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  • 1. Country & Education Sector Profile Republic of Turkey Educational Holding Group March 2010
  • 2. Educational Holding GroupChamber of Commerce,P.O. Box 27215, Safat,13133, KuwaitTel: +965-2224-0453Fax: +965-2240-7048 AnsariInvestment AnalystInvestment DepartmentEducational Holding GroupCountry & Education Sector ProfileRepublic of Turkey Page 2
  • 3. Summary This Report was prepared to look at investment opportunities in Turkey, in field of education. The report provides details of Turkey as an investment destination by understanding the current, economic, political & legal situation in the country and analyzing future prospects. It also looks in detail in the education sector of the country. Turkey is one of the major economies of EU and has strong fundamentals, although it has been impacted by current financial crisis it is slated to overcome it. The education sector in the country face challenges in terms of meeting the high standards set by the EU countries. There is a good education infrastructure however it is not sufficient to fulfill the growing need for education. Government of Turkey has pushed for more participation by private sector, which currently only contributes 4 % of the total education infrastructure; there are still great unmet demands. K -12 level is also lagging in some regions and with a huge base population as the target, it forms an attractive target sector. Istanbul with a significant gap in School education, and high Per Capita Income has good opportunity for high quality private education.Country & Education Sector ProfileRepublic of Turkey Page 3
  • 4. Contents Topic Page Number 1.0 Country Brief 1.1 Country Summary 6 1.2 Demographics 6 1.3 Political Stability 7 1.4 Economic Stability 7 1.5 Impact of Financial Crisis 8 2.0 Economy 2.1 Macroeconomic Indicators 2.1.1 Gross Domestic Product 9 2.1.2 Per Capita – Gross Domestic Product 10 2.1.3 Inflation 11 2.1.4 Public Finance 12 2.1.5 Labor Force 13 2.1.6 Foreign Direct Investment 14 3.0 Education Sector 3.1 Education System 16 3.2 Education Expenditure 18 3.3 Education Statistics 3.3.1 Enrollment Rate 21 3.3.2 Eligible Population 21 3.4 School Statistics 3.4.1 Students Growth Rate 21 3.4.2 Gap Analysis- Eligible Population 21 3.4.3 Gap Analysis – Eligible Population Grade wise 22 3.4.4 Number of Schools 23 3.4.5 Gap Analysis- Number of Schools 23Country & Education Sector ProfileRepublic of Turkey Page 4
  • 5. 3.5 Regional Analysis 3.5.1 Regional Analysis – Eligible Population 24 3.5.2 Number of Schools 25 3.5.3 Regional Gap Analysis- Number of Schools 26 3.5.4 Regional Gap Analysis- GDP per Capita 27 3.5 Gap Analysis – Quality & Occupancy 3.6.1 Students School Ratio 28 3.6.2 Students Teacher Ratio 29 3.6.3 The Estimated Gap 29 3.6.4 Affordability vs. Gap 30 3.7 Sectoral Analysis 3.7.1 Sector wise Breakdown- Number of Schools 32 3.7.2 Sector wise Breakdown- Number of Student 32 3.8 Higher Education Statistics 3.8.1 Eligible Population 33 3.8.2 Higher Education Brief 33 3.8.3 Higher Education – Number of Students Growth Rate 34 3.8.4 Higher Education Analysis- Eligible Population 34 3.8.5 Higher Education – Enrollment Rate 35 3.8.6 Higher Education – Number of Students Breakdown 36 3.8.7 Higher Education Gap Analysis 36 4.0 Strategy 4.1 Overview 38 4.2 Target Sector Analysis 38 4.3 Target Region Analysis 39 5.0 Analysis 5.1 SWOT Analysis 40 6.0 Legal 6.1 Laws for Foreign Direct Investment 41 6.2 Taxation Laws 42Country & Education Sector ProfileRepublic of Turkey Page 5
  • 6. Country Brief1.1 Country SummaryTurkey is a new country in old land; it was formed from the remnants of Ottoman Empire. It is a democratic,secular, and constitutional republic. Its political system was established in 1923 under the leadership ofMustafa Kemal Ataturk, following the fall of the Ottoman Empire in the aftermath of World War I. Turkeyjoined the UN in 1945 and in 1952 it became a founding member of NATO; it holds a non-permanent seat onthe UN Security Council from 2009-10. In 1964, Turkey became an associate member of the EuropeanCommunity.Turkey is a bridge between east and west, it is strategically located. Geographically, Turkey is located inbetween Asia and Europe. The smaller northwestern portion (Thrace) is part of Europe, while the largerportion (Anatolia) is part of Asia. Turkey’s proximity to Europe in west and Russia, Iran and Syria in east makesit important for peace and understanding. Also because of its location it has become an important transitroute for gas.Ankara is the capital city of Turkey and second largest city after Istanbul. The official language of Turkey isTurkish however other minority languages such as Kurmanji (Northern Kurdish) are also spoken by largenumber of people. Turkey is a secular state with no official state religion; the Turkish Constitution provides forfreedom of religion and conscience. However the majority of population is Muslim, according to 2009 data onthe worlds Muslim populations, around 98% of the total population in Turkey are Muslim.Turkey is a dynamic emerging-market economy and a member of the Organization for Economic Co-operationand Development (OECD). Turkey has the 15th largest GDP in terms of Purchasing Power Parity; its GDP PerCapita in terms of Purchasing Power Parity is much higher at US$ 13,111 which indicates that Turkey is anupper middle income country. Over 70 percent of its population lives in urban areas Turkey successfullyrecovered from a deep economic crisis in 2001.Source: World BankCountry & Education Sector ProfileRepublic of Turkey Page 6
  • 7. 1.2 Demographics Turkey’s population in 2009 was 72.56 million compared to 71.52 million in 2008 and 70.59 million in 2007. The Turkish population since 2000 has grown at an average of 1.35%. The population breakdown shows that in 2009 around 31.37 million of this population was less than 24 years which was around 43 % of the total population and also around 17.93 million was in 25 - 39 age groups. Chart 1: Total Population ( In Millions) Chart 2: Population Breakdown- 2009 (Source: Turkstat) ( In Millions)73.00 (Source: Turkstat) 72.56 Total Population under 24 was 31.37 million or 43%72.50 of the Total Population72.00 71.52 7.44 6.1671.50 6.20 15.82 6.5071.00 70.59 6.2370.50 6.28 17.9370.0069.50 2007 2008 2009 0 to 4 5 to 9 10 to 14 15 to 19 Total Population 20 to 24 25-39 40-59 60+ The population projection estimates that Turkish population will grow to 83.5 million by 2025. Despite a significant demographic shift expected in Turkey the under 24 population by 2025 is estimated to be around 30.8 million. Chart 3: Total Population Projections (In Millions) Source: Turkstat By 2025 the population under 24 is estimated to be around 30.8 million 85. 83. 57 80. 26 80. 76. 6 75. 72. 7 71. 08 70. 65. 60. 2008 2010 2015 2020 2025 Mid-year Total Population Projections Country & Education Sector Profile Republic of Turkey Page 7
  • 8. 1.3 Political StabilityTurkey is a parliamentary representative democracy, since its foundation as a republic in 1923. The head ofstate is the president; however the executive powers stay with Prime Minister. After a period of one-partyrule, 1950 election saw multi party system prevailing. Since then, Turkish political parties have multiplied.Turkey is the founding member of NATO and is a temporary member of UN Security Council. Turkey’s internalpolitics is stable; as per foreign relations Turkey has conflict with Kurd fighters based in Iraq. In 2007 Turkeylaunched an airstrike and followed it by ground invasion against Kurd fighters in northern Iraq. Turkey also hasan ongoing conflict with Cyprus over northern Cyprus; it maintains its troops in the island. None of its conflictsare grave and threaten an immediate disturbance; overall Turkey is a political stable country.1.4 Economic StabilityTurkey is closely related with world economy and has proximity with Europe and Asia alike. It has a trackrecord of good economic management and structural reform that drives its long-run economic prospects. Dueto its close relations with the world economy, through both trade and financial channels, Turkey was alsoseriously affected by the global recession since the fourth quarter of 2008.Over 70 percent of its 72.5 million people live in urban areas. Agriculture accounts for only 9 percent of itsGDP, industry for 22 percent, and services for 69 percent. Turkey’s economy is among the world’s 20 largest,with a GDP in 2008 of over US$790 billion. GDP per capita now exceeds US$9,300. Extreme poverty (thoseliving at below US$1.25 per day) is minimal in Turkey, but poverty remains significant around 18.5 percent in2007. Turkey although going through crisis like most of the world economies still remains stable with soundfundamentals. Source: World Bank, International Monetary Fund1.5 Impact of Financial Crisis Turkey is not strange to macroeconomic crisis. The previous crisis in 2001 saw public debt climbed to 80% of the GDP. The Turkish economy showed resilience and was out of the crisis. However the current crises are far more widespread and need a consolidated effort from all the major economies in the world to crawl back to normalcy. Turkey is an open economy with trade contributing more than 50% of GDP and exports in 2008 were nearly a quarter of GDP, with more than half the export going to EU. Since EU is itself in deep recession there is sharp decline for goods from Turkey, this has in turn affected investment & credit flow adversely. Portfolio flows too turned negative with an outflow of nearly $5 billion in 2008. The slow recovery of export sector and some protectionist measures by major economies have made it even more difficult for Turkey. However, Turkey has been among the country that has not suffered as much as worse hit economies. With positive data coming out of USA and other major economies recovery has begun and with effective management by Turkish authorities using their previous experience of similar situation, Turkey is poised to be among the first in EU to recover. The fundamentals of the economy remain strong. Source: World Bank, International Monetary Fund Young and Dynamic Population with over 31 million people (43% of the total Population) under the age of 24. Despite Demographic Shift, the population under 24 will remain significant. It is Parliamentary Representative Democracy and overall is politically stable. Strong Economic Fundamentals and closely integrated with world economy. Among world’s 20 largest economy with a GDP of over US$ 790 Billion.Country & Education Sector ProfileRepublic of Turkey Page 8
  • 9. Economy2.1 Macroeconomic Indicators2.1.1 Gross Domestic ProductTurkey has the 15th largest GDP in terms of Purchasing Power Parity and 17th largest in terms of Nominal GDP.The Nominal GDP in 2008 was at US $729 billion. Chart 4: Gross Domestic Product 800.00 Source: International Monetary Fund (IMF) 12.0% 9.4% 700.00 8.4% 10.0% 6.9% 8.0% 600.00 4.7% 6.0% 3.7% 4.0% 3.5% 3.5% 3.5% 500.00 0.9% 729.98 4.0% 400.00 2.0% 710.83 673.75 649.13 638.42 610.47 593.53 590.70 0.0% 529.19 300.00 482.69 -2.0% 392.21 200.00 -4.0% -6.5% 100.00 -6.0% - -8.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 *IMF Staff estimation Gross domestic product, current prices (US $ Billions) from 2009 onwards Real Gross Domestic Product Growth Rate (Percentage)The ongoing global economic downturn has hit Turkey hard. Real GDP growth rate was just 0.9% in 2008 asagainst 4.7 % in the previous year and was lower than the average Real GDP growth from 2004 -2007 ofaround 7.3%.This implies stagnant per capita income; also the Turkish economy contracted in the fourth quarter of 2008 by6.2 percent relative to one year earlier and year-on-year quarterly growth fell further to -13.8 percent in thefirst quarter of 2009, However by mid 2009 there were signs of recession bottoming out and positive data wasflowing in from US. Despite these positive signs, the Turkish economy is expected to shrink. IMF estimates asteep decline in Real GDP growth rate in 2009.The government’s response has combined monetary easing with foreign-exchange liquidity and confidencebuilding measures in the financial sector (banks are well-capitalized and well-regulated), some employmentmeasures, and temporary tax cuts.On comparison it shows that Turkish Economy has not been hit as badly as some other OECD high incomeeconomies or Euro economies; it has performed better than others in the area. Turkish Nominal GDP growthwas higher than the High Income OECD average of 0.69%, Euro area average of 0.73% and world average of2.01 %. Source: IMF, World Bank.Country & Education Sector ProfileRepublic of Turkey Page 9
  • 10. 2.1.2 Gross Domestic Product - Per CapitaTurkey saw a surge in GDP Per Capita Income (Current Prices) from 2004 onwards, in 2008 it was at 10,479US$. It’s GDP Per Capita in terms of Purchasing Power Parity is much higher at US$ 13,139 making it an uppermiddle income country. Chart 5: GDP - Per Capita 16,000 Source: International Monetary Fund (IMF) 14,000 15,213 14,577 13,966 13,405 12,000 13,139 12,891 12,849 12,339 12,107 10,000 11,006 10,479 9,844 9,551 9,422 8,000 9,153 8,769 8,478 8,427 8,295 7,767 6,000 7,108 5,862 4,000 2,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 *IMF Staff estimation Gross domestic product per capita, current prices (US$) from 2009 onwards Gross domestic product based on purchasing-power-parity (PPP) per capita (US$)Due to financial crisis the growth has been downward. IMF estimates that in 2009 the nominal GDP to shrinkby US $ 593 billion and further to US$ 590 billion by 2010. However the GDP Per Capita as per PurchasingPower is estimated to remain strong.Source: World Bank, International Monetary Fund2.1.3 InflationTurkey has witnessed high inflation rates throughout its period of development. It has been one major area ofconcern for the Turkish economy. Annual Inflation which was at around 8.3% in 2007 rose to over 10% at theend of 2008 remaining above the upper limit of uncertainty band. The events in global economy became maindeterminant of inflation throughout 2008 which became 11.1 percent by September 2008. Despite theconsiderable increase in exchange rate in last quarter of 2008, the effect of this on prices remained belowlevels of previous years, due to slowdown in import prices.In the first quarter of 2009 positive development on cost based effects and further slowdown in economicactivities , the annual rate of inflation maintained its downward trend. By March it reached a level of 7.89%which was well within the uncertainty band, IMF projected the annual rate to further go down to 6.2% by endof year. However Inflation dropped to 5.73% in June below the lower bound of uncertainty band set at 6.8%.Country & Education Sector ProfileRepublic of Turkey Page 10
  • 11. Chart 6: Inflation (Current & Projected) Source: IMF, Turkstat 12.00% 10.44% 10.00% 8.75% 8.00% 6.78% 6.20% 5.74% 6.00% 4.66% 4.00% 4.00% 4.00% 2.00% 0.00% 2007 2008 2009 2010 2011 2012 2013 2014 Average Consumer Price (Percentage change)The future forecast projected by IMF for Turkey projects that average consumer prices will decline in price riseand has projected it to be at around 4% till 2014.However, commodity price have picked up during April and May this year amid hopes of an earlier thanexpected recovery, higher demand boosted by China & India and weaker dollar.The outlook of inflation in Turkey much depends like all the major economies on growth and recovery ofeconomies across. After reeling under high inflation for a long timer the financial crisis has for once gotTurkey’s inflation rate within uncertainty band but this may not be very desirable for the Turkish economy as itlooks to push itself out of the financial downturn with increased demand, internally as well as globally.Source: International Monetary Fund, Turkstat2.1.4 Public FinanceCentral Government budget revenue and primary expenditure rose by 9.7 and 12.9 percent respectively in2008. As the rise in total expenditure became 10.7 percent, the ratio of expenditures covered by revenuesdecreased by 0.9 percentage points compared to 2007. Table 1: Government Budget Performance (In Billion TL) 2007 2008 % Change Jan-Apr 2008 Jan- Apr 2009 % Change Expenditures 204.1 226 10.7 70.2 87.4 24.5 Interest Expenditure 48.8 50.7 3.9 17.9 21.1 17.9 Primary Expenditure 155.3 175.3 12.9 52.3 66.3 26.8 Revenues 190.4 208.9 9.7 64.8 6748 4 Tax revenues 152.8 168.1 10 53.2 51 -4.1 Revenues to Expenditure 93.3 92.4 -0.96 92.3 77.1 Budget Deficit -13.7 -17.1 24.8 -5.4 -20.1 272.2 Primary Surplus 35 33.6 -4.1 12.5 1.1 -91.2Source: Central bank of TurkeyCountry & Education Sector ProfileRepublic of Turkey Page 11
  • 12. In 2008 the largest increase in primary item was due to capital expenditure because of investment GAP. Taxrevenue went down on account of low domestic demand. However the central government budget deficit wasjust below target due to increase in capital funds at TL 7.3 billion were transferred from Privatization andunemployment fund. In 2009, there was a trend of an evident increase in budget deficit, which is because offiscal measures taken by Turkey to alleviate the effect of downturn. In first four months of 2009 whileexpenditure increased by 24.5 percent revenues just rose by 4 percent. The ratio of expenditure covered byrevenues went sharply down to just 77.1 percent. Primary and interest expenditure increase had the maximumimpact as they rose by 26.8 and 17.9 percent respectively.However this has been an extraordinary period with fiscal measure taken against financial crisis had theirimplication on budget deficit.Source: Central Bank of Turkey, International Monetary Fund Chart 8:Public Debt (% of GDP) Source: Central Bank of Turkey 60 49.00 50 41.60 40 34.00 29.50 28.60 30 35.6 13.4 20 35.1 28.1 26.5 30 6.5 10 1.4 2.1 4 0 2004 2005 2006 2007 2008 Net External Debt Net Domestic Debt Total Public debtThe ratio of public net debt stock to GDP declined and became 28.6 percent at the end of2008. The domesticdebt stock included in 2008 was TL floating Rate debt 42.5% TL fixed rate debt 45.9% .CPI indexed bonds at3.2% and FX indexed bond at 6.4%. This composition didn’t change much in 2009.Given the current economic development, rising budget deficit is a worldwide phenomenon. In the first fourmonth of 2009 the central government budget was parallel to the macroeconomic developments and to fiscalmeasure enforced to contain the financial crisis.Source: Central Bank of TurkeyCountry & Education Sector ProfileRepublic of Turkey Page 12
  • 13. 2.1.5 Labor Force Chart 9: Labor Force (in 000) Source: International Labor Organisation 45,000 40,000 40,330 41,085 39,550 39,813 35,000 39,169 30,000 25,000 20,000 22,046 22,330 21,791 20,738 21,194 15,000 10,000 2,498 2,519 2,446 2,376 2,611 5,000 0 2004 2005 2006 2007 2008 Economically Active Populationbetween age ( 20-64) Total employment over 15 years Total UnemploymentOut of total economically active population of around 39 million in 2008, 21 million people of age over 15years were employed. The unemployment rate in 2008 was around 10.7 %, higher than last year’s rate of 10percent. Turkey has since 2004 had a high unemployment rate, with the average unemployment rate of 10.2percent for last 5 years. Still Turkey is the 5th largest labor force amongst EU countries. Turkey has a youngand dynamic labor force with the average age of 28.5 years Table 2: Labor Force Breakdown Industry wise (In 000) INDUSTRY GROUP 2004 2005 2006 2007 2008 Agriculture& Fishing 7,400 6,493 6,087 4,867 5,016 Mining 104 118 130 127 115 Manufacturing 3,801 4,083 4,187 4,088 4,233 Electricity, Gas, water 83 79 92 97 92 Construction 1,029 1,171 1,267 1,232 1,242 Wholesale & Retail 3,307 3,610 3,731 3,568 3,576 Hotels & Restaurant 872 937 1,000 989 999 Transport & Storage 1,100 1,131 1,162 1,135 1,089 Financial 237 238 237 249 259 Real estate 549 634 773 806 910 Public Administration & defense 1,252 1,246 1,225 1,260 1,265 Education 818 905 907 869 920 Healthcare 469 530 590 561 594 Other community services 583 871 942 890 884 Unemployed seeking their first job 612 553 490 430 394 Unemployed previously employed 1,886 1,967 1,956 1,946 2,217 Unemployed 2,498 2,519 2,446 2,376 2,611Source: International Labor OrganizationCountry & Education Sector ProfileRepublic of Turkey Page 13
  • 14. Agriculture has historically employed a large number of labor forces however it is declining as more and morelabor force move towards other employment avenues. It has reduced from 34% of total labor force to around23 % in 2008. Other important sector for employment has been manufacturing. Manufacturing in 2008employed around 4.2 million of the total labor force which was around 20% of the total labor force as against18 percent in 2004. Manufacturing has increased its share when it comes to employment; however it is thehardest hit sector by financial crisis hence large number of unemployment in this sector is inevitable.Source: Turkstat, International Labor Organization2.1.6 Foreign Direct Investment Table 3: Foreign Direct Investment (Millions of USD) 2005 2006 2007 2008 FDI Flows Inward 10,031 20,185 22,046 18,198 % Gross Fixed Capital Formation 17.10 15.60 12.30 Outward 1,064 924 2,106 2,585 % Gross Fixed Capital Formation 0.80 1.50 1.70 Net FDI Inflows 8,967 19,261 19,940 15,613 Average Net FDI Inflow last 4 years 15,945Source: United Nations Conference on Trade and Development (UNCTAD)FDI inflow has been steady in Turkey; the average FDI inflow reached a high of US$ 22 Billion in 2007, howeverdue to financial crisis the FDI inflow has been affected. The net inflow for 2008 was at US$ 15 billion for theyear 2008 compared to over US $ 19 billion last year. Turkey has seen good FDI inflows and hence it is animportant part of current account deficit. The inflows further decreased in 2009 averaging about 1 Billion US$for first 2 months. The Central Bank of Turkey has set a target of US$ 10 Billion for 2009, which would accountfor 40-50 percent of current deficit.Turkey also dropped 10 places in World Bank Doing Business Report in ease of doing business. Turkey wasranked at 73 out of 183 economies for the year 2010 as compared to 63 for the year 2009.Source: Reuters, World BankCountry & Education Sector ProfileRepublic of Turkey Page 14
  • 15. Turkish economy has had its share of crisis since 2001 and recently it has been impacted by global meltdown,however it has shown resilience and strong fundamental. Turkey has the 15th largest economy in the worldand has a high GDP Per Capita Income of US$ 9,300. It is poised for recovery earlier than any other EUcountries.Inflation has been a problem for Turkish economy. Current situation has helped it curb inflation but it is notdesirable. As economy starts recovering the government will have to maintain a check on inflation.Overall with strong FDI flow and positive signs, Turkey is set to continue being an emerging market and betterplaced than most of the other EU neighbors. This growth will fuel the need for better and bigger educationinfrastructure. Among 20 Largest Economies in the world with GDP of over US$ 790 Billion in 2009 An upper middle income group country with GDP per capita of over US$ 13,000 in 2009 Historically high inflation however got in control due to global meltdown. It is expected to rise once demand grows and economic growth picks up. High unemployment rate of 10.7% in 2008 Average FDI inflow for last 4 years was around US$15.9 BillionCountry & Education Sector ProfileRepublic of Turkey Page 15
  • 16. Education Sector3.1 Education SystemThe Turkish National Educational System is composed of two main sections: Formal Education and Non-formalEducation.Formal EducationFormal education is the regular education of individuals in a certain age group and given in schools. Thisincludes Pre-Primary education, Primary education, and Secondary education and Higher educationinstitutions. Pre-Primary education Pre-Primary education is an optional education for children between 3-5 years of age who are under the age of compulsory primary education. Primary Education With a new Law in 1997, eight years of Primary school is compulsory today (former system was five years of compulsory primary school, followed by three years of middle or junior high school education). Primary education is compulsory for all boys and girls at the age of 6-14, and is given free of charge in public schools. These schools provide eight years of uninterrupted education. There are also private (and paid) schools under State control. Secondary Education Secondary education covers general, vocational and technical high schools) that provide four years of education (used to be 3 years until 2005).It is optional for students from 15-19 years of age. General high schools prepare students for higher learning institutions. Some of the secondary schools and the private secondary schools have foreign language preparatory classes. Higher Education Graduates of the high schools can attend universities if they can pass admission exams. Universities, faculties, institutes, higher education schools, conservatories, vocational higher education schools, police and military academies and colleges, and application-research centers are considered as Higher Education institutions.Non Formal EducationNon-formal education in Turkey is offered by a network of training centers that are supervised by the Ministryof National Education (MEB). Non-formal education services aim to teach reading-writing, help to continueeducation of students for finish their incomplete education, teach balanced nutrition and a healthy life style,teach people from various professions the knowledge and skills they need to improve themselves, and so on.Country & Education Sector ProfileRepublic of Turkey Page 16
  • 17. The Turkish National Education System27 Doctorate Masters26 3 years (Medical Specialization)4 years25 Masters24 2 years Open Education Under Graduate23 Under Graduate (Diploma) (General/ Vocational)22 5 years 4 years2120 Preparatory Class (Compulsory for some University)19 Age (6-14) Secondary18 Secondary Secondary (Vocational/ Technical)17 (Normal /general) (Science High School) 5 years16 4 years 4 years1514 Preparatory Class ( Optional in Some Schools)13 Age (6-14) Primary Education (Compulsory) 8 years65 Pre Primary Education (Kinder Garten & Nursery)3 2 yearsAgeSource: Governorship of Kocaeli- TurkeyCountry & Education Sector ProfileRepublic of Turkey Page 17
  • 18. 3.2 Education ExpenditureGovernment lays strong emphasis on education and is committed to improve education for all. Turkishgovernment allocates funds from Central Government Budget for Ministry of National Education (MONE) andHigher Education Council (HEC), which overlook disbursement of allotted funds. On an average the TurkishGovernment for last three years provides funds close to 3.15% of GDP every year to MONE and HEC. There hasbeen a consistent increase in the government expenditure on education from 22.4 Billion Turkish Lira (TL) in2006 to 36.65 Billion TL in 2009 at an average growth rate of 18%. Chart 10: Budget allocation for Education ( Billion TL) Source: Ministry of National Education ( MONE) 36.65 40 30.22 8.77 27.9 22.4 7.31 30 6.58 5.84 20 27.88 22.91 21.35 16.56 10 0 2006 2007 2008 2009 Ministry of National Education Budget Higher Education Council Budget Chart 11: Education Expenditure Percentages Source: Ministry of National Education ( MONE) 16.00% 13.98% 13.57% 13.58% 14.00% 12.80% 12.00% 10.00% 8.00% 6.00% 3.00% 3.30% 3.00% 3.30% 4.00% 2.00% 0.00% 2006 2007 2008 2009 Total Education Budget Percentage of Central govt. budget Total Education BudgetPercentage of GDPThe Total Government expenditure on education in 2009 was 13.98% of Total Central Government and 3.30%of the Total GDP. This indicates that there was no change in government policy towards education despite thefinancial crisis. The government continued with same levels of expenditure as percentages of Total Budget andGDP.Country & Education Sector ProfileRepublic of Turkey Page 18
  • 19. Table 4: Ministry of National Education Budget Description ( Billion TL) Budget Breakdown 2007 2008 2009 Total MONE budget 21.35 22.91 27.88 Personnel Expenditure 13.48 15.4 18.48 Insurance Premium 3.16 1.81 2.13 Goods & Services 1.19 2.21 2.86 Current Transferable 1.9 2.07 2.47 Capital Expenditure 1.48 1.26 1.5 Capital Transfers 0.106 0.147 0.419Source: Ministry of National EducationThe budget breakdown shows the total breakdown of expenditure of the allotted budget to Ministry ofNational Education (MONE). MONE on an average for last three years spends around 65% of the total allottedbudget on Personnel i.e. staff and teachers salary and around 10% on insurance premium. MONE also spendson an average around 6% every year on capital expenditure to fill the gap in education. Table 5: Higher Education Council Budget Description ( Billion TL) Budget Breakdown 2007 2008 2009 Total Higher Council budget 6.58 7.31 8.77 Personnel Expenditure 3.41 3.85 4.572 Insurance Premium 0.77 0.505 0.565 Goods & Services 1.026 1.36 1.561 Current Transferable 0.0856 0.0992 0.2092 Capital Expenditure 1.28 1.49 1.863Source: Ministry of National EducationHigher Education Council (HEC) has on an average spent around 52% on personnel i.e. staff and teachers forlast three years. HEC has been active in fulfilling the education gap as it has allocated on an average around20% of the total expenditure on capital expenditure.Country & Education Sector ProfileRepublic of Turkey Page 19
  • 20. Chart 12: Investment Budget of Ministry of National Education ( Billion TL) Source: Ministry of National Education ( MONE) 0.23% 1.6 0.22% 0.25% 1.4 0.18% 1.2 0.20% 1 0.13% 0.15% 0.8 0.6 0.10% 1.29 1.24 1.49 0.4 0.05% 1.5 0.2 0 0.00% 2006 2007 2008 2009 Investment Budget of MONE ( Billion TL) MONE Investment %of GDPThe investment made by Ministry of National Education (MONE) in 2009 was around 1.5 Billion Turkish Lira(TL) compared to 1.29 Billion TL in 2008 and 1.49 Billion TL in 2007. The investments by MONE were 0.13% ofGDP in 2009 and 0.575 of the Total Central Government Budget in 2009. The total investment of centralgovernment in 2009 was around 13 Billion TL and compared to around 8 Billion TL a substantial increase ofover 50%. However out of this total investment of central government in 2009 around 5.3 % was investmentmade by MONE in education as stated above in the chart.3.3 Education Statistics3.3.1 Enrollment Rate Chart 13: Enrollment Rate in Schools Source: Turkstat 120.0 97.4 96.5 89.8 90.1 100.0 80.0 58.6 58.5 56.6 56.5 60.0 40.0 20.0 0.0 2006 2007 2008 2009 Primary SecondaryThe enrollment rate for primary is higher as it is compulsory however the enrollment rates for secondary dropbelow 60%.Country & Education Sector ProfileRepublic of Turkey Page 20
  • 21. 3.3.2 Eligible Population BreakdownThe population eligible for school education is between the age brackets of 3 – 19 years. Below is the gradewise breakdown of the eligible population. Table 6: Eligible Population (Millions) Pre Primary Primary Secondary (3 to 5) (6 to 14) (15 to 19) Total 2007 3.60 11.56 6.16 21.32 2008 3.66 11.53 6.19 21.37 2009 3.70 11.46 6.23 21.40Source: Turkstat3.4 Schools Statistics3.4.1 Number of Students Chart 14: Number of Students- Turkey 15.40 Source: Turkstat 15.35 15.30 15.20 15.10 15.00 14.87 14.90 14.82 14.80 14.70 14.60 14.50 2007 2008 2009 Number of Students( Millions)*Note: 2007 is the base year for Growth Rate The total number of students throughout all schools in Turkey up till secondary has grown to over 15.3 millionin 2009 from 14.82 million in 2008. The growth Rate for 2009 was 3.61% compared to negative growth of0.38% in 2008.Country & Education Sector ProfileRepublic of Turkey Page 21
  • 22. 3.4.2 Gap Analysis- Eligible Population Chart 15: Gap Analysis - Number of Students- Turkey Source: Turkstat 25.00 20.00 6.56 6.05 6.45 15.00 21.37 21.40 21.32 14.87 10.00 14.82 15.35 5.00 - 2007 2008 2009 Gap ( millions) Number of Students( Millions) Eligible for Education- Age 3-19 ( Millions)The total number of existing students in all the schools across Turkey when compared to population eligible foreducation (age group of 3-19) gives a gap in number of students who need education. The total eligiblepopulation for schools in 2009 was around 21.40 million while only 15.35 million were accommodated by allschools across Turkey.3.4.3 Gap Analysis – Eligible Population - Grade wise Chart 16: Gap Analysis (2009) - Grade wise Source: Turkstat 14.00 12.00 0.75 10.00 8.00 11.46 10.71 6.00 2.40 2.90 4.00 6.23 3.84 2.00 0.80 3.70 - Pre Primary ( 3-5) Primary (6-14) Secondary (15 -19) Gap ( millions) Number of Students ( Millions) Eligible Population ( Millions)There was a total gap of around 6.05 million students in the age group of 3-19 i.e. 6.05 million children didn’thave access to formal schools. Out of the 6.05 million the highest gap was in pre –primary and secondaryeducation, leaving around 2.90 million children this may be because pre primary education is optional,however importantly around 1 million students every year would graduate to primary education level.Primary education had minimal gap, the reason was that primary education for 8 years is made compulsoryand free by Turkish government. At secondary level there is a high gap of around 2.40 million students, this isbecause the student dropout rate is higher as secondary education is not made compulsory by government.Country & Education Sector ProfileRepublic of Turkey Page 22
  • 23. 3.4.4 Number of Schools Chart 17: Number of Schools- Turkey Source: Turkstat 66,500 232 66,000 65,500 228 65,000 64,500 66,097 64,000 235 64,879 63,500 63,000 63,265 62,500 62,000 61,500 2007 2008 2009 Average Number of Students Per School 2007 2008 2009The total number of Schools in 2009 increased to over 66,000 across Turkey from 64,879 in 2008.The average number of students per school was 232 in 2009, 228 in 2008, and 235 in 2007. Hence the averagenumber of students to schools for last three years is 232. Number of Schools by Grade- 2009 Source: Turkstat 40,000 317 35,000 30,000 34 25,000 20,000 33,769 15,000 23,653 442 10,000 5,000 8,675 - Pre Primary Primary Secondary Average Number of Students Per School Number of SchoolsThe Total number of schools in 2009 was 66,097 out of which Primary grade schools were around 33,769 andonly 8,675 schools in Secondary Grade. The average number of students in pre primary schools was very low at34 students per school because this is an optional stage of education, whereas the average students per schoolfor primary was around 317 and even higher for secondary education which was 442 students per school. Thisshows that there is lack of infrastructure for secondary schools.Country & Education Sector ProfileRepublic of Turkey Page 23
  • 24. 3.4.5 Gap Analysis – Number of Schools Chart 18: Gap Analysis- Number of Schools- Turkey Source: Turkstat 100,000 80,000 27,285 26,179 28,676 60,000 91,941 92,276 63,265 92,164 66,097 40,000 64,879 20,000 - 2007 2008 2009 Gap Number of Schools Required Number of SchoolsConsidering the total eligible population entitled for education as 21.4 million in 2009 (Refer to chart 15), outof which only 15.35 million are accommodated by 66,097 schools. Also, considering the average number ofstudents per school for the last three years as 232, (Refer to chart 17) it shows that, if all the eligiblepopulation were to be accommodated at the rate of 232 students per school then there is requirement foradditional 26,179 schools other than the existing 66,097 schools all across to fulfill the need of education forall the population entitled for it.3.5 Regional Analysis3.5.1 Regional Gap Analysis – Eligible Population Chart 19:Gap Analysis - Number of Students (2009 ) Regionwise Source: Turkstat 4.00 0.90 1.54 1.06 3.50 3.00 0.62 0.72 0.31 2.50 0.63 0.27 3.58 2.00 3.26 3.52 2.15 2.31 1.50 2.61 2.18 2.36 2.20 2.04 2.00 1.88 2.04 1.74 1.00 1.46 1.41 0.50 - Gap (Millions) Number of Students ( Millions) Eligible Population ( Millions)The highest difference between number of existing students and eligible population for education is in CentralAnatolia , Istanbul and Southeastern Anatolia of 1.06 million, 0.90 million and 1.54 million respectively in eachof provinces.Country & Education Sector ProfileRepublic of Turkey Page 24
  • 25. However the highest numbers of students are in Istanbul which is 2.6 million students in all the schoolsthroughout Istanbul, this is mainly because apart from being the largest city and former political capital of thecountry, Istanbul has always been the centre of Turkeys economic life, this is because of its location as ajunction of international land and sea trade routes. Istanbul is also Turkeys largest industrial centre; it employsapproximately 20% of Turkeys industrial labor and contributes 38% of Turkeys industrial workspace. HenceIstanbul has a high population as it attracts people from all around Turkey.The total population in Istanbul for 2009 was around 12.9 million with population in age group of 3-19 (eligiblepopulation) at 3.52 million which was only second to Southeastern Anatolia at 3.58 million of eligiblepopulation.Southeastern Anatolia had the highest gap in number of students and eligible population which was around1.54 million; this can be attributed to the economy of Southeastern Anatolia which is largely based onstockbreeding, agriculture and also some oil production because of which Per Capita Income in SoutheasternAnatolia is lower than the average national Per Capita Income. Hence affordability for private education is lowand public infrastructure is insufficient.3.5.2 Number of Schools Chart 20:Average Number of Students Per School- Regionwise Source: Turkstat 12,000 600 9,725 9,528 10,000 9,076 8,854 500 8,439 544 8,098 7,575 8,000 400 6,000 4,802 300 4,000 248 247 200 207 226 231 2,000 155 154 100 - - Number of Schools(2009) Average Number of Students per School(2009)Central Anatolia has the highest number of Schools at 9,725 followed by Eastern Anatolia with 9,528 schoolsand Black Sea with 9,076 schools. Istanbul has lowest number of Schools at 4,802 Schools whereas Istanbul hasthe highest number of Students of 2.6 million students, hence Istanbul has the highest number of Students perschool of 544 and the National average of all schools across Turkey is 232 Students per School. This impliesthat Istanbul has more number of students per school than the other regions, which means that the schoolsare burdened.Country & Education Sector ProfileRepublic of Turkey Page 25
  • 26. 3.5.3 Regional Gap Analysis – Number of Schools Chart 21: Gap Analysis - Number of Schools (2009) Source: Turkstat 18,000 4,710 6,683 16,000 4,667 4,028 14,000 2,991 2,991 12,000 10,000 1,097 1,251 15,537 14,435 14,195 8,000 13,104 1,656 11,430 6,000 9,725 9,528 9,349 9,076 8,854 8,672 8,439 8,098 7,575 6,458 4,802 4,000 2,000 - Number of Schools Required Number of SchoolsConsidering the average number of students per school (refer to chart 20), the total number of schoolsrequired in each region to accommodate all the eligible population (refer to chart 19) in those regions arestated above in the chart.This implies that the highest gap in number of schools, in Southeastern, Central and Eastern Anatolia Regions.3.5.4 Regional Analysis – Affordability vs. Gap Chart 22: Gap Analysis - Per Capita Income to Gap in Schools Source: Turkstat, IMF 12,000 9,740 10,109 10,216 10,000 7,551 8,276 7,343 8,000 5,369 6,000 4,376 2,991 4,028 4,710 4,667 1,097 1,656 1,251 6,683 4,000 2,000 - *Per Capita Estimates based on previous years. 2009 Gap In Schools 2009 Nominal GDP per capita in US $Country & Education Sector ProfileRepublic of Turkey Page 26
  • 27. When comparing the gap in schools to GDP per capita of the regions, it shows the affordability of the region tofulfill the gap. Istanbul has the highest GDP per capita income of US$ 10,216 and also it has a significant gap innumber of schools. Aegean and Marmara also have a high GDP Per Capita and a Significant Gap, whereasSoutheastern Anatolia has high gap but low GDP Per Capita.3.6 Gap Analysis- Quality & Occupancy3.6.1 Students School Ratio:Average Number of Students per School determines the standard of infrastructure of Schools in the region.While most of the region have the students to school ratio around the overall average of 232, Istnabul has avery high students to school ratio of 544. This implies that the school infrastructure in Istanbul is burdened,catering to over 2.6 million population with just around 4,802 schools. Chart 22: Average Number of Students per School(2009) Source: Turkstat 600 544 500 400 300 226 248 247 231 207 200 155 154 100 - Average Number of Students per School(2009)Country & Education Sector ProfileRepublic of Turkey Page 27
  • 28. 3.6.2 Students Teacher Ratio:The Students Teacher Ratio gives an indication of the quality of education of a school. The overall averagenumber of students to teachers in Turkey was around 23 in 2009. Istanbul and Southeastern Anatolia had avery high Student to Teacher ratio of 29 and 30 respectivley. This implies that the quality of education in theseregions have been compromised and there is need to increase the school infrastructure and bring in morehuman resources to fulfill the gap qualitatively. Chart 23: Student Teacher Ratio (2009) Source: Turkstat 30 140,000 29 35 120,000 25 30 21 22 100,000 19 18 19 25 80,000 20 60,000 15 91,160 76,751 59,489 88,527 91,409 91,135 66,991 40,000 114,296 10 20,000 5 - 0 Number of Teachers Students to Teacher Ratio3.6.3 The Estimated Gap in SchoolAs per above analysis, it indicates that Istanbul though does not show a huge gap in number of school, theschoos in Istanbul are low on quality of education when compared to other regions. The School Infrastructurein Istanbul is also burdenedwith more number of students per school. Hence to analyse the actual gap innumber of Schools the same quality benchmark which is across Turkey, needs to be considered. Chart 24: Gap Analysis - Number of Schools (2009) National Benchmark Source: Turkstat 18,000 10,354 6,601 16,000 4,326 14,000 12,000 1,751 (124) 1,691 1,876 (297) 10,000 15,455 15,156 14,051 8,000 10,190 9,974 6,000 9,725 9,528 9,404 9,266 9,076 8,854 8,779 8,439 8,098 7,575 4,802 4,000 2,000 - Gap Number of Schools Required Number of SchoolsCountry & Education Sector ProfileRepublic of Turkey Page 28
  • 29. Considering the last three years average number of students per school of all schools across Turkey (as in chart17) of 232, we can estimate the gap in number of schools in each region. If all the eligible population were tobe accommodated at the rate of national benchmark (chart 17) then each region will require the above statednumber of schools. Requirement for new primary schools was highest in Istanbul at around 8,000 schools.The assumption considered in the above analysis is that in future all regions will have standard students toschool ratio.The average number of students per school is not similar across regions (chart 20), hence some regions such asEastern Anatolia and Black sea (which have the students to school ratio less then national benchmark of 232),show negative gap. Regions such as Istanbul which had the highest student to school ratio of 544 show thehighest gap.3.6.4 Regional Analysis – Affordability vs. Gap Chart 25: Gap Analysis - Per Capita Income to Gap in Schools Source: Turkstat 16,000 13,217 13,326 14,000 11,594 12,000 10,176 10,042 8,897 10,000 8,000 5,873 10,354 6,000 3,614 6,601 4,000 1,751 4,326 1,876 (297) 1,691 (124) 2,000 - (2,000) Gap In Schools GDP per capita in US $When comparing the gap in schools to GDP per capita of the regions, it shows the affordability of the region tofulfill the gap. Istanbul has the highest GDP Per Capita Income of US$ 13,326 and also it has the highest gap innumber of schools of over 10,000. This implies that Istanbul can sustain the demand for a high quality privateeducation and should be the most likely target for investments in quality private schooling.Country & Education Sector ProfileRepublic of Turkey Page 29
  • 30. 3.7 Sectoral Analysis3.7.1 Sector wise Breakdown – Number of Schools Chart 26: Number of School- Sectorwise Breakdown Source: Turkstat The share of Private sector is around mere 4% , There is a vast opportunity for Private sector to expand its share. 45,000 41,116 40,775 40,727 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 1,474 1,598 1,717 - 2007 2008 2009 Public Private*Note: the above figures do not include Pre – Primary Schools.Turkish education system gives private sector equal opportunity; however as evident it is highly dependent onPublic sector as it is free; however private schools have an enormous opportunity to expand.There is a vast difference in number of schools in private and public sector. There were over 40,727 publicschools across all classes as compared to around 1,717 schools in private sectors. The Private schools haverisen steadily at an average rate of around 8% for last 3 years.Country & Education Sector ProfileRepublic of Turkey Page 30
  • 31. 3.7.2 Sector wise Breakdown- Number of Students Chart 27:Number of Students - Sectorwise Breakdown Source: Turkstat 16.00 13.93 13.80 14.19 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.30 0.32 0.35 0.00 2007 2008 2009 Public (Millions) Private (Millions)*Note: the above figures do not include Pre – Primary Schools StudentsThere are currently over 14.1 Million students in Public Schools while a marginal 0.35 million are in private.There is a great demand to increase the school infrastructure further and demand for quality private educationis only set to increase.Country & Education Sector ProfileRepublic of Turkey Page 31
  • 32. 3.8 Higher Education Statistics3.8.1. Eligible PopulationThe population eligible for Higher Education in the age brackets of 20 – 23 years was around 5.02 million in2009. Table 7: Eligible Population for Higher Education ( Millions) Higher Education ( 20-23) 2007 4.99 2008 5.01 2009 Higher Education BriefSince the passage of the Higher Education Law (No. 2547), the administration of higher education in Turkeywas comprehensively restructured and centralized. All higher education institutions were tied to the Council ofHigher Education (YÖK, COHE). COHE is a fully autonomous national board of governors and sets Turkish highereducation policies and strategies.Until 1984, there were no private universities in Turkey. Higher Education Law allowed non-profit foundationsto establish universities that must be accredited periodically. The law requires all the private institutions,governed by individual boards of trustees and completely autonomous in financial and administrative matters(including setting tuition fees and salary scales and appointing rectors and deans), to comply with theacademic requirements set forth by the Council of Higher Education.Student admissions are to be through the central admissions system, based on a competitive student selectionand placement examination, and the requirement that at least 10 percent of students must be admitted onscholarships provided by the institutions themselves. Private universities are eligible for state funding for up tohalf of per student funding at state universities. However, to qualify for such state aid, private institutionsmust demonstrate performance at par with state universities. The Council of Higher Education closelymonitors the situation by measuring the numbers of students and publications per full-time faculty.In terms of both the number of institutions and the share of total enrollments, private higher education inTurkey falls way below the numbers commonly encountered in the Asia-Pacific rim, and Central and EasternEurope. Yet, the growth of private higher education in Turkey has been smooth. Currently as per Council of Higher Education, As of October 2009, there are 137 universities out of which 92universities were Public Universities and 45 Private nonprofit universities. Apart from these 137 universitiesthere were two higher institutes of technology and five private post-secondary vocational schools that are notattached with any university. There are estimated 2.9 million students currently studying across all the 137universities including technical, vocational and open study courses. Table 8: Number of Universities Universities in 2009 Public Universities 92 Private (Non Profit) 45Country & Education Sector ProfileRepublic of Turkey Page 32
  • 33. 3.8.3 Higher Education – Number of Students Growth Rate Chart 28: Number of Students Growth Rate Source: Council of Higher Education, University of KOC- Report, Turkey- UK Seminar 3.50 16.41% 18.00% 15.28% 3.00 13.05% 16.00% 14.00% 2.50 12.00% 2.00 10.00% 1.50 8.00% 1.00 6.00% 2.22 2.98 2.56 4.00% 0.50 2.00% 0.00 0.00% 2007 2008 2009 Number of Students ( milions) Growth Rate (%)The total number of students in all the 137 universities for all the programs i.e. undergraduate, vocational andall the open courses was around 2.9 million (estimated as per 2007 numbers) in 2009. The number of studentsincreased, by over 15% over 2008.3.8.4 Higher Education Analysis – Eligible Population Chart 29: Higher Education Analysis- Eligible Population 6.00 2.04 4.99 2.45 5.01 5.02 5.00 2.77 4.00 2.98 3.00 2.56 2.22 2.00 1.00 0.00 2007 2008 2009 Gap Number of Students ( milions) Eligible for Education (20-23)( millions) (Millions)The total Eligible population in the age group of 20 -23 was around 5.02 millions in 2009 whereas all the highereducation institutions accommodated only around 2.9 million students for the year 2009.Country & Education Sector ProfileRepublic of Turkey Page 33
  • 34. 3.8.5 Higher Education – Enrollment Rate Chart 30: Education -New Enrollment to Applications The Current existing gap between students applied and available seats is 0.54 million 2.00 1.78 1.80 1.68 1.65 1.60 1.45 1.40 1.20 0.91 1.00 0.76 0.80 0.60 0.63 0.60 0.40 0.20 0.00 2006 2007 2008 2009 Applications ( Millions) New Enrolled ( Millions)The current existing gap in higher education can be determined by difference in number of seats available andstudents applying for higher education, currently Turkish Higher education infrastructure offers close to910,000 new seats in both regular and open category while students who applied were close to 1.45 million in2009. The gap between applications and enrollment is around 0.5 million. This gives an excellent opportunityfor private universities to fulfill the gap and also provides opportunities to start alternative courses toaccommodate the students who could not get through. Chart 31: Affordability for Higher Education Source: IMF 2.00 13,139 13,400 13,200 1.78 13,000 1.50 1.68 1.65 12,800 12,891 1.45 12,600 1.00 12,400 12,107 12,339 0.91 12,200 0.76 12,000 0.50 0.60 0.63 11,800 11,600 0.00 11,400 2006 2007 2008 2009 Applications ( Millions) New Enrolled ( Millions) Gross domestic product based on purchasing-power-parity (PPP) per capita (US$)The GDP per capita for Turkey in terms of Purchasing Power Parity was US$ 12,339 in 2009. This puts Turkey inhigh income countries and shows that it has good purchasing power. It can be ascertain that the affordabilityfor any private higher education is there.Country & Education Sector ProfileRepublic of Turkey Page 34
  • 35. 3.8.6 Higher Education – Number of Students Breakdown Chart 32: Number of Students Breakdown - Course wise 2.50 1.91 2.00 1.64 1.50 1.38 0.89 1.00 0.77 0.70 0.50 0.14 0.15 0.18 0.00 2007 2008 2009 Undergraduate (Millions) Post Graduate (Millions) Vocational (Millions)The total numbers of students in Higher Education across 137 universities in 2009 were around 2.9 million, outof which around 30% were in vocational courses and over 64% were in undergraduate courses. The totalnumber of students in vocational courses was around 0.89 million. Students enrolled in Post graduates courseswere around 0.18 million. Chart 33: Number of Students Breakdown - Typewise 2.50 1.94 2.00 1.67 1.50 1.38 1.04 0.85 0.90 1.00 0.50 0.00 2007 2008 2009 Regular (Millions) Open (Millions)Out of the total 2.98 million students in 2009 over 1.04 million students were enrolled in Open Universitycourses conducted by Anadolu University. Only around 1.94 million of total students were enrolled in regularcourses (including vocational) across Turkey.Country & Education Sector ProfileRepublic of Turkey Page 35
  • 36. 3.8.7 Higher Education – Gap AnalysisThe average number of students per university for 2.9 million students in 137 universities was around 21,771students. Hence to fulfill the gap of 0.54 million students (chart 27) there is a need for around 25 universities. Higher Education Gap Higher Education Number of Higher Education Institutions (Universities) (137) Vocational Regular Number of Students: (0.89 Million) Number of Students**: (2.08 Million) Applications*: 0.43 Million Applications*: 1.01 Million New Enrollment*: 0.29 Million New Enrollment*: 0.61 MillionSource: Council of Higher Education, University of KOC- Report, Turkey- UK Seminar.*Note: Data estimated as per the percentage of students in Vocational & Regular.**Note: Number of Students Include Under Graduates (1.9 Millions) & Post Graduates (0.17 Million)***All Data as of 2009Country & Education Sector ProfileRepublic of Turkey Page 36
  • 37. Strategy4.1 Overview of GapThere are gap at all levels of education from K-12 to Higher education level. The opportunities for educationalinvestment in Turkey are vast.At School level there is an estimated gap of over 26,000 schools which needs to be fulfilled. There are a total ofover 21 million eligible populations out of which only around 15 million students are accommodated in some66,000 schools. This gap in number of existing students and eligible population is even more startling inregions like Istanbul and Central Anatolia. The existing school infrastructure in these areas is also not sufficientto fill the gap.Higher education needs a lot of boost from private sector to fulfill the gap between supply and demand. Thedifference between eligible population for higher education and existing number of students was huge at 2.04million while only 2.9 million students were accommodated, There is an immediate gap in number ofapplicants and new enrollment of 0.5 million. This shows that Turkey has to immediately increase the currentexisting infrastructure for higher education to fulfill this gap.Turkey is categorized in the middle income country group. It has a high Per Capita Income (Nominal) of US$9,340 while Per Capita Income in terms of Purchasing Power Parity is as high as US$ 13,111. Turkey has thebuying power for quality private education.4.2 Target Sector AnalysisAs the demand for education is not met by the current existing schools & universities, there are still greatunmet demands for education. The Government of Turkey in recent times has pushed forward to increase theparticipation rate for education, especially in higher education. It has set a target of 65% enrollment rate inhigher education by 2020.The government has high focus on science and technology higher education, thenumber of colleges in the field have risen to 27 in the last decade and also number of new enrollment hasdoubled. The government’s effort to include private sector has helped ease the burden of public sector, thenumber of non profit private universities from being nonexistent until 1984 have risen tremendously to 45.For a developing country like Turkey, it is of utmost important to improve human skills by expanding highereducation and making sure that there is enough sources for conducting scientific and technological researches.University & K 12 investment looks very attractive. K-12 education in parts of Turkey is lacking and needs moreinfrastructure to fulfill the government goals hence making private participation crucial at K -12 level. At K-12 level there is a huge base line population of 3-19 years of close to 21 million and an estimated gap of over 6 million. K -12 levels will require another close to 26,000 schools in future to fill the gap in education. The share of Private Sector is around 4% which is estimated to significantly increase as government puts in more effort for public-private partnership. K -12 gives an enormous opportunity to private sector for growth. As Turkey is an unknown territory, the initial investment should be moderate and once, when well versed with the market future diversification in higher education can be considered. All the above suggest a good opportunity in Turkey for K-12 level private educationCountry & Education Sector ProfileRepublic of Turkey Page 37
  • 38. 4.3 Target Region Analysis Gap Analysis - Per Capita Income to Gap in Schools Most likely Source: Turkstat Investment 12,000 9,740 10,109 10,216 Target 10,000 7,551 8,276 10,354 7,343 8,000 5,369 6,000 4,376 6,601 4,000 4,326 2,000 - 1,751 1,691 1,876 (2,000) (297) (124) 2009 Gap In Schools 2009 Nominal GDP per capita in US $ Per Capita Income and gap in number of schools give an indication of opportunities present for high quality private education. As evident from the above graph Istanbul, Marmara, Aegean and Central Anatolia provide a good opportunity for high quality schools as these regions have a much higher Per Capita Income. The regions also have significant school gap. Hence these regions are most likely investment targets. Among all the regions, Istanbul has an enormous gap of around 10,354 schools and hence gives more & better opportunities. Istanbul is the largest city in Turkey and one of the major centers of the world. It has a significant gap at K-12 level and also has the high GDP per capita to support the demand for high quality private education. Istanbul should be a prime target for an initial investment and in future the Istanbul model can be replicated in other potential regions for diversification. Country & Education Sector Profile Republic of Turkey Page 38
  • 39. Analysis5.1 SWOT AnalysisStrengths Weakness  Strong Economic Fundamentals  Historical high inflation.  High Government expenditure on education  Failure in long term planning. of close to 3.3 % of GDP.  Slow growth rate of education infrastructure.  A young Dynamic Population with over 43% population in under 24 age bracket  High dropout rates after primary education  A high GDP per capita income and high disposable income.  Government expenditure in education still lowers the EU average.  Formidable Education system, with compulsory primary education  FDI laws at par with international standards.  Economic and political stability in the country.Opportunities Threats  Vulnerable towards Global Financial crisis  High Gap in Supply and Demand for Education.  Government policy shift may limit private investment in education.  Requirement for close to 66,000 schools and around 25 universities to fulfill education  Current Decline in GDP growth rate may curb gap. spending on education  Demand for High quality education as level  Dependency on global economies of qualification for workers increases  Private sector contribution in Education is  Increasing unemployment rate may increase only around 4%. dropout rates for school.  Low enrollment rates for secondary  Volatile exchange rate movements education  Recent increase in inflation.  Ministry of National Education Investment in education sector has increased however still needs investment from private sector to fulfill the education gap.Country & Education Sector ProfileRepublic of Turkey Page 39
  • 40. Legal6.1 Laws Governing Foreign Direct InvestmentUnder the Turkish FDI law (Law Number 4875)Freedom to Invest and National treatmenta) Unless stipulated by international agreement and other special law  Foreign investors are free to make foreign direct investment in Turkey  Foreign Investors shall be subject to equal treatment with domestic investorsb) Foreign Direct investment shall not be expropriated or nationalized, except for public interest and uponcompensation with due process of law.c) Foreign investors can freely transfer abroad: net profits, dividends, proceeds from sale or liquidation of all orany part of investment.All the sectors are fully accessible to foreign investors except the below stated sectors which are only partiallyor completely not accessible to foreign investors. Education sector is free from regulations on limit ofinvestment and it is fully accessible to foreign investors.  Media, radio and television broadcasting  Petroleum  Passenger-cargo air transportation  Airport ground handling services  Management of airports  Transportation railways infrastructure services  Port management  Transportation in coastal waters and rivers  Yacht ports managementReal estate acquisitionForeign CompaniesCommercial companies having legal personality established in foreign countries according to the laws of thosecountries are able to acquire real estate or limited rights in Turkey provided they operate pursuant to thespecial laws such as tourism encouragement law, the petroleum law, the industrial law etc. other foreign legalentities apart from mentioned commercial companies such as foreign charities, foreign foundations andforeign societies cannot buy property in turkey.Companies established/ Participated by foreign nationals (FDI companies)Legal entities established or participated in Turkey by foreign investors can acquire real estate or limited rightsin Turkey in line of operational purposes set in company’s article of association. If these properties areacquired by another company established in turkey by foreign nationals or a Turkish company owning aproperty is acquired by foreign investors same rule applies.Source: Turkish Embassy, London (active link)Country & Education Sector ProfileRepublic of Turkey Page 40
  • 41. 6.2 Taxation LawsIncome Tax structure for Corporate Tax:Taxable IncomeThe corporate tax is levied on the income and earning derived by corporations and corporate bodies. TheCorporate Tax Law sets provisions and rules applicable to the income resulted from the activities ofcorporations and corporate bodies.Determination of Net Taxable Income:Net corporate income is defined as the difference between the net worth of assets owned at the beginningand at the end of the fiscal year. In addition to the expenses in Income Tax Code allowed to be deducted fromrevenues, the followings may also be deducted regarding to the determination of business profit, bycorporations:  Expenses related to the issuance of stocks and shares;  Initial organization and establishment expenses;  Expenses incurred for general board meeting as well as expenses made for mergers dissolutions, and liquidations;  Profits shares accrued to active partners of partnerships in commendams limited by shares;  Profit shares accrued to partners by participation banks for participation accounts;  Research and development deductions calculated as %40 of new technology and know-how research expenses realized within business.In determining net corporate income, the following deductions are not allowed:  Interests paid or accrued on the basis of equity;  Interest, exchange difference and other costs paid or accrued on the basis of disguised capital;  Disguised earning distributed by transfer pricing;  Any kind of reserves;  The corporate tax, fines, tax penalties and late payment penalties and interest.  Leased or registered motor vehicles’ depreciation and other expenses not related with business activities;Corporate income tax is applied at 20 % rate on the corporate earnings.Source: Revenue & Administration. (Active Link)Country & Education Sector ProfileRepublic of Turkey Page 41
  • 42. 6.3 Government IncentiveAn investor in education sector certificate can benefit from the following incentives:  Tax reduction  Investment loans  Investment premiums  Access to education development funds  Loans with low interest rates and long maturity  Partial customs duty exemptionSource: FAQ Investment in Turkey Guide – (active link) ConclusionTurkey is an emerging economy with a young and dynamic population. It is closely related with world economyand hence was affected by global meltdown. However as the world shows sign of coming through therecession Turkey is also poised for a recovery.Education will play a crucial role in Turkey’s future as it looks to further trade with world economies. Turkeywill require quality skilled labor force to achieve its objective as manufacturing and financial hub for Asia andEurope.There is a vast gap in supply and demand of education at all levels and hence government looks upon privatesector to play an important role in fulfilling the gap, Turkey is keen to invite more foreign investment ineducation and has all the laws governing these investments at par with international standards.K -12 provides a good opportunity as it has a huge base line population of over 21 million and the currentschool infrastructure is not able to accommodate all. There is an estimated gap of around 26,000 schools.Further Istanbul should be a prime investment destination as it has significant gap in number of school andalso has the highest GDP per capita implying that it can sustain high quality education.Turkey is a good opportunity however it still is an unknown territory for which initial investments should belimited. Further investments can be evaluated based on returns from the initial investments.Country & Education Sector ProfileRepublic of Turkey Page 42