Turkey: Economic Analysis, Challenges, and Recommendations Report

This report provides a detailed economic analysis of Turkey, examining various challenges and proposing solutions. It begins with an overview of the economic conditions, identifying key problems related to political instability, religious issues, and economic factors such as current account balance, energy supply, and the education sector. The analysis employs models like PESTLE, Porter’s diamond, and the Global Competitiveness Index to evaluate the external market and assess the country's performance. The report then delves into specific issues, including constitutional reform, terrorist attacks, and the role of Islam. Furthermore, the report offers proposed solutions to the identified problems, addressing both political and economic challenges, and discusses limitations of the analysis. The study highlights the need for policy changes to improve the economic outlook of Turkey.

Turkey: a work in progress?

TABLE OF CONTENTS
Chapter 3: Problem statement and Plan of Analysis............................................................................
3.1 Plan of Analysis..............................................................................................................................
3.2 Problems.........................................................................................................................................
Political Problems.................................................................................................................................
Turkey political issue:..................................................................................................................1
Constitutional Reform:................................................................................................................2
Terrorist Attacks..........................................................................................................................2
Models.........................................................................................................................................2
PESTLE Analysis........................................................................................................................2
Turkey’s Pestle analysis linking to Porter’s diamond.................................................................4
Economic Problems..............................................................................................................................
Current account balance...............................................................................................................4
Savings investment balance.........................................................................................................5
Energy Supply..............................................................................................................................5
Education sector...........................................................................................................................5
Global Competitiveness Index Model.........................................................................................5
Religion Problems................................................................................................................................
Secularism issue and Freedom of Expression..............................................................................7
Kurdish problem..........................................................................................................................7
Cultural issues..............................................................................................................................7
Hofstede Model............................................................................................................................8
Chapter 4: Analysis and Findings.......................................................................................................
4.1 Introduction..........................................................................................................................10

Political problems......................................................................................................................10
Religious Problems....................................................................................................................13
Chapter 5: Proposed solution to problems/ recommendations, limitations of the Analysis...............
5.1 Solution to Political Problems.............................................................................................15
5.2 Solution to Economic Problems..........................................................................................16
5.3 Solution to Religion Problems.............................................................................................17
References..........................................................................................................................................

CHAPTER 3: PROBLEM STATEMENT AND PLAN OF ANALYSIS
3.1 PLAN OF ANALYSIS
In the present given case study, researcher focuses on evaluating the economic conditions
of Turkey which has suffered major setbacks in past but after the 2009-10 post recession period,
country is able to enhance and maintain its position. Herein, plan of analysis is to evaluate varied
problems that are associated with the economic conditions of Turkey according to the given case
so that use of effective economic conceptual tools and models proper analysis can be made and
desired enhancement can be made in different areas.
Considering the formal economy of Turkey which was mixture of modern and traditional
industries. In which, services accounted for 64% of the economic activity whereas,
manufacturing contributes 27% and remaining 9% is from agriculture. Thus, the main focus on
this study is to analyze the major problems associated with the economic prospects of the
Turkey. Furthermore, on the basis of given case study, researcher has evaluated varied problems
that affects the course of economic conditions of the country.
3.2 PROBLEMS
Following are the problems identified through given case scenario:
POLITICAL PROBLEMS
Turkey is not only economically bound but politically as well as they are trying to
modernize the country and to become a powerful and a significant within the world. Turkey
implemented a policy of «zero problems with neighbour countries» but unfortunately this failed.
For Turkey to think this was achievable illustrates that their government was too confident in its
ability to bring stability to its region where there are no agreements and a lot of parties in
conflict. So their policy failure was inevitable given these factors and the relationships they have
with countries they boarder with.
Turkey political issue:
According to the given case study, the distinguished issue in Turkey is role of Islam. In
past, modernization and Islamization were intermingled in the evolution of Turkish nationalism.
It is because of the fact that there are some parties who thinks that issue of women’s headscarves
is a testing ground to the commitment to the secular state. However, to have stable political
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environment it is important for the government of Turkey to promote the thought of never
involving religion into state because this will help in better social living standards.
Constitutional Reform:
Within the country, constitutional reform remains the pressing challenge faced by the
government. Despite of efforts made by the government parties to introduce more civilian
friendly constitution than the current one but still they are failed to protect minority and civil
rights.
Terrorist Attacks
Current political challenge that Turkey is facing is related to terrorist attacks which had
taken place due to Islamic extremist, Kurdish radicals, Turkish Militants that may have link with
Al-Qaeda.
Models
In order to understand the political problems it is important for the researcher to make in-
depth analysis under the constitutional reform of Turkey. In this regard, models like Pestle,
Porter’s and SWOT analysis has been used. The main purpose behind using these models is that
they will help in evaluating and analysing the external market of Turkey in appropriate and
reliable manner. Further, each and every aspects will be covered in detailed manner.
PESTLE Analysis
In general, Pestle analysis can be defined as the model of external analysis of the country.
Herein, researcher has used this method to understand the external market of Turkey so that
problems related to political environment can be resolved in the appropriate manner.
 Political: Looking at the current political environment of Turkey it can be said that one of
the current political strength in the country is that its government have polices on
liberalisation. However, it is was one of the major supporter of liberal trade and
investment policies which allow open trade between different countries in EU (Ozbudun,
2015). Export in the country has been raised with the average rate of 10% every year
which will assist fashion industry to flourish with the exports produced in the Turkish
plant.
 Economical: Considering the present condition, economic strength in Turkey is related to
high inflow of foreign investment from abroad. However, this investment source plays
significant role in speedy expansion of country’s economic growth. From 2008,
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privatisation program in Turkey has encouraged the sale of major bridges, highways,
electricity grids and share in the partly commercial bank. The main purpose of foreign
investment is that it will assist in course of expanding the infrastructure of the country.
By the means of this, government could bring more civilian friendly constitution than the
current which promotes better growth in the market.
 Social: The social strength of country is related to youth power because half of the
population in Turkey is aged below 30. By the means of this, country can improve its
employment rate because young people are enthusiastic and highly motivated to work
and this will enhance young labour force. High percentage of skilled labour will
encourage industrialisation in the country that directly improve the overall economic
conditions of Turkey (Öniş and Kutlay, 2013). Contrary to this, at present country is
suffering from high level of unemployment because of high percentage of Islamic people
or Kurds are located in rural areas as well as they are poor people.
 Technological: From the current situation of Turkey it can be said that its technological
strength is significant development in the ICT sector. In recent past, the ICT sector of
Turkey has shown rapid extension just because of the sharp increase in Turkish
telecommunication sector as they have been privatized by the government. But on the
other hand, one of the major problems related to technological aspect of country is low
expenditure costs on the research and development.
 Legal: Looking at the present legal system of Turkey it can be said that Turkey have
comprehensive legal structure. However, the judicial system is made up of general courts
which deals with domestic cases, heavy penal courts which deals with more serious
cases, military courts deals with military cases and the constitutional courts which are at
highest level of courts that deals with the essential cases related to Turkish government
i.e. war crimes (Guney, 2013). Another legal advantage that Turkey will possess is
related to relaxation of paperwork or lengthy process of registration for business this will
encourage more companies to enter into the market and generate higher foreign fund.
 Environmental: Environment condition of Turkey is relatively challenging because of
high pollution level due to which global warming is cased. Further, the solid waste
management in Turkey need to be taken care of appropriately because high level of
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environmental pollution is caused due to increase chemical and detergent flow which
indeed causes severe illness to people.
Turkey’s Pestle analysis linking to Porter’s diamond
On the basis of pestle analysis it can be said that, government of Turkey is focusing on
creating new legislation to assist to the industry and the companies to grow from foreign
investment. By the means of this, country will attain the national advantage and develop suitable
base for modernizing its overall functioning. Along with this, government is making the market
more demanding by stimulating foreign investment so that companies can become more
competitive and it will benefit Turkey as national advantage (Rosenzweig, 2014). By promoting
liberalization and industrialization, government can create new job by encouraging and training
young generating to have new skills and qualified to work in different sectors so that varied areas
can be developed and promote the modernization of the country. Furthermore, government is
constantly focusing on improving the ICT sector so that, it will help not only to modernized the
structure as well as benefit Turkey’s different industries to carry out their operations by making
optimum utilization of available resources. To manage the home affairs and judicial system in
the country different courts have been developed through the means of which companies and
people can be kept under the law and motivate them to carry out operations ethically to attain
growth in near future.
ECONOMIC PROBLEMS
Another factor is the political landscape and how religion impacts politics and legislation
which in turn impacts the economic performance of the country greatly. Turkey is really
interesting since it is a developing country that faces many challenges. Over the past two decades
Turkey has shown some definite signs of strong economic development, however a lack of
stability still exists for Turkey given its relationship with Europe, the US and the rest of the
world.
Current account balance
Looking at the balance of payment of Turkey it is it is relatively poor because of current
account negative balance nearly $78 billion or 10% of GDP. However, this is because oil shocks
in late 1970s pushed country to financial crisis. With the scare of energy resources, Turkey
imported 93% of its petroleum and 95% of its natural gas. Similarly, balance of payment for last
15 years also shows that Turkey is facing major concerns in exporting goods as in 2001 34.7 to
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143.4 in 2011 while on the other hand its import of goods in increasing at significant rate as in
2001 -38.1 to -232.5.
Savings investment balance
With the domestic investment at 21.7% not enough savings this directly leads to the need
for capital inflows of 9.4% of GDP and leads to constant rise in foreign debt. This is one of the
major problems in substantial growth for Turkey economy led by insufficient savings as people
always try to save under the pillow not in any bank or financial institution.
Energy Supply
Despite of increasing foreign direct investment, energy supply remained an outstanding
weakness for Turkey. Further it can be supported by the fact that, despite of some domestic coal
reserves, Turkey’s electric utilities imported 69% of their fuel and 97% of the natural gas in
2010. Further, the oil companies imported 91% of their crude oil which amount energy bill of
around $52 billion in April 2012 which leads to current account deficit of $67 billion.
Education sector
This is another major problem for government of Turkey as country’s educational system
is not able to generate better results. However, teachers were poorly trained and poorly
motivated. Further, there is no such initiatives related to incentive within the sector leads to
dissatisfy the people associated with this sector. Inequalities in schools of rural and urban areas
has led to the variances of education system, weak infrastructure etc.
Global Competitiveness Index Model
In general, global competitiveness index (GCI) is a report which published by World
Economic Forum. However, this report rank the countries on the basis of their global competitive
index. Through the means of this index, researcher is focusing on carrying out the analysis of
Turkey’s performance in the overall GCI, as well as in each of the sub-indexes and pillars of the
index.
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Figure 1: Global Competitiveness Index
(Source: Civelek, Uca and Cemberci, 2015)
There are three major categories of this model which are as follows:
 Basic requirements subindex: Under this category there are several pillars that need to be
taken care of i.e. institutions, infrastructure, Macroeconomic environment and health and
primary education. These pillars play key role for factor-driven economies (Zalengera
and et.al, 2014).
 Efficiency enhancer’s subindex: Under this category there are several pillars that need to
be taken care of i.e. higher education and training, goods market efficiency, labour
market efficiency, financial market development, technological readiness and market
size. These pillars play key role for efficiency-driven economies (Gillam and Siriwardena
2013).
 Innovation and sophistication factors subindex: Under this category there are several
pillars that need to be taken care of i.e. business sophistication and innovation. These
pillars play key role for Innovation-driven economies.
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RELIGION PROBLEMS
Turkey is a Muslim country as 99% of the Turkish population practice Muslim habits.
Politically it is really hard to manage this fact and the one to be part of EU where Muslim
religion is almost not existing within. On top of that, Turkey seems really specific by the way it
should be manage regarding the place that religion take.
Secularism issue and Freedom of Expression
In the era between 1950 and 1980 the Turkish government gradually made the transition
to democracy. The major issue identified in evaluation of democracy is related to secularism
because there are some members of establishment believed that issue of women’s headscarves is
a testing ground to the commitment to the secular state. However, Turkey is unable to promote
religious freedom and scarves is the major part of expression of freedom. Another major issues
between secular and religious group is received international attention when Turkish pianist Fazil
Say was convicted of insulting Islam by positing on Twitter which was seen as critical of Islam.
Kurdish problem
In several, foreign policy issues identified, Kurdish problem is the most preeminent one.
It is because of the fact that, around 20% of Turkish population had Kurdish roots. However,
majority of Kurds are mainly rural and poor located in southeast Turkey. In such region,
unemployment has led the people to live outrageous life which indeed affects the overall
economy of the country.
Cultural issues
Cultural issues of Turkey can be divided into three major categories that is religion,
location and gender equality. However it is important for the government of Turkey to consider
all the three aspects to resolve the culture issues:
 Religion: On the basis of given case study it has been evaluated that, Turkey’s main
religion is Islam and it heavily influenced the life of Turkish people in many ways.
However, people have faith in their religion and due to which government is constantly
suffering from issues like expression of freedom, as Islam promote women’s headscarves
and government in order to promote more freedom for women is trying to remove such
foundation. But still with lot of restrictions for female have caused major limitations of
the country in terms of growth and development. Therefore, encouraging modernization
will lead to provide flexible environment of females also to live in the country.
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 Location: Government is facing issues in establishing the plant and industries this due to
which liberal trade is not up to a great level (Cravens, 2014). Pollution is one of the major
problem for the country and in order to encourage industrialization, environment
considerations should be taken into account as a major priority.
 Gender equality: Looking at the current demographic prospect of the Turkey, it has been
analyzed that males are the dominate species in the societies. In order to maintain gender
equality several efforts have been made but still it is one of the serious issue with the
Turkish government. Promoting expression of freedom, equality will assist in breaking
the shackles for the government.
Hofstede Model
In general, Hofstede’s cultural dimension theory is a framework for cross-cultural
communication, proposed by Geert Hofstede. The main purpose of this model is that it helps in
illustrating the effect of a society’s culture on the value of its members and how these value
related to behaviour using structure derived from factor analysis.
Figure 2: Hofstede Model of Turkey
(Source: Turkey Hofstede Model, 2016)
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 Power distance: This dimension deals with the fact that all individual in the society are
not equal. However, Turkey have the major issue of gender equality which leads to lack
of freedom of expression for the people especially women. However, Turkey high score
on this dimension of 66 indicates that there are following characteristics possess in
Turkish style: dependent, hierarchical, superiors often inaccessible and ideal boss is
father figure. In this regard, males are more dominant species in the country and women
are not given better opportunity to explore themselves to different sectors in the country
(Kolios and Read, 2013).
 Individualism: This factor focuses on evaluating the degrees of interdependence a society
maintains among its members. With the score of 37 it can be said that Turkey is a
collectivistic society. This indicates, “We” is important and people belongs to groups
such as families, clans or organisations.
 Masculinity & Feminine: In general, high score on masculinity defines that society is
driven by competition, achievement and success in different areas or sectors. Wherein,
low score on the dimension of Feminine indicates that dominant values in society are
caring for other and quality of life (Blanke and Chiesa, 2013). Looking at the score of 45
it can be said that, it is more towards feminine this indicates softer aspects of culture such
as levelling with others, consensus, sympathy for the underdog are valued and
encouraged. This clearly defines that leisure time for Turks is very important and they
prefer such lifestyle.
 Uncertainty Avoidance: This dimension focuses on the way through which a society deals
with the fact that future can never be known or make any efforts to change the future.
With the high score of 85 on Uncertainty avoidance clearly indicates that there is need of
laws and rules for the country (Acs, Szerb and Autio, 2015). However, maximum number
of Islamic in the country and they remove their anxiety by using lot of rituals. However,
for foreign people, Turks looks more religious.
 Long term orientation: The main purpose of the dimension is to show how every society
should maintain some links with its own past so as to deal with the challenges of the
present or future. However, with the score of 46 indicates the moderate long term
orientation. However, no dominant cultural preferences can be inferred.
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