Download 2.Theoretical Background - Dokuz Eylül Üniversitesi

ECONOMIC SCENARIOS FOR
THE EU: Turkish perspective
Tankut Kurtay
Enise Elif Çetin
Nihat Çelik
Ruziye Gülce Canbazoğlu
Melis Tetik
Supervisors
Prof. Utku Utkulu
Assoc. Prof. Oğul Zengingönül
8th Semester Students at the Faculty of Economic and Administrative Sciences
Dokuz Eylül University, İZMİR, 2006
Plan
1.
2.
3.
4.
5.
6.
Introduction
Theoretical Background
European Monetary Union
Turkiye’s Integration to the EU
Economic Scenarios for 2020
Conclusion
1. Introduction
Aims:
Presenting an overview of the main aspects of
economic integration, the EMU and the Turkish
experience.
Evaluation of different economic scenarios in 2020 and
possibility of using this information to decide on
enlargement.
Methodology: Descriptive work
2. Theoretical Background
2.1 Types/Classification of Economic Integration
2.2 Economic Effects of Economic Integration
2.3 Factors Jeopardizing the Potential Benefits
of Integration
2.4 Enlargement
2. THEORETICAL BACKGROUND
2.1 Types/Classification of
Economic Integrations
• Free Trade Area
Two or more countries form a free trade area when they abolish all
import duties on their mutual trade in all goods but retain their
original tariffs against the rest of the world.
• Customs Union
The groups of countries that members abolish all import duties on
their mutual trade in all goods and adopt common tariffs to the third
countries.
2. 1. TYPES/CLASSIFICATION OF ECONOMIC INTEGRATIONS
• Common Market
If two or more countries form a common market, they form a
customs union and, in addition, allow free movement of all factors of
production among the member countries.
• Economic / Monetary Union
If two or more countries form an economic union, they form a
common market and, in addition, proceed to unify their fiscal,
monetary and socio-economic policies (joint policy decision).
2. 1. TYPES/CLASSIFICATION OF ECONOMIC INTEGRATIONS
2.2 Economic Effects of Integration:
The Case of Customs Union
1. Static effects
2. Dynamic effects
Production Effects
*Trade creation
*Trade diversion
Consumption Effects
Terms of Trade Effects
* Economies of scale
* Externalities
*
*
*
*
*
Industrialisation
Increasing competition
Technological progress
Increasing investment
Decreasing risk and uncertainity
2. 1. ECONOMIC EFFECTS OF ECONOMIC INTEGRATION
2.2 Economic Effects of Integration:
The Case of Monetary Union
There are two main requirements of a monetary union:
1. Joint monetary policy
2. Establishing a single currency i.e. Joint exchange rate policy
2. 2. ECONOMIC EFFECTS OF ECONOMIC INTEGRATION
Potential positive effects of a
Monetary Union (Benefits)
•
•
•
•
•
•
•
•
Diminishing transaction costs.
Removal of exchange rate uncertainity
Progress in reducing inflation and interest rate
Increase on investment and employment
Change in Union’s reserve policy
Developing capital markets
The fair redistribution of income.
The negative effects of speculation on exchange rates
reduces
• The need to find reserve will reduce because of the foreign
trade between the member countries
• Price stability
• Economic stability and growth
2. 2. ECONOMIC EFFECTS OF ECONOMIC INTEGRATION
Potential negative effects of a
Monetary Union (Costs)
• The member countries will lose their economic policy
freedom.
• Adjustment problems of member countries in face of
demand shocks
• Alternative choice of inflation-unemployment trade-off
for separate country can cause inequality among policy
results.
• Nominal wage increases depending upon labour markets
centralisation degress
• Loss in seigniorage revenues
• The transfer of the funds from rich countries to
developing countries will effect the rich countries
negatively
2. 2. ECONOMIC EFFECTS OF ECONOMIC INTEGRATION
Comparison of Costs and Benefits
of a Monetary Union
Benefits of
Monetary Union
Costs of
Monetary Union
Benefits
Costs
The integration level
with the member states
The integration level with
the member states
Figure 1.-The curve of benefits
Figure 2.-The curve of costs
2. 2. ECONOMIC EFFECTS OF ECONOMIC INTEGRATION
The Cost and
Benefits of Monetary
Union
Benefits
Benefits‹Costs
Benefits›Costs
Costs
E
Figure 3.-The Integration to the Monetary Union.
The integration level with the
member
2.3 Factors Jeopardizing the Potential
Benefits of Integration
►
The occurance of asymmetric shocks that
endangers the stability of the Monetary Union.
►The mobility of the production factors are very
important for the Union.The non-mobility of
them will endanger the future of the EMU.
►Adjustment problems of member countries in
face of demand shocks.
►The rigidity of price and wages will jeopardize
the benefits of integration.
► The differences of prices and inflation ratios
will reduce the impact of the economy policies
and will cause to unstability in economy.
2. 2. FACTORS JEOPARDIZING THE POTENTIAL BENEFITS OF INTEGRATION
► The openness of a country to foreign trade
,and its trade relations with the other member
countries is very important.
►If the financial integration level among the
member countries is not high.
The lack of harmony in economy policies among
the members.
►Alternative choice of inflation-unemployment
trade-off for separate country can cause
inequality among policy results.
►If there is no variability in export,it is hard to
cope with sectoral shocks.
2. 2. FACTORS JEOPARDIZING THE POTENTIAL BENEFITS OF INTEGRATION
2.4 Enlargement
The EU has already had a successful
enlarging past. Treaty Establishing the
European Coal and Steel Community
(Treaty of Paris 1951) with Treaty
Establishing the European Economic
Community and the European Atomic
Energy Community (Treaty of Rome1957)
has signed by the six founder members:
Belgium,
France,
Germany,
Italy,
Luxemburg and Holland.
2. 4. ENLARGEMENT
•
•
•
•
•
After this EU has passed along five enlargement
process:
1973 Denmark, Ireland and The United Kingdom
1981 Greece
1986 Portugal and Spain
1995 Austria, Finland and Sweden
2004 Cyprus, The Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Malta, Poland,
Slovakia and Slovenia.
2. 4. ENLARGEMENT
Advantages of Enlargement
•
•
•
•
•
•
Economic growth.
Stability
Global Presence.
Business Confidence.
Foreign Direct Investment (FDI).
Structural Funds.
2. 4. ENLARGEMENT
Disadvantages of Enlargement
• Migration (Though some countries’ stories do
not confirm this !).
• Common Agricultural Policy.
• Regional Aid.
• EU Standarts and Systems.
2. 4. ENLARGEMENT
Cost of Non-Enlargement
• Delay in enlarging the single market, and lower
economic growth in the applicant countries,
would deprive member states of economic
benefits.
• For the applicant countries failure to join the
Union would weaken the incentive for economic
reform, discourage foreign investment and
reduce economic growth.
• It could thus create political instability in Europe,
and even undermine the process of
democratisation, with potential repercussions for
the Union.
2. 4. ENLARGEMENT
• Without enlargement, the Union would be less
able to combat the problems of organised crime,
illegal immigration and terrorism.
• Disillusion with the Union in the applicant
countries would feed Euroscepticism in the
member states.
2. 4. ENLARGEMENT
3. The European Monetary Union
(EMU)
3.1 Major steps towards Economic and Monetary
Union
3.2 Today & Future
3.3 Common Exchange Rate Policy and EURO “as
reserve money”
3.4 Common Monetary Policy in the EURO Area
3.5 Fiscal Policy in the EU
3.6 Financial Integration and Financial Markets
3.7. Enlargement and Its Effects on the EMU
3.8 Some Potentially Important Concerns
3.1 Major steps towards the EMU
• October 1970 Report of the Werner Committee
published
• March 1971 Council of Ministers endorses EMU
by 1980 and March 1972 European ‘snake in
the tunnel’
• July 1978 European Council endorses plan for
EMS and March 1979 Start of EMS
• February 1986 Signing of Single European Act
• June 1988 Delors Committee established by
European Council and April 1989 Report of the
Delors Committee published
3.1 MAJOR STEPS TOWARDS THE EMU
• June 1989 European Council decides about
start of stage I of EMU and July 1990 Stage I of
EMU begins
• October 1990 European Council decides on
start of stage II of EMU
• December 1990 Start of intergovernmental
conferences on EMU and political union
• December 1991 European Council adopts
Treaty on European Union
• June 1992 First referendum in Denmark rejects
Maastricht Treaty
3.1 MAJOR STEPS TOWARDS THE EMU
• August 1992 Crisis in Exchange Rate
Mechanism (ERM) begins and September 1992
Referendum in France approves Maastricht
Treaty
• May 1993 and Denmark approves Maastricht
Treaty and November 1993 Maastricht Treaty
enters into force
• January 1994 Start of stage II of EMU; European
Monetary Institute established
• December 1995 European Council decides that
the name of new currency will be euro
3.1 MAJOR STEPS TOWARDS ECONOMIC AND MONETARY UNION
• June 1997 Adoption of Stability and Growth Pact
and Decision about ERM II
• May 1998 European Council decides about
membership of EMU, Decision about bilateral
central rates of the EMU currencies, Executive
Board of ECB appointed and
• June 1998 Establishment of ECB
• January 1999 Start of stage III of EMU; decision
on euro rates
• January 2002 Distribution of euro coins and
banknotes starts
3.1 MAJOR STEPS TOWARDS ECONOMIC AND MONETARY UNION
3.2 Today & Future
• The euro is the official currency of twelve
European Union member states
• EU member states are eligible to join if they
comply with certain monetary requirements.
• The euro is managed and administered by the
European System of Central Banks
• Denmark, Sweden and the United Kingdom
were the only EU member states outside the
monetary union.
3.2. TODAY & FUTURE
• In 2004 the 10 new EU member states had a
currency other than the euro
– 1 January 2007 for Estonia, Slovenia and
Lithuania.
– 1 January 2008 for Cyprus, Latvia and Malta
– 1 January 2009 for Slovakia
– Mid-January 2009 for Bulgaria
– 1 January 2010 for the Czech Republic and
Hungary.
– 2011 or later for Poland and Romania
3.2. TODAY & FUTURE
3.3 Common Exchange Rate Policy
and EURO “as reserve money”
• Features of the ERM
• Phases of the ERM;
– A turbulent start, 1979-1983
– A calmer intermediate phase, 1983-1987
– No realignments, 1987-1992
– Crises, 1992-1993
– Tranquility restored, 1993-1998
– ERM II 1999
• Current situation of ERM
3.3. COMMON EXCHANGE RATE POLICY AND EURO “AS RESERVE MONEY”
3.4 Common Monetary Policy in
the EURO Area
• The ECB is one of the world's largest central
banks, being in charge monetary policy for the
European Union
• Objectives of ECB;
– Maintain price stability in the euro area
(primary objective)
Protecting the purchasing power of the euro
– Support the general economic policies in the
European Community (but without prejudice
to the primary objective)
3. 4. COMMON MONETARY POLICY IN THE EURO AREA
3.5 Fiscal Policy in the EU
• No central fiscal authority
• Very small central budget; about 1% of GDP and
only 2.5% of national budgets
• No independent revenue raising capacity
• Limited inter-regional redistribution; no interpersonal redistribution
• The Stability and Growth Pact conduct of fiscal
policy and it is based on Articles 99 and 104 of
the European Community Treaty
3. 5. FISCAL POLICY IN THE EU
• Revenues of budget:
– custom duties
– agricultural levies (taxes on agricultural
imports and levies on sugar production)
– a share of the VAT
– A share of GNP
• Spending of budget:
– CAP
– Structural and cohesion funds
– Other expenses
3. 5. FISCAL POLICY IN THE EU
Table 3.1 Financial perspective of the European Union, 2000-2006 (ml euro,
1999 prices)
Stability and growth pact (SGP)
• Fiscal discipline would be maintained and
enforced in the EMU by SGP
• Two issues concerning the Stability and Growth
Pact (SGP).
– balance the budget
– Flexibility
• Criteria of SGP
– an annual budget deficit no higher than 3% of
GDP
– a public debt lower than 60% of GDP or
approaching that value
3.5FISCAL POLICY IN THE EU
3.6 Financial Integration and
Financial Markets
• Financial market integration in the EU has
started of the EMS in March 1979
• Three widely accepted interrelated benefits of
financial integration:
– risk sharing
– Improved capital allocation
– Economic growth
• Financial integration represented an extremely
ambitious programmed for economic change in
the EU. It also cause some technical difficulties
3. 6. FINANCIAL INTEGRATION AND FINANCIAL MARKETS
3.7. Enlargement and Its Effects on
the EMU
• The enlarged European Union grew by 10
countries from 15 to 25
• 10 New Member States increased absolute EU
GDP only by 5 percent.
• EU-25 GDP amounts to 9,715 billion.
• The New Member States countries measured at
current prices their GDP per capita amounts only
to 24 percent of EU-15 GDP per capita.
• EU-25 per capita GDP decreases to 21,232
Euro
3. 7. ENLARGEMENT AND ITS EFFECTS ON THE EMU
3.8 Some Potentially Important
Concerns
• What are the costs and benefits of monetary
union?
• Benefits of EMU;
– Lower transaction costs
– Reduction of exchange rate volatility and
uncertainty
– More price transparency
– A better functioning internal market.
3. 8. SOME POTENTIALLY IMPORTANT CONCERNS
• Costs of EMU;
– loss of an instrument of economic policy, start
to fix exchange rate mechanism
– asymmetric shocks
– Immobility of labour
3. 8. SOME POTENTIALLY IMPORTANT CONCERNS
Figure 3.1 the costs and benefits of a monetary union
Divergence
(asymmetric shocks)
costs>
benefits
benefits>
costs
Flexibility of labour market
3. 8. SOME POTENTIALLY IMPORTANT CONCERNS
Fig.3.2 Two views on the relationship between economic and
monetary integration and divergence
Divergence
(asymmetric shocks)
Krugman view
Commission view
economic and monetary integration
3. 8. SOME POTENTIALLY IMPORTANT CONCERNS
What Is an Optimum Currency Area?
•It is a region where it is best (optimal) to have
a single currency.
•Optimality depends on degree of economic
integration:
–Trade in goods and services
–Factor mobility
•Optimum currency areas are groups of
regions with economies closely linked by trade
in goods and services and by factor mobility,
where the exchange rates are fixed among the
members.
3. 8. SOME POTENTIALLY IMPORTANT CONCERNS
Figure 3.3:Intra-EU Trade as a Percent of EU GDP
3. 8. SOME POTENTIALLY IMPORTANT CONCERNS
IS EUROPE AN OPTIMUM
CURRENCY AREA?
• Most EU members export from 10 to 20
percent of their output to other EU
members. This is relatively small.
• Differences in culture and language
discourage labor mobility.
• Regional differences in labor and capital
endowments make the adjustment
process different in each region.
• Practice of fiscal federalism is limited in
scale.
3. 8. SOME POTENTIALLY IMPORTANT CONCERNS
4. Turkey’s Integration to
the European Union
Contents
•4.1 Historical Background of Relations
with the West
•4.2. Beginning of the Integration
•4.3. Turkey as a Negotiating Country
•4.4. Integration of Turkey to the EMU
4.1 Historical Background of
Relations with the West
• The Ottoman Empire, no less, was a
European state. Ottoman rule of over onethird of Europe for four hundred years
transformed the Empire from an originally
Asian one into a Eurasian one. In the 19th
Century, the Ottoman state
• centralized power over and against local
feudal notables,
• promoted a more secular public life,
• Adopted cultural attitudes shared by
Western Europe.
4.1. HISTORICAL BACKGROUND OF RELATIONS WITH THE WEST
• The modern Turkish Republic is founded
in 1923 and under the leadership of Kemal
Atatürk, based on the contemporary
system of values in all spheres of social
life-reforms which enabled the Turkish
nation to participate in the system of
values shared by the European family of
nations.
4.1. HISTORICAL BACKGROUND OF RELATIONS WITH THE WEST
• Atatürk’s will for a modern Turkey could be
understood from this speech: “Turks have
always gone towards the West. We want a
European Turkey, in other words a Turkish
country that looks towards the West. We want to
modernize our country. All our efforts are aimed
at founding modern Westernized government”
4.1. HISTORICAL BACKGROUND OF RELATIONS WITH THE WEST
4.2 Beginning of Integration
• In 1950s, Turkey was a member of the
United Nations, The Council of Europe,
NATO, the OECD and an associate
member of Western European Union.
• In the 31th of July 1959, Turkey applied to
EEC for membership. The result of the
negotiations was the signature of the
“Ankara Agreement” on 12 September
1963.
4. 2. BEGINNING OF INTEGRATION
• The Ankara Agreement envisaged the
progressive establishment of a Customs Union.
• In the meantime, the EEC would offer financial
assistance to Turkey.
• EEC's share in Turkish imports rose from 29% in
1963 to 42% in 1972.
4. 2. BEGINNING OF INTEGRATION
On 13 November 1970, the responsibilities of the
two sides were determined in an Additional
Protocol which took effect in 1973. It envisaged;
• the free movement of goods,
• Turkey’s harmonization with the EC’s Common
Agricultural Policy,
• the free movement of people and services,
• and harmonization with EC legislation on issues
such as transportation and economy were to be
realized.
4. 2. BEGINNING OF INTEGRATION
• With the signing of the Additional Protocol in
1973, Turkiye has accepted abolishing customs
duties on the EU’s industrial exports and
adopting the common external tariff of the EC
that is applied to third countries.
4. 2. BEGINNING OF INTEGRATION
• Turkiye applied for full membership in 1987, on
the basis of the EEC Treaty's article 237 which
gave any European country the right to do so.
• The Commission’s opinion basically underlined
Turkey's eligibility for membership, it also
mentioned that Turkey's accession was
prevented equally by the EC's own situation on.
4. 2. BEGINNING OF INTEGRATION
• After two years of negotiations, the
Customs Union between Turkey and the
EU took effect on 1 January 1996.
• An important feature of the Turkey-EU
Customs Union is that Turkey is the first
and only country to enter into such an
advanced form of economic integration
without being a full member.
4. 2. BEGINNING OF INTEGRATION
Imports after Customs Union (Billion $)
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
43.627
48.559
45.921
40.671
54.503
41.399
51.554
69.340
97.540
116.537
Source: SIS
4. 2. BEGINNING OF INTEGRATION
Exports after Customs Union (Billion $)
1996
1997
1998
1999
2000
2001
2002
2003
23.224
26.261
26.974
26.587
27.775
31.334
36.059
47.253
Source: SIS
4. 2. BEGINNING OF INTEGRATION
2004
2005
63.121 73.390
• Figures from the period since the start of the Customs
Union show that Turkey's imports from the EU in
1996 reached $23 billion, with an increase of 37.2%.
Considering the 22.27% increase in Turkiye’s total
import in 1996, it is clear that the Customs Union had
a certain impact on the increase in imports. On the
other hand, Turkey's export to the EU totaled $11.5
billion with an increase of 4.2%, below the 7.3%
increase in total exports in 1996. Consequently,
Turkiye's foreign trade deficit with the Union doubled
and increased to $11.6 billon in 1996.
4. 2. BEGINNING OF INTEGRATION
• In 1997, the EU reconfirmed Turkey's eligibility
for membership.
• However “Agenda 2000”, excluded Turkey from
this historical process. Turkish government
criticized the EU for its discriminatory approach.
4. 2. BEGINNING OF INTEGRATION
• On the eve of the Copenhagen European
Council of December 2002, Turkey-EU relations
have gained a new impetus. With a view to
meeting the accession criteria, Turkey has
accelerated its efforts along the path set by the
National Program.
4. 2. BEGINNING OF INTEGRATION
• European Commission published its
Regular Progress Report on 6 October
2004. In the document it is indicated that
Turkey sufficiently fulfils the political
criteria and accession negotiations should
be opened.
• The European Council of 16-17 December
2004, decided to initiate accession
negations with Turkey on 3 October 2005.
4. 2. BEGINNING OF INTEGRATION
4.3. Turkiye as a Negotiating
Country
• The negotiation process is a very complicated
process which includes adoption of the acquis,
fulfilling both economical and political criteria ,
and the screening process.
• The Screening Process includes 35 chapters
and Turkey’s efforts are going to be monitored
closely.
4. 3. TURKIYE AS A NEGOTIATING COUNTRY
• The Accession Negotiations are open ended and
at the end of the negotiations even Turkey fulfills
the criteria and adopts the acquis, Turkey’s
membership will depend on the “absorption
capacity” of the European Union.
4. 3. TURKIYE AS A NEGOTIATING COUNTRY
4.4. Turkiye’s Integration to
the EMU
Maastricht Criterions – Nominal
Convergence
• The enlargement wave on May 2004, ended
with the membership of ten European countries.
Those new members of the EU, should meet the
Maastricht Criteria in order to join the EMU. This
is called as “nominal convergence”
4. 4. TURKIYE’S INTEGRATION TO THE EMU
• The Maastricht Criteria are below:
• 1. Inflation rate: No more than %1,5 higher than
the 3 best-performing member states.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
• 2. Government finance:
• Annual government deficit: The ratio of the
annual government deficit to gross domestic
product (GDP) must not exceed 3% at the end of
the preceding fiscal year. If not, it is at least
required to reach a level close to 3%.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
• Government debt: The ratio of gross government
debt to GDP must not exceed 60% at the end of
the preceding fiscal year. Even if the target
cannot be achieved due to the specific
conditions, the ratio must have sufficiently
diminished and must be approaching the
reference value at a satisfactory pace.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
• 3. Exchange rate: Applicant countries should
have joined the exchange rate mechanism
(ERM II) under the European Monetary System
(EMS) for 2 consecutive years and should not
have devaluated its currency during the period.
• 4. Long-term interest rate: The nominal longterm interest rate must not be more than 2%
higher than the 3 best-performing member
states.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
• Turkey experienced two major economic crises
in November 2000 and February 2001. The cost
of these crises and of the subsequent
transformation of the economy was substantial.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
Source:SIS
4. 4. TURKIYE’S INTEGRATION TO THE EMU
Source: SIS
4. 4. TURKIYE’S INTEGRATION TO THE EMU
4. 4. TURKIYE’S INTEGRATION TO THE EMU
•According to PPP Criteria a country with a debt of
60% and a deficit of 3% is not in danger of finding
itself on an unsustainable debt path
•Turkey budgetary deficit(%); 2001 16.5, 2002 14.6,
2003 11.3, 2004 7.1, 2005 0.2
• Turkey Public debt / GDP(%); 2001 102.6, 2002
89.5, 2003 80.2, 2004 78.4, 2005 75.3
4. 4. TURKIYE’S INTEGRATION TO THE EMU
•
A new economic reform program was
announced in April 2001.The program
comprises three measures:
1. Reforming the banking sector,
2. Ensuring stability in the money and foreign
exchange markets
3. providing a sustainable growth environment in
macro-economic balances.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
• As a result of the strict economic program,
inflation was cut down to single-digits last year.
• For 2004, the year-end target rate of inflation
was set at 12%, but realized as 9.32%.
• In 2005, the inflation rate in terms of consumer
prices’ indexes was contracted % 7,72; and, %
2,66 as of producer prices’ indexes.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
Figure 8. Annual Inflation Rates and Convergence
%
Turkey
EU Criteria
Source: The Central Bank of Republic of Turkey
4. 4. TURKIYE’S INTEGRATION TO THE EMU
• Turkiye has been extremely careful with its
budget for the last two years. Peaked to 17 % in
2001, the budget deficit to GNP ratio was
realized as less than 3 % in 2005.
• With a very strong fiscal policy, net public debt to
GNP ratio declined to 57 % at the end of 2005
from 90,5 percent in 2001.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
• As a dynamic and evolving economy, Turkiye
reached the growth rate of %9,9 in 2004 and
%7,6 in 2005.
• Turkish economy is developing and sustainable
growth is an important target for the decision
makers.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
Copenhagen / Economic Criterions
–Real Convergence
• The Copenhagen Economic Criterions
require that the candidate countries;
1. Have a functioning market economy
2. The companies have competition power
with the other companies and market
forces in the European Union.
• Latest developments in Turkish economy,
caused an increase on GNP per capita. By
2005, per capita income rose to 5000
USD. GNP by purchasing power parity per
capita income in Turkiye is close to 8000
USD.
• Turkey’s low GNP per capita may rise to a
better level if the rapid development and
growth rates kept sustainable in the
following years.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
• The structural reforms implemented after
economic crises, helped Turkish economy to
become a functioning market economy. The
Banking Sector Reform had
crucial
importance. Prior to 2005, foreign direct
investment (FDI) in Turkey averaged less than
$1 billion annually, but further economic and
judicial reforms and prospective EU
membership are expected to boost FDI.
Privatization sales are currently approaching
$21 billion.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
• Competitiveness is an increasingly important factor
for Turkish economy. The largest industrial sector is
textiles and clothing, which accounts for one-third of
industrial employment; it faces tough competition in
international markets with the end of the global quota
system. However, other sectors, the automotive and
electronics industries, are rising in importance within
Turkiye's export mix. Turkish companies learnt to
cope with international market forces in the past years
due to the Customs Union Treaty.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
• In 1996-2002 period, while the share of textile and
clothing in export to the EU decrease from 48.3% to
44.3% respectively, the share of machinery and
transport equipment increased from 13% to 25.9%,
this might be considered a gradual change of
Turkish export to the EU
through more
value-added products.
4. 4. TURKIYE’S INTEGRATION TO THE EMU
5. ECONOMIC SCENARIOS FOR
2020
5.1. GDP
5.2. National Income per Capita
5.3. Unemployment Rate
5.4. Foreign Trade
5.5. FDI
5.6. Budgetary Implications
5.7. Turkish Labour Market Dynamics
5. ECONOMIC SCENARIOS FOR 2020: CONTENTS
Figure 5.1.1. The Share of Turkiye's GDP in
EU25 (% )
6,00%
5,00%
4,00%
3,00%
2,00%
1,00%
0,00%
Base Scenario
High Scenario
2004
2014
2020
SOURCE: SPO
5.1. GDP
Figure 5.1.2. The Amount of Turkiye's GDP
(at current prices, in millions of Euros)
1500000
1000000
Base Scenario
500000
0
High Scenario
2004
2007
2014
SOURCE: SPO
5.1. GDP
2020
Table 5.1.1. Turkiye’s Impact on the EU GDP (at current prices, in millions of
Euros)
2014
2016
2018
2020
Total
EU-25 GDP
15,949,217
18,289,862
19,144,521
20,975,181
128,565,071
GDP Low
Scenario
15,949
17,473
19,144
20,975
128,565
GDP High
Scenario
47,847
52,420
57,433
62,925
385,695
SOURCE: Hughes K. , Turkiye and the EU: Just Another Enlargement
5.1. GDP
Table 5.1.2. GDP Growth Rate (%)
TURKIYE
EU25
Base Scenario
High Scenario
2004
9.6
9.6
3.0
2007
5.1
6.0
3.0
2014
6.4
7.0
3.0
2020
6.4
6.8
3.0
2004–2020
6.2
6.8
3.0
SOURCE: SPO
5.1. GDP
5.1. GDP
Figure 5.2. National Income per Capita for
Turkiye (EU25=100)
40,0%
30,0%
Base Scenario
20,0%
High Scenario
10,0%
0,0%
2004
2007
2014
2020
SOURCE: SPO
5.2. NATIONAL INCOME PER CAPITA
Figure 5.3.Unemployment Rate (% )
12,0
10,0
Turkiye Base
Scenario
8,0
6,0
Turkiye High
Scenario
4,0
EU15
2,0
0,0
2004
2014
2020
SOURCE: SPO
5.3. UNEMPLOYMENT RATE
Figure 5.4.1. The Share of Foreign Trade in GNP (%)
SOURCE: UNDERSECRETARIAT OF THE PRIME MINISTRY FOR FOREIGN TRADE
5.4. FOREIGN TRADE
Table 5.4.1. Turkiye's Foreign Trade (million USD)(in 2005)
Exports (FOB)
73 400
Imports (CIF)
115 000
Volume
188 400
Balance
-41 600
Exp./Imp.
63,8
SOURCE: UNDERSECRETARIAT OF THE PRIME MINISTRY FOR FOREIGN TRADE
5.4. FOREIGN TRADE
Table 5.4.2. The Share of EU in Turkiye’s Exports (%)
1990
1995
2000
2001
2002
2003
2004
EU (25)
EU
(15)
56,5
54,2
54,3
53,8
54,0
54,8
54,6
55,4
51,2
52,2
51,4
51,2
51,8
51,6
Table 5.4.3. The Share of EU in Turkiye’s Imports (%)
EU (25)
45,8
48,3
50,2
45,8
47,6
48,3
46,7
EU
(15)
44,4
47,2
48,8
44,2
45,2
45,7
43,5
SOURCE: UNDERSECRETARIAT OF THE PRIME MINISTRY FOR FOREIGN TRADE
5.4. FOREIGN TRADE
Table 5.4.4. Turkiye’s Share in EU’s Extra EU-25 Trade (%)
1999
2000
2001
2002
2003
2004
Share in
Imports
2.09
1.83
2.17
2.5
2.75
0.03
Share in
Exports
3.03
3.58
2.33
2.82
3.33
3.93
SOURCE: EUROSTAT, own calculations
5.4. FOREIGN TRADE
Figure 5.4.2.Sectoral Shares of
Turkiye's Exports (%) (2005)
Manufactures
Mining
Products
Agricultural
Products
Other
Products
SOURCE: UNDERSECRETARIAT OF THE PRIME MINISTRY FOR FOREIGN TRADE
5.4. FOREIGN TRADE
Figure 5.4.3. Sectoral Breakdown
of Manufactures in Turkiye's
Exports (2005)
Iron and Steel
6%
21%
11%
Chem icals
5%
10%
Other Sem i
Manufactures
Machinery and
Transport Equipm ent
Textiles
12%
35%
Clothing
Other Consum er
Goods
SOURCE: UNDERSECRETARIAT OF THE PRIME MINISTRY FOR FOREIGN TRADE
5.4. FOREIGN TRADE
Figure 5.4.4.Sectoral Shares of Turkiye's Imports (%)
(2005)
13%
1%
18%
Investm ent
Goods
Interm ediate
Goods
Consum ption
Goods
Others
68%
SOURCE: UNDERSECRETARIAT OF THE PRIME MINISTRY FOR FOREIGN TRADE
5.4. FOREIGN TRADE
Figure 5.4.5. Turkiye’s Imports Fom EU Countries (in
billions of Euros)
5.4. FOREIGN TRADE
Figure 5.5.1. Breakdown of FDI Capital Inflows to
Turkiye by Country Groups (1995-2005)
SOURCE: CBRT
5.5. FDI
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
Manufacturing
Services
Other
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
million USD
Figure 5.5.2. Sectoral Breakdown of FDI Capital Inflow
in Turkiye (1995-2005)
SOURCE: CBRT
5.5. FDI
Figure 5.5.3. Breakdown of Companies with EU Capital
According to the Amount of Equity Capital (USD) (2005)
5%
5%
<50000
50000-200000
25%
200000-500000
65%
SOURCE: CBRT
5.5. FDI
>500000
Table 5.6.1. Turkiye’s Contribution of Traditional Own
Resources to the EU Budget
5.6. BUDGETARY IMPLICATIONS OF TURKIYE’S MEMBERSHIP UPON THE EU
Figure 5.6.1. Turkiye’s Contribution to the EU Budget
(at current prices, in millions of Euros)
5.6. BUDGETARY IMPLICATIONS OF TURKIYE’S MEMBERSHIP UPON THE EU
Figure 5.6.2. Estimated Support to be received by
Turkiye from the EAGGF Guarantee Section
(in millions of Euros)
5.6. BUDGETARY IMPLICATIONS OF TURKIYE’S MEMBERSHIP UPON THE EU
Table 5.6.2. Relationship Between Turkiye and the EU
Budget-I (in millions of Euros)
5.6. BUDGETARY IMPLICATIONS OF TURKIYE’S MEMBERSHIP UPON THE EU
Table 5.6.3. Relationship Between Turkiye and the EU
Budget-II (in millions of Euros)
5.6. BUDGETARY IMPLICATIONS OF TURKIYE’S MEMBERSHIP UPON THE EU
5.7.TURKISH LABOUR
MARKET DYNAMICS
Contents
•5.7.1.Population
5.7.1.1.The Indicators of
Population Rates Concerning with the
Economy,Demography and Education
5.7.1.POPULATION
•
5.7.1.1. The Indicators of
Population Rates Concerning with
the Economy,Demography and
Education
5.7.TURKISH LABOUR MARKET DYNAMICS
Population and Demography
• According to the population and
development indicators Turkish population
growth rate is %1.29(2004)
• Turkish population is expected to increase
87 million people in 2025.On the other
hand,looking at the long-term projection of
the population it is estimated that in the
2050s the population will stop rising and
begin to decline.(SPO,2004)
5.7.TURKISH LABOUR MARKET DYNAMICS
• %64.6 is included between the ages 1564.
• The age group 0-14 consitutes %30.5 of
the population.According to the Eurostat
figures ,this ratio is %16 for EU-15.While it
falls to%12.5 in 2020,it will be %23 in
Turkiye.
5.7.TURKISH LABOUR MARKET DYNAMICS
Breakdown of Population by Age
Group 1990-2070*(1000)
5.7.TURKISH LABOUR MARKET DYNAMICS
Population and Economy
• According to the HLFS of the year 2005 Turkiye
has a total labour force of 24.1 million people.
• The number of employment is 21.034.000
people.Labour force participation rate is % 46.9.
• As looked at the numbers by gender;labour
participation rate of men is%71 and women
participation rate is %23.2 with the women
participation rates on increase.Half of the
agricultural labour force, or more precisely, %80
of women in the agricultural sector are in the
form of unpaid family labour.
5.7.TURKISH LABOUR MARKET DYNAMICS
Population and Education
• The share of workforce that has received higher
education in the total workforce is rapidly
increasing.Examining the share of workforce that
has received higher education in the total
workforce which stood at %8.8 in 2000,will rise
to %17.9 in 2020.
• A Turkiye with a predominantly young population
and with nearly half its total workforce having
received higher education would provide
important contributions in the EU after an
accesion.
5.7.TURKISH LABOUR MARKET DYNAMICS
5.7.TURKISH LABOUR MARKET DYNAMICS
5.7.TURKISH LABOUR MARKET DYNAMICS
5.8.MIGRATION
Causes of Worker Migration
•
•
•
•
•
Unemployment
Inequalities in the distribution of income
Inequalities between regions
Imbalanced city-rural living
The failure to deliver a speedy and
balanced industrialisation programme
• Lack of participation in socio-economic
activities by large groups of the population
5.8 MIGRATION
Ranking of Migration Levels in the
Member States
1.
2.
3.
4.
5.
6.
7.
GERMANY
RUSSIA
UNITED KINGDOM
ITALY
HOLLAND
AUSTRIA
SWITZERLAND
5.8 MIGRATION
• The highest immigration rates are to be found in
Luxembourg.
• Accorrding to the Council of Europe ,the biggest
European populations living in a foreign member state
are Turkish community.(2.75 million Turks live outside
Turkiye,especially in Germany in Europe.)
5.8 MIGRATION
Migration Scenarios For Turkiye
• High Growth,EU Membership and Free
Movement of Labour
• Suspended EU Accession,Lower Growth
and No Free Mobility of Labour
5.8 MIGRATION
High Growth Scenario
5.8 MIGRATION
Scenario for No Membership and No Free
Movement of Labour
5.8 MIGRATION
THE ELEMENTS THAT WOULD SHAPE
POSSIBLE MIGRATION FROM TURKIYE
• The length of negotiating process
• The attitude of the EU side on the free
movement of persons during negotiations
• The length of any transitional period concerning
the free movement of persons after accession
• Development of the Turkish economy
• Turkiye’s social development and its rate of
population growth
• The social cost and cultural differentation of the
migration,leaving social environment and
oriental cultural habits
5.8 MIGRATION
• The demographic situation of the
EU,Turkiye has a great chance to replace
the aged labour market of the EU in next
20 years.
5.8 MIGRATION
Free Movement & Migration of Workers From Turkiye to EU Countries
The general intention to migrate reflects a basic attitude towards migration to the EU. The
questionnaire includes a direct question: “Do you intend to go to live and work —for a few months or for
several years— in a current EU country in the next five years?”
General Intention:
Firm Intention: The firm intention to migrate to the EU provides a second measurement within the present
study, which should provide the highest degree of probability to predict actual migration behavior by
capturing, at least partly, the intensity of the intention to migrate. It has been measured with the help of four
variables— two of which have already been used to measure the “general intention.” In addition, these
answers are controlled by a third indicator of “target regional mobility into the EU15” and by a fourth
indicator, which measures the willingness to live in a country with a foreign language. The question was “How
willing would you be to live in another European country, where the language is different from your mother
tongue?” To accept explicitly the challenges that come with migrating to a country with another language
provides an indicator of “medium level” strength of the seriousness to migrate. The response categories vary
from “very much,” to “some extent,” “not much” and “not at all.” The indicator of a firm intention to migrate
includes only those respondents who answered “very much” to this question. Similar to approaches by other
scholars, the present study aims to capture the strength of the intention to migrate by using a fourdimensional scale
5.8 MIGRATION