIZATION*
*Assumed as an above the line item.
Source: Ministry Of Finance, Privatization Administration.
EFFECT OF PRIVATIZATION ON PENSION FUNDS
SOCIAL SECURITY SERVICES ARE PROVIDED BY THREE DIFFERENT
PUBLIC INSTITUTIONS FOR THREE DIFFERENT EMPLOYMENT TYPES
SOCIAL SECURITY
INSTITUTIONS (SSI’s)
BAĞ-KUR
FUNDS
(ESTABLISHED
UNDER SSK LAW)
BANKS
INSURANCE &
REASSURANCE
COMPANIES
CHAMBERS
Social Insurance
Institution (SSK)
WORKERS
 SELFEMPLOYED
TRADESMEN,
CRAFTSMEN
 FARMERS
(Thousand)
Total Population
Active Insured
SSK (56% of active insured population)
Emekli Sandığı ( 20 % of active insured population)
Bağ-Kur (24 % of active insured population)
Active Insured / Employment
Civil Servants
Retirement
Fund(ES)
CIVIL
SERVANTS
2002 Q2
65,910
9,975
5,551
2,045
2,379
48%
EFFECT OF PRIVATIZATION ON PENSION FUNDS
OCCUPATIONAL PENSION SCHEMES (FUNDS) IN TURKEY
• Present only in
banking and insurance industries
Sponsored by employers
• Cover only less than 0.5 % of public employment
• SOEs in the privatization portfolio of the Privatization Administration
do not have such pension schemes
•Long term liabilities and actuarial valuation of pension funds of the
public banks, which are to be privatized in the coming years, should be
evaluated accurately.
EFFECT OF PRIVATIZATION ON MARKET
EFFICIENCY
Various surveys on analysis of privatization show that:
• Privatization positively affected labor productivity and
volume of output
• Privatized firm switches to a more capital intensive
technology
• Both capital and capital labor ratio increase
• Employment decreases
REASONS FOR THE POOR PERFORMANCE
• Lack of legal framework
• Macroeconomic conditions in and out of the
country
• Objections coming from labor unions and
opposition parties
OBSTACLES TO PRIVATIZATION
WORKERS & CIVIL SERVANTS ARE ENTITLED TO THE
FOLLOWING RIGHTS AS A RESULT OF PRIVATISATION (LAW
NO:4046)
LAID-OFF WORKERS;
• Regular
Severance Payments
• Job Loss Compensation
•Services provided by the Turkish Employment Agency in career
development, vocational and apprenticeship training and in finding new
jobs
CIVIL SERVANTS;
•Transfer to another public institution
•Receive 30% higher lump-sum payment at retirement if they are entitled
to retirement according to the Turkish Pension Fund Law and if they accept
to retire within two months
OBSTACLES TO PRIVATIZATION
EMPLOYMENT FOLLOWING PRIVATIZATION
Privatised Company
Workers
Civil Servants
Civil servants + workers
Workers
Sign a contract with
new employer
State Personnel
Department’s Pool
Laid off
Retire
OBSTACLES TO PRIVATIZATION
PUBLIC SECTOR PROVIDES MORE FAVOURABLE WAGES,
PENSION AND OTHER RIGHTS
PUBLIC SECTOR EMPLOYMENT
PRIVATE SECTOR EMPLOYMENT
WORKERS
• High wages and favorable rights
• High severance payment
• High trade unionism
• Flexible working conditions
• High pension payments depending on
wages
CIVIL SERVANTS
• Better health services
• Better pension payments
• Life-time job guarantee
•
•
•
•
Low wages and limited rights
Low severance payment
Limited trade unionism
Low pension payments
OBSTACLES TO PRIVATIZATION
800000
700000
600000
500000
400000
300000
200000
100000
0
Weekly Working Hours
46
Hour
45
44
43
Public
Public
Workers Included by Collective Bargaining
Agreements (%)
70
60
50
%
40
30
20
10
0
2001
Public
Private
Private
2001-1
2
2000-1
1999-1
Private
2
41
2001-1
2
2
2000-1
42
1999-1
TL
Gross Wages
CONCLUSION -1
• Privatization has not been completely accomplished as programmed.
Therefore, monetary impact of privatization on state owned
enterprises, social funds and public balance in general were not
significant.
• Being one of the main impediments, legal framework has been
reformulated with the new laws and constitutional amendments.
• Employment considerations were the main issues in the privatization
process.
• Although labor adjustment programs have significant impact on
employment, they are not sufficient enough to fill the gap between
employment conditions in public and private sector.
• Therefore, considering the importance of privatization on market
efficiency, the monetary and non-monetary conditions of private sector
jobs need to be improved to accelerate privatization in Turkey.
CONCLUSION-2
•
•
•
•
•
With the economic reform program, that was started at the end of 1999, it was
aimed to reduce inflation and enhance sustainable growth in the economy.
With the determined implementation of the program, the role of the public
sector in the economy will be diminished.
Various regulations have been made to enhance privatization of big companies
such as telecom, sugar, tobacco and natural gas etc.
The impact of ongoing privatizations on the product and labor market will be
significant.
Therefore, unemployment insurance system, various redeployment projects towards dismissed workers after privatization, social
security reform to improve financial positions of the social security institutions
and introduction of private pension system will be important in lessening
negative consequences of future privatizations.
A sustainable macroeconomic environment together with structural changes
towards reducing the role of the public sector in the economy will let private
sector to operate in a more efficient environment and the gap between public
and private sector will be lessened gradually.