2010-2012 Medium-Term Programme

8/3/2019 2010-2012 Medium-Term Programme

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MEDIUM TERMPROGRAMME

(2010 - 2012)

SEPTEMBER 2009

Undersecretariat of State Planning Organization

Necatibey Caddesi No: 108, 06100 Ycetepe / ANKARAwww.spo.gov.tr e-mail: [email protected]

REPUBLIC OF TURKEY


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Medium Term Programme (2010-2012), prepared by

Undersecretariat of State Planning Organization was

decided by issuing Cabinet Decree No. 2009/15430,

14.07.2009 and Published in Official Gazette No.27351, 16.09.2009.


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CONTENTS

INTRODUCTION .................................................................................................1

I. ECONOMIC AND SOCIAL OUTLOOK ...........................................................2II. MAIN OBJECTIVES AND REFORM AREAS ..............................................13III. MACROECONOMIC POLICIES AND OBJECTIVES..................................20

A. MACROECONOMIC POLICIES..............................................................211. Growth and Employment.....................................................................212. Fiscal Policy ........................................................................................233. Monetary Policy ..................................................................................314. Balance of Payments ..........................................................................33

B. TARGET AND INDICATORS DURING THE PROGRAMME PERIOD..341. Growth and Employment.....................................................................342. Public Finance.....................................................................................353. Balance of Payments ..........................................................................36

4. Prices ..................................................................................................37IV. DEVELOPMENT AXIS IN THE PROGRAMME PERIOD ...........................38A. ENHANCING COMPETITIVENESS ........................................................38

1. Improving the Business Climate..........................................................382. Reducing the Informal Economy.........................................................393. Developing the Financial System........................................................394. Improving the Energy and Transportation Infrastructure ....................405. Protection of Environment and Imprtovement of Urban

Infrastructure.......................................................................................436. R&D and Improving Innovation ...........................................................447. Dissemination of Information and Communication Technologies.......458. Improving the Agricultural Structure....................................................479. Ensuring the Shift to High Value Added Production Structure in

Industry and Services .........................................................................49B. FOSTERING EMPLOYMENT .................................................................53

1. Improving Labour Market ....................................................................532. Increasing Sensitivity of Education to Labour Demand ......................543. Improving Active Labour Market Policies ...........................................55

C. STRENGTHENING HUMAN DEVELOPMENT AND SOCIALSOLIDARITY ..........................................................................................551. Improvement of the Educational System ............................................552. Improving Health System ....................................................................573. Improving Income Distribution, Social Inclusion and

Combating Poverty...............................................................................574. Increasing Effectiveness of the Social Security System.....................585. Protecting and Promoting Culture and Strenghtening Social

Dialogue...............................................................................................59D. REGIONAL DEVELOPMENT AND REDUCING REGIONAL

DISPARITIES...........................................................................................601. Increasing the Effectiveness of Regional Development Policy

at the Central Level ............................................................................602. Ensuring Development to be Based on Local Dynamics and

Inner Potentials ...................................................................................613. Improving the Institutional Capacity at Local Level.............................624. Achieving Rural Development.............................................................63

E. IMPROVING THE QUALITY AND EFFECTIVENESS INPUBLIC SERVICES.................................................................................64

1. Rationalizing Authorities and Responsibilities Among Institutions......642. Enhancing Policy Making and Implementation Capacity ....................653. Developing Human Resources in the Public Sector ..........................654. Dissemination of e-Government Applications .....................................665. Improving the Judical System .............................................................676. Enhancing the Effectiveness of Security Services..............................687. Natural Disasters .................................................................................68

Annex Table 1 : Main Economic Indicators.......................................................70Annex Table 2 : Selected Figures About Public Finance..................................71Annex Table 3 : Public Sector Borrowing Requirement....................................72Annex Table 4 : General Government Borrowing Requirement .......................73


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The most rapid contraction in the global economicactivity after the Second World War has been experi-enced in 2009. The Medium Term Programme, whichcovers 2010-2012 periods, aims at resumption of ro-bust and sustainable growth period for Turkey in the-se challenging times which contains intensive uncer-

tainties in the world.Current international conjuncture entails the in-

crease of the pace of structural reforms that Turkeyrequires. The fundamentals of our economy will bemore strengthened by the measures and structural re-forms in the scope of The Medium Term Programme.The Programme, prepared with a holistic approach,will increase the predictability in our economy andstrengthen the trust.

It is envisaged that Turkish economy will start togrow again in 2010 and the pace of growth will beginto increase as of 2011.

In order to obtain important gains in near future,the foreseen policies in the Programme will be carriedout in a determined and timely manner. In the prog-ramme period, developments in global economy willbe closely observed and necessary policies will be for-mulated with a dynamic approach.

MEDIUM TERM PROGRAMME

INTRODUCTION


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Transformation efforts since 2000

Increasing vulnerabilities in the macroeconomicstructure, resulted from the fiscal and monetary polici-es implemented throughout 1990`s, deteriorated thestable growth of Turkish economy; years, in whichhigh growth rates were observed, were followed by

the ones in which economic contraction or low growthrates were experienced. In this period, besides theunstable growth, high inflation, ever-increasing publicdeficits and debt stock, high interest expenditures andinefficiencies were the fundamental problems of theeconomy. Structural transformation to overcome the

difficulties in the economy was not realized in this pe-riod.

In the aftermath of 2001 crisis, tight fiscal and mo-netary policies as well as structural reforms which willincrease the life quality of our people, ensure a per-manent macroeconomic stability and provide the eco-

nomy with a flexible and productive structure, consti-tuted the basic characteristics of the implemented po-licies. In this period, confidence and stability in Tur-kish economy were established and a deep rootedprocess of change was commenced towards the res-tructuring of economy and public management.


I. ECONOMIC AND SOCIALOUTLOOK


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Significant developments, aimed at the enhance-ment of the competitiveness in economy, were reali-zed in the fields such as financial sector particularlybanking sector, the independence of Central Bank,tax, public finance, public financial management, labo-

ur market effectiveness, improvement of business cli-mate, R&D, transportation, infrastructure of energyand ICT, agricultural subsidy, regulatory and supervi-sory agencies, public procurement system and priva-tization.

So as to improve life quality and income distribu-

tion, reformist steps have been taken in the areassuch as social security, health and education infras-tructure, housing and urban transformation, tax reduc-tions in basic commodities, social assistances and taxreductions for low income groups, university establish-ments to enhance human resources, renewal of curri-cula and active employment programs.

In order to contribute to regional development;development agencies have been established, effortswithin the context of Southeastern Anatolia Project(GAP), Eastern Anatolia Project Master Plan and Kon-ya Plain Project (KOP) have been intensified, VillageInfrastructure Support Project (KYDES) and Munici-

pal Infrastructure Support Project (BELDES) were car-ried out for the development of rural infrastructure andmodel development programs were performed.

To increase prevalence, quality and efficiency ofthe public services, important steps have been takenon the areas such as local administration reform,



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e-transformation, justice, tax, land registry and cadas-tre infrastructure, disaster and emergency manage-ment.

Negotiations towards full membership to the EUwere initiated and concrete developments were reali-

zed in the process of harmonization with the EU Acqu-is, foreign policy initiatives were conducted to enhan-ce the international cooperation on economic and so-cial fields and access new markets.

Political stability in our country, fiscal disciplineand monetary policies implemented determinedly, re-

alized structural reforms, positive conditions in inter-national markets bring about desired outcomes withregard to macroeconomic stability and public balan-ces.

In 2003-2007 period, annual average of 6.9 per-cent growth rate was realized. Moreover, in the same

period, a high level of public primary surplus, 4.6 per-cent of GDP on annual average, was experienced.The ratio of total public debt to GDP, which was 10percent in 2002, has been decreased to 0.1 percentand the ratio of the EU defined general governmentnominal debt stock to GDP fell to the level of 39.4 per-cent from a level of 73.7 percent. In the same period,

annual consumer price inflation declined from 39 per-cent to 8.4 percent.

Turkeys 2003-2007 experience demonstratedthat fiscal discipline, declining inflation and a soundgrowth performance would have been simultaneouslycarried out.



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In this period, a high performance has also beenperformed in exports. On the other hand, rise in ener-gy prices, increase in imports as a result of the depen-dence of domestic production to the imports and bo-ost in domestic demand lead to high level current de-

ficit. In addition, thanks to direct international capitalinflow with the contribution of stability and confidenceatmosphere, the financing of high current deficits we-re managed without any problem.

The Emergence of Global Crisis

Originating from the US housing market crash in

the second half of 2007, the decline in asset prices indeveloped markets resulted in a decline in householdwealth and thereby a contraction in domestic demand.This process also inflicted serious damage to the ba-lance sheets of important investment banks. In such aperiod where a high level of global economic and fi-

nancial integration existed, these developments qu-ickly started to influence all economies worldwide.Starting from the second half of the 2008, the instabi-lity, which arose first in developed countries financialmarkets and then spread to developing countries inthe course of time, reached alarming levels and trans-formed into a global economic crisis.

Starting from the last quarter of 2008, many deve-loped economies entered into recessionary periodand growth rates began to slow down in many develo-ping countries. It is forecasted that, world output willcontract by 1.4 percent, United States by 2.6 percent,Japan by 6 percent, and Euro Area by 4.8 percent in



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2009. On the other hand, developing countries are ex-pected to grow by 1.5 percent mainly due to the highgrowth rates of China and India. The impacts of adver-se developments in world economy can be observedmore strikingly in world trade volume. As a matter of

fact, it is forecasted that world trade volume will shrinkby 12.2 percent in 2009.1

Due to the significant declines in employment, it isforecasted that unemployment rates will rise in EuroArea from 7.5 percent to 10 percent, in United Statesfrom 5.8 percent to 9.3 percent, and in OECD countri-

es from 5.9 percent to 8.5 percent in 2009.2

The worl-dwide unemployment rate, on the other hand, is ex-pected to increase by 2.6 percentage point.3

In 2009, inflation rates are expected to fall all overthe world due to the global contraction. It is forecastedthat consumer prices will rise by 0.1 percent in deve-loped countries and by 5.3 percent in developing co-untries. On the other hand, it is expected that oil pri-ces will decrease around 38 percent and non-fuelcommodity prices around 24 percent in 2009, compa-red to the previous year.4

As a result of global economic contraction and thefall in inflation rates, it is expected that the ongoingdecline in interest rates will continue in 2009 and inte-rest rates will continue to float at low levels.


1 IMF, World Economic Outlook, July 2009 Update2 OECD Economic Outlook, June 20093 IMF, World Economic Outlook, April 20094 IMF, World Economic Outlook, July 2009 Update


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The recent data indicates that a relative recoveryis beginning in world economy, the instability in finan-cial markets is decreasing, and consumer and inves-tor confidence are getting better comparatively. In thiscontext, a positive revision may be the case for the

above mentioned estimates on global economicgrowth. However, taking the depth and extend of thecurrent global crisis into account, there are still someuncertainties especially on how fast the labour marketwill recover. Another factor preventing the formation ofa strong positive expectation on global outlook is the

different pace and scope of economic recovery in dif-ferent parts of the world.

In the current outlook, there is a common agree-ment that all countries should act cautiously. There isalso a consensus on the fact that the fiscal and finan-cial measures administered to overcome the global

crisis and the supports for the finance sector shouldnot risk the price stability, financial stability, and finan-cial sustainability in the medium and long term. In thiscontext, a lot of countries are creating medium termprograms and targets and designing exit strategies forthe post-crisis period. The coordination of these stra-

tegies in a global manner will be the key factor for therecovery process.

The Effects of Crisis on Turkey

Global crisis affected Turkish economy throughtrade, financing and expectations channels.



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Because of the fact that the impacts of crisis we-re more adverse on EU region, which constitutes aro-und 50 percent of our exports, our export performan-ce was affected negatively and exports, especially ba-sed on driving sectors, has started to decrease signi-

ficantly since November 2008. This decline in exportswhich contributed significantly to the growth perfor-mance in recent years affected production and emp-loyment negatively.

Financing is the second channel that the crisis af-fected Turkish economy. As a result of the global fi-

nancial crisis, similar to other developing countries netcapital outflows was realized in Turkey starting fromOctober 2008. Following this, real sector had difficulti-es about foreign financing, the access of which waseasy in previous years. Therefore, the short-term andmedium term foreign debt roll-over ratio of non-bankprivate sector decreased to 73 percent in the first 7

months of 2009, from 191 percent in 2008.

Global crisis increased uncertainty in Turkey simi-lar to entire world. The increasing uncertainty causedinvestment and consumption decisions to be delayedand decreased the economic activity significantly thro-ugh its negative effects on both confidence environ-

ment and forward looking expectations. The increasein production capacity of Turkey was restricted andthe usage of existing capacity was affected negati-vely.

GDP decreased by 6.5 percent in the last quarterof 2008 and GDP growth rate was realized as 0.9 per-



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cent in 2008. GDP is expected to decline around 6percent in 2009. According to quarterly data, the dec-rease in economic activity, which was 14.3 percent inthe first quarter of 2009, improved to 7 percent in thesecond quarter of the year. This tendency is expected

to continue and in the third and fourth quarters of2009, economy is expected to recover significantly.

This contraction in economy resulted in a decrea-se in employment and an increase in unemploymentlevels, similar to many other countries. Employment isexpected to decrease by 1.1 percent compared to the

previous year and become 14.8 percent in 2009. Be-sides employment losses, increase in labour forceparticipation rate was also effective on these figures.

Crisis had some positive consequences on cur-rent account balance, inflation and foreign debt stock.Imports declined more than exports, thereby current

account deficit decreased significantly. The contracti-on in imports stemmed partly from the decline in ener-gy prices and partly from the slowdown in economicactivity. Especially in a period of limited foreign finan-cing facilities, the decrease in current account deficiteased the financing of deficit.

In addition to significant declines in commodityprices following demand contraction around the world,the contraction in domestic demand contributed to thedeclining trend in inflation. The decreasing inflationarypressures enabled the Central Bank to implementgrowth supporting monetary policy without deviatingfrom the main objective of price stability.



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The effect of global crisis on Turkish banking sec-tor was quite limited. Contrary to many other countri-es, the necessity of intervention to the banking sectorby public sector or resource transfers did not arise.The improvement in regulation and supervision frame-

work and restructuring of the sector were the key fac-tors of this success.

However, the global crisis has significant adverseeffects on public finance performance. Tax revenueswere realized well below the projected budget fore-casts as a result of the contraction in growth and tax

cuts to support the real sector. On the other hand, ex-penditures were realized as projected in budget re-gardless of the growth. Besides, additional increaseswere made in some expenditure items to lessen theimpacts of the crisis. The contraction in economic ac-tivity caused social security premiums to stay well be-low the targets and an obvious increase in social se-

curity deficit was recorded. As a result, budget deficit,debt burden and Treasury debt rolling ratio increasedmore than projected.

Central government budget deficit for 2009 whichwas foreseen as 10.4 billion TL at the beginning of theyear, is expected to realize as 62.8 billion TL as of the

end of year, and IMF-defined primary balance for2009, which was foreseen to give a surplus of 29.8 bil-lion TL at the beginning of the year, is expected to gi-ve a deficit of 20.8 billion TL as of the end of 2009.

These developments in the budget balance andthe contraction in the economy caused an increase in



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EU-defined general government nominal debt stock toGDP ratio, which has been decreasing for the last se-ven years. EU-defined general government nominaldebt stock to GDP ratio, which was realized as 39.5percent in 2008, is expected to increase to 47.3 per-

cent in 2009.Measures Taken in Turkey Against the Global

Crisis

In order to lessen the adverse effects of global cri-sis on Turkish economy, a series of expenditure and

revenue measures have been taken since mid-2008.Along with the measures taken by the Central Bank,BRSA (Banking Regulation and Supervision Agency)and CMB (Capital Markets Board), measures that ha-ve no direct or instant effect on budget are also takenin order to increase credit volume and guarantee limit.With these measures, it is aimed to ease the econo-

mic activity, which is under pressure because of thecrisis, by increasing the transactions in the good mar-kets and thereby increasing the flow of goods and mo-ney; to accelerate the process for economic growth byrestricting the effects of the crisis on potential produc-tion; and to sustain the employment and production le-vels.

In order to maintain the existing employment andcreate new employment, conditions of allowance forshort-term working and eligibility criteria for unemploy-ment benefits were improved; funds for education oflabour force were increased; and new employment



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areas for short-term working were developed. Trans-fers to EXIMBANK and KOSGEB (Small and MediumIndustry Development Organization) and funds alloca-ted to local administration from the central budget we-re increased to support the private sector. Additional

funds to South Eastern Anatolian Project and invest-ment projects of other infrastructure and irrigation we-re provided.

Arrangements for tax benefits to introduce someassets to national economy and tax concession wereintroduced in order to reduce the foreign financingproblem resulted from the international credit crunch.Besides, to cut down the employment costs and to im-prove employment opportunities for the young, womenand disabled, arrangements that decrease the emplo-yers share of insurance premium were made. Moreo-ver, in order to increase the domestic demand, reduc-tion on tax rates were introduced for sectors that were

significantly affected from the crisis. Finally, unpaid ta-xes were restructured in order to lessen the social andeconomic effects of the crisis, the duration of the LawNo. 5084 was prolonged for a year, and also tax reduc-tions and support for moving the factories were intro-duced with the new investment incentive system takinginto consideration the regional differences.

Including various expenditure and revenue me-asures, the total cost of support packages on the bud-get is expected to be around 0.8, 2.1 and 1.6 percentas a ratio to GDP for 2008, 2009 and 2010, respecti-vely.



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The main objective of the Medium Term Program-

me covering 2010 2012 periods is to provide oureconomy with sustainable growth period again andthereby to increase the social welfare of our countryby taking the advantage of the powerful aspects of oureconomic and social structure in the course of brea-king through the global crisis.

Public sector has crucial role in reducing the ef-fects of global crisis on economy with the implementa-tion of revenue and expenditure policies. From thatpolicies, the short term ones focus on increasing con-sumption expenditures and eliminating bottlenecks incredit system, while the medium term ones concentra-te on permanent increase in production, investment,and export in economy. Accordingly, it is targeted thatbreaking out the crisis and following growth processwould be realized with the leadership of the privatesector.

Gradual reduction in public sector borrowing re-quirement and maintaining the price stability is crucial

to increase the available resources and the foresightof private sector in investment and production decisi-ons.

In the Medium Term Programme period, a com-prehensive structural reform program which will en-hance competitiveness, ensure lasting improvement


II. MAIN OBJECTIVES AND

REFORM AREAS


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in growth and fiscal balance will also be implemented.In this context;

Fiscal rules will be implemented.

It is targeted that the legal infrastructure related to

the fiscal rules will be completed before the first quar-ter of 2010. Starting from 2011 budget year, public fis-cal management will be carried out in accordance withthe determined fiscal rules. The necessary improve-ments in implementation, monitoring and control ofthe public fiscal management system will be made in

2010.Within the framework of fiscal rules, public deficit

to GDP ratio in the medium-long term is targeted to re-alize at a level compatible with a sustainable debtstructure. The deviation of the actual deficit from themedium-long term target in the previous year will be

considered while setting public deficit adjustment.

Another factor which will be taken into considera-tion when determining the adjustment in public deficit5


5 Fiscal rule can be expressed as a=y(a-1-a*)+k(b-b*)

a: public deficit adjustment/GDPa-1: previous year realized public deficit/GDPa*: targeted medium-long term public deficit/GDPb: real GDP growth rateb*: long term average of real GDP growth ratey: convergence velocity coefficient of public deficit to medium-long term targetk: reflection coefficient of conjuncture effects(y and k coefficients are negative. The negative a indicates a decrease in pub-lic deficit. Values of parameters, definition and content of public deficit, detailsabout application, monitoring and reporting, exceptions and other issues will befinalized during the process of infrastructure formation for fiscal rule.)


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is the effect of conjuncture. The adjustment in the pub-lic deficit will be higher when the annual growth rate ishigher than the long-term growth rate average, lowerwhen the annual growth rate is less than the long-termgrowth rate average.

A new governance model in SEEs will be imple-mented.

A new draft law, based on the accountability,transparency, flexibility in decision-making processesand strategic management approach in SEEs, will be

prepared. Current public expenditures will be directed topriority areas.

Under the coordination of State PersonnelAgency, idle personnel in the public sector will be de-termined and public sector needs will be met primarilyfrom this personnel. Under the supervision of Ministryof Finance, current expenditures and operations andsavings opportunities will be reviewed, and the non-priority expenditures will be carefully avoided duringthe Programme period. Appropriations will be usedwithout creating debt.

Public investments will be prioritized and mademore efficient.

Resources, allocated for public investments, willbe directed to high priority economic and social infras-tructure investments.



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In the financing of investments, the use of pub-lic-private collaboration models will be expanded.

In order to increase the volume of investment andaccelerate them, the legal infrastructure of public-pri-vate collaboration model will be completed in 2010,

and the number of projects carried out with this modelwill be increased.

Health services and expenditures will be madeefficient.

Under the coordination of Social Security Instituti-on (SSI) in 2010, the prices in Health Communication

Communiqu will be updated according to actualcosts without increasing the total burden, and diagno-sis related pricing system will be expanded. Measuresto prevent unnecessary use of medicines and servi-ces will be taken. Global budget application will be ex-panded in the health expenditures.

Appropriateness and efficiency in social aids willbe achieved.

In 2010, under the coordination of the Prime Mi-nistry, the duties and responsibilities of relevant orga-nizations will be redefined in order to increase coordi-nation and ensure appropriateness in the social aid

system. Efficiency in spending will be provided by thestrengthening of administrative capacity and the integ-ration of IT infrastructure.

Agricultural supports will be rearranged.

Agricultural support payments will be differentia-ted on the basis of field and product in order to increa-



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se competitiveness in the sector and provide stabilityin revenues. Management and control of the supportswill be made area-based.

Loss and fraud in taxes will be reduced.

An effective inter-agency cross-control systemwill be established in the year 2010. Performance cri-teria about the reduction of loss and fraud in taxes willbe determined for the Revenue Administration; thesecriteria will be followed precisely; measures will be ta-ken towards the Revenue Administration to work mo-re effective in this context. Also, income tax law will be

renewed in the year 2010. Fight against smuggling will be activated.

Measures will be implemented in order to reducethe illegal trafficking of the goods such as fuel, tobac-co and alcohol.

Arrangements will be made for the local govern-ments to increase their own revenues and impro-

ve their financial management.

Arrangements, increasing the own revenues ofMunicipalities and special provincial administrations,will be implemented in 2010 in order to strengthen the-

ir financial structure and increase their managerialresponsibilities towards their fellow countrymen.

Training the man power will be accelerated in thenature that the business world demands.

It will be provided that the representatives of thebusiness world will take an active role in the manage-



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ment of vocational schools and in determining theprograms. Administrative and legal regulations on thisissue will be held under the coordination of HigherEducation Council in 2010. The Lifelong LearningStrategy, which was already prepared, will be imple-mented under the coordination of the Ministry of Edu-cation in 2010. The implementation of occupationalstandards and certification system, prepared underthe coordination of Vocational Qualification Authority,will begin in 2010.

Forms of flexible employment will be expanded.

To increase employment and reduce informaleconomy, flexible working models will be encouragedand expanded in the framework of flexicurity.

The contributions of newly established universi-ties to the growth process will be increased by

strengthening their human resources and physi-

cal infrastructure.

Need for teaching staff of the universities, estab-lished between the years 2006-2008, will be resolvedby using the Faculty Training Program and distancelearning technologies under the coordination of HigherEducation Council; and physical infrastructure needswill be met in advance.

Development agencies, of which organizationprocess completed, will be put into operation.

In 2010, all development agencies across the co-untry will reach a capacity to provide financial and



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technical support by putting them into operation.Agencies will execute programs that will support de-velopment, competitiveness and innovative local initi-atives.

State aids will be made more transparent and ef-ficient.

Under the responsibility of Treasury, the legal andinstitutional infrastructure will be created to monitorand supervise the state aids in 2010.

The efficiency of Credit Guarantee Fund will be

increased.The Credit Guarantee Fund, which was provided

Treasury support guarantee in order to expand creditchannels and meet the collateral needs of SME finan-cing, will be made more operational.

The speed and efficiency of the judicial systemwill be increased.

To improve the business environment, to enhan-ce predictability and for effective functioning of marketeconomy, related laws will be amended and the spe-ed and efficiency of the judicial system in this field willbe strengthened.



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Basic macroeconomic priorities of this programare to provide a transition of the economy for a susta-inable growth period again, to increase employment,to maintain disinflation trend and to set public balan-ces in order which has been deteriorated by the influ-ence of the global crisis. To this end, the program cap-tures short term measures and medium term structu-

ral reforms. Compatible execution of fiscal and mone-tary policies is very important in order to reach prog-ram targets.

The recovery of our country from the influence ofthe global crisis is closely related with the improve-ments in the world economy. Targets in the program

are determined by taking also forecasts about foreigneconomic conjuncture. Recent estimations of interna-tional institutions suggest that throughout the worldthe recovery will start from the beginning of the lastquarter of 2009 and in 2010 a positive growth will berealized even at a low level. However; in many coun-tries especially in the developed ones, rises in the

unemployment rates are estimated to continue also in2010. Due to weak demand and employment conditi-ons, global inflation is estimated to maintain at low le-vels also in 2010.

According to the frame of predictions regardingthe world and measures to be taken, in the Program-


III. MACROECONOMIC

POLICIES AND OBJECTIVES


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me period gradual improvement has been aimed ineconomic growth and public balances. Besides eco-nomic growth, with the help of policies to be imple-mented for the labour market, it is aimed that the es-calation period in employment will begin in 2010 and

thereby gradual downturn in the unemployment ratewill start. Although, the tendency to increase in thecurrent account deficit is anticipated in the Program-me period by the influence of economic recovery andstructural effects, current account deficit is predictedto remain in sustainable levels.

A. MACROECONOMIC POLICIES

1. Growth and Employment

i. Monetary and fiscal policies, provided thatthey do not conflict with the price stability objecti-ve of the Central Bank, will be implemented in co-ordination in a way to support economic growthand stability.

ii. In accordance with the aim of facilitating theeconomy to exit from the crisis and establishing asustainable growth structure again, new policies

will be executed to increase private sector invest-ment, export and employment.

iii. Public investment projects will be given we-ight in order to provide renewal and expansion ofphysical and social infrastructure investments ineconomy.



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iv. According to the new incentive system fra-mework, large scale investments and investmentsin sectors determined on a regional base will besupported.

v. Development agencies will contribute to in-

crease the production and income by getting localpotential into act.

vi. A comprehensive industry strategy based onthe creation and improvement of technological in-novations will be carried out in cooperation withprivate sector.

vii. In order to increase non-agricultural employ-ment in rural areas, putting rural development po-licies and agriculture based industrial policies intopractice is essential.

viii. Resources to improve knowledge intensive

and high technology based production structurewill be raised, so a sustainability of the economicgrowth will be provided.

ix. Structural reforms that contribute to a susta-inable growth process will be continued.

x. Domestic savings and long term capital inf-

lows that do not create debt will be encouraged.xi. Collateral support provided by the Treasuryto credit guarantee fund will be put into place ef-fectively in order to make credit channels effecti-ve and meet collateral and financing requirementsof SMEs.



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xii. A convenient environment for private sectorto make long term plans will be established bydecreasing uncertainties stemming from publicpolicies.

2. Fiscal PolicyThe main target of the fiscal policy which will be

pursued in the Programme period is to gradually redu-ce the public sector deficit which has increased withthe impact of the economic crisis to reasonable levelsin order to lower the increasing share of resource usa-

ge of the public sector.Implementation of fiscal policy, in harmony with

the revenue and monetary policy will be carried out byan approach that ensures the realization of the medi-um term fiscal targets determined in this Programme,which is related with revenue, expenditure, public sec-

tor deficit and debt.

As of 2011 budget period, public financial mana-gement will be implemented in accordance with thefiscal rules determined.

The statistics related to public finance which has

great importance in making and analyzing the policieswill be provided as more inclusive and of good quality.

The efforts aiming at strengthen the fiscal trans-parency will be maintained and arrangements andimplementations which violate fiscal transparency willbe diligently avoided.



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a. Public Expenditure Policy

In utilization of public resources, it is essential toact in accordance with pre-determined policies andpriorities and to build public expenditures on firm gro-unds by revising activities and projects in terms of ne-

cessity, effectiveness and efficiency.The basic expenditure policies that will be imple-

mented during the Programme period are as follows:

i) The expenditure programs will be reviewedby the public administrations; activities and pro-

jects which have lost their priority and are ineffici-

ent will be eliminated.

ii) Regarding the employment of new personnelin the public sector, the limitations in the centralgovernment budget laws will be continued.

iii) Without compromising the quality of healthservices, measures aiming at making medicineand treatment expenditures more rationalistic willbe continued as such including the arrangementsthat make beneficiaries contribute to the costs ofthe system.

iv) General health insurance system will be con-tinued to be implemented together with the healthtransformation program in order to keep its finan-cial burden at a reasonable level.

v) The deductions from the general budget taxrevenues of the local governments on account ofthe liabilities to the public sector will be made re-



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gularly and the ratio of deductions will be determi-ned in a way that it will avoid new debts and helpreducing the stock of debt.

vi) Concerning the arrangements and imple-mentations leading to fiscal outcomes, impact

analyses including medium and long term reflecti-ons as well as short term will be made.

vii) In order to make social assistance programsmore effective, the social assistance system willbe restructured by taking it as a whole.

b. Public Investment Policy

The effectiveness of public investments will beenhanced. The investments will be directed towardsinfrastructure that meets social needs having priorityand supports productive activities and it will be usedas an effective instrument in realizing the aims of sec-

toral, regional and cohesion to EU. Within this frame-work;

i) The efforts targeting efficient use of the exis-ting capital stock and effective, productive andpunctual realization of public sector investmentswill be maintained.

ii) Infrastructure investments in education, he-alth, technological research, transportation, drin-king water and improvement of communicationand information technologies will be given priority.

iii) Public sector investments, especially SouthEastern Anatolian Project, Eastern Anatolian Pro-



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ject, and Konya Plain Project, will focus on econo-mic and social infrastructure projects that aim atreducing inter-regional development disparities.

iv) The investments required by the efforts forrealizing the policies and priorities maintained for

the EU membership will be accelerated.

v) The usage of models that encourage privatesector participation in public infrastructure invest-ments will be enhanced.

vi) The proposals of and the decisions on public

investments will be based on sectoral researchincluding problem and result-oriented analysesand qualified feasibility analyses and studies.

c. Public Revenue Policy

The main aim of the public revenue policies is to

contribute to support growth, investment and employ-ment and reduce informal economy. Encouragementof individual and institutional savings and capital accu-mulation has particular importance. Within this frame-work;

i) Stability in implementing tax policies and fo-

resight in taxation will be essential. Legal structu-re in tax legislation and implementations will bestrengthened in order to maintain simplicity andstability.

ii) The studies regarding the determination offiscal amount of tax expenditures will be finalized.



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iii) Audits for the purpose of preventing tax los-ses and exiles, mainly in heavily taxed productswill be increased.

iv) In order to ensure punctual payments of ta-xes and other fiscal liabilities, an effective collec-tion system will be established.

v) The studies about increasing voluntary taxobeying and broadening the tax-base will be con-tinued.

vi) Lump-sum taxes and fees will be updated by

taking the general economic environment into ac-count.

vii) Studies about strengthening the audit andimplementation capacity of tax administration willbe continued.

viii) Necessary arrangements will be made fortax disputes in the area of administrative adjudi-cation.

ix) In order to strengthen fiscal structure of mu-nicipalities and special provincial administrationsand increase their administration responsibilities

towards their citizens, arrangement about raisingtheir own revenues; will be implemented. In orderto increase local administrations proprietary reve-nues, it will be benefited more from the increasesin asset values led by the construction and infras-tructure services.



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x) Necessary measures will be taken for StateEconomic Enterprises in order to discharge theirtax liabilities of past years.

d. Public Borrowing Policy

The main target of debt management is to meet fi-nancing need at the lowest possible cost in mediumand long term, in accordance with the risk level deter-mined considering cost factors, domestic and foreignmarket conditions.

i) In order to increase the amount of funds thatcan be used by the private sector, rollover ratio ofdomestic debt will be decreased gradually.

ii) Regular announcement of the financingprograms and debt information and increasing thetransparency in debt management will be continu-ed.

iii) Studies about the development of new ins-truments and retail sales methods in order to en-hance the investor base of Government DomesticBorrowing Instruments will be continued.

iv) In order to enhance public borrowing faciliti-es and decrease the costs, financing instrumentswill be developed in accordance with the inves-tors demands.

v) To reduce liquidity risks, which may arisefrom cash and debt management, the policy ofholding adequate amount of reserves and the stu-dies for more effective management of cash re-serves will be continued.



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e. Public Fiscal Management and Audit

In order to realize new fiscal management andauditing understanding in public sector created byPublic Financial Management and Control Law No.5018, which aims that the administrative and fiscal

responsibilities are fulfilled, it is essential that internalcontrol systems in a healthy way to be establishedand internal and external auditing are conducted in aneffective and coordinated way.

i) To ensure an effective external auditing inaccordance with Public Financial Management

and Control Law No. 5018, necessary regulationsabout Court of Accounts will be made.

ii) To enhance auditing capacity of Court of Ac-counts, emphasis will be given to training activiti-es.

iii) In order to ensure fiscal discipline and in-

crease the efficiency of public expenditures, audi-ting activities of Court of Accounts at the interna-tional standards will be made widespread in pub-lic sector.

iv) In order to ensure expected performancefrom auditing activities of Court of Accounts, it is

needed that internal control systems are to be es-tablished in accordance with the internationalstandards in whole public sector and internal au-dit systems to be functional. In this context, ne-cessary steps will be taken by Court of Accountsto make internal control and auditing systemsfunction in a healthy way.



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v) In order to strengthen responsibility of admi-nistration in public sector institutions, measuresabout effective implementation of fiscal manage-ment, internal control and internal audit activitieswill be strengthened.

vi) To increase the number of internal auditorswho could be assigned in public sector, trainingand certification activities will be accelerated.

f. State Economic Enterprises and Privatization

It is essential that SEEs will be operated in accor-

dance with profitability and efficiency principles. Priva-tization activities of SEEs in line with a pre-determinedschedule and strategy will be maintained decisively.

i) A strategic management approach based ondelegation, accountability, transparency, effici-ency in decision making processes and perfor-

mance based management in SEEs will be madewidespread.

ii) All corporate policies of SEEs will be deter-mined so as to attain the targets foreseen in thestrategic plans and in the general investment andfinancial decrees, and implemented effectively.

iii) The current market value will be taken as thebasis in appraisal of idle real estate properties ofSEEs. The transfer of properties of SEEs whichare not idle will be possible in such a way so asthe efficiency and integrity of the SEEs and envi-ronmental health will not be adversely affected.



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iv) Problems of operating units of SEEs that in-cur losses will be resolved by also taking theirfunctions into account.

v) Measures will be taken to meet SEEs requ-irements for qualified personnel.

vi) It is targeted that public will withdraw fromdistribution of electricity and sugar productionsectors completely; the share of public in tele-communication and port operation sectors will bedecreased. Preparation studies intended for pub-lic offerings of some part of shares of Ziraat Bank

will be started; decisions regarding implementati-on will be made by taking the results of efforts andmarket conditions into account.

3. Monetary Policy

Monetary policy in 2010-2012 periods will be imp-

lemented in accordance with the inflation targeting re-gime. Within this framework the basic objective of themonetary policy is to establish price stability.

In line with this target;

i) The short term interest rates will continue tobe used as the main policy tool.

ii) The collaboration between the Governmentand Central Bank in determining inflation targetwill continue.

iii) Central Bank, in order to support healthywork of transmission mechanism in line with mo-netary policy targets, will continue to execute li-



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quidity management in a flexible and effectiveway.

iv) In a case where the problems in internationalcredit markets create loss of confidence in do-mestic financial system, Central Bank can take

additional measures to overcome the foreign exc-hange and Turkish Liras liquidity shortage and tomake the markets operate healthier.

v) The floating exchange rate policy will be pur-sued.

vi) Foreign exchange selling auctions may bestarted if unreliable price formation occurs as aresult of loss of depth in exchange market. Mo-reover, in case of speculation depending on lossof market depth, the foreign exchange market canbe intervened directly.

vii) If foreign exchange supply exceeds demand,

foreign exchange buying auctions can be made inline with the general strategy of having strong fo-reign exchange reserves position.

viii) Inflation Report will continue to be the maincommunication tool of monetary policy and acco-unting mechanism.

ix) In cases which inflation realizations exhibit ex-cessive deviations from the target or when anyprobable risk of deviation emerges, to ensure ac-countability and transparency of the monetary po-licy, the Central Bank will declare in written formto the government and announce to the public the



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reasons of the deviation from the target and me-asures that should be taken in order to convergeto the original target again.

4. Balance of Payments

Sustainability of the current account deficit duringthe Programme period and financing it by the resour-ces that do not create debt are major aims. Within thisframework;

i. In order to provide sustainable exportgrowth, production and marketing processes of

innovation and R&D based, high value added andbranded products and services will be encoura-ged.

ii. Directing towards value added increments intraditional export sectors, existing supports regar-ding design, brand, marketing and advertisementwill be improved by diversification.

iii. Exports to neighbours and periphery countri-es, African and Asia-Pacific countries, anticipatedrelatively less influenced by the global crisis, willbe increased within the context of market variety

strategy at exports.iv. In order to decrease high dependency ofproduction and exports on imports, domestic pro-duction capacity intensifier policies and supportswill be maintained especially in intermediate andcapital goods.



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iii. In line with growth that is expected in Prog-ramme period, it is estimated that there will be anincrease about 1 million 250 thousand people inemployment.

iv. The unemployment rate which is estimated to

increase to 14.8 percent because of the crisis in2009 is expected to decline to 13.3 percent at theend of the Programme period.

2. Public Finance

i) It is foreseen that public sector deficit to GDPratio, which is expected to be 6.5 percent at theend of 2009, would decline to 2.1 percent at theend of the Programme period.

ii) Similarly, it is targeted that general govern-ment deficit to GDP ratio, which is expected to be6.6 percent in 2009, would decline to 2.7 percentin 2012.

iii) At the end of the Programme period, it is ex-pected that public sector balance excluding inte-rest payments and privatization revenues to GDPratio would increase to 2.1 percent surplus from0.4 percent deficit in 2009 by improving cons-tantly.

iv) It is foreseen that general government expen-ditures to GDP ratio, which is estimated to be 40.1percent in 2009, would decline to 37.8 percent in2012.

v) It is expected that the general governmentnon-interest expenditures to GDP ratio, estimated



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to be 33.6 percent in 2009, would increase to 34.3percent in 2010 then by getting into decliningtrend, would drop to 33 percent in 2012.

vi) It is foreseen that general government revenu-es excluding privatization revenues to GDP ratio,

estimated to be 33 percent in 2009, would be 34.4percent in 2012.

vii) It is expected that the tax burden including so-cial security premiums (excluding tax rebates) toGDP ratio, which is estimated to be 24 percent in2009, would increase to 26.2 percent in 2010 and

would be at the same level during the Programmeperiod.

viii)It is foreseen that General Government Nomi-nal Debt Stock (EU Definition) to GDP ratio, whichrealized at 39.5 percent in 2008, would increaseto 47.3 percent in 2009. This ratio, which is esti-

mated to increase to 49 percent in 2010, is expec-ted to drop to 47.8 percent by the end of the Prog-ramme period.

ix) It is targeted that the SEEs would have a pri-mary surplus around 0.4 percent of GDP duringthe Programme period. In order to reach the tar-gets, all kinds of necessary measures, particularlythrough the price, stocks and investment policies,will be taken.

3. Balance of Payments

i) Quick deterioration on trade and world eco-nomy resulted from global crisis is expected to



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disappear in the Programme period gradually. Inthis framework, by 2012, exports are expected toreach USD 130 billion with an annual averagegrowth of 9.7 percent while imports are expectedto reach USD 187 billion with an annual averageincrease of 11.7 percent.

ii) Tourism revenues that are estimated to beUSD 21 billion in 2009 is expected to reach USD24.5 billion in 2012 by increasing during the enti-re Programme period.

iii) The ratio of current account deficit to GDP,

in the face of contraction on foreign and domesticdemand, financing, production as a result of glo-bal crisis, is expected to be around 3.3 percentduring the Programme period.

4. Prices

i) Reduction in the inflation recorded on the

first half of the 2009 is expected to continue whenthe recession in demand and deterioration inworld energy and commodity prices are taken in-to consideration. In this context, YoY increaseprojections in CPI inflation are taken as 5.9 per-cent for 2009; 5.3, 4.9, 4.8 percent for the years

2010, 2011 and 2012 respectively.



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A. ENHANCING COMPETITIVENESS

1. Improving the Business Climate

The main objective is to improve the business cli-mate by providing a competitive structure.

Within this framework;

i. Measures towards overcoming the financingproblems of SMEs, deepened by effects of globalcrisis, will be taken; in the mid and long term, ef-forts on structural and institutional improvementsin order to facilitate the access of enterprises, par-ticularly the SMEs, to financial resources and di-

versify the financial instruments will be intensified.

ii. Efforts on reducing bureaucracy, accelera-ting the procedures and decreasing the cost ofprocedures with a view to improve the businessenvironment will be continued.

iii. Efforts to harmonize the state aid systemwith the EU acquis will be continued.

iv. In the intellectual property system, institutio-nal capacity and legal framework will be streng-thened, efficient cooperation and coordinationbetween institutions will be ensured.


IV. DEVELOPMENT AXIS IN THE

PROGRAMME PERIOD


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v. Entrepreneurial information system will beimproved.

vi. Studies on improving the business climate toenhance the competitiveness of artisans andcraftsmen and support the process of changing

and transformation will be conducted.

2. Reducing the Informal Economy

In the Programme period, the main objective is toreduce the informal economy through the targets of in-creasing competitiveness, preventing unfair competiti-

on and contributing to public finance. Within this fra-mework;

i) Under the scope of the Strategic Action Planto Combat with Informal Economy which has be-en implemented since February 2009, registeredactivities will be encouraged, auditing capacity willbe improved, deterrence of the sanctions will beincreased, corporate and social agreement aga-inst informality will be strengthened.

ii) In order to ensure effectiveness in auditing,primarily tax auditing, in a way that also includescross-checking among institutions, human andtechnological infrastructure of public institutionswill be improved by attaching importance on de-velopment of implementation capacity of instituti-ons.

3. Developing the Financial System

Confidence and stability in the financial sector will



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be strengthened and international competitiveness ofthe sector will be increased. Within this framework;

i) Measures taken to keep credit channels acti-ve, which are affected negatively due to global fi-nancial crisis, will be developed.

ii) Current approaches and instruments that aimto strengthen confidence in financial markets andto prevent systematic risk will be made operatio-nal.

iii) The regulation and supervision of financialsector will be improved in line with the internatio-

nal standards, EU acquis, new actions executedby the leadership of G-20 platform following theglobal crisis period, collaboration and informationsharing with foreign supervisory authorities andrelated international agencies will be increased.

iv) Istanbul International Financial Centre Project

will be implemented according to the strategy do-cument to be declared.

v) Capital Market Strategy Document will be pre-pared and implemented.

4. Improving the Energy and Transportation In-

frastructure

a. Energy

The main objective of the energy policy is to me-et the energy needs of an increasing population and agrowing economy in a continuous, quality and secure



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manner at a minimum cost in a competitive free mar-ket environment. Within this framework;

i) Necessary measures will be taken to preclu-de the projected medium term energy supplyshortfall which has been suppressed due to glo-

bal economic crisis at present and to sustain longterm energy supply security.

ii) Privatizations, especially in electricity distri-bution, will be completed to establish a properlyfunctioning free market in electricity and maintai-ning private sector investments in a stable man-

ner will be supported.iii) Construction of nuclear power plants (NPP)which will help to contribute to the diversity ofelectricity supply resources and the security ofelectricity supply will commence.

iv) Use of domestic and renewable resources in

electricity production will be expedited to reducethe overdependence on imported natural gas.

v) Effective implementation mechanisms for in-creasing the energy efficiency will be developed.

vi) Natural gas usage will be expanded througha competitive process and natural gas supply se-

curity, taking the seasonal demand variations intoaccount, will be ensured at a national level.

vii) Due studies will be continued to make Tur-key a transit country and a hub for the transporta-tion of energy (oil, gas and electricity) resourcesin our region to the world markets.



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b. Transportation

The main objective in the transportation sector isto create a transportation infrastructure which is secu-ring a balance among modes, is compatible with mo-dern technological and international standards and is

sensitive to the environment in due time, where trans-portation is conducted safely, economically and ra-pidly. Complementary balance between transportationsub sectors and widespread use of combined trans-port are essential. Within this framework;

i) In realization of the transportation infrastruc-

ture investments, public-private partnership mo-dels will be made widespread.

ii) Traffic safety will be increased in all transportmodes; maritime safety will be given priority.

iii) With utmost utilization of the EU funds, ef-forts for integrating national transport network to

Trans-European transport, providing Turkishports to take place on the main axis of EU Motor-ways of the Sea (MoS) and integration to theSingle European Sky will be continued.

iv) The existing dual carriageway infrastructureworks will be completed and also the standards of

existing highways will be improved.v) Turkish State Railways (TCDD) quality ofservice will be increased and high speed trainpassenger transport will be made more widespre-ad. TCDD will be restructured in order to reduceits financial burden on the public sector.



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vi) In freight transport, the priority will be givento rail and maritime transport; ports will becomelogistics centres that enable combined transportvia improving hinterland connections. Appropriateport areas will be determined, hub ports will be

established, effective and efficient managementof the ports will be ensured.

vii) In order to determine the medium and longterm capacity needs of airports, studies will beconducted. In this framework, measures will betaken to promote regional air transportation.

viii) Studies in order to enhance the administrati-ve capacity at the central and local level will be re-alized to ensure the efficiency and the producti-vity, during the planning, scheduling, realizationand management stages of the infrastructure pro-

jects of urban transport.

5. Protection of Environment and Improvement ofUrban Infrastructure

The main objective is environmental protection byimproving the living standards of cities, providing sus-tainable urban development and forming livable at-mosphere. Within this framework;

i) Administrative, supervision and implementa-tion capacity for implementation of environmentallegislation, which is formed to comply with the EUacquis, will be strengthened.

ii) Contribution will be made to global efforts to-



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wards reducing impacts of climate change withinthe framework of national strategy to be prepared.

iii) Administrative, legal and financial arrange-ments will be implemented in order to managewater sources effectively.

iv) Regarding the domestic solid waste mana-gement; decomposition at the source, collection,transportation, recycling and disposal stages willbe evaluated both technically and financially as awhole, sanitary landfill technology will be prefer-

red.v) The institutional capacity of municipalities to-wards environmental protection will be strengthe-ned in planning, designing projects, realizationand operating urban infrastructure services.

vi) Urban development strategy and action planwill be prepared.

vii) Arrangements will be made by taking disas-ter risk within planning and structuring process in-to account.

6. R&D and Improving Innovation

Main targets of science and technology policyare; improving the innovation capability of the privatesector, increasing competence in science and techno-logy and converting this competence into economicand social benefits. Within this framework;



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i) Increasing R&D capacity and R&D demand ofthe private sector, particularly SMEs, will be en-sured.

ii) Programs for enhancement of cooperationamong private sector, universities and research

institutions and pre-competition R&D collaborati-on will be supported.

iii) Commercialization of research results andtechnology transfer applications will be made mo-re effective and Technology Development Zoneswill be strengthened.

iv) Functionality of programs for development ofproducts and technologies based on domestictechnology will be increased in sectors with highexternal dependency such as defence, health andenergy will be increased.

v) Researcher human power in prioritized tech-

nology fields will be improved in terms of qualityand quantity, considering needs of the privatesector.

vi) In order to strengthen R&D based productioncapability, foundation of research centers andcentral laboratories, particularly in developing uni-

versities, will be supported.

7. Dissemination of Information and

Communication Technologies

The main objective is accelerating the transforma-tion into information society and thereby contributing



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to the improvement of Turkeys welfare, by means ofwidespread and effective use of information and com-munication technologies. Within this framework;

i) In order to develop information and communi-cation technologies infrastructure, competition in

electronic communications sector will be enhan-ced through the introduction of alternative infras-tructure and services.

ii) Necessary legal arrangements in order to es-tablish effective competition environment throug-hout the sector will be accomplished, current ar-rangements will be reviewed in line with the ne-eds emerging from changes in technology andmarket structure and effective and timely executi-on of arrangements will be ensured.

iii) In order to improve productivity level and com-

petitiveness of the economy, regional variety ininformation and communication technologies in-frastructures will be decreased, access to infor-mation and communication technologies, broad-band access in particular, will be made availableto all segments of the society and widespread usewith appropriate costs will be ensured.

iv) In the area of satellite technologies, efforts onthe production of a domestic satellite and relevantR&D activities will be intensified.

v) Training programs directed at development ofqualified human resources in the areas of speci-



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alization, which the IT sector needs will be imple-mented.

vi) Postal sector will be restructured with a com-petitive approach on the principles of quality, reli-ability and accessibility in parallel with EU regula-tions and effective regulation and supervision inthe sector will be ensured.

vii) Broadcasting sector will be improved by takingthe developments in technology into considerati-on and transition to digital terrestrial broadcasting

in parallel with EU countries will be ensured.8. Improving the Agricultural Structure

The basic objective in the agricultural sector is todevelop a well organized and highly competitive struc-ture by taking food security and safety concerns into

account along with the sustainable use of natural re-sources. Within this framework;

i) Agricultural supports will be restructured forthe objective of increasing effectiveness, produc-tivity and quality in production via differentiatingthem on the basis of area and product.

ii) Data contributing to the implementation ofagricultural policies will be improved in terms ofquality and quantity and information infrastructurewill be reinforced.

iii) The modernization efforts of the agriculturaland food industry enterprises will be supported



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within the framework of phytosanitary, animal he-alth and food safety priorities.

iv) Priority of export subsidies for agriculturalproducts will be given to high value added, bran-ded and final consumer oriented products.

v) Producers will be supported to be organizedso as to transform into commercial enterprise inorder to improve productivity and marketing op-portunities in their operations.

vi) Practices for the purpose of increasing pro-

ductivity in the plant production will be extendedand phytosanitary practices such as the usage ofintegrated combating methods regarding plant di-seases and harmful organisms will be improved.

vii) In animal husbandry, supports will be arran-ged to enhance the structural transformation and

activities related to breeding, combating diseasesand pests and increasing the production of qualityfodder will be given priority.

viii) In the fisheries sector, institutional capacityfor resource management system will be impro-ved and aquaculture production policies will be

implemented taking its environmental sustainabi-lity into account.

ix) Training and publication services will be gi-ven emphasis mainly through strengthened pro-ducer organizations and existing public serviceswill be improved.



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x) Methods and means for effective use of landand water resources will be given priority.

xi) So as to alleviate the scale problem of agri-cultural enterprises, hereditary fragmentation ofagricultural lands will be prevented and land con-

solidation efforts will be expedited.

xii) While extending irrigation investments,implementation of Southeastern Anatolia Project(GAP), East Anatolia Project (DAP) and KonyaPlains Projects (KOP) will be accelerated. Furt-hermore; construction, operation and/or mainte-nance of irrigation projects will be opened to pri-vate entrepreneurship.

xiii) Forests will be protected and exploited con-sidering health and needs of society within the ap-proach of sustainable management; afforestation,

rehabilitation and urban forestry will be extended;training and publicity activities having more emp-hasis on ecosystem and ergonomy will be intensi-fied.

9. Ensuring the Shift to High Value-Added Produc-

tion Structure in Industry and Services

a. Industry

The main objective in manufacturing industry is toaccelerate the structural transformation by increasingthe production of high value-added goods. Within thisframework;



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i. Regulations and supports towards the restruc-turing of enterprises will be prioritized.

ii. Initiatives directed towards increasing exportsof industry and structural transformation, particu-larly those in medium and high technology sec-tors, will be supported.

iii. Clustering policy will be formulated; within thisframework, establishment of the enterprises in theindustrial zones will be encouraged, cooperationbetween enterprises and clustering activities will

be supported within a model.iv. Enlargements and mergers of SMEs will beencouraged. In this context, productivity enhance-ment, setting up a business and development ac-tivities will be supported.

v. In order to increase the quality of industrial go-ods, conformity assessment and market surveil-lance systems will be activated.

vi. In defence industry, a system based on do-mestic technology and capability acquiring will beestablished.

vii. In the mining sector, country potential will bebenefited at the highest level. Domestically andinternationally oil and natural gas exploration andproduction activities will be accelerated. Studieson the necessary institutional structure will beconducted.



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b. Services

In services sector, which has an increasing sharein the economy and has become the repulsive power,main objective is to improve quality, efficiency, com-petitive environment and to increase the exports of

services.

Tourism

In tourism sector, besides increasing the numberof incoming tourists, the main objective is to form astructure, which increases the quality of services as

well as targeting high income groups through diversif-ying marketing channels, preserving the natural we-alth while ensuring its sustainability and focusing ondiverse tourism products where Turkey has relativecompetitive advantage. Within this framework;

i. Tourism investment will be diversified and tou-

rism facilities will be ensured to expand to entireyear by shifting them from developed regions andthose are subject to intensive demand to otherareas.

ii. All investments related to the sector will be

evaluated with an approach of protecting and im-proving natural, historical, social and cultural en-vironment.

iii. In order to increase the share from global tou-rism market, promotion activities, particularly intarget markets, will be given importance.



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iv. Cultural, social and natural assets of tourismregions which have high growth potentials, espe-cially Istanbul, will be evaluated in a context ofsustainable tourism perspective.

Construction, Engineering-Architecture, Techni-

cal Consultancy and Contracting Services

Main objective is to construct a sector structureappropriate to national economy and social require-ments, compatible with modern technology and inter-national rules, sensitive to environment, also with highvalue added, foreign exchange inflow and employ-

ment. Within this framework;i) Competitiveness in the foreign contractingand consultancy services will be increased.

ii) Supervision activities in the sector will be acti-vated.

iii) The quality of the labour force in the sector willbe improved.

iv) The usage of technical consultancy servicesin the sector will be made widespread by impro-ving its quality.

Commercial Services

The main objective in the commercial sector is toincrease efficiency in a competitive environment, toenhance activity capacity, to encourage innovationand new technologies. Raising the competitive power,the level of quality and productivity, improving thecompetition environment and increasing service ex-



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port of SMEs in the sector is essential. Within this fra-mework;

i) High value-added service production will besupported in commercial sector and that the sec-tor will again be provided to reach to a high

growth rate in the medium term.ii) In the wholesale and retail trade sectors; asector structure protecting the competition andconsumer, supporting the production in the rela-ted sectors, preventing unregistered economy, in-creasing efficiency and quality, providing compa-

tibility with hygienic rules and a balanced deve-lopment among the internal players in the sectorwill be formed.

iii) Logistic and combined transportation activiti-es will be improved for sustaining physical flow ofgoods by means of reliable, cheap and rapid

transportation systems having high standards.iv) Arrangements will be made for supervisingof unfair commercial applications in the contextof protecting consumer rights.

B. FOSTERING EMPLOYMENT

1. Improving Labour Market

Within the framework of employment-orientedsustainable growth, reducing the negative effects ofthe crisis to the minimum level, increasing employ-ment and activating the labour market are the mainobjectives. Within this framework;



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i) In order to increase employment and decrea-se informality, flexible working models will be en-couraged and extended within the concept of fle-xicurity. In this context, social dialogue channelswill be utilized effectively.

ii) Adaptation capacity and capability of busi-nesses and workers to the changes in the worldand in our country will be enhanced.

iii) In the labour market, supporting policies to-wards disadvantaged groups, particularly the yo-

uth, women and disabled will be carried on.

iv) New models, which will enable businesses tocreate additional employment and discourage in-formality, will be developed.

2. Increasing Sensitivity of Education to Labour

Demand

Increasing sensitivity of education to labour de-mand and training labour force in accordance with thequality and quantity required by the market is the ma-in objective. In this perspective;

i) Life-long learning strategy will be implemen-ted effectively.

ii) The coherence between secondary and hig-her education and the labour market will be in-creased.

iii) Studies towards the harmonization of the



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curriculum of the vocational and technical schoolswith the professional standards will be initiated.

3. Improving Active Labour Market Policies

Extending active labour programs including voca-

tional trainings which will raise occupational skills andqualities in order for individuals to find appropriate jobs, public employment services and job creationprograms and increasing the quality of the related ser-vices is the main objective. Within this framework;

i) Taking the negative effects of the crisis to-

wards the labour market into account, active labo-ur market programs will be expanded in line withthe labour market need analysis and the effects ofthese programs on the labour market will be as-sessed.

ii) In order to implement to active labour prog-rams effectively the institutional capacity of Tur-kish Employment Agency (fiKUR) will be increa-sed

iii) For unemployed people, programs aiming tocreate short term employment particularly thepublic-work programs will be carried on.

C. STRENGTHENING HUMAN DEVELOPMENT

AND SOCIAL SOLIDARITY

1. Improvement of the Educational System

The main objective of the education policy is tobring up individuals of the information society with



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well-developed thinking, perceiving and problem-sol-ving capabilities. They should also be open-minded,self-confident and responsible, devoted to the princip-les of Atatrk, loyal to democratic values, acquaintedwith their national culture and able to understand dif-

ferent cultures. Within this framework;i) Schooling rates in all levels of education willbe raised, equipment and physical infrastructurewill be improved, regional imbalances and genderdisparities in access to education will be reduced.

ii) The Ministry of National Education and the

Higher Education Council will be restructured inorder to increase quality, competitiveness, effici-ency and equality of opportunities in education.

iii) Alternative financing models in all levels ofeducation will be developed; educational invest-ments of private sector will be encouraged by fo-

cusing on quality.iv) The share and quality of vocational trainingwill be increased, active participation of privatesector and professional organizations to vocatio-nal education process will be provided.

v) International programs in order to increasethe exchange and mobility of students and teac-hers in secondary and higher education will beextended as well as grant programs to enable fo-reign students and lecturers to participate in edu-cational activities in Turkey and new programswill also be developed. In this context, necessary



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arrangements will be made in administrativestructure.

2. Improving Health System

The main objective of health policy is to ensure

that all citizens will take part in economic and social li-fe as healthy individuals and to raise their quality of li-fe. Within this framework;

i) Implementation of family medicine will bemade widespread.

ii) Accessibility to health services will be increa-

sed.iii) Preventive health services will be strengthe-ned and made widespread.

iv) Effectiveness of health expenditures, parti-cularly medicine expenditures, will be increasedthrough applications such as rational use of drugs

and diagnosis related pricing.

3. Improving Income Distribution, Social Inclusion

and Combating Poverty

The main objective is to enable the individualsand groups, who are under the risk of poverty and so-cial exclusion, to participate more actively in economicand social life, to upgrade their quality of life and to se-cure social integration. Within this framework;

i) The accessibility of major services such aseducation, health, employment and social secu-rity will be improved for the disadvantaged gro-ups.



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ii) In the context of activities for combating po-verty, implementations which prevent the formati-on of a culture of poverty and the intergeneratio-nal transmission of poverty will be emphasized.

iii) Transfers aiming to decrease poverty will be

made more effective.iv) Family support services will be made wides-pread, violence against women and children willbe combated more intensively, the quality of pre-ventive, protective and rehabilitative services to-wards disadvantaged children will be improved.

4. Increasing Effectiveness of the Social Security

System

The basic objective is to make the social securitysystem have a structure that covers the entire popula-tion, can meet the changing needs of the society, has

financial sustainability and effective control mecha-nism, and provides good quality services. Within thisframework;

i) Aiming to prevent loss of rights and repeatedbenefits, the IT infrastructure of the social securitysystem will be strengthen; the system will be in a

structure which provides effective, accessible andsustainable services.

ii) The shortage of qualified personnel and in-termediate staff in the area of social services andassistance will be eliminated.



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iii) To enable the disabled to participate moreactively in economic and social life, improvementof the social and physical milieu conditions will becontinued.

iv) In order to improve the collaboration and ap-propriateness in the social assistance system, theauthorization, tasks and responsibilities of the re-lated institutions will be redefined with the coordi-nation of Prime Ministry.

5. Protecting and Promoting Culture and Streng-

thening Social DialogueThe main objective is protecting the cultural pros-

perity and diversity in the social change process andtransmitting them to the next generations. Accor-dingly, synthesis of our cultural heritage with contem-porary values and, with an understanding which con-siders our differences as our richness, creating an en-vironment of collaboration and tolerance in which allindividuals can live within the framework of commoncultural values are aimed. Within this framework;

i) Priority will be given to social research pro-jects to determine institutions and sources that fe-ed the culture of solidarity, reconciliation and tole-

rance in our society and to mark factors that wea-ken this culture.

ii) Youth services will be restructured so as tocover all areas regarding the youth and will impro-ve their self-confidence and feeling of belongingto the society.



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iii) Expansion of TV series, documentaries andcartoons in print and visual media that emphasizethe integrity and importance of the family and aimto strengthen family relations will be supported.

iv) Studies will be carried out to draw up an in-

ventory of our domestic and overseas cultural he-ritage and to protect and restore this heritage.Public awareness will be increased regarding thisissue.

v) Economic aspect of culture sector will bestrengthened by developing culture tourism and

encouraging the production of cultural films anddocumentaries.

D. REGIONAL DEVELOPMENT AND REDUCINGREGIONAL DISPARITIES

The main objective of regional development polici-es is; on the one hand, to decrease the development

disparities among the regions and improve the mini-mum standart of living in rural areas; and on the otherhand, to maximize the contribution of regions to natio-nal development, competitiveness and employmentthrough increasing the regions competitiveness.

1. Increasing the Effectiveness of Regional Deve-

lopment Policy at the Central Level

i) National Strategy for Regional Developmentwill be formulated to ensure coordination at centrallevel in terms of regional development and compe-titiveness, as well as establish a general frame-work for the lower-scaled plans and strategies.

MEDIUM TERM PROG

Documents

2010-2012 Medium-Term Programme