Download Turkey Rural PER

ANNEX 2
RURAL PUBLIC EXPENDITURE REVIEW
1.
INTRODUCTION
Objectives and Scope
1.1
The purpose of this rural sector Public Expenditure Review (PER) is to assist both the
Government of Turkey and the World Bank to enhance the impact of rural development in
Turkey. This annex provides a cross-agency picture of the magnitude and structure of public
expenditures to the rural sector in Turkey, with reference where appropriate to comparator
countries. It is intended that this analysis will inform future decisions over priority public
expenditures for rural development and the shifts in expenditure allocations that are necessary
to make the most effective use of available resources.
1.2
The rural PER examines public expenditure and performance in the rural sector over
the period 1999-2003. Analysis of actual spending is restricted to capital investment and
recurrent expenditures recorded by the State Planning Organization (SPO) and Ministry of
Finance (MOF). The PER does not include analysis of agricultural subsidies and the impact
of recent subsidy reforms - these are presented in a separate study.1 The health, education and
housing sectors are also outside of the scope of this review.
1.3
The review covers both central and local government expenditures to the rural sector.
For the purposes of this study, ‘rural’ is defined as covering:

agriculture - including farmer support services such as extension and research,
animal health, plant protection;

forestry, erosion control, and other agri-environment programs; and,

irrigation and other rural infrastructure - rural roads, water supply and sanitation,
electricity.
1.4
The report is structured as follows. The remainder of this Section summarizes recent
rural performance, including information on rural poverty and the role of agriculture, as well
as details of the principal government agencies involved in rural areas. Section 2 briefly
outlines recent government reforms in agriculture and strategic planning issues. Section 3
reviews public expenditure management, including a summary of recent reforms introduced
by government. Section 4 reviews public expenditure trends in rural areas and provides an
analysis of the composition of this expenditure by economic classification (capital and
recurrent spending), by function, and by geographic region. Section 5 sets out the principal
findings and recommendations of the study.
Rural Poverty
1.5
Rural development, including both growth in agriculture and off-farm employment, is
important for achieving poverty reduction in Turkey. It is estimated that 35 percent of
Turkey’s population live in rural areas2. This is high relative to the rest of Europe and Central
Asia, where on average 25 percent of the population is rural. The distribution of the rural
1
2
“Turkey: A Review of the Impact of the Reform of Agricultural Sector Subsidization”, World Bank, March
2004.
Turkey 2000 Population Census, SIS.
population varies considerably between provinces, ranging from 74 percent (Bartin) to 9
percent (Istanbul). What is important to note is that by all measures of poverty, the rural
sector accounts for 50-60 percent of poor households in Turkey3.
1.6
The 2002 Household Budget Survey (SIS) shows that the relative poverty incidence in
rural areas is almost twice that of urban areas - 20 percent of the rural population is defined as
poor, compared to 11 percent of the urban population. Other poverty incidences such as food
and non-food poverty rate (22.0 percent for urban and 34.5 percent for rural), people living
below US$ 2.15 per capita per day (2.4 percent in urban and 4.1 percent for rural) as well as
people living below US$ 4.3 per capita per day is 24.6 percent in urban and 38.8 percent in
rural areas) all show similar differences. Rural communities also lag behind their urban
counterparts in measures of human development4. The 2002 survey shows the most
significant determinants of household poverty in Turkey are education, employment status,
and whether or not the household is located in a rural or urban area. Overall, 37 percent of
households whose principal economic activity derives from the agricultural and natural
resources sector (defined as agriculture, hunting, forestry and fisheries) are poor, and face the
greatest risk of poverty of any group.
Rural Sector Performance
1.7
A recent study estimates that the rural sector contributes 30-35 percent of GDP5. This
compares with a share of agriculture in GDP for comparator countries as follows: Brazil – 11
percent; Poland – 29 percent; Mexico - 24 percent; China – 24 percent; and India – 28
percent. In Turkey, the rural share of GDP in 54 provinces out of 81 is greater than 50
percent. In fact when one excludes Marmara region, the remaining regions together have a
rural share of GDP of almost 47 percent and the agricultural share of GDP ranges from 15-30
percent. (The same phenomenon is operative in other countries in which their main industrial
and service sector region is excluded, e.g, Sao Paulo state in Brazil.) The study found that
rural GDP is growing more slowly than the rest of the economy and the relative share of rural
value-added from agriculture has been declining in recent years.
Table 1 - Comparator Country GDPs
Country
Rural Population
Share
72%
63%
49%
38%
35-40%
36%
Rural GDP Share
Agricultural GDP
Share
23%
15%
6%
4%
13%
5%
National GDP Per
Capita (Atlas) US$
India
28%
460
China
24%
890
Brazil*
11%
3,070
Mexico*
24%
5,530
Turkey
30-35%
2,530
Poland
29%
4,230
*Rural GDP shares for Brazil and Mexico are expanded ag. figures including food and processed products .
Source: WB SIMA Tables, Own Calculations.
1.8
Given the low agricultural share of GDP (12 percent), the relatively high share of rural
GDP indicates that the rural off-farm economy is fairly developed. In addition, the variation
of the relative size of the rural off-farm economy is not high as it ranges from a low of 53
percent in the Black Sea region to a high of 66 percent in the Central Anatolia region. In sum,
3
2000 Census and 2002 Poverty Study (State Institute of Statistics). See also, press release of 13/04/2004 on the SIS website:
http://www.die.gov.tr/ENGLISH/SONIST/YOKSL/200404/200404.htm
4 Turkey: Economic Reforms, Living Standards, and Social Welfare Study, World Bank, January 2000.
5 See ‘TURKEY A Review of the Impact of the Reform of Agricultural Sector Subsidization’ Annex 3, World Bank, March
2004.
the rural sector is large and off-farm GDP is the main source of rural income. However,
compared to Poland which has a similar land tenure pattern, a comparable population active in
agriculture (28 percent in 2001) and relatively the same share of agricultural value added per
hectare (roughly USD 600/ha), the off-farm sector in Turkey is much smaller.
1.9
This is because the industrial and service sectors need to expand further in rural areas,
as they have in Poland over the 1990s. Over the last 25 years, industry’s share of GDP in
Turkey has risen from 17 percent to 25 percent (having reached as high as 37 percent in 1996)
and that of the service sector has risen from 50 to 63 percent. Agriculture has performed
poorly over the same period, and agriculture’s share of total GDP has fallen quickly from 34
percent in 1970 to 12 percent in 2003. The declining share of agriculture within GDP is
typical as a country develops, since land availability generally limits growth of agricultural
GDP, while industrial and services sectors are not as constrained by fixed factors of
production.
1.10 What is problematic in Turkey is that the growth of jobs in the urban and off-farm
sectors has not been sufficient to accommodate a larger shift of labor out of agriculture. In
2002-2003, agriculture continued to employ over 35 percent of the country’s total workforce.
At the same time, land and labor productivity in agriculture have been stagnant 6, suggesting
that Turkey has failed to benefit widely enough from global advances in agricultural technical
efficiency. Thus, as long as labor demand outside the agricultural sector is relatively weak,
and a large proportion of the total workforce is employed in an agricultural sector with
lagging productivity, rural development policy will need to focus as much on increasing
agricultural productivity as generating off-farm employment if rural income growth is to
accelerate and contribute to poverty reduction more broadly in Turkey.
1.11 Table 2 shows recent performance of the agriculture sector relative to the rest of the
economy. The impact of the recent economic crisis has been especially noticeable in the
agriculture sector. In 2001, while total GDP fell by 7.4 percent in real terms, agricultural
income fell by more than 22 percent. But agriculture made considerable recovery in 2002,
and 2003 growing by 7.1 percent and 7.6 percent respectively.
Table 2 - Agriculture Performance 1999 – 2003
1999
2000
2001
2002
2003
GDP (TL trillion, 1999 prices)
GDP growth in 1999 prices
75,101
-4.9%
79,203
5.5%
73,326
-7.4%
78,915
7.6%
83,468
5.8%
Agric GDP (TL trillion, 1999 prices)
Real Agric. Income growth in 1999 prices*
11,301
-17.7%
11,268
-0.3%
8,700
-22.8%
9,319
7.1%
10,026
7.6%
Share of GDP
Agriculture
Industry
Services / other
15.0%
22.6%
62.4%
14.2%
23.5%
62.3%
11.9%
25.1%
63.0%
11.8%
25.2%
63.0%
12.0%
24.8%
63.2%
37.6
17.5
44.9
34.9
18.5
46.6
35.4
17.8
46.8
Employment by sector (%)
Agriculture
40.2
36.0
Industry
17.2
17.7
Services / other
42.7
46.3
* Change in agricultural GDP by using GDP Deflator.
Sources: State Planning Organization, State Institute of Statistics.
6
See H. Akder, H. Kasnakoglu and E. Cakmak ‘Turkey: Sources of Growth in Turkish Agriculture’, April 2000.
1.12 Besides investment in irrigation and other infrastructure, the state has traditionally
supported rural areas through a wide range of agricultural subsidies (especially credit and
fertilizer) and direct government involvement in agricultural production, agro-processing, and
marketing. Fiscal subsidies to the agriculture sector reached over 3 percent of GDP in 1999 this was at a time when agriculture contributed just 14 percent of GDP.
1.13 Such pervasive government intervention in agriculture has had negative consequences
for the rural economy. It subsidized inefficient production technologies, discouraged
production in sub-sectors where Turkey has comparative advantage, and hindered private
sector involvement in rural markets. Moreover, the benefits of this policy tended to be
captured by the larger farmers and more affluent regions of the country.
1.14 Since 2000, government has been reforming its rural and agricultural support policies.
This has involved the reduction or elimination of subsidies and, in partial compensation for
these subsidy reductions, the introduction of a Direct Income Support (DIS) Program. At the
same time government is gradually withdrawing from marketing and processing activities and
cooperatives are being restructured. This has resulted in a dramatic reduction of net fiscal
transfers to agriculture, which fell to 0.7 percent of GDP by 2003.
1.15 Turkey’s National Development Plan for 2004-2006 emphasizes accelerated rural
development for achieving national objectives of economic growth and poverty reduction.
Achieving these objectives is likely to require further investments in rural infrastructure and in
sustainable rural institutions that deliver critical services (technology transfer, rural credit,
marketing, processing). In this respect, the challenge for government is to define priority
areas where it can lead and other areas where it can promote private sector initiative.
1.16 Growing inequality between regions is explained both by differences in the sectoral
structure of production and in agricultural productivity. The lagging regions have more
resources employed in agriculture and also in less productive sub-sectors of agriculture.
Income levels in the richer provinces (Marmara, major port cities around the Aegean and
Mediterranean coast) are converging, while poor provinces are falling further behind. Unlike
in Western Europe, state transfers have played little role in equalizing incomes at the
individual or household level. On the contrary, previous government support to agriculture in
the form of input and price subsidies disproportionately benefited large farmers, and
contributed to income inequality and the widening of absolute income differentials in rural
areas. However, the government recognizes the problem of regional inequalities, and is
attempting to address this through targeted spending (see Section 4.77- 4.79).
Sector Institutions
1.17 Public spending to the rural sector is channeled through both central and local
government agencies. This section provides an overview of the principal agencies responsible
for rural sector spending, and a brief outline of current proposals for decentralized
government.
Central Government
1.18 Central government in Turkey is administered through a series of ministries and
affiliated agencies. Ministries have field offices at provincial and district levels, 7 which are
7
When coordination or efficiency makes it necessary to create an organization of a field activity beyond the limits of a single
province, administrative divisions covering several provinces may be created. This is the case for example of DSI, GDRS and
also under the authority of the provincial governors (vali) and district sub-governors
(kaymakam). The provincial administration operates on the principle of de-concentration (i.e.
a delegation of power from the central administration to the provincial level). Provincial
governors and sub-governors are appointed by central government and have authority over the
field offices of the central administration.
1.19 The State Planning Organization (SPO) is part of the Office of the Prime Minister.
It is responsible for advising and coordinating the activities of ministries and public
institutions on economic, social and cultural policies, and preparing long-term development
plans and annual programs.
1.20 The Ministry of Agriculture and Rural Affairs (MARA) is the lead agency
responsible for policy and public services for agriculture and rural development. It has four
service directorates:

TUGEM (Agricultural Production Development General Directorate): agricultural
support policies, livestock development and implementation of various donor-funded
projects.

KKGM (Protection and Control General Directorate): regulatory functions,
including animal health, crop protection and quarantine services.

TEDGEM (Organization and Support General Directorate): education and extension
services, and permits for cooperatives.

TAGEM (Agricultural Research General Directorate): publicly funded agricultural
research undertaken through a number of research institutes.
1.21 The General Directorate of Rural Services (GDRS) was established in 1984 by
merging three directorates: YSE (Rural Roads, Drinking Water and Electricity), Topraksu
(Soil and Irrigation Works), Toprak Iskan (Land and Settlement). It is responsible for the
provision of rural infrastructure services and (since 2001) reports to MARA. GDRS is mainly
involved in the construction of rural roads, and developing ground and surface water
resources for small irrigation and drainage schemes. It also provides safe drinking water to
villages, and land consolidation and resettlement services.
1.22 The General Directorate of Highways (GDH)8 is responsible for the planning,
design, construction, and maintenance of highways. It is an annex budget organization
affiliated to Ministry of Public Works and Settlement.
1.23 The General Directorate of Hydraulic Works (DSI) reports to the Ministry of
Energy and Natural Resources. It is responsible for planning, constructing and managing
large-scale water resources for irrigation, drinking water and hydraulic energy.
1.24 The Ministry of Environment and Forestry (MOEF) was established in May 2003
by merging the Ministry of Forestry and Ministry of Environment. Its responsibilities
include: environment management, environmental assessment and planning, forestation and
erosion control, village forest relations, and the management of national parks. Reporting to
MOEF, the General Directorate of Forests (GDF) is the principal agency responsible for the
management of national forest resources. It is an annexed budget organization and majority
GDH, whose territorial units are organized as regions comprising a number of provinces. These regions vary among
organizations.
8 Provincial roads for which GDH is responsible are considered as rural in this study as they are located mainly in rural areas.
of its activities are funded through a revolving fund (through the sale of timber and other
forest resources).
1.25 The Turkish Electricity Distribution Company (TEDAS) is the state electricity
agency. Following the economic reforms of the mid-1980s there are now many privately
owned firms also involved in the electricity sector. The distribution system currently served
by TEDAS has been divided into 25 regions and long-term operating rights have been
awarded to private investors in 14 of these regions.
Local Government
1.26 There are three forms of local administration in Turkey: Special Provincial
Administrations (SPA), municipalities, and villages. These are democratic governmental
organizations established outside of the central administration, based on the principle of
decentralization and with responsibility for the provision of local public services. They are
locally elected and have their own budgets. Local administrations are coordinated by the
Ministry of Interior through its General Directorate of Local Authorities.
1.27 By the size of their budget, Municipalities are by far the most important level of local
administration. A municipality must be set up in all province and district centers, regardless
of their population. In addition, all settlements of over 2,000 inhabitants can request to set up
a municipality subject to approval from central government. The municipal population elects
the municipal council and the mayor. Core services provided by Municipalities include urban
transportation, water supply and wastewater management, and solid waste collection and
disposal9.
1.28 There are a total of 3,225 municipalities in Turkey. Most of them, however, are very
small and more akin to villages and rural areas than urban centers. Overall, the average size
of municipalities is 17,000 residents. Half of the urban population lives in eight ‘greater
municipalities’, each of which includes several municipalities and has a total population over
600,000 residents. Municipalities of less than 20,000 inhabitants - which, together with
villages, can be approximated as ‘rural’ - account for 20 percent of total municipal spending.
1.29 Villages do not fall under the jurisdiction of municipalities, but are governed by an
elected village headman (muhtar) and an elected council of village elders. Currently there are
35,140 villages. The village headman, as chief village executive, not only represents his
village and takes responsibility for local services, but also acts as the representative of central
government.
While the law establishes a number of responsibilities for village
administrations, in practice many of these are carried out, even if sporadically, by the
provincial offices of central government agencies.
1.30 The creation of Special Provincial Administrations (SPA) can be traced back to the
late Ottoman period. Each province has an SPA. The decision-making body is the provincial
council, composed of elected members on behalf of districts. SPAs are subject to the de facto
control of the provincial governors (not elected but nominated), who are heads of the
provincial council and whose ratification is required for all decisions and the budget. The
functions assigned by law to the SPA are very broad (including health and social assistance,
public works, education, and agriculture). In practice, SPAs perform these tasks only to a
limited extent, partly because they do not have the necessary resources and partly because the
9
Other responsibilities include sanitary control inspection of food markets, establishment and management of parks and
recreational facilities, municipal clinics and welfare facilities, etc.
central administration and its field offices often carry out these functions. Most SPA spending
goes to rural areas - specifically to villages and small municipalities that have limited budgets.
Decentralization
1.31 Government is currently reviewing a draft law to shift responsibility for the provision
of certain services to local administrations10. If this law is accepted, a number of important
rural services will shift to the responsibility of local administrations. These include services
provided by the Ministry of Agriculture and Rural Affairs, Ministry of Environment and
Forests, and some public works and health services. As part of these reforms, GDRS is to be
abolished. Regional offices and field staff of these ministries (including GDRS) will be
merged with local administration. Sayistay (Court of Accounts) will be responsible for
external auditing of both central and local administrations, and will have power to establish
regional and/or functional departments.
1.32 Decentralization aims to improve the quality of services by making them more
demand-driven and service providers more accountable to service beneficiaries. However,
experience from elsewhere in the world indicates that decentralized government does not
necessarily result in improved quality of services. Care is needed in the implementation of
reforms. Particular dangers to avoid include:
2.

Reforms being implemented in such a way as to maintain central government
dominance over decision-making, resulting in limited local empowerment;

Benefit capture by local elites, who are successful in directing public expenditure to
their advantage.

It is also important to recognize that the management of natural resources has effects
that extend beyond the immediate locality. For this reason, the natural resources, and
rural sector more broadly, may require continued and active oversight from central
government.
RURAL SECTOR POLICY
Recent Reforms
2.1
Prior to economic reforms in 2001, Turkey’s agricultural policy was based on a system
of producer subsidies, agricultural price support and import protection, combined with
extensive government involvement in agricultural production, processing and marketing. The
high cost of government interventions in the sector was financially unsustainable and
appeared to have little impact in reversing the trend of declining agricultural productivity.
2.2
Table 3 shows the cost of expenditure allocations to agriculture in the form of
producer subsidies and price support from 1999-2002. Before 2001, PSE was mainly formed
of tariff protection and price support programs. With the initiation of reforms including direct
income subsidy program, indirect support and cost to consumers declined. Analysis of
subsidy incidence shows larger commercial farmers have mainly captured the benefits of this
pre-reform policy, while small farmers have received little direct benefit.
10
This law is a framework law and all the detailed restructuring is going to be made with additional regulations. Another law
on local administrations is also being prepared and the type of functions and responsibilities of each level of local authority is
going to be determined via this law.
Table 3 - Support to Agriculture (%)
1999
Producer Subsidy Estimate11
23
Consumer Subsidy Estimate12
-22
Total Transfer Estimate (as share of GDP)13
6.51
Source: http://www.oecd.org/dataoecd/34/4/32361171.xls
2000
21
-22
5.32
2001
5
-3
2.84
2002
20
-17
4.44
2.3
In 2000 Government embarked upon a wide-ranging economic reform program.
Aimed to tackle high inflation and volatile exchange rates, the reform program required a
reduction of government expenditures in all sectors. In agriculture, these reforms focused
upon reducing the level of subsidies, and improving the targeting and allocative efficiency of
remaining transfers14.
2.4
Reforms to agricultural policy focused on two broad areas. The first was the phasing
out of subsidies for fertilizer, credit and price support, and the introduction of a national
program of Direct Income Support (DIS). This provides farmers with a uniform per hectare
payment (roughly US$ 90/ha) that is decoupled from the production of any specific crop.
This was done to compensate for the removal of the old subsidy system and to provide income
support to the rural sector, but in an incentive-neutral way.
2.5
The second area for reform has involved the commercialization and privatization of
national parastatal enterprises, including those engaged in sugar, tobacco and alcohol, and tea,
and restructuring of the state grain purchasing company. Agricultural sales cooperative
unions (ASCUs) are also being restructured to remove them from direct government influence
and place them more effectively under their members’ control.
2.6
By the end of 2003, the reform program reduced the fiscal outlays on agricultural
subsidies to US$ 0.7 billion. This represents a savings of roughly 2.7 percent of GDP. DIS
payments, reached US$ 1.25 billion in 2002 and US$ 1.56 billion in 2003. The large
difference between the fiscal savings from the agricultural transfer (subsidy and DIS) reform
program (US$ 3.8 billion) and the net income loss to farmers (US$ 1.1 billion) reflects the
inefficiencies of the pre-reform agricultural subsidies in supporting farmers’ income.
2.7
Between 1999 and 2002, agricultural income fell by 16 percent (US$ 2.7 billion),
while agricultural output declined by only 4 percent. The cuts in agricultural subsidies
lowered agricultural commodity prices and raised input prices, bringing both closer to world
price levels. By doing so, the cuts in agricultural subsidies realigned downward the
profitability of agriculture that had been pushed artificially high by fiscally unsustainable
subsidies. Prices of the highly regulated crops (tobacco, sugar beet and hazelnut and grain)
fell the most.
2.8
A rural Quantitative Household Survey (QHS) in 2002, conducted under the
Agricultural Reform Implementation Project (ARIP), found that DIS payments accounted for
7 to 8 percent of household income. Given the evolution of the ratio of net agricultural
income to gross agricultural income over the reform period, it appears from the QHS results
PSE is a measure of the part of producers’ agricultural revenue which accrues from market price support-farm gate prices
relative to border prices, as well as support to farmers through payments based on output, input usage and land acreage, etc.
12 CSE, when negative, is a measure of support, which is paid by consumers through consumer prices, which are above
border prices.
13 TSE is the sum of PSE and a measure of farmers’ indirect support through subsidies not provided on the basis of outputs or
inputs (such as marketing, promotion, training, research and development, etc.)
14 See ‘TURKEY A Review of the Impact of the Reform of Agricultural Sector Subsidization’ World Bank, gray cover
March 2004.
11
that the DIS program replaced 40 percent in 2002 and 50 percent in 2003 of the net income
loss, which farmers have experienced as a result of the reforms. The results also indicate that
the impact of the DIS program on farmer’s welfare has been positive: one million TL paid in
DIS generates approximately TL 2.5 million in net agricultural income.
Strategic Planning For Rural Development
2.9
Strategic planning in Turkey is highly centralized. The State Planning Organization
(SPO) prepares five-year development plans as well as annual programs and accompanying
investment programs. Both annual and investment programs are prepared in coordination
with line ministries and Treasury. Current reforms to strengthen strategic planning will give
line ministries greater responsibility for developing sector plans. SPO has already embarked
upon a program of training staff from selected line ministries in strategic planning techniques.
Also National Rural Development Strategy is in the process of construction by MARA as part
of EU pre-accession activities.
2.10 The National Development Plan (2004-06) places considerable emphasis on
accelerated rural development. The NDP identifies the following priorities for rural
development

Increasing employment and income generating activities in rural areas;

Strengthening capacity towards efficient utilization of natural resources;

Increasing the living standards of the rural population through the application of
modern (productivity enhancing) agricultural techniques;

Creating employment in diverse livelihood opportunities (including tourism, textiles,
handcrafts, and forestry products) and promoting these in disadvantaged areas;

Promoting of SMEs, together with supporting micro-finance and marketing;

Reducing inter-regional and intra-regional disparities, including reducing migration
from rural areas to urban areas;

Strengthening participatory approaches through vocational training, extension and
consulting services.
2.11 Turkey currently implements just one regional rural development program through the
Southeastern Anatolia Regional GAP Administration (GAP RDA), but does not have any
other dedicated regional development organizations (see Appendix 2). In the past, SPO has
prepared other regional development plans, but these have not been implemented as funding
has not been made available through the budget process (for example, the development plans
for East Anatolia and Black Sea regions). SPO has started preparations to implement 2
regional development projects co-funded by grant support from the EU, both of which focus
upon support to local development initiatives, SMEs, and small-scale infrastructure:

Samsun, Kastamonu and Erzurum Development Project (52 million Euro); and

East Anatolia Development Project (45 million Euro).
2.12 Government has also prepared a medium-term agriculture policy paper setting out the
priorities for government support to the sector over 2006-2010. This emphasizes:

Improving agricultural productivity, and raising the contribution of agriculture in
rural incomes;

Using participatory approaches to determine service priorities;

Reducing further the role of the state in agriculture - through further cuts in transfer
payments and government involvement in procurement activities;

Aligning government support to the sector with WTO and EU rules and regulations;

Supporting the development of self-sustaining agricultural producer unions; and,

Supporting greater private sector involvement in the provision of services in rural
areas.
2.13 Balance between development and social objectives. An important policy issue for
government is achieving an appropriate balance between ‘productive’ policies (aimed at rural
growth and enhancing productivity) and ‘distributional’ policies (targeting the poor). In this
regard, it will be important to assess the impact of recent reforms on service and market
access for small farmers in remote rural areas.
2.14 Affordability. It is not clear how the priority interventions proposed by government
are to be executed. There is also a question over the capacity of central line agencies and
local administrations effectively to utilize public funds. Given limited resources, strategic
planning exercises by the key implementing ministries, agencies and general directorates
therein are required to refine the core activities for government funding to rural development
in the context of productivity boosting and poverty reduction objectives.
2.15 Need for a coordinated approach.
Performance in agriculture, and rural
development more generally, are affected by a range of government spending and require a
coordinated approach between government (central and local), the private sector, NGOs and
others. For example, non-agricultural spending such as on rural roads is likely to have a
major impact upon opportunities for the development of agriculture. In the absence of a clear
policy for rural development the costing and prioritization of rural development expenditures
are not well coordinated. The need for a coordinated approach to rural development will
become increasingly important as decentralization proceeds.
2.16 Role of government. Government has made significant progress in redefining its role
in agriculture relative to other players. To date this has focused upon a reduction in state
transfers to agriculture, and reduced state involvement in agricultural production and
procurement activities. In the longer-term government should only intervene in agriculture to
correct for instances of market failure and to address specific social objectives (poverty
reduction).
2.17 It is also important that government consider how best to deliver its core agricultural
services in the context of proposed decentralization reforms, as well as options for
contracting out service delivery to the private sector.
Decentralization of agricultural
services will require clear identification of roles for central and local administrations.
Meanwhile, options for the contacting out of service delivery depend upon how quickly
capacity develops in the private and non-government sector (especially in less developed
regions), as well the trade-offs between potential efficiency gains of contracted-out delivery
on the one hand, and the costs of monitoring and regulating on the other.
2.18 Effectiveness and efficiency. For government agencies to strengthen their future
claim on public resources for spending to rural development, it is important that they
demonstrate effectiveness and efficiency (value-for-money) in the services they provide to the
sector. This issue is relevant across all government agencies. Analysis of the efficiency with
which government services to agriculture and the rural sector are provided is prevented by a
complete absence of data on costs and quality of services. There is also little needs
assessment undertaken in the design of rural development programs, with the result that
interventions tend to be supply- rather than demand-driven. These are issues that sector
agencies should seek to address if they wish to strengthen their future claim on public
resources. Decentralization reforms provide an opportunity to address these issues through
strengthened participatory planning and capacity building to record systematically information
on the costs of service delivery and outcomes achieved.
2.19 Wider impact of public spending to agriculture. Strengthening the claim for public
resources allocated to agriculture also requires an understanding of the links between
spending to agriculture and wider economic growth and poverty reduction. There have been
many international studies of the relationship between government expenditure and economic
growth, some of which show positive growth and poverty reduction effects from public
spending in agriculture (see Box 1).
Box 1 - Agricultural Spending and Economic Growth – A Review of the Evidence
A recent study of public expenditure in 43 developing countries shows average spending to agriculture falling
from 9.8 percent of agricultural GDP in 1980, to 7.9 percent of agricultural GDP in 1998 (Fan and Rao,
2003)15. This compares public spending to agriculture for developed countries of around 20 percent of
agricultural GDP.
The Africa and Latin America regions experienced a fall in spending to agriculture between 1980 and 1990
(the fall was especially sharp in Latin America), with some recovery of spending by 1998. Asia has
experienced a more gradual but steady decline in spending in agriculture, falling from 9.6 percent of
agricultural GDP in 1980 to 8.2 percent in 1998.
But what has been the impact of public spending to agriculture? The analysis by Fan and Rao (2003)
suggests that public spending to agriculture has a significant positive impact on agricultural GDP, with
investments in rural infrastructure (primarily irrigation and roads) and agricultural research contributing most
strongly to this growth. This is supported by other studies that suggest investment in productivity-enhancing
agricultural research has a larger output-promoting effect than other forms of public spending to agriculture
(including subsidies).
Fan and Rao show that overall the impact of government spending in different sectors is mixed. However, in
Africa, government spending on agriculture and health has been particularly strong in promoting economic
growth. In Asia, investment in agriculture has also had strong growth effects (together with education and
defense). The study also found growth in agricultural production to be the most crucial element in addressing
poverty in rural areas.
Several lessons can be drawn:
15

Governments should consider increasing spending in agriculture, particularly on productionenhancing investments such as agricultural research and rural infrastructure. This type of spending
not only yields high returns to agricultural production, but also has a large impact on poverty
reduction since most of the poor still reside in rural areas and their main source of livelihood is
agriculture.

Sector spending has differential impacts on economic growth, implying that there is potential to
improve efficiency of government spending by reallocation among sectors.

The estimated returns to agricultural research are as high now as they ever were, and high enough to
justify greater investment of public funds.
Fan, Shenggen; Rao, Neetha. 2003. Public spending in developing countries: (Discussion Paper) Washington, D.C.:
International Food Policy Research Institute (IFPRI).
3.
EXPENDITURE MANAGEMENT
3.1
The Public Expenditure and Institutional Review (PEIR) carried out in 2001
highlighted major weaknesses in the management of public expenditures. Although
government has subsequently made progress in improving budget systems, many deficiencies
identified in the PEIR are relevant to the rural sector institutions for most of the period under
review (1999-2003).
3.2
Information on rural sector expenditures is fragmented and presented in a way that
makes it difficult to analyze and interpret in a meaningful way. The lack of an overarching
policy for rural development and weak coordination between rural sector interventions is
compounded by the following problems:

Despite efforts to rationalize the ‘consolidated budget’ of central government16, a
significant number of special funding arrangements continue to be actively used by
rural sector agencies. This includes some very large revolving funds for managing
agency revenues – for example in forestry;

Spending to rural areas is fragmented amongst a large number of agencies, often with
overlapping mandates. A significant portion of the budget reported as ‘transfers’ is in
fact the movement of funds from one agency to another, rather than transfers to nonpublic entities. This conceals the true policy and program nature of expenditure.
Budget transparency would be improved by directly appropriating resources to the
ultimate spending agency;

Only economic and administrative classifications of expenditure are available. The
absence of functional and program classifications is a major handicap to linking
policies and budgets and monitoring and evaluating budget implementation.
3.3
Linkages between policies and strategic planning and the budget are weak. A
major weakness of the Five-Year Development Plan (FYDP) prepared by SPO is that it does
not provide an estimate of the fiscal costs of plan proposals, thus weakening the linkage of
policy proposals to the budget. The high inflation environment compresses budgetary time
horizons and discourages longer term fiscal planning - this is especially problematic for the
planning of long-term rural development programs. So far, Turkey does not use a multi-year
budget framework and only prepares annual budgets. The FYDP is translated into an annual
program statement prepared by SPO highlighting plan priorities for the coming year.
However, there are difficulties in translating this annual program into meaningful budget
allocations, in particular due to the fragmentation of information and budgets and a weak
budget coding and classification system.
3.4
The linkage between the investment budget and the recurrent budget is weak.
Budget responsibilities are divided between SPO (investment), MOF (personnel and other
recurrent expenditures) and Treasury (transfers). SPO oversees all investments from agencies
under the consolidated budget, State Owned Enterprises (SOE), special funds, autonomous
agencies and investment by local administrations which relies on foreign funding. Overprogramming of investment has been a longstanding problem, with an excessive number of
projects relative to resource availability. In the rural sector (and elsewhere) resources are
spread thinly over a large number of projects, with substantial delays in project
16
The term Consolidated Budget, as used in Turkey, refers to the aggregate of items in the General Budget and
the Annexed Budget which is submitted for Parliamentary review and approval.
implementation and completion. There is also little evidence that completed projects receive
adequate and timely funding for operations and maintenance from the recurrent budget.
3.5
The budget preparation process has little credibility with line agencies, who view
it mainly as an administrative requirement to obtain incremental funding for their ongoing
activities. Partly due to the high turnover of governments, policy formulation has been
neglected for many years both at the center and in line ministries. As a consequence, line
agencies have little policy guidance for the formulation of their budget. Until 2001, ministries
and other agencies did not receive either any indication on budget ceilings until very late in
the budget process, which generated frustration when top-down ceilings had to be reconciled
with bottom-up budget requests. At the same time, the need to curb macroeconomic
instability has led to severe fiscal constraints allowing very little scope for discretionary
decisions in the budget. Under these circumstances, budget preparation is largely a nonstrategic accounting exercise.
3.6
Budget implementation in Turkey is characterized by multiple sources of funding,
complex budget allocation procedures and the issue of visas (authority to incur expenditure)
not only by MOF, but also by the Turkish Court of Accounts (TCA). This system of multiple
ex-ante approvals is extremely rigid and hampers budget execution, thereby providing a
strong incentive for agencies to seek to develop off-budget sources of funding. It emphasizes
compliance with existing financial regulations, but provides no assurance that waste,
inefficiency and diversion of funds are minimized.17
3.7
TCA is the Supreme Audit Institution of Turkey, in charge of auditing the accounts of
all agencies under the general and annexed budgets. Each ministry has its own inspectorate
and a variety of other bodies also have diverse auditing responsibilities. The external audit
reports focus on compliance with regulations but give little attention to assessing performance
or efficiency. Despite the plethora of audit bodies, audit coverage is uneven with some
entities audited by several inspectors and auditors, whereas some others escape audit
altogether due to inadequate mandate of audit institutions or inadequate capacity or
willingness to fulfill audit mandates.
3.8
Following the PEIR, Government has taken important steps towards: (i) improving
budget coverage and classification; (ii) enhancing the budget preparation process, restoring its
credibility with line ministries and strengthening the capacity to formulate policies and
budgets within a medium term perspective; and (iii) improving budget execution and financial
accountability. The Public Financial Management and Control (PFMC) Law enacted in late
2003 provides a legal framework for structural and institutional reforms to upgrade public
expenditure management in Turkey, which will take several years to be fully implemented
and bear fruit.
3.9
The following steps have already been taken:

17
All budgetary funds18 (with the exception of the Support Price Stabilization Fund) and
all but five non-budgetary funds19 were closed by early 2002. The legislation enacted
to close these funds, however, still allows the Government to continue to collect these
These problems are being addressed under the recently enacted Public Financial Management and Control (PFMC) Law
(5018). This law also expands the mandate of TCA.
18 In 2000, there were a total of 62 budgetary funds.
19 In 2000, there was a total of 13 non-budgetary funds, most of which were closed in 2001 and 2002. The 5 remaining ones
are: Privatization Fund, Defense Industry Support Fund, Social Aid Solidarity Fund, Promotion and Publicity Fund, Saving
Deposit Insurance Fund.
revenues (now called special revenues) and transfer them to the relevant agency’s
account as a special appropriation.

Starting in 2002, MOF has tested a new government expenditure classification in six
pilot agencies. This budget classification, which is compatible with the Government
Finance Statistics (GFS) system, will improve budget transparency by allowing for a
comprehensive and consistent presentation of the budget across all general
government agencies, with a complete functional breakdown of expenditures (in
addition to economic and administrative breakdowns). The new GFS budget
classification is expected to become fully operational for the entire government in the
2005 budget.

The Prime Minister’s Call to the budget for 2002, included for the first time indicative
ceilings for both the recurrent and investment budgets for ministries and line agencies.

The Government has taken steps to limit the introduction of new projects into the
public investment program and to clean up the portfolio of dormant projects.

Budget reforms are also underway to build capacity for policy formulation and
improve the performance of public agencies. In accordance with the PFMC law, all
public administrations will be required to prepare strategic plans with measurable
objectives and performance indicators, which will serve as a basis for the preparation
of annual budgets and performance assessment. The SPO has issued guidelines for
strategic planning by key line ministries and departments including guidelines for
costing policies. Eight institutions have been selected as pilots for 2004 – among
which the Ministry of Agriculture and Rural Affairs (MARA) – to prepare strategic
plans by mid-2004 with support from SPO.

A new public procurement law was enacted in January 2002, with a set of technical
amendments adopted in mid-2003. The independent Public Procurement Agency
established under the law to oversee public procurement and ensure enforcement of
the new procurement standards became operational in 2003.

The PFMC law provides for a clarification of institutional responsibilities for internal
and external financial control and audit. It is expected that: (i) there will be a gradual
shift from a system of central (external) financial control to a system of financial
control that is internal to public administration units; and (ii) TCA will discontinue
involvement in budget execution and focus on ex-post audits, including performance
audits, with its mandate for external audit extended to all general government
agencies.
3.10 Most of the improvements described above will contribute to enhancing budget
transparency and facilitating its implementation. Efforts are also being made to improve the
linkages between policy, planning, and the budget.
3.11 Issues related to the role and size of public administration also have to be confronted.
Initial steps have been taken to rationalize public employment through a partial freeze on
recruitment by government line agencies and a reduction of redundancies in state enterprises.
There is still a need to address this issue in a broader perspective – by clarifying roles and
responsibilities of public administrations and considering the scope for transferring some
responsibilities to the private sector.
4.
RURAL SECTOR EXPENDITURE
Note on the Data
4.1
Rural development is affected by the level and effectiveness of a wide range of public
spending. This review covers public spending to the rural sector by five central government
agencies20 (covering agriculture, water resources and irrigation, environment, and forests),
and rural expenditure by local administrations (through municipalities, villages, and SPAs).
The review does not include expenditure on social services to rural areas, such as health and
education.
4.2
As indicated in Section 3, weaknesses in the way in which expenditures are recorded
raises a number of difficulties that suggest prudence should be exercised in the interpretation
of expenditure data. In particular:

The distinction between recurrent and investment budgets is ambiguous – many
investment activities are within the recurrent budget, and vice versa21;

It is not easy to disaggregate expenditures by functional classification;

There are still a multitude of off-budget expenditures that are not reflected in the
consolidated budgets of the various agencies; and,

Local administrations often provide some of the costs for activities implemented by
central government agencies - for example, operational costs for some MARA and
GDRS services.
Sources of Funding
4.3
Before discussing public expenditure to the rural in detail, it is helpful first to briefly
outline the major sources of funding to the sector. Sources of public funding comprise:

Allocations to sector agencies from the consolidated budget (representing the majority
of total funding) – including funding to State-Owned Enterprises (SOEs) active in the
sector (declining)

Funds generated by SOEs;

Revolving funds and other special funds (declining but still significant in certain subsectors);

Bank of Provinces (Iller Bank); and,

Local administrations.
4.4
Overall, the consolidated budget dominates public spending, accounting for an
estimated 90 percent of total spending across all sectors. The share of recorded development
spending (investment) within total government spending is very small – approximately 5
percent of total spending. Within the investment budget, the share accounted for by central
government (through the consolidated budget) grew from 46 percent in 1999, to almost 70
percent by 2002. This reflects efforts by government to reduce off-budget investment
spending flows to SOEs and special funds (Appendix Table 6).
20
21
MARA, DSI, GDRS, MOEF, and GDF.
This problem is being addressed through a new budget code and classification system introduced in the 2004 budget cycle.
Figure 1 - Actual Investment Expenditures by Source of Funding (1999-2002)
Investment Expenditures by Source of Funding
Bank of
Provinces
4%
Revolving Funds
2%
SOE
23%
Funds (off
budget)
6%
SOE under
privatization
5%
Consolidated
Budget
60%
Source: State Planning Organization
4.5
While domestic resources constitute the major source of public funding, external
funding accounts for a growing share of central government investment (rising from 13 to 29
percent of investment between 1999 and 2003). There is also some external funding that goes
direct to local administrations; most of which goes to urban municipalities and is only
recorded by SPO if it requires a guarantee by central government.
4.6
Besides their allocations under the consolidated budget, central government agencies
have traditionally received revenues through special funds, comprising ‘budgetary’ (included
in the budget) and ‘non-budgetary’ (off-budget) funds. These special funds proliferated in
Turkey in the 1980s and 1990’s and were financed through earmarked excise taxes and levies.
However, as indicated in Chapter 3, most of these special funds have been closed as MoF has
sought to rationalize the budget. For many of these funds, corresponding financial allocations
are now included in the consolidated budget and are subject to the same financial control and
spending mechanisms.
4.7
Earmarking of revenues still persists in some cases, with the transfer of revenues
(usually a small percentage) to the relevant agency as ‘special appropriations’ (sometimes
referred to as ‘special accounts’). Special appropriations are not included in budget
allocations at the start of the financial year, but are made during the year as revenues are
collected. Spending against these accounts can only be made for designated activities and are
reported in final budget expenditures. Most special appropriations are due to be abolished in
2005.
4.8
Government agencies that earn own-revenues typically manage these through
revolving funds. Revolving funds are fully off-budget (revenues and expenditures are not
included in the consolidated budget). Spending against these funds does not require ex-ante
approval, but are subject to the same ex-post financial controls and audit procedures as
expenditures under the consolidated budget.
4.9
A number of special funds are of relevance to the rural sector. MARA had several
special funds (including a large ‘pasture fund’), all of which closed in 200222. MARA
currently receives funding from just one non-budgetary fund, the ‘Social Aid Solidarity Fund’
(managed by the Prime Minister’s Office), for poverty-focused investment activities in
agriculture. MARA also has a number of revolving funds that currently are active (193 funds
in 2003).
4.10 The Ministry of Forestry had three non-budget funds (Forest Villages Development
Fund, Forestation Fund, Fund for National Parks) that were closed in 2002, but which still
operate as ‘special appropriations’. The General Directorate of Forests operates a large
revolving fund funded by sales of national timber reserves (equivalent to twice the allocation
to GDF from the consolidated budget). Other rural sector agencies (DSI, GDRS) also operate
revolving funds, but these are reported to be small.
4.11 Government intends to close all revolving funds and to integrate these funding flows
into the budget by 2007. While this will improve budget transparency, there are concerns that
it may discourage agencies from collecting user-fees, and may also result in a reduction in
funding for some services. To a large extent, the proliferation of revolving funds has been a
way for government agencies to secure off-budget revenues and continue their activities
despite shrinking government budget allocations and cumbersome budget spending
mechanisms. Government agencies are also concerned that until the system of ex-ante
approvals for budget expenditures is streamlined (in 2005), the closing of the various special
funds will hamper operational flexibility (especially for agricultural activities where timing is
essential).
4.12 It is recommended that reform of revolving funds should be undertaken on a case-bycase basis. Some funds are used to undertake activities that could and should be left to the
private sector (this applies to some of the revolving funds currently managed by MARA, for
example in the livestock and seed sub-sectors). Alternatively there may be a justification to
retain funds that are tied to the provision of specific public services that have a pro-poor
focus, provided that appropriate controls and mechanisms are in place to ensure
accountability, transparency and efficiency of fund use.
4.13
Local administration revenues comprise:

A share of central government tax revenue;

Taxes and duties levied locally;

User-charges and other revenues earned by local administrations; and,

Special aids and funds.
4.14 By law, 6 percent of state tax revenues are allocated to municipalities in proportion to
their population,23 while Special Provincial Administrations (SPAs) receive 1.12 percent of
general tax revenues (also distributed in proportion to their population).24 Locally generated
Four other special funds were previously managed by MARA: ‘State Aid Fund for Investment Activities of Agricultural
Co-operatives’; ‘Handicraft Development Fund in Villages’; ‘Farmers and Co-operatives Educational Fund’; and ‘Fund for
Farmers Harmed by National Disasters’. These funds received only small allocations before being closed in 2001/02.
23 Up until 2002 municipalities received an additional 3 percent from the ‘Municipalities Fund’ under the Ministry of Public
Works, and 0.25 percent for the ‘Local Authorities Fund’ from the Ministry of Interior and the Ministry of Public Works.
These additional allocations stopped in 2002.
24 Up until 2002, a further 0.28 percent was transferred to SPAs from the Ministry of Interior for investments by SPA, and 0.3
percent was granted to the ‘Local Authorities Fund’ by the Ministry of Interior and the Ministry of Public Works. These
additional allocations stopped in 2002. However, special appropriations continue to be made to the Ministry of Interior for the
22
revenues include local taxes and duties, users-fees for municipal services, and other revenues
received by local authorities. Local governments, especially SPA, also receive special funds
as transfers from central government ministries, in particular the Ministry of Interior and the
Ministry of Public Works. A local tax (salma) is collected by village authorities.
Overall Expenditure Levels and Trends
Central Government
4.15 Table 4 shows overall trends in expenditure from the consolidated budget, presented in
constant 1999 prices. This represents the majority of total public spending (but excludes some
spending by local administrations and SOEs, and off-budgetary funds)25.
4.16 The table shows total expenditure from the consolidated budget rising 34 percent in
real terms from 1999 to 2002. In 2003, public expenditure from the consolidated budget
contracted by 5 percent; a further contraction of 11 percent is forecast for 2004.
4.17 Since 1999, recurrent expenditure has consistently accounted for around 95 percent of
total spending. This comprises significant spending on interest payments and other transfers,
which account for around 45 percent and 25 percent of total spending respectively - personnel
and other recurrent expenditure accounting for 25 percent of spending. This leaves just 5
percent for development (investment) activities. The share of expenditure on investment
activities appears low - - compared to 13 percent for recent EU accession countries26 - but
weaknesses in the way in which expenditures are recorded suggest that the recurrent budget
may also include some investment spending.
4.18 Spending to rural sector agencies has fallen from 3.5 percent of the consolidated
budget in 1999, to 3 percent of the budget in 200327. When other transfers to the rural sector
(agricultural subsidies, income support) are included, the share rises to around 5-6 percent of
the consolidated budget. The overall share of spending to the rural sector (a definition
broader that agriculture alone) is low relative to other countries. The share of total public
spending allocated to agriculture is typically around 6-8 percent for developing countries, and
3-5 percent for developed industrialized countries. Examples of the share of public spending
to agriculture in comparator countries (as a share of total budget) include: Poland (4 percent),
Kyrgyz (7 percent) Armenia (9 percent), and Nicaragua (8 percent). Given that our analysis
extends beyond agriculture to include some rural infrastructure (especially roads), one would
expect spending closer to 10 percent of the budget.
transfer of funds to SPA (mostly for the construction of local school buildings, rural roads and other infrastructure
investments such as village sewerage systems).
25 This review estimates that spending in other areas not captured within the consolidated budget accounts for around 10
percent of total public spending.
26 EU Accession-7 includes Czech Republic, Hungary, Slovak Republic, Slovenia, Estonia, Latvia and Lithuania, but
excludes Poland (Source: Poland PEIR, 2003).
27 This is equivalent to 1.1 percent of GDP in 2003 - down from 1.4 percent of GDP between 2000-2002.
Table 4 - Consolidated Budget - Expenditure Trends, (Constant 1999 Trillion TL)
1999
28,085
5.5%
2000
30,951
5.3%
2001
34,384
5.1%
2002
34,185
6.0%
2003
33,786
5.1%
20043
Alloc.
31,516
5.3%
993
3.5%
1,141
3.7%
1,033
3.0%
1,124
3.3%
976
2.9%
926
2.9%
a) Recurrent- Share of Rural Cons. Budget
69.1%
67.4%
67.6%
60.6%
72.2%
71.0%
- personnel
- agency transfers
- other recurrent4
61.6%
6.2%
1.2%
57.1%
9.1%
1.2%
60.8%
5.5%
1.3%
54.0%
4.8%
1.7%
66.0%
3.9%
2.3%
61.8%
3.2%
6.0%
b) Investment- Share of Rural Cons. Budget
30.9%
32.6%
32.4%
39.4%
27.8%
29.0%
Consolidated budget1
Share of Investment
Rural Consolidated Budget2
Share of Rural within Consolidated
GDP Deflator (SIS)
1.0
1.5
2.3
3.4
4.1
Sources: State Planning Organisation, State Institute of Statistics.
1
Excludes spending by local government, spending to SOEs, and spending on ‘special’ funds.
2
.’Rural’ comprises expenditures by MARA, MOEF, DSI, GDF, and GDRS.
3
Budget allocations for 2004 do not take into account the supplementary budget passed in March 2004, which
cut discretionary expenditures by 13 percent across all ministries.
4
‘Other transfers’ are agricultural subsidies additional to agency transfers.
4.19 An alternative measure of assessing the level of spending to the rural sector is to show
spending as a proportion of GDP. In Turkey, spending through rural sector agencies has
fallen from 1.4 percent of GDP in 2000-02, to 1.1 percent of GDP in 2003. This is low
relative to data for comparator countries, which tends to show spending to agriculture at 1.5 2 percent of GDP. However, when other transfers are included, the figure for Turkey rises to
2 percent of GDP (2003). This is still a little lower than might be expected given the broader
coverage of the review.
Table 5 - Comparator Country Data, 2001-2004
Agriculture as
Share of GDP
A
Agriculture
Budget share
B
Agric. Spending
As % GDP
C
Ratio of
Budget/GDP
Shares for Ag.
B/A
Ratio of Ag.
Spending As a
Share of Ag. GDP
C/A
13%
5%
6%
4%
2%
2%
0.46
0.83
0.15
0.37
Mexico
4%
5%
0.7%
1.35
0.16
Venezuela
5%
3%
0.5%
0.67
0.12
China
15%
11%
1.2%
0.71
0.08
Turkey*
Poland
India
23%
15%
1.8%
0.63
0.08
*For Turkey, this is actually total rural spending (including both transfer and non-transfer budget
Source: Fan, Shenggen and Neetha Rao (February 2003) "Public Spending in Developing Countries: Trends,
Determination and Impact" International Food Policy research Institute, EPTD Discussion Paper No.99; State
Institute of Statistics; Own Calculations.
Note: Agriculture spending in Poland includes a large subsidy and pensions element, equivalent to around 2.5%
GDP.
4.20 It is important that decisions over future levels of public funding to agriculture and the
rural sector are based upon an assessment of the quality of expenditures provided.
Productivity growth in the sector also depends as much upon improvements in the wider
policy and institutional environment, as upon the provision of public-funded rural services.
4.8
Local Administrations
4.21 Municipalities account for most of the spending by local administrations. Data from
SIS28 on budgets and final accounts of municipalities and SPA (Appendix Table 5) indicate
that final expenditures of municipalities are almost five times that of SPAs and villages.
Villages account for a negligible share of expenditures (about one-tenth of SPA expenditures).
Expenditures of municipalities below 20,000 population are roughly equivalent to total
expenditures of SPAs. As villages and SPAs have limited financial resources compared to
municipalities, many small settlements have been applying to set up a municipality as allowed
by law for a population of at least 2,000 residents. However, the Ministry of Interior has not
allowed the creation of new municipalities since 1990, to avoid a continuing increase in the
high number of very small municipalities.
Figure 2 - Distribution of Local Administrations’ Budget
Breakdown of Local Administrations' Budget
SPAs
16%
Villages
3%
Municipalities
81%
Source: State Planning Organization
4.22 Estimates from SPO indicate that total consolidated expenditures of local
administrations (all sectors) represent less than 4 percent of GNP in 2002 and 2003, down
from around 5 percent in earlier years. This compares to central government consolidated
budget expenditures, which represent around 40 percent of GNP (see Appendix Tables 3 and
4).
4.23 Local administrations nonetheless account for a significant share of the total
investment budget, estimated at 30 percent of the total (Appendix Tables 6 and 7)29. This is
mainly due to the low share of investment spending in central government expenditure.
4.24 The share of agriculture within overall local administration spending is small. Data
from SPO suggest that only 3 percent of local administration investment spending goes to
agriculture - equivalent to 0.04 percent of GNP (Appendix Table 7). The largest areas for
28
In general, data on local government revenues and spending are not very reliable. In the absence of consolidated data from
the Ministry of Interior, information is based on SIS publications and data provided by SPO, which are not entirely
compatible.
29 In its estimates of investment by local governments (Table 7), SPO has attempted, in principle, to eliminate double
counting with general budget and other central government funding sources. This is the main reason for differences with
investment expenditures by local governments reported by SIS (Table 5), since SIS data include all sources of funding of
local governments.
local government investment spending are drinking water supply, sanitation and other basis
services (45 percent), and rural transport infrastructure (33 percent).
Economic Classification
4.25 This section reviews rural sector spending by economic classification, comprising:
salaries, subsidies and transfers, other non-wage recurrent spending, and investment spending.
Overall, since 1999, the shares of the rural budget allocated to recurrent and investment
spending have remained consistent, at around 70 percent recurrent and 30 percent investment
(Table 5). The exception being 2002, when unusually high levels of investment in irrigation
raised investment spending to almost 40 percent of total spending.
4.26 Table 6 shows the breakdown of rural spending by economic classification. Recurrent
expenditures are dominated by salaries, which account for around 90 percent of recurrent
spending. This is very high. While there can be no absolute rule, it is generally considered
that the effectiveness of agricultural services is likely to be adversely affected if salary costs
exceed 60 percent of the total recurrent budget.
Table 6 - Breakdown of Rural Spending by Economic Classification (1999-2004)
Recurrent
of which:
Personnel
Other current
Transfer
Investment
1999
69%
2000
67%
2001
68%
2002
61%
2003
72%
2004 Alloc.
71%
89%
2%
9%
85%
2%
13%
90%
2%
8%
89%
3%
8%
91%
3%
6%
87%
8%
5%
31%
33%
32%
39%
28%
29%
100%
100%
Total
100%
100%
100%
100%
Source: MoF.
Note: Comprises ‘rural’ sector spending by GDRS, DSI, MARA, MOEF and GDF.
4.27 Spending on transfers to rural agencies as a share of the rural sector recurrent budget
has fallen from 13 percent in 2000, to 6 percent in 2003 (and an allocation of 5 percent in
2004). This reflects recent reforms by government to curb funding to subsidies and transfer
payments.
4.28 ‘Other’ non-wage recurrent spending has increased from 2 percent of the rural
recurrent budget in 1999, to 3 percent of the budget in 2003 (and an allocation of 8 percent in
2004). Spending on this item includes funding for logistical and operational costs such as
fuel, travel allowances, utility charges, communications, and general office costs. These items
are essential for the effective provision of public-funded rural services. Although ‘other’ nonwage recurrent spending is increasing, it is still relatively low – in many countries for
example, 10 percent of the recurrent budget is typically allocated to the logistical and
operational costs of rural development programs. The problem of low funding for non-wage
recurrent spending, which is general for all government agencies, is particularly acute in the
rural sector. To some extent, off-budget funding mechanisms act to alleviate the difficulties
created by the low allocations for ‘other current’ expenditures under the consolidated budget;
but these alternative funding sources are being closed, or consolidated within the consolidated
budget. This raises concerns over how operational costs will be covered in the future.
4.29 As indicated in Table 4 above, overall levels of investment spending in Turkey are
low – accounting for only 5 percent of the total consolidated budget (all sectors). Within the
rural sector however, investment represents 30 percent of total spending under the consolidate
budget.
4.30 Table 7 below, shows a more comprehensive picture of total public investment (all
sectors), including, inter alia, investment spending by SOEs and special funds (but excluding
local administrations). This shows that rural agencies’ investment budget share30 within the
total public investment is fairly stable at 13 %. This is in line with the share of agricultural
GDP but far less than the rural GDP share of over 30 percent. Moreover, this 13 percent share
of rural is offset by the fact that overall levels of investment spending in Turkey are low –
accounting for only 5 percent as mentioned above. Investment spending in agriculture
accounted for 9 percent of total public investment.
Table 7 - Share of Total Public Investment (Nominal Trillion TL)
1999
2000
2001
2002
2003
Public investment1
% of GNP
2,992
3.8%
5,154
4.1%
6,569
3.7%
10,815
4.0%
12,464
3.5%
Total ‘rural’2
% of total
361
12.1%
689
13.4%
897
13.7%
1,644
15.2%
1,480
11.9%
20043
Alloc.
11,978
1,539
12.8%
Agriculture 3
238
434
599
1,202
1,142
1,167
% of total
8.0%
8.4%
9.1%
11.1%
9.2%
9.7%
Sources: State Planning Organisation, State Institute of Statistics.
1
Includes spending on SOE’s and special funds. Excludes investment by local administrations.
2
Includes the whole agriculture sector (as defined by SPO), plus investment by GDRS and GDH in rural roads
and investment by TEDAS in rural electricity distribution.
3
Excludes roads, drinking water and electricity.
4.31 The breakdown of investment by local administrations (Appendix Table 7) shows a
predominance of investment in drinking water supply and sanitation and in transportation
(mainly in urban municipalities). Investment by SPAs is mainly directed to education; SPAs
are required by law to spend at least 20 percent of their total budget in this sector (mostly
construction of local school buildings). SPAs also invest in transportation (rural roads) and
water supply and sanitation, mostly in villages and small municipalities. Investment by SPAs
in agriculture is negligible. An unknown amount of investment in roads and water supply by
municipalities also benefits rural areas31.
4.32 Figure 3 shows the breakdown of total rural spending from the consolidated budget
between the five main sector agencies (for 2003). This shows that together GDRS and DSI
account for the majority of sector spending (67 percent), followed by MARA (18 percent),
and GDF and MOEF (8 percent and 7 percent respectively).
30
Including non-agriculture investments undertaken by GDRS and GDH in rural infrastructure (mainly rural roads, water
supply) and TEDAS (electricity).
31 Although SIS provides data on investment by municipalities, these are only aggregate figures without any functional
breakdown. However, the level of investment by municipalities in rural roads and water supply is likely to be very small.
Figure 3 - Share of Total Rural Spending (Recurrent and Investment) by Agency (2003)
GDF
8%
MOEF
7%
GDRS
43%
MARA
18%
DSI (irrig)
24%
Source: Ministry of Finance and Own Calculations
4.33 Table 8 provides a more detailed breakdown of the relative share of recurrent and
investment spending between agencies (for 2003) and Table 9 shows the breakdown of
investment budget by agricultural and non-agricultural activities. This shows that GDRS
accounts for almost half of total personnel spending, a major share of ‘other recurrent’
expenditures, and nearly one-third of investment. DSI has a relatively low share of personnel
and ‘other recurrent’ spending, but a large share of total investment (56 percent).
Table 8 - Share of Recurrent and Investment Spending By Agency (Percentage Share, 2003)
Percent
GDRS
DSI
MARA
GDF
MOEF
TOTAL
Source: MoF.
Personnel
49
11
23
10
7
100
Recurrent
Other Current
43
2
32
14
9
100
Investment
Transfer
13
36
8
18
25
100
31
56
6
1
6
100
4.34 Thus, investment spending is allocated heavily towards large agricultural infrastructure
works by DSI- on average about 45 percent over 1999-2004 period. The on-farm irrigation
investments and land consolidation activities executed by GDRS are relatively under-funded.
As noted in Chapter 4 of the main report, this has led to a situation in which the construction
of head-works and main canals in certain irrigation systems are finished but the works for onfarm irrigation structures are left waiting in a long line of un-tendered contracts for many
years. There is also relatively little investment in the non-agricultural rural priorities of roads
and drinking water (GDRS). As shown below, non-agricultural investment accounts for on
average accounts for 25-30 percent of total rural investment.
Table 2. 7 Investment by Rural Agencies (Constant 1999 Trillion TL)
Agriculture
Total Agricultural Share, of which:
DSI-Irrigation
GDRS-Irrigation and Other Agriculture
MARA
MEF
GDF
Other
Rural Non-Agricultural
Total Share, of which:
Rural Roads-GDRS&GDR
Rural Drinking Water-GDRS
Rural Electrification-TEDAS
Total
Source: State Planning Organisation.
1999
242
74%
47%
9%
4%
3%
6%
5%
85
26%
14%
8%
4%
100%
2000
263
68%
44%
8%
4%
3%
5%
5%
121
32%
13%
7%
11%
100%
2001
215
68%
39%
7%
7%
3%
5%
6%
103
32%
20%
7%
5%
100%
2002
244
67%
38%
7%
6%
4%
4%
7%
120
33%
18%
6%
9%
100%
2003
272
77%
48%
7%
7%
5%
4%
7%
79
23%
14%
5%
4%
100%
2004
249
76%
48%
8%
7%
5%
4%
4%
79
24%
13%
5%
6%
100%
Functional Classification
Overview
4.35 An important characteristic of the functional distribution of public spending in the
rural sector is that almost half of expenditures are allocated to transfer payments in the form
of income support and subsidies. (Reference: Review of the impact of the reform of
agricultural subsidization). This section reviews the functional distribution of expenditures
other than these subsidies.
4.36 The way in which expenditure data is recorded prevents detailed review of public
spending to the rural sector in terms of services delivered and outcomes achieved. However,
functional analysis is possible at a general level to the extent that administrative entities are
specialized in some functions. This section therefore reviews rural sector expenditures by
each of the five major sector agencies:

GDRS accounts for the largest share of the rural sector consolidated budget at between
40-45 percent of spending during the period under review. GDRS is mainly involved
in the construction of rural roads (80 percent of its funds in 2003) and, to a lesser
extent, village water supply works (9 percent), small-scale irrigation and soil
conservation (9 percent) and land consolidation (3 percent).

DSI is responsible for the construction of large- and medium-scale irrigation facilities
and accounts for around 25 percent of the rural sector budget. There has been
significant annual variation, with a peak in investment in 2002, but no clear trend in
DSI’s share of the rural sector budget during the period under review.

MARA has the main responsibility for agricultural support services in crop and
livestock production (including extension, research, veterinary services, plant
protection, etc.) and accounts for about 18 percent of the rural sector budget (planned
to increase to 21 percent in 2004).

MOEF and GDF, both involved in the forestry/environment sub-sector, together
accounted for 15 percent of rural sector expenditure in 2003.
4.37 As indicated in Section 2 of this report, investment by the five main rural sector
agencies is not coordinated. Regional planning is done by SPO but spending agencies are
limited in the extent to which they can provide financial support to these plans due to the low
share of discretionary expenditures in their budget. The result is that, with the exception of
GAP, regional development plans have remained unrealized. Coordination of investment
activities within the GAP area is achieved through a coordinating agency (GAP
Administration) and a high-level decision-making authority (GAP High Council) (for details
see Appendix 2).
4.38 There are also problems in relation to the prioritization of investment expenditures at
the regional level. Each year a large number of provinces (50 out of 81 in 2003) are declared
as priority provinces for investment, but only limited advantages are set for the priority
regions (e.g. higher salary for civil servants).
General Directorate of Rural Services (GDRS)
4.39 Total expenditures of GDRS under the consolidated budget have been declining in real
terms since 2000 (Appendix Table 12). The main responsibility of GDRS is to develop smallscale rural infrastructure (construction of small scale irrigation schemes and drainage systems,
rural roads and village water supply systems, land consolidation and resettlement). Despite
this mandate, investment activities currently account for only 22 percent of GDRS
expenditure (down from 26 percent in 1999). The bulk of GDRS expenditures are on wages –
in 2003 salary costs accounted for 76 percent of total GDRS spending, and 99 percent of the
recurrent budget.
4.40 During the period 1999-2003, on average 54 percent of the GDRS investment budget
was spent on rural roads, 24 percent on agriculture (mainly irrigation) and 21 percent on other
public services (including drinking water supply) (Appendix Table 13). The share of rural
roads in the investment budget of GDRS has been decreasing steadily during this period,
while the shares to agriculture and other services have increased.
Figure 4 - GDRS’ Consolidated Budget Expenditures
GDRS Consolidated Budget
Actual Expenditures in real terms
TL billion in 2003 prices
2,500,000
2,000,000
Total
Personnel
Other current
Investment
Transfer
1,500,000
1,000,000
500,000
0
1999
2000
2001
2002
2003
Source: MoF
4.41 GDRS currently employs 53,600 staff, mainly in its regional and provincial field
offices. Most staff (about 45,000) is laborers employed for construction works carried out by
GDRS field offices. This workforce is included in the GDRS personnel budget, whereas other
costs (mainly fuel, maintenance and repairs of machinery and equipment) incurred for these
construction works are included in the investment budget32. Most of the work carried out by
GDRS directly is related to rural roads, whereas other works related to agriculture (mostly
irrigation), water supply and settlement are executed mainly through private contractors.
4.42 Besides funding under the consolidated budget, a significant part of GDRS activities
are carried out at the request of SPAs and protocols with other administrations (Appendix
Table 14). SPAs usually provide some contribution towards the cost from their own budgets.
Given limited allocations to GDRS for fuel and equipment repairs and maintenance under the
consolidated budget, this enables the mobilization of GDRS staff and machinery which
otherwise would remain idle. Nonetheless, both staff and machinery of GDRS remain
significantly under-employed due to limited operating funds.
4.43 All infrastructure built with assistance of GDRS is transferred to beneficiaries, usually
local administrations and in some cases cooperatives (especially for irrigation schemes). In
principle, GDRS is not responsible for the operation and maintenance costs of infrastructure.
However, its investment budget includes provision for rehabilitation and/or major repairs of
rural roads, which local authorities are not able to carry out without assistance. There is no
policy for the recovery of these costs by GDRS from local authorities.
4.44 GDRS activities in agriculture consist mainly of developing small-scale irrigation,
construction of small dams, and on-farm irrigation development including land leveling and
lower level drainage systems. GDRS is also involved, to a lesser extent, in soil conservation
works, land reclamation and construction of animal drinking water ponds. In principle, there
is a complementarity between DSI and GDRS for large-scale irrigation schemes, with DSI
responsible for main construction works and delivery of water to tertiary canals, and GDRS
responsible for on-farm irrigation development. However, the programs of the two agencies
are not closely coordinated, undermining the effectiveness of some investments.
4.45 Despite significant staff reductions and rationalization since the mid-1990s, the staff
and machinery of GDRS are under-utilized. While there is a need for further investment in
rural infrastructure, the value of maintaining a large workforce and capital equipment without
sufficient operating funds is questionable. GDRS (or rather its predecessors 33) was
established at a time when there were few contractors in rural areas, which is not the case any
more. There may be scope for contracting out activities to the private sector (except perhaps
in the most remote rural areas), which would further stimulate the emergence of small rural
entrepreneurs and the development of off-farm private activity in rural areas. There is also
little justification to central planning of small and scattered works like those carried out by
GDRS.
4.46 Under current government decentralization proposals, GDRS is to be abolished, with
its field services transferred to local government, and its residual central functions to MARA.
The staff remaining under MARA will need to play a stronger role in ensuring that a larger
share of irrigation sector funding is switched from head-woks and canals to on-farm irrigation
structures and accompanying land consolidation activities, with priority given to areas where
head-works and canals are completed. MARA should also promote: i) a switch from funding
32
33
As shown in Annex Table 12, the “other current” budget of GDRS has been negligible throughout the period
1999-2003.
TOPRAKSU (soil and irrigation works), YSE (rural roads, drinking water and electricity) and Toprak Iskan
(land and settlement). TOPRAKSU and YSE were established around 1965.
in-house staff for road construction to outsourcing through competitively tendered contracts;
and ii) the redeployment of such savings into increased road maintenance and rehabilitation
and investments for road network expansion where the probability of locally funded
maintenance is highest.
General Directorate of State Hydraulics Works (DSI)
4.47 Investment accounts for two-thirds of total spending by DSI under the consolidated
budget, with the bulk of other expenditures consisting of personnel. Until 2002, total
investment expenditure reported by DSI (Appendix Table 11) was significantly higher than
MOF consolidated budget data,34 as DSI also received additional resources in particular from
the ‘Public Participation Fund’ managed by Treasury. This was not for irrigation, but for
investment in energy and water supply projects.
4.48 Irrigation accounted for around one-third of DSI’s total investment budget during the
period 1999-2004 (Appendix Table 11). Other investments by DSI, which are outside the
scope of this review, relate to energy (power generation) and urban water supply. DSI has a
breakdown of personnel and other recurrent expenditures by region, but not on a functional
basis - hence recurrent expenditures cannot be disaggregated between sectors.
4.49 Allocations from MOF to DSI under the consolidated budget (Appendix Table 9)
provide only a small allowance for ‘other recurrent’ expenditures, representing less than 0.5
percent of DSI’s total actual expenditures under the consolidated budget throughout the period
1999-2003 (planned to increase to 3 percent in 2004). The tiny size of DSI’s ‘other recurrent’
budget limits expenditure on operation and maintenance of irrigation infrastructure. Prior to
1993, most large-scale irrigation schemes were managed by DSI after construction was
completed, with operating costs funded through user-fees. However, poor collection rates
(about 40 percent recovery of costs) resulted in inadequate maintenance of irrigation schemes.
Starting in 1993, DSI initiated a program of accelerated transfer of operation and maintenance
functions to Water User Organizations (WUO). By the end of 2003, over 90 percent of the
total irrigated area developed by DSI had been transferred to WUOs. This transfer concerns
not only tertiary and secondary canals, but also the main canal of irrigation schemes. WUOs
are self-financing and responsible for setting and collecting users’ fees to cover the costs of
their activities.
4.50 The transfer of responsibilities to WUOs has resulted in significant savings in staffing
and other costs for DSI, together with substantial improvements in the effectiveness and
efficiency of irrigation facilities. However, many WUOs still need further strengthening to
develop as sustainable organizations that can adequately take care of the financial and
technical management of the irrigation systems. Also, DSI still has to manage the main canal
and drain systems, and little progress has been made so far with the introduction of a specific
irrigation service fee intended for this purpose. Given its limited operational budget, DSI
funds these remaining tasks from its investment budget. Nonetheless, both head works and
many other parts of existing irrigation systems continue to slowly deteriorate. This reduces
the efficiency and economic returns from the substantial public investments that have been
made in irrigation infrastructure.
4.51 The wage bill of DSI is substantial, accounting for 25-30 percent of total expenditures
during the period 1999-2004 (Appendix Table 11). DSI currently employs 33,500 staff.
34
Figures reported respectively by MOF and DSI for actual expenditures other than investment are consistent,
with only minor differences.
Although there has been some reduction in DSI total workforce (reported to be 36,700 in the
PEIR carried out in 2000/01) this seems to be mainly the result of attrition35. DSI reports that
no jobs were lost following the transfer of irrigation management to WUOs, as staff was
moved to other departments. A majority of DSI staff are unionized wage earners and not civil
servants and the different processes governing adjustments in remuneration have created
discrepancies between salaries (for civil servants) and wages (for unionized skilled and
unskilled laborers). Wages for temporary unskilled laborers are higher than base salaries of
senior civil servants. This contributes to demoralization among civil servants who neither
have access to unions nor any real power to influence their salaries and benefits. These
problems limit the ability of DSI to recruit qualified engineers, managers and other
professionals. These issues require a fundamental review of staffing and salary arrangements
at DSI and may require the retrenchment of unskilled staff in line with a more focused
investment program.
4.52 Over-programming of public investment has been a longstanding problem in Turkey,
and is particularly striking in the case of DSI as it deals with large investments that often
require several years to complete. The DSI investment program in agriculture for 2004
includes a total of 183 projects, with total costs estimated at TL 40,235,000 billion of which
TL 14,318,000 billion has already been funded by the end 200336. With annual allocations at
the level initially set for 2004 (TL 745,349 billion), it would take almost 35 years to complete
the current portfolio of DSI projects. However, this is an improvement over the situation that
prevailed in 200037, and government is continuing to rationalize the public investment
program (both DSI and other public agencies), in particular by limiting the entry of new
projects38 and cleaning up the portfolio through the elimination of ‘dormant’ projects39.
However, funding levels remain insufficient to enable the timely completion of current
projects and projects continue to be implemented without an explicit scheme or prioritization.
4.53 Stock-piling of projects in DSI irrigation investment portfolio stems from many years
of deficiencies in the prioritization of public investment mainly due to a lack of political will
to take hard decisions, together with a reduced capacity to fund public infrastructure as a
result of inadequate public debt management. DSI does not have a detailed plan at the agency
level and is not in a position to take hard decisions when faced with funding constraints, as it
cannot unilaterally suspend or freeze ongoing contracts in the absence of enabling legislation
and higher level decisions during the budget process. Its annual budget requests are based on
estimates of the funding that would be required in order to implement all ongoing projects as
planned. This has continued to be the case in recent years, although indicative ceilings are
reportedly given to line agencies before budget preparation.
35
However, operations and maintenance personnel on have been cut by 5,000 over the last ten years.
These costs estimates are updated in 2004 constant prices.
37
As of end 2000, DSI had 223 irrigation projects in its portfolio. The total budgetary requirement to complete
the remaining works on all ongoing irrigation projects amounted to TL 11,606,000 billion in constant 2000
prices, compared with an annual allocation of TL 255,650 billion for DSI irrigation investment budget in
2000. This represents only 2.2percent of the remaining funding requirements to finish off the existing project
stock without any further additions, i.e. about 45 years to complete the existing portfolio. (Source: PEIR
2001).
38
On average, 18 projects were introduced annually in DSI irrigation portfolio during 1995-1998 (45 in 1995,
none in 1996, 19 in 1997, and 8 in 1998). Starting in 1999, only one or two new projects have been
introduced every year.
39
The public investment program has traditionally included projects that will not be implemented immediately,
corresponding to “dormant” projects receiving only “trace allocations” (e.g. for feasibility studies) from SPO.
It is likely that this category includes a significant proportion of projects of limited or doubtful economic
value but with some influential constituencies lobbying for their inclusion.
36
4.54 Throughout the period 1999-2004, DSI received only about 15-20 percent of its budget
requests for investment in agriculture (Appendix Table 11). At the same time, the wage bill
has increased from about 26 percent of DSI total expenditure in 1999 to an estimated 30
percent in 2004. The way in which funds are released by MOF has also been a constraint for
effective and efficient operation of DSI. The release of budgetary appropriations has often
been temporarily frozen and/or partly cut. Even though this is usually compensated before the
end of the year, it creates uncertainties with contracted works and cash flow constraints that
result in delays in payment of contractors and implementation of ongoing projects.
4.55 Weak procurement procedures have also contributed to low efficiency of public funds
invested in irrigation. Prior to the recent enactment of the new public procurement law,
bidders who offered discounts on pre-determined unit construction costs increased their
chances of winning the contract. This resulted in substantial upfront contractor discounts,
followed by contract variations and cost escalation of ongoing projects in subsequent years.
Furthermore, new projects were introduced in DSI investment program with incomplete
design features, with responsibility for final designs allocated to the contractor. This creates
further potential for large increases in the costs of projects through contract modifications.
Final designs are usually done piecemeal, so that the contractor can advance with the works
without waiting for the full package. However, the costs of not doing full investigations and
final designs in advance can be high, as potentially less costly alternatives cannot be explored.
The full costs of the project becomes evident only in the process of its implementation, which
results in systematic and continuous underestimation of the financing needs of the investment
portfolio and thus exacerbates the problem of incomplete projects. Once the original contract
sum is spent (after allowance for general price inflation), unfinished schemes may be
transferred to users who then may have to resort to their own limited means to finish the
works.
4.56 All the above problems have contributed to poor utilization of public funds by DSI.
Lack of user participation in the planning, construction and financing of the irrigation
schemes exacerbates these problems. Although a legal framework exists for the recovery of
investment costs, existing decrees do not include any provision for adding interest and
adjusting for inflation and farmers’ dues have become meaningless. As the present
agricultural reform agenda has had some negative short-term on income in the farming
community, it would be unrealistic to expect government to adopt more stringent investment
cost recovery in the near future. Priority should be placed first on achieving adequate
recovery of operating costs to ensure the sustainability of irrigation investments. Even
without user participation in the financing of investment – which would be the surest way of
fostering least-cost designs and ownership of these projects – there is still room to seek their
increased participation in the planning, design and construction phase of irrigation schemes,
which DSI has started to do in recent years only to a limited extent.
4.57 Rationalization of the DSI irrigation portfolio is a priority. There is a need to take a
fresh look at the stock of existing projects, many of which have been in the pipeline for a long
time, in order to reassess their viability under present economic circumstances.
Rationalization of the portfolio also means making efficient use of DSI resources in terms of
staff, machinery and other installations. Increased reliance on the private sector for irrigation
development also needs to be considered. Under the Participatory Privatization of Irrigation
Management and Investment Project (PPIMIP) supported by the World Bank, WUO have also
started to contribute to the rehabilitation costs of existing irrigation systems. There may be
scope for further privatization of the development of new medium size irrigation schemes.
Channeling private sector funds to complement existing public funds would provide the
fastest means of exploiting the remaining irrigation potential in the country.
4.58 Recommendations on the restructuring of irrigation investment policies, including
issues related to the privatization of unfinished irrigation infrastructure, is being developed as
part of the ‘Irrigation and Drainage Sector Analyses’ carried out under the Rural Growth
Study. These analyses also include an assessment of constraints to improved efficiency of
water use and costs recovery.
Ministry of Agriculture and Rural Affairs (MARA)
4.59 The consolidated budget of MARA is dominated by wages, which have accounted on
average for 82 percent of its expenditures during the period 1999-2003 (Appendix Table 15).
This leaves precious few operating resources for MARA to adequately carry out its main
function, which is to deliver advisory and other support services. ‘Other recurrent’
expenditures have been on average only 4 percent of MARA total consolidated budget
expenditures. Some recurrent expenditures (including staff per diems, fuel and other transport
expenditures, etc.) are however funded through the projects included in the investment budget.
MARA also receives some off-budget funding, in particular from the Social Aid Solidarity
Fund,40 and some MARA staff carry out activities funded through revolving funds.
Nonetheless, overall funding of operational costs appears insufficient for effective and
efficient delivery of MARA services.
4.60 In real terms, the total consolidated budget of MARA has remained broadly constant
during the period 1999-2003. However, the composition of the budget between recurrent and
investment expenditures has fluctuated - from 1999 to 2001, investment expenditures
increased while personnel expenditures declined, this trend then reversed with an increase in
personnel expenditures and a decrease in investment over 2002-03. Initial budget allocations
for 2004 indicate a substantial increase in ‘other recurrent’ allocations, rising to 12 percent of
MARA’s total consolidated budget, with further reductions in investment. This appears to
correspond, at least in part, to the new budget codes and classification system that are being
introduced in 2004. In nominal terms, the total allocation to MARA under the consolidated
budget for 2004 is almost 25 percent higher than its actual 2003 budget expenditures.
Figure 5 - MARA’s Consolidated Budget Expenditures
TL billion in 2003 prices
MARA Consolidated Budget
Actual Expenditures in real terms
800,000
700,000
600,000
500,000
400,000
300,000
200,000
Total
Personnel
Other current
Investment
Transfer
100,000
0
1999
2000
2001
2002
2003
Source: MoF
40
The Social Aid Solidarity Fund is one of the 5 remaining non-budgetary funds and is managed by the Prime Ministry.
4.61 The investment program of MARA gives a detailed breakdown of expenditures by
General Directorates (Appendix Table16). Over the period 1999-03, the General Directorate
of Protection and Control (KKGM) accounted for the largest share of MARA investment
budget (33 percent) followed by General Directorate of Organization and Support TEDGEM
(24 percent), General Directorate of Agricultural Production Development TUGEM (19
percent), and General Directorate of Research TAGEM (11 percent), with miscellaneous other
projects accounting for the balance (13 percent).
Figure 6 - MARA’s Investment Budget (1999-2003)
MARA Investment Budget (1999-2003)
Other Projects,
13%
TAGEM,
11%
TEDGEM
Cooperatives
iinvestment credit,
18%
TEDGEM Other, 6%
TUGEM, 19%
KKGM, 33%
Source: MARA
4.62 About three-quarters of investment by TEDGEM consist of medium to long-term
credit extended to Agricultural Development Cooperatives (ADC)41. It is questionable
whether MARA should carry out this type of activity. Loans funded under the MARA
consolidated budget require a contribution of 15-20 percent from ADCs and are extended at
subsidized interest rates (18 percent in 2003, 9 percent in 2004) with two-years grace and a
repayment period depending on the type of project (e.g. five years for livestock purchase, ten
years for olive oil processing and packaging facilities). Loans are approved by MARA
provincial offices and handled through a protocol with the Agricultural Bank (Ziraat Bankasi),
with MARA assuming the entire risk.
4.63 MARA has carried out this activity for over thirty years and claims a recovery rate of
95 percent42. MARA receives many applications from ADCs for credit, but is able to serve
20-25 applications each year. It is planned that this activity will expand further in 2004.
TEDGEM reports that it extended a total of TL 24,000 billion in 2003 as investment credit to
ADCs under its consolidated budget, whereas the amount allocated for this activity under
MARA consolidated budget for 2004 would be TL 88,400 billion.43 In addition, the Social
Aid Solidarity Fund (non-budgetary fund) has started to channel funds to MARA since
October 2003 in order to carry out similar activities, with repayment over four to five years,
41
Most Agricultural Development Cooperatives (ADC) are small village level cooperatives. They operate under the general
cooperative law. It is estimated that there is a total of roughly 5,000 ADC with some 500,000 members. They tend to focus
mainly on activities not covered by Agricultural Sales Cooperatives and Agricultural Credit Cooperatives – e.g. dairy and
livestock, beekeeping, greenhouse production and marketing of fruit and vegetable, mushroom production, handicrafts,
consumer articles. It is reported that their numbers and business volumes are increasing.
42 Not independently verified by the consultants.
43 Until 2003, these amounts were under the investment budget of MARA. From 2004 onwards, they are included in its
transfer budget.
and at a zero interest rate. As of February 2004, TEDGEM has already received TL 11,000
billion from this fund and expects to receive a total of TL 200,000 billion in 2004.
4.64 It is not possible to carry out an analysis of MARA expenditures specifically related to
main functions such as research, extension or other key services, nor is it possible to assess
the efficiency (e.g. cost per unit) of these activities. As of February 2004, MARA had a total
of 38,400 employees, out of which about 1,800 work at the central offices in Ankara, and the
balance is distributed among provincial and district offices, research institutions and
laboratories.
4.65 TEDGEM is responsible for providing technical support to MARA field activities
related to extension and training of farmers and cooperatives. This includes agricultural
vocational schools and training centers for handicrafts. Field extension staff of MARA
consists on average of about 10 training and extension agents in each provincial office and 5
in each district. This represents a total staff of up to 5,500 extension agents - equivalent to
800 farmers per extension agent. Besides training its own field extension agents, MARA also
provides training to approximately 1,000 ‘agricultural consultants’ who are village residents
and paid by the SPA or village services unions. In order to promote improved efficiency and
responsiveness to farmers needs in the delivery of extension and other advisory services,
further efforts should be made to switch from a government-led extension service towards
increased involvement of professional/ farmers organizations and other non-governmental
organizations.
4.66 The General Directorate of Protection and Control (KKGM) coordinates the activities
of MARA related to plant protection, seeds certification and control of food production, as
well as animal health and veterinary services. Out of about 5,000 agricultural engineers
employed by MARA, around 2,000 work in plant protection activities. MARA currently
employs 3,000 veterinarians and 2,100 veterinary technicians, mainly in its field offices. This
compares with about 3,000 private veterinarians who are active mostly in rural areas.
Veterinarians employed by MARA provide health services, some of which could be
privatized.
4.67 In addition to resources provided under the consolidated budget, MARA used to have
a large non-budgetary fund for the development and improvement of pastures and meadows
(the ‘pasture’ fund)44. This fund closed in 2002, but government has continued to collect
corresponding revenues in 2002 and 2003, amounting to around TL 60,000bn annually, of
which only half have been transferred to MARA. The reduced level of funding and delays in
the release of funds from the consolidated budget create difficulties in the execution of these
activities, which need to be carried out in a timely manner at specific periods of the
agricultural season.
4.68 MARA has a very large number of revolving funds (Appendix Table 17). These
represent a significant share of MARA’s total expenditures; equivalent to 8 percent of MARA
spending from the consolidated budget in 2003. Most investment and staff salaries for
activities carried out under revolving funds are paid out of the consolidated budget, whereas
operating expenditures are paid from fund revenues. The resulting ‘profit’ (difference
between revenues and expenditures of the funds) is mainly distributed as a premium to the
staff, with a small percentage re-invested in investment activities. The size of these funds is
44
MARA also had several BF which received only small allocations before being closed in 2001/2002 (State aid fund for
investment activities of Agricultural Cooperatives, Handicraft Development Fund in Villages, Farmers and Cooperatives
Educational Fund, Fund for Farmers harmed from National Disasters).
generally very small –the largest (Pendik Veterinary Control and Research Institute) has an
annual turnover of TL 70,500 bn from production and sales (including exports) of vaccines for
foot-and-mouth and other animal diseases.
4.69 Other research institutes are also involved in revenue generating activities such as
seeds production and laboratory analyses. Since funds for operational costs are limited under
the consolidated budget, the operation of revolving funds have become of increasing
importance to some departments.
4.70 Overall, the number of revolving funds managed by MARA has decreased from 253 in
1999 to 193 in 2003. However, those that have been closed are mostly the smaller funds, and
in some instances funds have been amalgamated. Although many activities financed by these
funds have effectively been transferred to the private sector (e.g. production of grape
seedlings), there is scope for privatization to extend further.45
Environment and Forestry (MOEF and GDF)
4.71 Expenditures under the consolidated budget of MOEF increased 10 percent in real
terms during the period 1999-2003 (Appendix Table 18)46. In 2003, personnel expenditures
accounted for 62 percent of total expenditures, other current expenditures 3 percent,
investment 21 percent and transfers 13 percent.
4.72 The forestry sector is characterized by a complex system of budgetary funds (now
converted into ‘special appropriations’) and transfers, which together accounted for 28 percent
of total expenditures in 2000 and have been decreasing thereafter.
Figure 7 - MOEF’s Consolidated Budget Expenditures
Consolidated Budget of MOEF
Actual Expenditures in real terms
TL billion in 2003 prices
350,000
300,000
250,000
Total
Personnel
Other current
Investment
Transfer
200,000
150,000
100,000
50,000
0
1999
2000
2001
2002
2003
Source: MoF
4.73 The investment program of MOEF gives a detailed breakdown of investments by its
main general directorates. Over the period 1999-03, the General Directorate of Reforestation
and Erosion Control (AGM)47 accounted for the largest share of the MOEF investment budget
The efficiency of RF activities cannot be estimated on the basis of their reported “profit”, which excludes a large share of
investment and personnel expenditures funded out of the consolidated budget.
46 Ministry of Forestry and Ministry of Environment were merged in 2003 into MOEF. Previous years' data for the Ministry
of Environment have been included for consistency of the series.
45
47
AGM deals with reforestation, prevention of erosion, pasture improvement in forest areas, production of seeds and
seedlings. It has become active in preparation and implementation of integrated/participatory watershed development plans
under the Eastern Anatolia Watershed Rehabilitation Project.
(76 percent) followed by National Parks and Wild Life (MPG) (11percent) and support
services (8 percent) which are mainly vehicle procurement and maintenance as well as
publications and promotions. General Directorate of Research and Laboratories obtain 4
percent of the investment budget and General Directorate of Forest Village Relations
(ORKOY) gets only as much as 1 percent.
Figure 8 - MOEF’s Investment Budget
MOEF Investment Budget (1999-2003)
Forest Villages
1%
Research and
Laboratories
4%
Support
8%
National Parks
11%
Reforestation and
Erosion Control
76%
Source: MOEF
4.74 Expenditures of the General Directorate of Forests (GDF) under the consolidated
budget are roughly equivalent in size to those of MOEF.
Figure 9 - GDF’s Consolidated Budget Expenditures
GDF Consolidated Budget
Actual Expenditures in real terms
350000
TL billion in 2003 prices
300000
250000
Total
200000
Personnel
Other current
150000
Investment
Transfer
100000
50000
0
1999
2000
2001
2002
2003
Source: MoF
4.75 Besides its allocation under the consolidated budget, GDF has a large revolving fund,
unique in Turkey for its size. Annual turnover of this fund in 2003 was TL 666,500bn,
equivalent to twice the consolidated budget of GDF. Timber sales are the main source of
revenues for this fund, which is used by GDF for activities in forest management, forest
protection, forest area cadastre activities, building forest roads and fire bands, research and
etc. The fund also supports reforestation activities of AGM and forest villages through
various employment initiatives as a complement to the limited activities undertaken by
(ORKOY). Due to removal of tariff barrier and subsequent drop in wood prices, as well as
administered sales at allocated prices, revenues of GDF have declined imposing net costs on
the national budget. As a result of this drop, various important field programs including
reforestation and economic development of forest villages cannot be adequately financed.48
Alternative ways to increase revenues and profitability of the sector should be taken into
account.
4.76 GDF’s revolving fund will be closed and its revenues will be merged into the general
budget in 2007 as part of the budgetary reforms. The closing of the revolving fund raises
concerns about losing operational flexibility especially for activities where timing is essential
such as firefighting. Special arrangements to provide flexibility in such cases should be
considered. Spending by region49
Regional Spending
4.77 Regional spending from the consolidated budget50 for 2002 show that the highest total
spending is made in South East Anatolia Region due to irrigation investments under GAP.
The second highest per rural capita spending is in East Anatolia, then in Central Anatolia and
the Black Sea region. More developed Marmara, Mediterranean and Aegean regions have the
lowest rural per capita spending.
4.78 In terms of functional spending: MARA spends most in Central Anatolia; DSI spends
most in the South East region; GDRS spends most for rural roads in the Black Sea region and
spends most for drinking water and other services in the Mediterranean region; GD Roads
spends most in the Black Sea region; TEDAS spends most in the Black Sea region; and
MOEF spends most in Central Anatolia. It is worth noting that DSI’s spending is concentrated
in areas where there are water resources. Consequently, its investments are determined more
by the availability of water resources. The same is true for MOEF, as its spending
concentrates on forest areas.
See. ‘Turkey Forestry Sector Review’. Report no: 22458-TU World Bank. June 2001.
Regional figures capture only part of the total regional spending due to different accounting practices of organizations. DSI
and TEDAS could not provide recurrent expenditures by region and GDRS could not provide indirect expenditures by region.
Also DSI and GD Roads have their own regional breakdown which is very different than the 7 geographical regions;
approximations were made for them.
50 The figures do not include spending of local administrations.
48
49
Table 10 - Rural Expenditures by Region and Organization 2002 Current Billion TL51
Sources: MARA, DSI, GDRS,GD Roads, TEDAS, MOEF
4.79 Within the 5-year development plan, SPO determined 48 (out of 81) priority
development provinces that are located mostly in the East, South East and Black Sea regions
and which have in general the lowest per capita income. It is encouraging to see that total per
capita spending amounts are more or less in line with planned regional priorities. There is a
negative correlation (-0.70) between per capita income and per total capita spending by
region, meaning more spending is made in less developed regions in general. However,
significant organizational differences exist. There is strong negative correlation between per
capita spending for rural roads and per capita income. MARA’s per capita spending does not
provide such strong negative correlation, and MOEF and TEDAS per capita spending show a
positive correlation.
Table 11 - Correlation of Per Capita GDP and Organizational Spending in 2002
Sources: MARA, DSI, GDRS, GD Roads, TEDAS, MOEF and Own Calculations
4.80 GAP52, being the biggest regional integrated project, comprises an important part of
investments. Approximately 15 percent of rural budget expenditures is allocated to GAP
projects (excluding energy) in 2002. As of the end of 2001, 10.8 quadrillion TL have been
spent for GAP, reaching a cash realization ratio of 48.1percent. Although investment
allocation for GAP increased by 22 percent for 2002 with respect to 2001 (in real terms),
considering the decision to complete the invest program fully by the year 2010, investment
51
52
Figures exclude headquarters’ spending.
GAP investments consist of the combination of various projects and activities conducted by different organizations and
agencies in economic and social sectors. Allocations made for investments to be made by different organizations and
agencies in various sectors are included in the investment budgets of these organizations and used by them.
allocations to GAP need to be increased considerably in order to complete the program on
time. (For details of GAP see Appendix 2.)
Table 12 - GAP Spending on Major Projects 2002 Billion TL
Sector
Spending*
Agriculture
361,752
Energy
30,531
Drinking Water
30,622
Total
422,905
*Excludes spending of local administrations.
Source: www.gap.gov.tr
5.
RECOMMENDATIONS
Overview
5.1
The aim of this review has been to explore ways in which public spending to rural
development can be made more effective in achieving national objectives of economic growth
and poverty reduction. The main findings and recommendations of the review are set out in
the sections below. Some overall comments, however, should first be made.
5.2
The principal challenge for rural development in Turkey is to enhance agricultural
productivity, while at the same time providing opportunities for off-farm employment that
would enable agriculture’s share of total employment to fall. This is a major challenge given
the relatively low share of public funding currently allocated to the sector (especially for
investment), and the apparent inefficiency with which public resources currently are used.
5.3
Effective support to rural development calls for the following features of public
administration:

An appropriate overall macro-economic framework conducive to growth and equitable
distribution;

Inter-and intra-sectoral resource allocations that are broadly efficient (i.e. investments
have similar benefits in social and economic terms);

A overall rural development strategy, and policies that are realistic in relation to their
goals and affordable in relation to government’s overall resource envelope;

Sector agencies and institutions with clear objectives, functions and structures that are
conducive to achieving the objectives of the strategy, and with clear roles and
responsibilities defined between central and local government, and between
government and the private sector; and,

A budget management system that works efficiently and achieves an appropriate
balance between recurrent and development expenditures.
5.4
While government has made significant progress in many of these areas (especially in
reforming agriculture policy and strengthening systems of expenditure management), much
remains to be done to enhance the effectiveness and efficiency of public funding to the rural
sector. Areas where the need for improvement is especially marked include:

Creating an overall vision for rural development in Turkey that is widely supported,
sets out clear roles for government, is coordinated effectively, and is consistent with
the resources available;

Ensuring consistency between the priorities of central and local government, as
revealed by funding priorities;

Developing an expenditure management system that provides a sound framework for
prioritizing between competing activities against sector objectives (by providing
information on effectiveness and efficiency of spending), and that ensures consistency
between investment and recurrent budgets; and,

Strengthening the efficiency of service delivery across a wide range of rural services.
5.5
The following sections set out the specific recommendations arising from this review.
Prioritization of expenditure to the rural sector

Enhanced agricultural productivity and rural development more broadly, are critical
for achieving national growth and poverty objectives. Still, there is not yet a
comprehensive policy framework to ensure that spending is effectively prioritized to
rural areas to achieve these objectives. It is expected however, that this will be
addressed through the work currently being undertaken by MARA to prepare a
National Rural Development Strategy.

There is a need to strengthen the strategies and policies that provide the link between
desired rural development outcomes and the investments required to achieve those
outcomes. Important elements that need to be addressed include:
o Identifying key factors that will boost agricultural productivity while
also increasing opportunities for off-farm employment;
o Subjecting proposed programs to more rigorous scrutiny in terms of
their expected effectiveness in achieving outputs;
o Ensuring that public-funded rural services are responsive to clientdemand and that measures to enhance the efficiency of service delivery
are explored fully, including options for contracting out to the private
sector.

In developing a strategy for rural development, there is a need to consider the balance
between productive policies (designed to enhance growth and productivity) and social
policies targeted towards to specific needs of the rural poor. An important first step in
this regard would be to evaluate the impact to date of recent reforms in agriculture and
their impact upon different income groups of the rural population, using the
information gathered under the rural Quantitative Household Survey (financed under
the Agriculture Reform Implementation Project) as an initial step.

For rural expenditures specifically targeted to the poor and to improve the focus of
poverty reduction efforts more generally, there is a need for the concept of rural
poverty to be clearly defined, with a more explicit link between spending and intended
poverty impact.

Sector planning also needs to recognize the essential role of social sector spending –
especially education, which is closely correlated to poverty.

There is a need to improve the prioritization of development expenditures in the sector
– spreading limited funds thinly across too many investment activities only reduces
overall effectiveness.

Recent reforms in agriculture have made considerable progress in clarifying the public
role in the sector. This process needs to continue, with future government support to
the sector becoming more focused around addressing instances of market failure and
social objectives.
Efficiency of service delivery

A major challenge is presented by the need to raise the effectiveness and efficiency
with which rural services are provided. This study finds that such analysis is currently
prevented by a complete absence of data on costs and quality of services. For
government agencies to strengthen their future claim on public resources for spending
to rural development, they will need to demonstrate effectiveness and efficiency
(value-for-money) in the services they provide. Otherwise, there is a real danger of a
vicious circle emerging whereby poor performance, due to low levels of funding,
becomes a justification for further cuts in funding.

Collecting information on beneficiary impact is especially important for assessing
programs aimed at reducing poverty. Such monitoring systems should be widely
introduced.

Current proposals for decentralization of government services provide an opportunity
to address these issues through strengthened participatory planning and capacity
building to record systematically information on the costs of service delivery and
outcomes achieved.

In order to enhance efficiency, government should explore further the options to (i)
withdraw from services with strong private good characteristics; and (ii) contract out
the delivery of remaining public-funded services to the private sector.
Expenditure trends and management issues

By international standards, the share of public expenditure to the rural sector is low.
Not including transfers, rural sector expenditure currently accounts for just 3 percent
of the consolidated budget – this share could be doubled and still remain comfortably
within international standards. Only 1 percent of the consolidated budget is spent on
investment in agriculture. Provided that improved effectiveness and efficiency can be
demonstrated, government and donors should be alert to the risk of public funding for
the rural sector falling below optimal levels.

Expenditure management systems need to be strengthened to provide an effective
framework for scrutinizing and prioritizing competing activities against sector
objectives, and ensuring an appropriate balance between recurrent and investment
expenditures.

The share of salaries within the budgets of most rural sector agencies is excessive,
accounting for 90 percent of total recurrent spending to the rural sector. When salaries
exceed two-thirds of the recurrent budget it is generally considered that the
effectiveness of services is likely to be adversely affected.

Action is needed to reduce problems of instability and unpredictability in the release of
funds. The untimely release of funds by central government causes uncertainties and
leads to inefficiencies in program implementation – timing is especially critical in
agriculture.

A more systematic approach is needed to the management of revolving funds and
other special lines of funding. Although government is working to rationalize these
within the consolidated budget, many such funds still remain, presenting opportunities
for abuse of public funds. Procedures should be put in place for setting appropriate
user-charges based on the costs of providing individual services, and the needs and
ability to pay of different user groups. Charges and costs need to be properly audited,
and reviewed on a periodic basis, together with beneficiary impact and the efficiency
of service delivery.

Addressing incentives and the strengthening of management and technical skills
within rural sector agencies is needed. Capacities in areas such as policy development
and impact analysis need to be developed. In the longer-term, contract management
skills may also be required if some public-funded services are to be out-sourced.

Decentralization adds a further level of complexity. An immediate priority is to assess
how best to support and coordinate the development of central and local government
budgets and work-plans. In the longer-term, addressing the technical and management
issues needed to raise the effectiveness of locally determined service delivery will
require sustained and coordinated support.
APPENDIX 1
List of tables
Table 1:
Table 2:
Table 3:
Table 4:
Table 5:
Table 6:
Table 7:
Table 8:
Table 9:
Table 10:
Table 11:
Table 12:
Table 13:
Table 14:
Table 15:
Table 16:
Table 17:
Table 18:
Table 19:
Table 20:
Basic Economic Indicators
Total Public Sector Expenditures
Consolidated Central Government Budget Expenditures
Consolidated Operations of Local Governments
Local Governments Budgets and Final Accounts
Sector Investment by Source of Funding
Sector Investment by Local Governments
Rural Sector Investment by Main Agencies
Consolidated Budget Expenditures of Main Rural Sector Agencies
Contribution of Main Agencies to Rural Sector Consolidated Budget
Budget Expenditures of DSI
Consolidated Budget Expenditures of GDRS
GDRS Investment Budget
Direct Costs of GDRS Investments in Infrastructure (including contractors and
force account)
Consolidated Budget of MARA
Breakdown of Investment Budget Allocations of MARA
Revenues and Expenditures of MARA Revolving Funds (RF)
Consolidated Budget Expenditures of Ministry of Environment and Forestry
(MOEF)
Consolidated Budget Expenditures of GDF
Revenues and Expenditures of GDF Revolving Fund (RF)
Table 1
Basic Economic Indicators
1999
2000
2001
2002
2003 est.
Gross National Product (GNP) 1/
GNP (TL billion - 109) at current prices
GNP (US$ billion - 109) at current prices
Exchange Rate (TL/USD - annual average)
GNP Deflator (1987=100) - current/constant
% annual change
78,282,967 125,596,129 176,483,953 273,463,168 357,045,000
187.66
201.48
144.61
181.89
238.05
417,144
623,355
1,220,440
1,503,494
1,499,867
698.68
1,054.15
50.9%
1,637.40
55.3%
2,354.08
43.8%
2,928.48
24.4%
53.1
62.9
51.4
32.7
61.6
88.6
50.1
30.8
25.6
13.9
Price Indices (% annual change) 1/
Wholesale Price Index (annual average)
Wholesale Price Index (year-end)
Gross Domestic Product (GDP) by Sector 2/
GDP at market prices (TL billion at current prices)
of which:
Agriculture 3/
Industry
Services / other
% of GDP:
Agriculture
Industry
Services / other
Rural GDP 4/
Rural GDP at market prices (TL billion at current prices)
77,415,272 124,583,458 178,412,438 276,002,988 359,762,926
11,851,055
17,973,866
47,590,352
17,540,631
21,521,043
32,933,706
42,126,246
29,027,782
45,881,462
70,034,336
88,813,240
78,015,045 111,009,933 173,034,947 228,823,440
15.3%
23.2%
61.5%
14.1%
23.3%
62.6%
12.1%
25.7%
62.2%
11.9%
25.4%
62.7%
11.7%
24.7%
63.6%
27,896,535
43,406,013
22,050
21,580
21,524
21,354
21,450
8,856
3,784
9,410
7,769
3,810
10,001
8,089
3,774
9,661
7,458
3,954
9,942
7,586
3,816
10,048
100.0%
40.2%
17.2%
42.7%
100.0%
36.0%
17.7%
46.3%
100.0%
37.6%
17.5%
44.9%
100.0%
34.9%
18.5%
46.6%
100.0%
35.4%
17.8%
46.8%
Civilian Employment by Sector 1/
Civilian Employment (in thousands)
of which:
Agriculture
Industry
Services
% of Civilian Employment:
Agriculture
Industry
Services / other
1/
2/
3/
4/
Source: SPO
Source: SPO (1998-2002) and SIS (2003)
Crop and livestock production contribute about 94% of agriculture value-added, forestry and fisheries about 3% each.
Source: TURKEY A Review of the Impact of the Reform of Agricultural Sector Subsidization’ Annex 3, World Bank, March 2004.
Table 2
Total Public Sector Expenditures
(TL billion at current prices)
TOTAL EXPENDITURES
Current Expenditures
Investment Expenditures
Fixed Capital Investments
Changes in Stocks
Transfer Expenditures
Current Transfers
Other Transfers
Stock Revaluation Fund
Total Public Sector Expenditures as % of GNP
Source: SPO
2001
2002
2003 est.
1999
2000
32,101,977
51,125,344
86,008,313 120,734,536 140,411,345
10,438,286
15,481,515
23,141,350
34,826,624
44,192,468
5,172,830
27,674
8,602,104
65,172
11,300,047
-1,475,147
17,320,083
-98,776
16,774,200
-663,212
14,368,093
1,018,298
26,018,016
-155,505
50,345,669
-169,956
66,712,839
65,587
81,016,002
-1,867,402
1,076,796
1,114,043
2,866,349
1,908,179
959,291
41.0%
40.7%
48.7%
44.2%
39.3%
Table 3
Consolidated Central Government Budget Expenditures
(TL billion at current prices)
2000
TOTAL EXPENDITURES
28,094,057
46,970,360
81,175,207 117,225,463 140,053,981
Personnel
Other Current
Investment 1/
Interest Payments
Other Transfers 2/
6,911,927
2,247,665
1,567,800
10,720,840
6,645,825
9,978,800
3,610,956
2,767,364
20,439,862
10,173,378
15,211,894
5,188,128
4,798,166
41,062,226
14,914,793
23,089,184
7,482,711
8,433,961
51,870,658
26,348,949
30,200,762
8,217,904
7,165,121
58,609,163
35,861,031
35.9%
22.2%
37.4%
21.1%
46.0%
22.7%
42.9%
23.9%
39.2%
22.8%
100.0%
100.0%
100.0%
100.0%
100.0%
1999
24.6%
8.0%
5.6%
38.2%
23.7%
2000
21.2%
7.7%
5.9%
43.5%
21.7%
2001
18.7%
6.4%
5.9%
50.6%
18.4%
2002
19.7%
6.4%
7.2%
44.2%
22.5%
2003 est.
21.6%
5.9%
5.1%
41.8%
25.6%
86%
14%
86%
14%
88%
12%
86%
14%
89%
11%
Total Consolidated Budget Expenditures as % of GNP
Non-interest expenditures as % of GNP
Distribution of Expenditures (%)
Personnel
Other Current
Investment 1/
Interest Payments
Other Transfers 2/
Interest payments, other transfers, personnel costs
Other "discretionary" expenditures
2001
2002
2003 est.
1999
1/ Wages related to investment are included in the personnel expenditures
2/ Transfers to SEEs, Tax Rebates, Social Security, Other Transfers
Source: SPO
Table 4
Consolidated Operations of Local Governments 1/
(TL billion at current prices)
1999
2000
2001
2002 prov.
2003 est.
3,602,187
5,894,042
9,117,510
10,382,389
13,886,893
Current Expenditures
1,381,705
2,154,404
3,185,986
4,497,819
6,050,726
Investment Expenditures
Fixed Investment
Stock Change
1,258,737
9,073
1,991,500
13,714
3,051,143
21,308
3,986,328
8,992
5,393,271
26,055
Current Transfers
819,261
1,415,572
2,436,770
1,233,319
1,536,664
Expropriation and Increase in Fixed Assets
108,008
206,452
302,086
362,794
454,903
25,403
112,400
120,217
293,137
425,274
4.6%
4.7%
5.2%
3.8%
3.9%
TOTAL EXPENDITURES
Capital Transfers
Total Consolidated Expenditures as % of GNP
1/ Includes Municipalities, Special Provincial Administrations, Bank of Provinces (Iller Bank),
Water and Sewerage Utilities, Natural Gas and Transportation Utilities.
Source: SPO
Table 5
Local Governments Budgets and Final Accounts
(TL billion at current prices)
1999
2000
2001
2002
2003
BUDGETS
REVENUE
Tax revenues
Revenues other than taxes
Special aids and funds
3,482,096
2,097,483
1,184,502
200,111
5,559,773
3,118,739
2,057,590
383,445
7,299,948
4,225,618
2,528,024
546,305
10,080,847
6,095,676
3,416,682
568,489
13,897,937
8,153,647
4,996,560
747,730
EXPENDITURE
Current expenditures
Investment expenditures
Transfer expenditures
3,482,096
1,244,416
1,123,004
1,114,676
5,559,773
2,127,010
1,727,901
1,704,862
7,299,948
2,946,762
2,017,881
2,335,304
10,080,847
4,093,708
2,661,327
3,325,812
13,897,947
5,844,100
3,745,112
4,308,734
REVENUE
Tax revenues
Revenues other than taxes
Special aids and funds
2,304,253
1,436,008
789,985
78,260
3,762,463
2,424,467
1,223,625
114,371
5,695,900
3,711,405
1,830,561
153,933
n.a.
n.a.
EXPENDITURE
Current expenditures
Investment expenditures
Transfer expenditures
2,466,253
1,266,571
651,201
548,480
3,843,814
1,968,596
1,079,360
795,858
5,715,273
2,911,798
1,514,871
1,288,604
n.a.
n.a.
66%
68%
67%
39%
68%
78%
59%
30%
78%
88%
72%
28%
n.a.
n.a.
71%
102%
58%
49%
69%
93%
62%
47%
78%
99%
75%
55%
n.a.
n.a.
REVENUE
Tax revenues
Revenues other than taxes
Special aids and funds
634,220
320,572
226,890
86,758
1,101,758
524,066
414,598
163,094
1,575,084
733,059
606,388
235,637
2,168,707
1,044,231
830,400
294,076
2,955,834
1,425,770
1,161,300
368,765
EXPENDITURE
Current expenditures
Investment expenditures
Transfer expenditures
634,220
320,513
158,093
155,613
1,101,758
556,827
269,316
275,614
1,575,084
801,150
373,366
400,568
2,168,707
1,126,557
495,169
546,981
2,955,834
1,579,309
639,575
736,950
REVENUE
Tax revenues
Revenues other than taxes
Special aids and funds
422,009
224,636
158,926
38,447
677,295
370,009
252,445
54,841
1,042,305
571,272
381,323
89,710
n.a.
n.a.
EXPENDITURE
Current expenditures
Investment expenditures
Transfer expenditures
447,661
310,926
97,360
39,374
721,417
487,594
157,171
76,653
1,095,658
776,135
202,896
116,628
n.a.
n.a.
REVENUE
Tax revenues
Revenues other than taxes
Special aids and funds
67%
70%
70%
44%
61%
71%
61%
34%
66%
78%
63%
38%
n.a.
n.a.
EXPENDITURE
Current expenditures
Investment expenditures
Transfer expenditures
71%
97%
62%
25%
65%
88%
58%
28%
70%
97%
54%
29%
n.a.
n.a.
A. MUNICIPALITIES (all)
FINAL ACCOUNTS
FINAL ACCOUNTS AS % OF BUDGETS
REVENUE
Tax revenues
Revenues other than taxes
Special aids and funds
EXPENDITURE
Current expenditures
Investment expenditures
Transfer expenditures
o/w: Municipalities below 20,000 population
BUDGETS
FINAL ACCOUNTS
FINAL ACCOUNTS AS % OF BUDGETS
TABLE 5-CONTINUED
B. SPECIAL PROVINCIAL ADMINISTRATIONS
BUDGETS
REVENUE
Tax revenues
Revenues other than taxes
Special aids and funds
235,862
173,093
62,437
332
366,076
263,658
100,183
2,234
492,062
357,837
131,083
3,143
706,642
493,488
211,080
2,074
1,047,214
682,647
361,696
2,871
EXPENDITURE
Current expenditures
Investment expenditures
Transfer expenditures
235,862
43,457
117,773
74,631
366,076
74,304
180,982
110,790
492,062
100,070
243,668
148,324
706,642
146,396
318,421
241,825
1,047,214
218,360
474,775
354,079
REVENUE
Tax revenues
Revenues other than taxes
Special aids and funds
603,865
146,135
171,136
286,594
956,524
267,960
185,982
502,582
1,494,126
388,816
366,035
739,276
n.a.
n.a.
EXPENDITURE
Current expenditures
Investment expenditures
Transfer expenditures
521,023
115,134
327,433
78,456
767,481
185,808
460,626
121,048
1,117,501
274,188
667,582
175,732
n.a.
n.a.
256%
84%
274%
86294%
261%
102%
186%
22494%
304%
109%
279%
23522%
n.a.
n.a.
221%
265%
278%
105%
210%
250%
255%
109%
227%
274%
274%
118%
n.a.
n.a.
39,884
80,124
116,285
182,450
213,419
4.4
12.6
4.5
12.5
4.6
12.0
11.3
11.0
Municipalities < 20,000 / SPA and Villages
final expenditures
budgets
0.8
2.3
0.9
2.5
0.9
2.6
2.4
2.3
SPA / Villages
5.9
9.6
9.6
FINAL ACCOUNTS
FINAL ACCOUNTS AS % OF BUDGETS
REVENUE
Tax revenues
Revenues other than taxes
Special aids and funds
EXPENDITURE
Current expenditures
Investment expenditures
Transfer expenditures
C. VILLAGES
BUDGET
RATIOS
Municipalities / SPA and Villages
final expenditures
budgets
Sources:
- 2003 Budgets, Municipal and Special Provincial Administrations and Villages, State Institute of Statistics (published
in February 2004)
- Final Accounts, Municipalities and Special Provincial Administrations, 2001, State Institute of Statistics (published
in October, 2003)
Table 6
Sector Investment by Source of Funding 1/
(TL billion at current prices)
A. Actual Expenditures
2002
2003
2004
5,154,456
6,569,160 10,814,770
n.a
n.a
1,377,540
802,280
74,821
130,319
384,397
222,798
2,260,837
1,416,170
118,432
244,589
747,213
367,215
4,190,405
1,226,736
179,676
376,785
283,005
312,553
7,364,796
2,446,212
227,452
308,722
3,000
464,588
1999
46.0%
26.8%
2.5%
4.4%
12.8%
7.4%
2000
43.9%
27.5%
2.3%
4.7%
14.5%
7.1%
2001
63.8%
18.7%
2.7%
5.7%
4.3%
4.8%
2002
68.1%
22.6%
2.1%
2.9%
0.0%
4.3%
233,423
7.8%
655,111
12.7%
1,111,912
16.9%
3,293,996
30.5%
o/w AGRICULTURE SECTOR
237,915
434,350
598,679
1,202,412
n.a
n.a
Consolidated Budget
SOE 2/
Revolving Funds 3/
Bank of Provinces
Funds (off budget)
SOE under privatization
222,403
7,147
8,346
409,491
11,111
13,731
560,926
17,349
20,403
1,163,130
3,465
33,215
19
17
1
2,602
93.5%
3.0%
3.5%
0.0%
0.0%
0.0%
94.3%
2.6%
3.2%
0.0%
0.0%
0.0%
93.7%
2.9%
3.4%
0.0%
0.0%
0.0%
96.7%
0.3%
2.8%
0.0%
0.0%
0.2%
12,797
5.4%
53,683
12.4%
88,243
14.7%
430,744
35.8%
2,992,155
1,258,737
4,250,892
29.6%
5,154,456
1,991,500
7,145,956
27.9%
TOTAL PUBLIC INVESTMENT 1/
Consolidated Budget
SOE 2/
Revolving Funds 3/
Bank of Provinces
Funds (off budget)
SOE under privatization
1999
2000
2,992,155
2001
Funding Source as % of total
Consolidated Budget
SOE 2/
Revolving Funds 3/
Bank of Provinces
Funds (off budget)
SOE under privatization
Foreign funding
% of total
Funding Source as % of total
Consolidated Budget
SOE 2/
Revolving Funds 3/
Bank of Provinces
Funds (off budget)
SOE under privatization
Foreign funding
% of total
Memo
Total public investment 1/
Plus: Local governments 4/
Grand total
% Local governments
6,569,160 10,814,770
3,051,142
3,986,327
9,620,302 14,801,097
31.7%
26.9%
TABLE 6 CONTINUED
B. Annual Allocations (initial)
1999
2000
2001
3,560,000
5,905,000
6,887,000
9,835,000 12,464,000 11,977,543
1,410,000
1,155,020
87,000
123,000
645,000
139,980
2,352,000
1,908,600
144,000
234,200
1,030,000
236,200
3,500,000
2,205,000
224,000
311,000
337,000
310,000
5,736,000
2,811,000
390,000
405,000
4,000
489,000
8,000,000
2,866,500
512,000
519,600
21,400
544,500
7,471,543
2,908,000
622,000
545,000
21,000
410,000
655,123
18.4%
1,035,811
17.5%
909,186
13.2%
1,325,177
13.5%
3,650,223
29.3%
2,751,540
23.0%
o/w AGRICULTURE SECTOR
242,340
397,000
503,060
823,710
1,141,525
1,167,450
Consolidated Budget
SOE 1/
Revolving Funds 2/
Bank of Provinces
Funds (off budget)
SOE under privatization
212,500
8,840
20,900
352,500
14,000
30,400
440,000
22,000
41,000
751,000
14,000
55,710
1,050,800
17,500
69,575
1,078,295
11,250
73,800
100
100
60
3,000
3,650
4,105
2,340
1.0%
3,427
0.9%
1,840
0.4%
12,571
1.5%
331,600
29.0%
288,699
24.7%
TOTAL PUBLIC INVESTMENT 1/
Consolidated Budget
SOE 2/
Revolving Funds 3/
Bank of Provinces
Funds (off budget)
SOE under privatization
Foreign funding
% of total
Foreign funding
% of total
2002
2003
2004
C. Actual Expenditures as % of initial Annual Allocations
1999
2000
2001
2002
2003
2004
TOTAL PUBLIC INVESTMENT
84%
87%
95%
110%
n.a
n.a
Consolidated Budget
SOE 2/
Revolving Funds 3/
Bank of Provinces
Funds (off budget)
SOE under privatization
98%
69%
86%
106%
60%
159%
96%
74%
82%
104%
73%
155%
120%
56%
80%
121%
84%
101%
128%
87%
58%
76%
75%
95%
o/w AGRICULTURE SECTOR
98%
109%
119%
146%
n.a
n.a
Consolidated Budget
SOE 2/
Revolving Funds 3/
Bank of Provinces
Funds (off budget)
SOE under privatization
105%
81%
40%
116%
79%
45%
127%
79%
50%
155%
25%
60%
19%
17%
2%
87%
1/ Does not include investment by local governments (municipalities). Investments made on force account by own
labor of Government agencies are not included either (corresponding costs are under the personnel budget).
2/ State-Owned Economic Enterprises
3/ Social security institutions and autonomous institutions (referred by SPO as "revolving funds")
4/ Estimates of Local Governments investment from Table 7.
Source: SPO
Table 7
Sector Investment by Local Governments 1/
(TL billion at current prices)
2000
2001
2002 prov.
2003 est.
2004 prog.
33,069
88
10,733
56,370
415,265
6,237
36,183
102,788
41,361
53,338
145
19,592
47,995
612,707
10,404
58,770
118,893
65,142
74,964
458
27,147
55,945
977,109
12,798
87,406
161,991
106,296
100,627
269
35,830
81,164
1,294,449
18,389
111,947
218,586
129,415
135,326
364
48,903
204,272
1,772,409
24,043
150,536
273,671
172,260
159,231
427
57,293
217,811
2,091,784
26,964
177,137
335,397
203,864
52,669
503,974
89,570
914,944
136,055
1,410,973
162,474
1,833,177
224,937
2,386,551
269,774
2,880,668
1,258,737
1,991,500
3,051,142
3,986,327
5,393,272
6,420,350
1999
TOTAL LOCAL GOVERNMENT INVESTMENT
Agriculture
Mining
Manufacturing
Energy
Transportation
Tourism
Housing
Education
Health
Other Public Services:
- Economic 2/
- Social 3/
TOTAL
Total as % of GNP
Agriculture as % of GNP
1.6%
1.6%
1.7%
1.5%
1.5%
0.04%
0.04%
0.04%
0.04%
0.04%
3%
0%
1%
4%
33%
0%
3%
8%
3%
3%
0%
1%
2%
31%
1%
3%
6%
3%
2%
0%
1%
2%
32%
0%
3%
5%
3%
3%
0%
1%
2%
32%
0%
3%
5%
3%
3%
0%
1%
4%
33%
0%
3%
5%
3%
2%
0%
1%
3%
33%
0%
3%
5%
3%
4%
40%
4%
46%
4%
46%
4%
46%
4%
44%
4%
45%
2,445
0
13
7
4,891
3,164
2,158
89,178
7,336
2,832
0
16
8
5,841
3,894
2,655
109,914
9,027
3,970
254
1
660
50,271
5,868
8,526
149,370
27,417
7,119
0
102
105
65,872
10,652
8,054
201,963
25,521
8,854
0
127
130
81,926
13,248
10,016
251,188
31,741
10,893
0
156
160
100,791
16,299
12,323
309,027
39,050
10,192
24,452
14,160
28,649
35,257
48,464
45,396
72,195
56,461
89,792
69,462
110,467
143,836
176,996
330,058
436,979
543,483
668,628
Composition of investment as % of total
Agriculture
Mining
Manufacturing
Energy
Transportation
Tourism
Housing
Education
Health
Other Public Services:
- Economic 2/
- Social 3/
o/w Special Provincial Administrations (SPA)
Agriculture
Mining
Manufacturing
Energy
Transportation
Tourism
Housing
Education
Health
Other Public Services:
- Economic 2/
- Social 3/
TOTAL
Total as % of GNP
Agriculture as % of GNP
0.2%
0.1%
0.2%
0.2%
0.2%
0.003%
0.002%
0.002%
0.003%
0.002%
1/ In its estimates of investment by local governments (Table 7), SPO has attempted, in principle, to eliminate doublecounting with general budget and other central government funding sources. This is the main reason for
differences with investment expenditures by local governments reported by SIS (Table 5), since SIS data include
all sources of funding of local governments.
2/ Includes general administration, security, maps and cadaster, trade.
3/ Includes mainly drinking water supply and sanitation, and other services (municipal services, land use planning,
environment, social services, etc.)
Source: SPO
Table 8
Rural Sector Investment by Main Agencies 1/
(TL billion at current prices)
A. Actual Expenditures
TOTAL PUBLIC INVESTMENT 1/
as % of GNP
TL billion - constant 2003 prices
% annual change
Agriculture
as % of total public investment
as % of GNP
as % of Agriculture GDP
1999
2000
2,992,155
3.8%
5,154,456
4.1%
2001
2002 2003 alloc.
2004 alloc.
6,569,160 10,814,770 12,464,000 11,977,543
3.7%
4.0%
3.5%
12,541,409 14,319,309 11,748,887 13,453,559 12,464,000
14.2%
-18.0%
14.5%
-7.4%
237,915
8.0%
0.3%
2.0%
434,350
8.4%
0.3%
2.5%
598,679
9.1%
0.3%
2.8%
1,202,412
11.1%
0.4%
3.7%
1,141,525
9.2%
0.3%
2.7%
997,204
1,206,644
21.0%
1,070,732
-11.3%
1,495,799
39.7%
1,141,525
-23.7%
of which:
DSI
GDRS
MARA
Ministry of Forestry (& Environment)
GDF
sub-total
% of Agriculture
161,387
29,323
11,281
7,430
12,850
222,271
93%
312,140
48,672
17,798
13,085
15,262
406,957
94%
403,283
57,453
63,017
17,692
19,645
561,090
94%
961,795
80,180
58,488
37,778
26,906
1,165,147
97%
708,800
105,000
103,610
68,475
57,350
1,043,235
91%
745,349
123,500
106,846
71,200
62,500
1,109,395
95%
Roads transportation 2/
488,886
953,716
1,291,535
2,325,099
1,478,350
1,455,224
69,896
14,340
17%
120,647
25,379
15%
158,674
42,380
16%
202,894
46,611
11%
155,000
50,894
14%
161,000
33,987
13%
167,329
349,550
531,937
604,737
773,100
697,900
o/w GDRS 4/
GDRS as % of total
25,321
15%
43,053
12%
58,617
11%
75,701
13%
79,000
10%
80,500
12%
Electricity distribution (TEDAS) 2/
63,898
197,240
188,187
402,514
350,962
430,000
o/w rural
rural as % of total
13,632
21%
65,694
33%
38,384
20%
116,135
29%
53,576
15%
96,000
22%
361,104
12.1%
0.5%
3.0%
689,123
13.4%
0.5%
3.9%
896,734
13.7%
0.5%
4.2%
1,643,753
15.2%
0.6%
5.0%
1,479,995
11.9%
0.4%
3.5%
1,538,937
12.8%
1,513,542
1,914,415
26.5%
1,603,801
-16.2%
2,044,826
27.5%
1,479,995
-27.6%
161,387
124,540
11,281
7,430
12,850
317,488
88%
312,140
212,372
17,798
13,085
15,262
570,657
83%
403,283
274,744
63,017
17,692
19,645
778,381
87%
961,795
358,775
58,488
37,778
26,906
1,443,742
88%
708,800
339,000
103,610
68,475
57,350
1,277,235
86%
TL billion - constant 2003 prices
% annual change
o/w GDRS
GDH rural roads 3/
GDRS/GDH rural as % of total
Drinking water supply & sanitation 2/
TOTAL "RURAL" 5/
as % of total public investment
as % of GNP
as % of Agriculture GDP
TL billion - constant 2003 prices
% annual change
of which:
DSI
GDRS
MARA
Ministry of Forestry (& Environment)
GDF
sub-total
% of "Rural"
1,167,450
9.7%
745,349
365,000
106,846
71,200
62,500
1,350,895
88%
TABLE 8 CONTINUED
B. Annual Allocations (initial)
1999
2000
2001
3,560,000
5,905,000
6,887,000
Agriculture
242,340
397,000
503,060
823,710
1,141,525
1,167,450
o/w DSI
GDRS
MARA
Ministry of Forestry (& Environment)
GDF
sub-total
% of Agriculture
154,425
27,900
12,655
10,950
18,500
224,430
93%
255,650
46,000
20,600
17,300
28,300
367,850
93%
290,160
55,500
53,940
25,000
35,800
460,400
92%
469,500
90,000
79,600
47,000
45,850
731,950
89%
708,800
105,000
103,610
68,475
57,350
1,043,235
91%
745,349
123,500
106,846
71,200
62,500
1,109,395
95%
Roads transportation 2/
501,500
843,973
715,000
1,120,000
1,478,350
1,455,224
34,500
11,187
55,335
18,812
116,000
36,292
172,600
42,561
155,000
43,900
161,000
33,987
200,325
327,000
413,500
556,500
773,100
697,900
25,410
42,760
51,050
74,270
79,000
80,500
TOTAL PUBLIC INVESTMENT 1/
o/w GDRS
GDH rural roads 3/
Drinking water supply & sanitation 2/
o/w GDRS 4/
2002
2003
2004
9,835,000 12,464,000 11,977,543
Electricity distribution (TEDAS) 2/
63,898
197,240
188,187
402,514
350,962
o/w rural
13,632
65,694
38,384
116,135
53,576
TOTAL "RURAL" 5/
327,069
579,601
744,786
1,229,276
1,473,001
430,000
96,000
1,538,937
1/ Does not include investment by local governments (municipalities). Investments made on force account by own labor
of Government agencies are not included either (corresponding costs are under the personnel budget).
2/ Total investment in the subsector (including rural and urban areas).
3/ In addition to investments in village roads by DGRS, investments by GDH in provincial roads benefit mainly to rural
areas (other investment by GDH in state roads and highways is considered as urban).
4/ GDRS assistance to villages for water supply investment is reported by SPO under "rural area planning".
5/ Includes the whole agriculture sector (as defined by SPO), plus investment by GDRS and GDH in rural roads and
investment by TEDAS in rural electricity distribution.
Source: Data from SPO (and GDH for amount of its investments in rural roads, TEDAS)
Investment in real terms by main subsector
(TL billion - constant 2003 prices)
a/
b/
c/
Irrigation (DSI + GDRS)
MARA
Forestry
Other rural infrastructure
Total
Total rural sector
1999
2000
2001
799,348
47,284
85,002
516,338
1,447,971
1,513,542
1,002,352
49,444
78,749
707,771
1,838,316
1,914,415
824,022
112,705
66,777
533,069
1,536,574
1,603,801
a/ DSI and GDRS investment in agriculture
b/ MOFE and GDF
c/ Rural roads, water supply and electricity
2002 2003 alloc.
1,296,215
72,759
80,467
549,028
1,998,469
2,044,826
813,800
103,610
125,825
338,470
1,381,705
1,479,995
2004 alloc.
Table 9
Consolidated Budget Expenditures of Main Rural Sector Agencies
(TL billion at current prices)
A. Actual Expenditures
Summary
TOTAL CONSOLIDATED BUDGET
Personnel
Other Current
Investment
Transfer
TOTAL "RURAL" 1/
Personnel
Other Current
Investment
Transfer
"RURAL" as % of total cons. budget
Personnel
Other Current
Investment
Transfer
Discretionary expenditures 2/
TOTAL CONS. BUDGET as % of GNP
2001
2002
2003
2004 alloc.
1999
2000
28,084,685
6,911,927
2,260,863
1,544,427
17,367,468
46,705,028
9,978,784
3,635,153
2,475,116
30,615,975
992,823
611,996
11,924
307,202
61,701
1,721,728
982,692
21,093
560,683
157,260
2,420,113
1,471,655
30,834
784,919
132,705
3,803,278
2,055,156
64,417
1,499,460
184,245
4,047,588
2,670,461
92,784
1,126,408
157,935
4,429,029
2,738,434
265,543
1,282,636
142,416
3.5%
8.9%
0.5%
19.9%
0.4%
3.7%
9.8%
0.6%
22.7%
0.5%
3.0%
9.7%
0.6%
18.9%
0.2%
3.3%
8.9%
0.8%
21.8%
0.2%
2.9%
8.8%
1.1%
15.7%
0.2%
2.9%
8.5%
1.9%
16.1%
0.1%
8.4%
9.5%
8.7%
10.5%
7.9%
7.1%
35.9%
37.2%
45.7%
42.3%
39.2%
1.3%
8.4%
3.6%
1.4%
9.8%
4.0%
1.4%
11.2%
1.4%
11.5%
1.1%
9.6%
4,161,350
4,783,037
14.9%
4,328,351
-9.5%
4,731,272
9.3%
4,047,588
-14.5%
100%
25%
8%
5%
62%
100%
21%
8%
5%
66%
100%
19%
6%
5%
69%
100%
20%
7%
6%
67%
100%
22%
6%
5%
67%
100%
21%
9%
5%
64%
33%
146%
17%
36%
147%
18%
34%
126%
20%
35%
116%
22%
27%
115%
19%
43%
174%
17%
100%
62%
1%
31%
6%
100%
57%
1%
33%
9%
100%
61%
1%
32%
5%
100%
54%
2%
39%
5%
100%
66%
2%
28%
4%
100%
62%
6%
29%
3%
2%
4%
49%
2%
4%
56%
2%
4%
52%
3%
4%
71%
3%
8%
41%
10%
21%
43%
80,579,065 115,682,350 140,053,981 150,658,129
15,211,894
23,089,184
30,200,762
32,187,000
5,236,128
8,018,775
8,217,904
13,849,565
4,149,580
6,891,836
7,165,121
7,960,589
55,981,463
77,682,555
94,470,194
96,660,975
"Rural" as % of:
GNP
Agriculture GDP
Rural GDP
TL billion - constant 2003 prices
% annual change
ECONOMIC CLASSIFICATION (%)
Total consolidated budget
Personnel
Other Current
Investment
Transfer
Other current as % of personnel
Other current as % of investment
Investment as % of pers.+current
"Rural" sector budget
Personnel
Other Current
Investment
Transfer
Other current as % of personnel
Other current as % of investment
Investment as % of pers.+current
TABLE 9 CONTINUED
Actual Expenditures
Details
1999
2000
2001
2002
2003
2004 alloc.
174,693
151,579
4,587
12,234
6,293
269,828
222,714
8,796
18,108
20,210
413,014
324,793
11,379
68,367
8,475
587,382
472,139
33,857
70,507
10,879
734,237
617,635
29,622
74,305
12,675
915,723
628,780
110,614
80,688
95,641
Min. Forestry (& Environment) 3/
Personnel
Other Current
Investment
Transfer
52,143
34,978
1,401
5,219
10,545
80,331
49,554
1,961
10,311
18,505
125,545
85,742
2,316
15,206
22,281
193,340
124,161
5,008
46,153
18,018
298,971
185,797
8,727
64,199
40,248
313,702
185,280
19,903
78,425
30,094
Min. Environment
Personnel
Other Current
Investment
Transfer
13,848
4,105
932
1,856
6,955
23,603
5,622
1,304
5,733
10,944
34,982
8,984
1,990
9,031
14,977
42,069
16,540
3,560
13,126
8,843
DSI (total)
Personnel
Other Current
Investment
Transfer
640,339
199,397
1,384
382,750
56,808
1,073,783
337,674
2,069
627,347
106,693
1,540,625
484,645
7,547
904,369
144,064
2,305,308
625,987
8,459
1,429,924
240,938
2,945,514
839,086
4,533
1,930,878
171,017
2,790,119
830,700
82,627
1,873,124
3,668
DSI (est. irrigation share) 4/
Personnel
Other Current
Investment
Transfer
258,895
68,352
474
170,595
19,474
490,941
126,161
773
324,144
39,863
621,715
150,414
2,342
424,247
44,712
1,321,718
247,315
3,342
975,871
95,190
965,133
276,575
1,494
630,694
56,370
1,131,470
349,784
34,792
745,349
1,544
GDF
Personnel
Other Current
Investment
Transfer
50,173
42,837
2,364
631
4,341
110,804
58,657
5,871
4,659
41,617
154,157
133,157
8,286
4,554
8,160
229,198
188,784
13,374
4,149
22,891
321,703
276,069
12,959
3,960
28,715
338,710
279,320
41,277
10,000
8,113
GDRS
Personnel
Other Current
Investment
Transfer
443,071
310,145
2,166
116,667
14,093
746,221
519,984
2,388
197,728
26,121
1,070,700
768,565
4,521
263,514
34,100
1,429,571
1,006,217
5,276
389,654
28,424
1,727,544
1,314,385
39,982
353,250
19,927
1,729,425
1,295,270
58,957
368,174
7,024
MARA
Personnel
Other Current
Investment
Transfer
Table 10
Contribution of Main Agencies to Rural Sector Consolidated Budget
(TL billion at current prices)
2003 2004 alloc.
1999
2000
2001
2002
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
MARA
Personnel
Other Current
Investment
Transfer
18%
25%
38%
4%
10%
16%
23%
42%
3%
13%
17%
22%
37%
9%
6%
15%
23%
53%
5%
6%
18%
23%
32%
7%
8%
21%
23%
42%
6%
67%
MOEF 1/
Personnel
Other Current
Investment
Transfer
7%
6%
20%
2%
28%
6%
6%
15%
3%
19%
7%
6%
14%
3%
28%
6%
7%
13%
4%
15%
7%
7%
9%
6%
25%
7%
7%
7%
6%
21%
DSI (irrigation)
Personnel
Other Current
Investment
Transfer
26%
11%
4%
56%
32%
29%
13%
4%
58%
25%
26%
10%
8%
54%
34%
35%
12%
5%
65%
52%
24%
10%
2%
56%
36%
26%
13%
13%
58%
1%
GDF
Personnel
Other Current
Investment
Transfer
5%
7%
20%
0%
7%
6%
6%
28%
1%
26%
6%
9%
27%
1%
6%
6%
9%
21%
0%
12%
8%
10%
14%
0%
18%
8%
10%
16%
1%
6%
GDRS
Personnel
Other Current
Investment
Transfer
45%
51%
18%
38%
23%
43%
53%
11%
35%
17%
44%
52%
15%
34%
26%
38%
49%
8%
26%
15%
43%
49%
43%
31%
13%
39%
47%
22%
29%
5%
Share of Rural Consolidated Budget (%)
Personnel
Other Current
Investment
Transfer
1/ Data of the Ministry of Environment until 2002 have been added to Ministry of Forestry.
Source: Calculated from Table 9
Table 11 - Budget Expenditures of DSI (TL billion at current prices)
A. Actual Expenditures
1999
756,660
2000
1,320,070
2001
2,003,206
2002
3,345,446
2003
2,911,714
2004 alloc.
2,790,119
Current Budget
o/w Personnel
Other current
200,780
199,430
1,350
339,743
337,729
2,014
492,192
484,635
7,557
634,446
626,076
8,370
828,980
824,424
4,556
913,327
830,700
82,627
Investment
Agriculture
Energy
Water Supply
Environment
497,658
170,595
255,779
71,262
22
867,578
324,144
409,590
133,596
248
1,366,951
424,247
748,645
193,722
337
2,470,062
975,871
1,182,660
311,023
508
1,913,429
630,694
1,030,563
251,890
282
1,770,124
745,349
816,660
207,400
715
58,222
112,749
144,064
240,938
169,305
106,668
34%
37%
31%
40%
33%
42%
100%
26%
0%
66%
8%
100%
26%
0%
66%
9%
100%
24%
0%
68%
7%
100%
19%
0%
74%
7%
100%
28%
0%
66%
6%
100%
30%
3%
63%
4%
TOTAL BUDGET
Expropriation & Transfer
Agriculture as % investment
Economic Classification (%)
Personnel
Other current
Investment
Transfer
Note:
Until 2002, total investment reported by DSI is significantly higher than MOF consolidated budget data (Table 9). DSI got additional ressources, in
particular from the "Public Participation Fund" managed by Treasury. This was related to investment in energy and water supply projects (not irrigation).
B. Revised (end of year) Appropriations
2000
1,334,368
Current Budget
202,620
342,115
502,987
637,577
886,756
913,327
Investment
Agriculture
Energy
Water Supply
Environment
502,964
173,490
257,845
71,536
94
878,971
327,795
416,281
134,648
248
1,380,617
428,320
755,519
196,439
338
2,539,078
988,475
1,200,985
349,110
508
2,030,713
660,037
1,077,850
292,270
555
1,770,124
745,349
816,660
207,400
715
58,529
113,281
148,338
246,032
177,509
106,668
1999
638,917
2000
1,088,083
2001
1,309,495
2002
2,081,671
2003
3,068,982
2004
2,790,119
Current Budget
146,625
281,200
355,910
602,002
726,461
913,327
Investment
Agriculture
Energy
Water Supply
Environment
Expropriation & Transfer
459,725
154,425
212,500
92,700
100
32,567
736,365
255,650
359,465
121,000
250
70,518
895,210
290,160
462,700
142,000
350
58,375
1,357,308
469,500
681,300
206,000
508
122,361
2,229,435
708,800
1,210,000
310,000
635
113,086
1,770,124
745,349
816,660
207,400
715
106,668
1999
2000
2001
2002
2003
2004
2,190,000
1,284,805
667,815
237,130
250
3,035,000
1,775,750
927,300
331,700
250
5,075,000
2,810,000
1,660,600
604,000
400
7,438,288
3,817,933
2,913,485
706,362
508
8,837,650
4,560,000
3,124,000
1,152,900
750
9,425,000
4,725,000
3,565,000
1,134,285
715
21%
12%
32%
39%
40%
24%
14%
39%
36%
100%
18%
10%
28%
24%
88%
18%
12%
23%
29%
100%
25%
16%
39%
27%
85%
19%
16%
23%
18%
100%
29%
18%
45%
41%
99%
27%
15%
45%
33%
84%
34%
26%
41%
49%
100%
23%
14%
35%
25%
74%
Expropriation & Transfer
2001
2,031,941
2002
3,422,688
2003
3,094,977
2004 alloc.
2,790,119
1999
764,113
TOTAL BUDGET
C. Initial Appropriations
TOTAL BUDGET
D. Requested
Investment
Agriculture
Energy
Water Supply
Environment
Initial Appropriations as % of Requested
Investment
Agriculture
Energy
Water Supply
Environment
Revised (end of year) Appropriations as % of Requested
Investment
23%
Agriculture
14%
Energy
39%
Water Supply
30%
Environment
38%
Source: DSI
Table 12
Consolidated Budget Expenditures of GDRS
(TL billion at current prices)
A. Actual Expenditures
1999
2000
2001
2002
2003
2004 alloc.
443,072
745,751
1,070,700
1,429,911
1,693,714
1,729,425
Current Budget
o/w Personnel
Other current
312,311
310,145
2,166
522,372
519,984
2,388
773,086
768,565
4,521
1,011,884
1,006,608
5,276
1,320,920
1,310,232
10,689
1,354,227
1,295,270
58,957
Investment
116,667
197,258
263,514
382,038
370,801
368,174
Expropriation & Transfer
14,093
26,121
34,100
35,989
1,992
7,024
Economic Classification (%)
Personnel
Other current
Investment
Transfer
100%
70%
0%
26%
3%
100%
70%
0%
26%
4%
100%
72%
0%
25%
3%
100%
70%
0%
27%
3%
100%
77%
1%
22%
0%
100%
75%
3%
21%
0%
CONSOLIDATED BUDGET (constant 2003 prices)
Total
1,857,106
o/w Personnel
1,299,952
Other current
9,079
Investment
489,004
Transfer
59,072
2,071,729
1,444,539
6,634
547,993
72,564
1,914,938
1,374,571
8,086
471,293
60,987
1,778,808
1,252,219
6,563
475,255
44,770
1,693,714
1,310,232
10,689
370,801
1,992
1999
2000
2001
2002
2003
2004 alloc.
452,272
758,306
1,098,389
1,449,808
1,711,783
1,729,425
Current Budget
o/w Personnel
Other current
314,893
312,498
2,395
528,106
525,575
2,531
780,829
775,768
5,061
1,015,799
1,010,100
5,699
1,333,263
1,322,363
10,900
1,354,227
1,295,270
58,957
Investment
122,878
203,314
282,033
388,411
370,801
368,174
14,502
26,886
35,527
45,599
7,719
7,024
1999
2000
2001
2002
2003
2004
275,150
594,855
803,031
1,291,494
1,510,583
1,729,425
185,600
184,000
1,600
426,650
424,500
2,150
555,440
552,840
2,600
942,497
937,997
4,500
1,156,813
1,151,863
4,950
1,354,227
1,295,270
58,957
87,910
164,595
243,300
337,892
340,290
368,174
1,640
3,610
4,291
11,105
13,480
7,024
TOTAL CONSOLIDATED BUDGET
B. Revised (end of year) Appropriations
TOTAL CONSOLIDATED BUDGET
Expropriation & Transfer
C. Initial Appropriations
TOTAL CONSOLIDATED BUDGET
Current Budget
o/w Personnel
Other current
Investment
Expropriation & Transfer
Source: GDRS
Table 13
GDRS Investment Budget
(TL billion at current prices)
A. Actual Expenditures
Investment
Agriculture 1/
Transportation 2/
Housing
Other public services 3/
Composition of Investment (%)
Agriculture 1/
Transportation 2/
Housing
Other public services 3/
1999
2000
2001
2002
2003 alloc.
2004 alloc.
124,635
29,323
69,896
95
25,321
212,857
48,672
120,647
485
43,053
275,452
57,453
158,674
708
58,617
359,797
80,180
202,894
1,022
75,701
340,195
105,000
155,000
1,195
79,000
365,000
123,500
161,000
0
80,500
24%
56%
0%
20%
23%
57%
0%
20%
21%
58%
0%
21%
22%
56%
0%
21%
31%
46%
0%
23%
34%
44%
0%
22%
1999
2000
2001
2002
2003 alloc.
2004 alloc.
132,368
31,718
74,554
95
26,001
237,765
50,514
141,389
496
45,366
296,334
63,648
171,515
739
60,432
398,594
92,988
222,021
1,022
82,563
340,195
105,000
155,000
1,195
79,000
365,000
123,500
161,000
0
80,500
1999
2000
2001
2002
2003
2004
87,910
27,900
34,500
100
25,410
144,595
46,000
55,335
500
42,760
223,300
55,500
116,000
750
51,050
337,892
90,000
172,600
1,022
74,270
340,195
105,000
155,000
1,195
79,000
365,000
123,500
161,000
0
80,500
B. Revised (end of year) Appropriations
Investment
Agriculture 1/
Transportation 2/
Housing
Other public services 3/
C. Initial Appropriations
Investment
Agriculture 1/
Transportation 2/
Housing
Other public services 3/
1/ Mainly small-scale irrigation and on-farm development works, also soil conservation and water ponds.
2/ Rural (village) roads.
3/ Includes village water supply and other activities (e.g. settlement) under "rural area planning".
Source: SPO
Table 14
Direct Costs of GDRS Investments in Infrastructure (including contractors and force account)
(TL billion at current prices)
Actual Expenditures
TOTAL DIRECT COSTS OF INVESTMENT
Village roads
Water supply
Agriculture 1/
Settlement
Composition of Investment (%)
Village roads
Water supply
Agriculture 1/
Settlement
o/w
Consolidated Budget
Village roads
Water supply
Agriculture 1/
Settlement
Spec. Province Administrations (SPA) 2/
Village roads
Water supply
Agriculture 1/
Settlement
Protocols 3/
Village roads
Water supply
Agriculture 1/
Settlement
1999
2000
2001
2002
2003
262,237
199,280
27,061
25,663
10,233
400,757
292,380
46,752
44,282
17,343
564,400
412,260
65,757
63,246
23,137
966,654
739,534
99,621
88,455
39,044
1,134,192
897,707
103,435
95,610
37,440
76%
10%
10%
4%
73%
12%
11%
4%
73%
12%
11%
4%
77%
10%
9%
4%
79%
9%
8%
3%
191,460
142,578
15,283
25,083
8,516
286,539
201,368
28,154
42,094
14,923
358,560
250,553
36,028
55,229
16,750
699,149
541,520
49,339
81,427
26,863
844,081
690,029
44,817
85,998
23,237
68,272
54,217
11,758
580
1,717
113,089
90,185
18,519
1,965
2,420
200,019
158,180
29,365
6,087
6,387
263,707
194,472
50,026
7,028
12,181
287,671
205,678
58,178
9,612
14,203
2,505
2,485
20
1,129
827
79
223
5,821
3,527
364
1,930
3,798
3,542
256
2,440
2,000
440
1,113,321
812,245
129,879
123,017
48,180
1,009,425
737,324
117,606
113,115
41,380
1,202,516
919,979
123,928
110,038
48,571
1,134,192
897,707
103,435
95,610
37,440
TOTAL DIRECT COSTS OF INVESTMENT (constant 2003 prices)
Total
1,099,148
o/w Village roads
835,268
Water supply
113,424
Agriculture 1/
107,565
Settlement
42,891
1/ Mainly small-scale irrigation and on-farm development works, also soil conservation and animal drinking water ponds.
2/ Works done by GDRS on behalf of SPA and not included in the Consolidated Budget. SPA usually provide small
equipment and other goods such as fuel, as contribution in kind from their own budgets for roads construction by
GDRS with its own labor force and machinery.
3/ Works done by GDRS under protocols with various other administrations.
Source: GDRS
Table 15
Consolidated Budget of MARA
(TL billion at current prices)
A. Actual Expenditures
2004 alloc.
1999
2000
2001
2002
2003
174,693
269,829
413,014
587,382
734,237
156,165
151,579
4,587
231,511
222,714
8,796
336,172
324,792
11,379
505,996
472,139
33,857
647,257
617,635
29,622
12,234
18,108
68,367
70,507
74,305
6,293
20,210
8,475
10,878
12,675
100%
87%
3%
7%
4%
100%
83%
3%
7%
7%
100%
79%
3%
17%
2%
100%
80%
6%
12%
2%
100%
84%
4%
10%
2%
CONSOLIDATED BUDGET (constant 2003 prices)
Total
732,215
o/w Personnel
635,332
Other current
19,225
Investment
51,280
Transfer
26,378
749,596
618,710
24,437
50,306
56,143
738,672
580,888
20,352
122,274
15,157
730,702
587,340
42,118
87,711
13,533
734,237
617,635
29,622
74,305
12,675
1999
2000
2001
2002
2003 alloc.
170,901
279,247
425,857
615,980
720,374
148,995
144,210
4,785
236,631
227,320
9,311
338,748
325,830
12,919
521,790
468,035
53,755
578,244
563,394
14,850
15,380
21,918
76,980
82,067
102,975
6,526
20,699
10,129
12,123
39,155
100%
84%
3%
9%
4%
100%
81%
3%
8%
7%
100%
77%
3%
18%
2%
100%
76%
9%
13%
2%
100%
78%
2%
14%
5%
1999
2000
2001
2002
2003
2004
137,463
236,816
317,613
530,282
720,374
915,723
119,250
115,000
4,250
208,320
202,000
6,320
256,000
248,500
7,500
441,855
428,355
13,500
578,244
563,394
14,850
739,394
628,780
110,614
14,085
23,682
55,540
79,990
102,975
80,688
4,128
4,814
6,073
8,437
39,155
95,641
100%
84%
3%
100%
85%
3%
100%
78%
2%
100%
81%
3%
100%
78%
2%
100%
69%
12%
TOTAL CONSOLIDATED BUDGET
Current Budget
o/w Personnel
Other current
Investment
Transfer
Economic Classification (%)
Personnel
Other current
Investment
Transfer
B. Revised (end of year) Appropriations
TOTAL CONSOLIDATED BUDGET
Current Budget
o/w Personnel
Other current
Investment
Transfer
Economic Classification (%)
Personnel
Other current
Investment
Transfer
2004 alloc.
C. Initial Appropriations
TOTAL CONSOLIDATED BUDGET
Current Budget
o/w Personnel
Other current
Investment
Transfer
Economic Classification (%)
Personnel
Other current
Table 16
Breakdown of Investment Budget Allocations of MARA
(TL billion at current prices)
Initial Appropriations
1999
2000
2001
2002
2003
TOTAL CONSOLIDATED BUDGET
138,713
236,816
317,613
530,282
720,374
Current Budget
o/w
Personnel
Other current
119,250
115,000
4,250
208,320
202,000
6,320
256,000
248,500
7,500
441,855
428,355
13,500
578,244
563,394
14,850
15,335
23,682
55,540
79,990
102,975
3,865
500
2,810
555
5,247
760
3,485
1,002
12,906
1,400
10,181
1,325
21,840
2,120
17,645
2,075
24,540
2,400
19,470
2,670
TUGEM 2/
KKGM 3/
TAGEM 4/
3,493
4,605
1,686
4,764
7,705
2,021
12,677
18,560
6,194
12,770
26,669
9,340
15,263
36,258
11,725
Other projects
local
foreign
1,686
1,236
450
3,945
3,186
759
5,203
5,003
200
9,371
7,986
1,385
15,189
12,879
2,310
4,128
4,814
8,437
2,000
39,155
2,000
801
1
15
1
1,251
1
30
1
6,073
1,500
0
0
40
1
500
3,310
3,531
4,532
5,937
500
30,000
6,655
100%
18%
7%
23%
30%
11%
11%
100%
15%
7%
20%
33%
9%
17%
100%
18%
5%
23%
33%
11%
9%
100%
22%
5%
16%
33%
12%
12%
100%
19%
5%
15%
35%
11%
15%
Investment
o/w TEDGEM 1/
Training
Cooperatives investment credit
Other project support
Transfer
Cooperatives operational credit
BF State Aid for Investment of Cooperatives
BF Handicrafts Development in Villages
BF Farmers and Cooperatives Education
BF Farmers harmed from National Disasters
Pasture services 5/
Others
Breakdown of Investment (%)
TEDGEM Cooperatives investment credit
TEDGEM Other
TUGEM
KKGM
TAGEM
Other Projects
1/
2/
3/
4/
5/
Organization and Support General Directorate (TEDGEM)
Agricultural Production Development General Directorate (TUGEM)
Protection and Control General Directorate (KKGM)
Research General Directorate (TAGEM)
NBF closed in 2002 and integrated in the budget
Source: MARA
Table 17
Revenues and Expenditures of MARA Revolving Funds (RF)
(TL billion at current prices)
1999
2000
2001
2002
2003
Number of RF
Revenues
Expenditures
"Profit"
253
14,979
12,153
2,826
239
24,375
18,598
5,777
229
40,069
31,107
8,963
202
63,965
45,772
18,193
193
87,887
57,507
30,380
o/w Regulation 969 1/
Number of RF
Revenues
Expenditures
"Profit"
224
10,394
8,816
1,578
210
17,322
12,710
4,611
205
28,228
21,639
6,588
181
46,857
32,728
14,129
173
67,471
42,012
25,460
Regulation 867 1/
Number of RF
Revenues
Expenditures
"Profit"
10
2,546
2,018
528
10
3,527
2,884
643
9
5,706
4,128
1,578
8
7,744
5,578
2,166
7
7,407
6,332
1,075
Regulation 170 1/
Number of RF
Revenues
Expenditures
"Profit"
19
2,040
1,319
721
19
3,526
3,004
522
15
6,136
5,340
796
13
9,364
7,466
1,898
13
13,009
9,163
3,845
TOTAL as % of MARA consolidated budget expenditures
Revenues
9%
9%
Expenditures
7%
7%
"Profit"
2%
2%
10%
8%
2%
11%
8%
3%
12%
8%
4%
TOTAL
1/ The "profits" of RF under regulation 969 are distributed as premiums to MARA staff who
participate in their activity. Under regulations 867 and 170, only 80% is distributed to staff with the
balance of 20% used to increase activity of RF (investment or other increase in RF activity).
Source: MARA
Table 18
Consolidated Budget Expenditures of Ministry of Environment and Forestry (MOEF)
(TL billion at current prices)
A. Actual Expenditures
2004 alloc.
1999
2000
2001
2002
2003
TOTAL 1/
Personnel
Other Current
Investment
Transfer
65,991
39,083
2,333
7,075
17,500
103,934
55,176
3,265
16,044
29,449
160,527
94,726
4,306
24,237
37,258
235,409
140,701
8,568
59,279
26,861
298,971
185,797
8,727
64,199
40,248
Min. Forestry (& Environ.) 1/
Personnel
Other Current
Investment
Transfer
52,143
34,978
1,401
5,219
10,545
80,331
49,554
1,961
10,311
18,505
125,545
85,742
2,316
15,206
22,281
193,340
124,161
5,008
46,153
18,018
298,971
185,797
8,727
64,199
40,248
Min. Environment
Personnel
Other Current
Investment
Transfer
13,848
4,105
932
1,856
6,955
23,603
5,622
1,304
5,733
10,944
34,982
8,984
1,990
9,031
14,977
42,069
16,540
3,560
13,126
8,843
0
0
0
0
0
100%
59%
4%
11%
27%
100%
53%
3%
15%
28%
100%
59%
3%
15%
23%
100%
60%
4%
25%
11%
100%
62%
3%
21%
13%
CONSOLIDATED BUDGET (constant 2003 prices)
Total
276,597
o/w Personnel
163,814
Other current
9,779
Investment
29,654
Transfer
73,350
288,733
153,281
9,070
44,571
81,811
287,101
169,417
7,701
43,348
66,636
292,848
175,032
10,659
73,743
33,415
298,971
185,797
8,727
64,199
40,248
1999
2000
2001
2002
2003
2004
TOTAL 1/
Personnel
Other Current
Investment
Transfer
53,042
27,220
2,470
9,574
13,778
98,044
52,700
3,587
19,092
22,665
122,116
62,307
4,255
28,285
27,269
192,512
115,861
8,850
53,649
14,152
263,747
161,428
9,735
76,475
16,109
313,702
185,280
19,903
78,425
30,094
Min. Forestry (& Environment) 1/
Personnel
Other Current
Investment
Transfer
39,640
24,100
1,377
7,376
6,787
74,678
47,500
2,031
12,933
12,214
93,080
55,977
2,413
20,285
14,405
159,893
103,426
5,250
42,930
8,287
220,896
141,672
5,775
63,900
9,549
313,702
185,280
19,903
78,425
30,094
Min. Environment
Personnel
Other Current
Investment
Transfer
13,402
3,120
1,093
2,198
6,991
23,366
5,200
1,556
6,159
10,451
29,036
6,330
1,842
8,000
12,864
32,619
12,435
3,600
10,719
5,865
42,851
19,756
3,960
12,575
6,560
Economic Classification (%)
Personnel
Other current
Investment
Transfer
B. Initial Appropriations
1/ Ministry of Forestry and Ministry of Environment were merged in 2003. Ministry of Environment is included for
consistency of the series.
Source: MOF
Table 19
Consolidated Budget Expenditures of GDF
(TL billion at current prices)
A. Actual Expenditures
2004 alloc.
1999
2000
2001
2002
2003
50,174
42,837
2,364
631
4,341
110,804
58,657
5,871
4,659
41,617
154,157
133,157
8,286
4,554
8,161
229,198
188,784
13,374
4,149
22,891
321,700
276,065
12,959
3,960
28,715
100%
85%
5%
1%
9%
100%
53%
5%
4%
38%
100%
86%
5%
3%
5%
100%
82%
6%
2%
10%
100%
86%
4%
1%
9%
CONSOLIDATED BUDGET (constant 2003 prices)
Total
210,300
o/w Personnel
179,550
Other current
9,908
Investment
2,647
Transfer
18,195
307,820
162,951
16,311
12,943
115,614
275,709
238,150
14,819
8,145
14,595
285,123
234,847
16,638
5,161
28,476
321,700
276,065
12,959
3,960
28,715
1999
2000
2001
2002
2003
2004 alloc.
36,560
31,370
1,450
2,500
1,240
67,850
54,800
4,950
5,500
2,600
122,305
103,280
7,000
7,500
4,525
198,620
171,045
12,750
7,500
7,325
290,981
248,556
14,025
9,400
19,000
338,710
279,320
41,277
10,000
8,113
TOTAL CONSOLIDATED BUDGET
Personnel
Other current
Investment
Transfers
Economic Classification (%)
Personnel
Other current
Investment
Transfer
B. Initial Appropriations
TOTAL CONSOLIDATED BUDGET
Personnel
Other current
Investment
Transfers
Source: GDF
Table 20
Revenues and Expenditures of GDF Revolving Fund (RF)
(TL billion at current prices)
A. Actual Expenditures
2004 alloc.
1999
2000
2001
2002
2003
REVENUES
Sales Revenues
Foreign Credit
Other revenues
163,591
151,842
273,552
227,601
283,624
264,180
493,950
466,543
666,459
619,952
11,749
45,951
19,444
27,407
46,507
EXPENDITURES
Investment
Recurrent
Payments outside of appropriation 1/
205,391
6,022
199,369
273,223
11,037
222,421
39,766
283,019
13,065
269,954
442,131
23,061
419,070
548,591
22,654
525,937
1999
2000
2001
2002
2003
2004 alloc.
REVENUES
Sales Revenues
Foreign Credit
Other revenues
186,500
166,500
429
19,571
286,800
240,000
300
46,500
296,300
260,000
270
36,030
415,725
365,725
592,700
535,000
751,000
670,000
50,000
57,700
81,000
EXPENDITURES
Investment
Recurrent
Payments outside of appropriation 1/
186,500
16,000
170,500
286,800
22,800
264,000
296,300
28,300
268,000
415,725
38,350
377,375
592,700
47,950
544,750
751,000
52,500
698,500
B. Initial Budget
1/ Due to low revenues in 1999, MOF made an additional allocation to the revolving fund of GDF in 2000
Source: GDF
APPENDIX 2
The Southeastern Anatolia Project (GAP)
The Southeastern Anatolia Project (GAP) is a multi-sector and integrated regional development
effort approached in the context of sustainable development. Its basic objectives include the
improvement of living standards and income levels of people so as to eliminate regional
development disparities and contributing to such national goals as social stability and economic
growth by enhancing productivity and employment opportunities in the rural sector. The project
area covers 9 administrative provinces (Adiyaman, Batman, Diyarbakir, Gaziantep, Kilis,
Mardin, Siirt, Sanliurfa and Sirnak) in the basins of the Euphrates and Tigris and in Upper
Mesopotamia. The development program encompasses such sectors as irrigation, hydraulic
energy, agriculture, rural and urban infrastructure, forestry, education and health. The water
resources development component of the program envisages the construction of 22 dams and 19
hydraulic power plants and irrigation of 1.7 million hectares of land. The total cost of the project
during the project period of 1990-2010 is estimated as US$ 32 billion. The total installed
capacity of power plants is 7476 MW and projected annual energy production reaches 27 billion
kWh.
In 1986, State Planning Organization was given the mandate of addressing development
activities in Southeastern Anatolia within the framework of integrated regional planning and
ensuring the coordination of these activities. Starting as an energy and irrigation project to
develop the rich land and water resources of the region, GAP was transformed into an integrated
regional development project with the completion of the GAP Master Plan in 1989. The Master
Plan is a guide for plans, programs and projects to be designed in conformity with the overall
line and sub-scales that the development of the region will follow. The Master Plan formulates
the basic objective as "raising the development indicators of the region up to country standards
in shortest possible time", defines economic and social targets serving to this objective and
adopts the basic strategy of "transforming the region into an export center for agriculture based
goods".
The mandate of carrying out the project along the lines of integrated regional development and
ensuring required coordination was given to the GAP Regional Development Administration as
an entity established in 1989 under the Prime Ministry. The decision making body is the GAP
Higher Council presided by the Prime Minister and consisting of the State Minister in Charge of
GAP, State Minister in Charge of State Planning Organization and Minister of Public Works and
Settlement in Sanliurfa.
Overall objectives of GAP include the following: Raising the level of income in the GAP region
by improving the economic structure of the region and thus reducing regional development
disparities; enhancing productivity and employment opportunities in rural areas, enhancing the
population absorption capacities of big centers in the region and to contribute to economic
growth, social stability and export promotion as national objectives by efficient utilization of the
resources of the region.
In terms of agriculture sector the objectives are: Raising levels of income in rural areas by
increasing agricultural productivity and diversifying farming activities; providing sufficient
inputs to agro-industries; minimize rural migration tendencies in the region by enhancing
employment opportunities and contributing to the production of exportable goods.
The financing needs of public investments that must be made for attaining the targets and
magnitudes bet by the GAP Master Plan for the period 1990-2005 is 22.6 Quadrillion TL at
2002 fixed prices. As of the end of 2001, 10.9 Quadrillion TL has been spent for GAP, pointing
out to a cash realization ratio of 48.1percent.
GAP PROJECT COST AND CASH REALIZATIONS BY SECTORS AS OF THE END OF
THE YEAR 2001 (Billion TL at 2002 Prices)
ECONOMIC SECTORS
Total Cost (Required
Funds)
Cumulative Investments
by the end of 2001
Realization (%)
6 811 714
1 144 319
16.8
522 393
530 243
100.0
Manufacturing
1 005 673
408 021
40.6
Energy
7 236 872
5 696 882
78.7
Transportation-Communication
4 982 234
1 677 455
33.7
Tourism
37 823
9 495
25.1
TOTAL
20 596 708
9 446 416
46.0
Housing
217 702
76 730
35.2
Education and Health
597 004
507 231
85.0
Other Public Services
1 094 444
781 478
71.4
TOTAL
1 909 150
1 369 288
71.7
GRAND TOTAL
22 505 859
10 831 855
48.1
Agriculture
Mining
SOCIAL SECTORS
GAP investments consist of the combination of various projects and activities conducted by
different organizations and agencies in economic and social sectors. Allocations made for
investments to be made by different organizations and agencies in various sectors are included
in the investment budgets of these organizations and used by them.
COMPARATIVE TRENDS IN PUBLIC INVESTMENTS IN GAP (FOR THE PERIOD 1990 2002)
Looking at the trend of GAP investments in the period 1990-2001, it is observed that the region
has an average annual share of 7percent in total investment allocations. In 2002, the share of
GAP investments in total increased by 10.7 percent over the previous year and reached
5.4percent. However, considering the decision to complete the project fully by the year 2010, it
becomes apparent that investment allocations to GAP need to be increased considerably in order
to complete the project by the target year.
(Billion TL at 2002 Prices)
TURKEY
Investment
Allocation
Increase (%)
Investment
Allocation
Increase (%)
Share of GAP in
National Total
(%)
1990
8 096 812
-6.3
657 842
-1.5
8.1
1991
7 586 379
+3.5
647 700
-10.9
8.5
1992
7 854 199
-4.6
576 716
-1.5
7.3
1993
7 488 466
-21.6
567 911
-22.2
7.6
1994
5 870 933
-28.0
442 000
-30.8
7.5
1995
4 227 556
+27.1
305 862
+21.4
7.2
1996
5 375 971
+7.9
371 335
+20.2
6.9
1997
5 802 429
+45.2
446 283
+25.6
7.7
1998
8 427 492
-8.9
560 380
-19.6
6.6
1999
7 680 218
+16.4
450 654
+41.9
5.9
2000
8 939 816
-1.2
639 454
-32.0
7.1
2001
8 836 021
+11.5
434 792
+22.2
4.9
2002
9 855 000
Years
GAP
531 658
5.4