Economic Development in Modern Turkey, Research Paper Example

According to the International Monetary Fund, Turkey is classified as having an emerging economy, which indicates that it is currently undergoing a period of rapid development of growth and is likely to become a major player in the world’s market. The country’s political decisions beginning in the early 1990s have helped to boost its economy. These policy effects became apparent during the late 1990s, and this have shaped many aspects of how Turkey interacts with other countries. Since Turkey’s economic growth has expanded in such a short period of time, it would be valuable to examine that political policies that its leaders have put in place to allow such growth. Struggling nations would be able to look at these decisions as a model to follow for initial economic development or for economic recovery.

One of the major factors that has both highlighted and confirmed the economic success of Turkey is the fact that its economy has expanded as much as 9.2% in 2010, indicating that it was able to rapidly recover from its role in the global financial recession that had occurred several years prior (Invest in Turkey, 2010). Upon examination of the economic trends that have occurred in the nation in addition to policy changes that have occurred simultaneously, we can determine why we observe a significant positive increase in GDP.

Beginning in December of 1995, Turkey had become a member of the G-20 major economies, which is a central banking system involving 20 major economies. While the system is not as formalized as the measures implemented by the European Union, this partnership attempts to present and resolve economic crises by discussing policy related to the international financial system. Ultimately, since this allows world leaders to resolve mutual issues, Turkey’s membership demonstrated that it was willing to take on a larger role in the world market. Therefore, it put measures in place to ensure that its entry would be welcomed by a series of powerful nations, which was the first step taken to ensure that its other economic policy would be supported.

Before we can understand what contributed to Turkey’s ability to succeed in the world market past the 1990s, it is useful to determine the basis of its economy prior to these movements. Interestingly, Turkey has been a leader in agriculture since the 1980s, which has allowed it to support itself through the past few decades. Since this time period, the nation has been completely sufficient in food production. Today, this country is a major producer of staples including hazelnuts, cherries, figs, apricots, and pomegranates. They were able to achieve this modern success by first recognizing their ability to effectively grow these products in their given climate and to accurately maintain their farmland for maximal yield. This is significant because it demonstrates that the nation has always had a marketable product that would be valuable to other nations for trade if their production levels were unable to keep up with this same growth. Therefore, Turkey began to market its agricultural prowess, which helped boost the economy. While this was a continuous movement since the 1980s, they have seen the fruits of their labor more recently, as agricultural jobs have contributed to a decrease in their unemployment rate. In fact, employment in the field of agriculture was as high as 29.5% in the nation as of 2007 (Ray et al., 1999).

Another reason for the agricultural success observed was also due to an investment that the nation placed into establishing new infrastructure and supporting the old. While certain aspects of the project are still in the construction phase, the government has established a plan entitled the Southeastern Anatolia Project, which provides for the development of 22 new dams, 19 water based power plants, and mass irrigation, in the region. The main goal of the project is to improve both farming and energy production, which are expected to bolster one another and work hand in hand. As this productivity has increased, other agricultural trends have increased significantly as well. The production of livestock goods increased, as did the ability for fisheries to produce profitable amounts of food.

Like the United States, Turkey realizes that it must invest a certain amount of its funds into the development of infrastructure in order to achieve long-term sustainability. However, unlike the United States, it is also concerned with ensuring that this debt is paid back before a detrimental amount is accrued. As a consequence, Turkey’s government has been ensuring they closely follow the Maastricht criteria that is established by member states of the European Union. These criteria include agreeing to only implementing HICP inflation rates, setting the annual governmental budget deficit to consistently decrease, to have a stable exchange rate, and low long-term interest rates, among others. This is significant for Turkey because it was able to lower its deficit from more than 10% in 2002 to less than 3% in 2011, noting that it achieved the criteria set in place by the European Union. Other world economies that are not members of the European Union would benefit greatly by taking these same measures to reduce debt.

Another major political factor that has helped Turkey’s economy evolve is that the government has supported its trade policies. The country recognizes that it needs to be able to trade with other nations in order to remain competitive, and it would be valuable to export agricultural products and import others in order to bolster what it has to develop. Ultimately, business leaders from the country have been quoted saying that the success of Turkey lies in their ability to provide exports to non-traditional western markets, as it will enable many countries that have not already entered into specific trade agreements to be accessible for this purpose. Since Turkey is entering the world economy late in the game, it is essential that it considers the ways it can gain advantage over already powerful nations. As a consequence, it has entered into trade agreements with the European Union, which reportedly accounts for about a third of the country’s exports. Recognizing that other nations trade with the union as well, Turkey has turned to Iraq as its primary source of exports (Dombey et al., 2013).

The government is supporting the desire of Turkish businessmen to further build the trade relationships that the country currently has in the Middle East in the following years.  Furthermore, the government is interested in opening embassies in other untapped markets, such as Africa. To do so, the government will provide money to Turkish airlines in order to improve connectivity between the regions, thereby allowing businessmen to travel back and forth easily. It appears that the Turkish government intervenes in the nation’s economy by first listening to the wants and needs of businessmen, and then investing funds in infrastructure in order to make these goals possible. However, the government is not without selectivity. Since Turkey has entered the world economy later than many nations, it is likely to invest more in the ideas that have not yet been attempted by these countries, so that it has an opportunity to develop without a lot of competition (Reuters, 2013). It is essential for Turkey to act fast so that it is far ahead of these efforts before other nations recognize the value of these trade decisions.

An additional measure that the Turkish government is implementing in order to promote business into areas that are currently not maximally accessible is by promoting a series of deals with leaders in the Middle East that would allow visa-free travel deals and the establishment of trade zones. It is likely that these partnerships will continue to develop Turkey’s economy if they are successful. However, it is also important to consider the ingenuity of this economic development strategy. Since many Middle Eastern nations are currently at political odds with the United States and several countries in Europe, if Turkey is able to establish agreements with these nations, it will strengthen the Middle East. Therefore, both leaders have incentive to cooperate so that all may mutually benefit.

An interesting development in these agreements between Turkey in the Middle East are its current attempts to the Kurdish Regional Government (KRG) in northern Iraq. This is a shocking move, as the Iraqi government does not generally approve of the Kurdish autonomy. Therefore, this demonstrates that the Turkish government is willing to make extreme risks in order to promote its ability to succeed. Since a lot of trade that the nation currently conducts is with the widely recognized Iraqi government, entering into a trade agreement with the Kurdish could potentially hurt these ties. On the other hand, if the Turkish government is able to achieve trade with both sections of Iraq, they will greatly benefit, as this is something that no other nation has accomplished in the past.

Economists believe that many of the macroeconomic actions that Turkey has taken in recent years has been directly tied into its relationship with exchange economic pressure (Katircioglu, et al., 2011). This appears to be true, as a majority of its policies relate to its want to be able to compete with other nations. Therefore, the government and businessmen must work together to determine which markets are currently untapped and develop ways in which they can become accessible. Currently, it appears that the country’s plan is successful, but we will need to wait several years to determine if it is sustainable.

While the most important of Turkey’s exports is arguably its agricultural products, its economy has been able to expand since the 1990s because it has been developing other products as well. Many of these products are used locally rather than exported, which demonstrates the country’s tendency to support local businesses in its effort to build its economy. This policy is generally effective because self-sufficiency allows the nation to be more strategic about the trade deals that it strikes with other nations. One notable product produced in Turkey is a brand of television set called Vestel. This is significant because in 2006, this company accounted for one-fourth of all of the television sets produced and sold in Europe. Therefore, by observing other nations, Turkey recognized that it would be able to bolster its economy by investing in technology. It appears that this investment will help the nation continue to grow into the future, as television is a product that is always high in demand, despite the fact that many individuals already own one. There is always a great want for the newest model, and as long as Turkey is able to keep up with these technological demands, this aspect of its industry should continue to grow and remain successful.

Interestingly, the competition that occurs among business leaders in Turkey has also helped to promote the nation’s economy. The rules of competition dictate that when two similar products are available, the creators of the products will attempt to give theirs an edge through advancing the product or by determining a unique way to market it. In Turkey, the two major television set brands are Vestel and Beko. While there are other successful companies, these two constantly engage in competition in order to become dominant in the European market. The struggle between these companies have enabled these products to improve and become more desirable as exports in other parts of the world. To support this, the government promoted the enacting of the Customs Union agreement between the European Union and Turkey, which significantly increased the sales of Turkish electronic products to union members. It is likely that this partnership will allow this sector of the economy to continue to grow, possibly allowing it to become as strong as the European Union.

Another production item of interest is the train units, locomotive, and wagons produced by Turkey. While some of these vendors are hired by business owners in other countries, it is necessary to emphasize how producing high speed transportation will positively influence the nation’s economy. Ultimately, the government investing money in this industry means that it is doing so in order to expand business. At the moment, this is occurring primarily within the country, but it is likely that these products will be exported to Turkey’s major trading partners. The capacity for rapid trade indicates a capacity for rapid economic growth, so it is not surprising that this is one of the areas that this country is concentrating on for economic development. While many popular train models were built in the country at the end of the 1900s and during the 1950s, Turkey reassessed its economic status compared to the rest of the world and recognized that there was a need to advance even this industry. Therefore, in 2006, their newest model, the EUROTEM, was released in accordance to the economic plan it has established in the 1990s in order to facilitate growth.

Of particular interest and concern to many countries around the world is also Turkey’s involvement in the arms industry. The government is aware that if the country strengthens itself economically, it will be more likely to be involved in armed conflict. Furthermore, Turkey’s financial agreement with many Middle Eastern countries put it in an interesting political situation, and it may be necessary for them to join their trade partners to fight against an enemy nation. Nonetheless, Turkey stands to gain economic profit by producing weapons. There are many Turkish individuals involved in this particular industry. Altogether, the profits earned by exporting weapons amounted to $1.4 billion in 2013 (Anadolu Agency, 2014). Overall, it is important to understand that like their introduction to the economy, the initiation of the Turkish involvement in the weapons market is relatively new. Although they had produced their own weapons for years for purposes of self-defense, they begun to sell these for profit in the early 2000’s. It appears that Turkey is willing to expand its economy in any way necessary, and this tactic appears similar to that used by the United States for both economic and political means.

Overall, it appears that the Turkish government’s interventions starting in 1990 were responsible for driving the economic growth that we observe of the country today. The government put into place many economic policies that allowed the business in the country to expand, thereby allowing the GDP to increase. Turkey has been able to build its economic standing from nothing. Even though it is currently classified as an emerging economy, it is likely that this growth will continue to expand until we equate the Turkish economy with the greater world economies, such as Spain, the United States, England, and Germany.

Turkey was able to expand its economic impact because it had an excellent understanding of the resources it had available to make this expansion possible. As discussed, one of the major advantages of the nation is that the land was fertile enough for the country to be self-sufficient and grow enough produce to be able to sustain themselves. This allowed them the ability to export excess goods to other countries that did not have the ability to grow these goods. This also provided the country with an excellent trading plan that takes advantage of the competitive marketplace. Rather than competing with countries that had already established themselves as major competitors in the world market, Turkey had taken advantage of securing trade partners that were seen as undesirable by these leaders.

In conclusion, it appears that Turkey’s economy is currently strong, which is evident by growth trends that we have observed since the 1990s. It will continue to strengthen as a consequence of the policies that the government has put in place. Overall it appears that a strong economy based on these policies will be beneficial for businesses and workers, so this is generally supported by the public. Since the implementation of the economic reform, the unemployment rate has dropped in addition to the national debt. It is difficult to determine the next steps that the country will take in order to ensure that its economic success will continue, but they will likely build upon the policies that have been established in the past few decades. Other countries would benefit from understanding Turkish economic policy because this country managed to expand its economic influence significantly within a few decades. It would be useful for the current world economic leaders to look towards these policies and alter their own if they wish to remain at the top. The world should look at this lesson and understand that it is important to diversify trading partners in order to achieve success.

References

Anadolu Agency. (2014). Turkey’s defense exports up 10 percent to $1.4 billion. Retrieved from  http://www.hurriyetdailynews.com/turkeys-defense-exports-up-10-percent-to-14-billion.aspx?PageID=238&NID=60922&NewsCatID=345

Dombey, D., Guler, F. (2013). Ankara Views Northern Iraq as ‘Natural Extension’ for Business”. Financial Times. Retrieved from http://www.ft.com/cms/s/64635cd4-ae7e-11e2-bdfd- 00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcm s%2Fs%2F0%2F64635cd4-ae7e-11e2-bdfd- 00144feabdc0.html%3Fsiteedition%3Duk&siteedition=uk&_i_referer=http%3A%2F%2 Fen.wikipedia.org%2Fwiki%2FEconomy_of_Turkey#axzz2Sv1nMx5G

Invest in Turkey. (2010). Economic Outlook. Retrieved from http://www.invest.gov.tr/en- us/turkey/factsandfigures/pages/economy.aspx

Katircioglu, S.T., Feridun, M. (2011). Do macroeconomic fundamentals affect exchange market pressure? Evidence from bounds testing approach for Turkey. Applied Economics Letters, 18(3): 295-300.

Ray, I., Gul, S. (1999).More from Less: Policy Options and Farmer Choice under Water Scarcity. Irrigation and Drainage Systems, 13(4):363-383.

Reuters. (2013). UPDATE 1-Turkey hails new investment grading but worries about money flows. Retrieved from http://www.reuters.com/article/2013/05/17/turkey-economy- idUSL6N0DY1TI20130517