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Turkish Arab Economic Forum

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Turkish Arab Economic Forum

  1. 1. Turkish-Arab Economic ForumApril 5, 2013Mehmet ŞimşekMinister of Finance1
  2. 2. Outline2Global OutlookCommon ChallengesManagingPoliticalTransitionEnsuringMacroeconomicStabilityDiversifyingEconomyJob CreationIncreasing LaborMarketFlexibilityMoving up theValue ChainCombattingShadowEconomyEnhancingHuman CapitalStockImprovingBusinessEnvironmentImprovingInfrastructureReducingPovertyMinimizingRegionalDevelopments
  3. 3. Global Outlook3
  4. 4. Outlook for Global GrowthTentative signs of improvementHowever, growth is likely to stay below potentialEMs will do better4
  5. 5. Factors Limiting Growth:High & Rising DebtSource: IMFDebt-to-GDP(%,2007-13)66,474,267,2162,494,9111,4 111,7224,3507090110130150170190210230250Euro Area OECD USA Japan2007 20135
  6. 6. Factors Limiting Growth: High UnemploymentUnemploymentRate,s.a.(December2007=100)Source: Eurostat, TURKSTATEuro AreaJapanUSA100901101301501701902102008-12009-12010-12011-12012-12013-16
  7. 7. Euro AreaFiscal austerity is dragging growth downUnemployment atrecordThe need for structuralreforms7Source: The Economist
  8. 8. USARecovery on Track8Positiveimpact ongrowthRisingemploymentStrongcorporateprofitabilityRising privatesectorinvestments
  9. 9. JapanA moreaggressivemonetary policy… BOJ’s assetpurchase around$78bn/month9Source: The Economist
  10. 10. Emerging EconomiesRising economic activities10Source: HSBCContractionExpansion
  11. 11. Common Challenges11
  12. 12. Challenge #1:Managing Political Transition12
  13. 13. Arab SpringShort-Term• Uncertainty• DisruptionLong-Term• Democracy• Prosperity• Stability13
  14. 14. Impact of Arab Spring on the EconomySource: National authorities; and IMF staff estimates.1Spread between 1st and 3rd quartile.RealGDPGrowth,%14
  15. 15. Impact of Arab Spring on Fiscal BalancesSource: National authorities; and IMF staff estimates.1Spread between 1st and 3rd quartile.FiscalBalance(%,GDP)15
  16. 16. Impact on Turkish Exports16(12monthrolling%,y/y)-63-100-50050100150200250T-24T-22T-20T-18T-16T-14T-12T-10T-8T-6T-4T-2T-0TT+2T+4T+6T+8T+10T+12Libya*T: Data troughs in Jan-12
  17. 17. Impact on Turkish Exports17(12monthrolling%,y/y)*T: Data troughs in Jun-11-14-10-20-15-10-505101520253035 T-6T-5T-4T-3T-2T-1T-0T-1TT+1T+2T+3T+4T+5T+6T+7T+8T+9T+10T+11T+12T+13T+14T+15T+16T+17T+18T+19T+20T+21Tunisia
  18. 18. Impact on Turkish Exports18(12monthrolling%,y/y)*T: Data troughs in Nov-12-70-80-60-40-200204060T-30T-28T-26T-24T-22T-20T-18T-16T-14T-12T-10T-8T-6T-4T-2TT+2Syria
  19. 19. Challenge #2:Ensuring Macroeconomic Stability19
  20. 20. MENA: Deterioration in Fiscal Outlook20
  21. 21. Deterioration in Overall Fiscal PositionsSource: IMF, Regional Economic Outlook, Nov. 201221-10-8-6-4-202468102007 2008 2009 2010 2011 2012 2013MENAMENA Oil Importers
  22. 22. Deterioration in Non-Oil Fiscal PositionsSource: IMF, Regional Economic Outlook, Nov. 201222-70-60-50-40-30-20-10010202007 2008 2009 2010 2011 2012 2013MENAMENA Oil Exporters Non-OilGCC Non-Oil
  23. 23. Government Wage Bills Rising Fast(Real wages and salary expenditures, 2010–13, percent change, nationalcurrency deflated by CPI inflation)Source: IMF, Regional Economic Outlook, Nov. 201223
  24. 24. Turkey: How did we achievemacroeconomic stability?PastPresent24
  25. 25. Political Stability1950-2002: 41 Governments•Average life span of 16 months1923-2002: 57 Governments•17 months2002-13:AK Party Governments• Good Policies• Good Politics25
  26. 26. Fiscal Discipline  Lower Deficit10,87,94,10,1-1,30,21,65,53,00,41,3 1,5 1,2 0,9-2,00,02,04,06,08,010,012,02002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Maastricht Criteria: 3%Medium-Term Program(2013-15)Achieved Maastricht Criteria except 2009Source: Ministry of DevelopmentBudgetDeficit-to-GDP,%26
  27. 27. 74,067,759,652,746,539,9 40,046,142,439,236,035,033,031,030,035,040,045,050,055,060,065,070,075,02002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Medium-Term Program(2013-15)Fiscal Discipline  Lower DebtDebt-to-GDP,%Satisfying Maastricht Criteria since 2004Maastricht Criteria: 60%Source: Treasury27
  28. 28. 107,2125,599,16,202040608010012014019801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201228Central Bank Independence  Single-Digit InflationSource: TURKSTATLowest rate for the past 44 years
  29. 29. Challenge #3:Diversifying Economy29
  30. 30. Turkey is a well-Diversified EconomyIntheworld16th largest economy2nd largest construction/contracting industry6th largest agricultural economy6th largest in # of tourist arrivals9th biggest commercial vehicle producer30
  31. 31. Challenge #4:Job Creation31
  32. 32. Need to Create Lots of JobsTurkey: 50%
  33. 33. New Jobs in TurkeyKaynak: TÜİK2021222324252008-12009-12010-12011-12012-1(MillionPeople,S.A..)33Net JobCreation3.5millionsince20091millionlastyear
  34. 34. Challenge #5:Increasing Labor Market Flexibility34
  35. 35. Excess Labor Regulations and EducationMismatches*35InadequatelyeducatedworkforceLabor regulationsSource: World Bank Enterprise Surveys 2006–11.*Percent of firms identifying each item as a major constraint.Note: EE & CA = Eastern Europe and Central Asia; SSA = Sub-Saharan Africa.
  36. 36. Turkey: Average Weekly Hours Worked on the MainJob (2011)Source: OECD48,93032343638404244464850TurkeyKoreaMexicoGreeceCzechRepublicSlovakRepublicPolandIcelandHungarySloveniaPortugalChileEstoniaSpainFranceAustriaItalyNewZealandFinlandLuxembourgBelgiumSwedenUnitedKingdomAustraliaGermanySwitzerlandIrelandNorwayDenmarkNetherlandsHighest among the OECD countries!36
  37. 37. Turkey: Share of Part-time Employment(%, 2011)Source: OECD11,70510152025303540NetharlandsSwitzerlandIrelandAustraliaUnitedKingdomGermanyNewZelandJapanNorwayCanadaDenmarkAustriaBelgiumMexicoChileIcelandItalyLuxembourgSweedenIsraelFranceKoreaSpainFinlandUnitedStatesTurkeyPortugalGreeceEstoniaSloveniaPolandHungarySlovakRepublicCzechRepublıc9th lowest among the OECD countries37
  38. 38. Our National Employment Strategy4 Main ObjectivesReducing labor market rigiditiesIncreasing employment of women, youth and the disadvantageousStrengthening the link between education and employmentStrengthening the link between employment and social protection38
  39. 39. Limited participation of female in labor force29,516,725,630,638,170,91020304050607080Total Illeterate Less than highschoolHigh school Vocational highschoolHigher schoolLaborPaticipationRatebyEducation(2012)OECD Average: 62.3Source: TURKSTAT, OECD39
  40. 40. Improving Girls’ Education200291.1 girls per100 boys2012101.8 girlsper 100 boys40
  41. 41. Challenge #6:Moving Up The Value Chain41
  42. 42. Why is R&D so significant for us?The share of high and medium-hightechnology sectors in production and inexport is lowBoosting R&DSource: Ministry of Development27.672.435.664.401020304050607080High and Medium-High Low and Medium-LowProduction Export42
  43. 43. Source: The Scientific and Technological Council of TurkeyR&D Spending43• 3.00%2023• 0.86%2011• 0.53%2002
  44. 44. Industrial Design Applications41,226 applications in 2012Up by 103% since 2002Source: TPI44
  45. 45. Trade Mark ApplicationsSource: TPI• 36,5782002• 109,767201245
  46. 46. Patent ApplicationsSource: TPI461.87411.5551.0002.0003.0004.0005.0006.0007.0008.0009.00010.00011.00012.0002002 2012
  47. 47. Brand Turkey, moving up the LaddersSource: Brand - FinanceTurkey ranks 19th globally47
  48. 48. Challenge #7:Combatting Shadow Economy48
  49. 49. We Reduced the Size of Shadow Economy(% GDP)32,231,530,730,429,128,428,928,327,727,22627282930313233200320042005200620072008200920102011201249
  50. 50. Size of Shadow Economy (2012, % GDP)32,329,629,52928,627,226,52625,82524,322,821,619,419,219,217,116,4161614,814,713,813,713,512,81110,598,27,97,85101520253035BulgariaRomaniaCroatiaLithuaniaEstoniaTurkeylatviaCyprusMaltaPolandGreeceHungaryItalyPortugalAverageSpainBelgiumCzechRepSloveniaSlovakiaNorwaySweedenDenmarkFinlandGermanyirelandFranceUKNetherlandsLuxembourgAustriaSwitzerland50
  51. 51. Challenge #8:Enhancing Human Capital Stock51
  52. 52. 9,417810121416182002 2013Source: Ministry of FinanceShare of Education Budget%52
  53. 53. Gross Schooling RatesSource: Ministry of Development11,296,580,835,846,4108,492,681,61030507090110130Preschool(age of 4-5 )Primary School Secondary School Higher Education2002-2003 2011-201253
  54. 54. Improving Quality of EducationWith Fatih Project, we are providing our children withBroadband Internet AccessSmart BoardsTablet PCsOther Information Technology Tools54
  55. 55. Challenge #9:Deepening Capital Markets55
  56. 56. A New Capital Markets Law•Increasing financial deepening & innovation•Strengthening investor rights•Improving corporate governanceNew legal framework inline with the best globalpractices56
  57. 57. Restructuring of ISERegionalLeadershipRaisingMarketCap/GDP to80%1,000 newcompanies57
  58. 58. Incentives for Global Fund ManagersA tax free environment forGlobal FundsMaking it easier to manage assetsin Turkey58
  59. 59. Incentives for Venture CapitalAllowing contributions to Venture Capital to bededucted from Corporate & Personal Income TaxBase, up to• 10% of VC Revenues• 20% of VC CapitalTax Relief on Dividends59
  60. 60. Incentives for Business Angels60
  61. 61. SukukSimilar to euro bonds, international holders Sukuk willnot be subject to withholding taxSep-12: First Sukuk issued for $1.5bn in internationalmarketOct-12: Sukuk denominated in TL issued for TL1.6bn indomestic marketFeb-13: Sukuk issued for TL1.5bn61
  62. 62. Challenge #10:Improving Infrastructure62
  63. 63. 1,714 KmTotal of Motorways4,387 KmTotal of State andProvincial DualCarriagewaysTotal: 6,101 KmDual CarriagewayNetwork(January 1, 2003)2,236 KmTotal of Motorways20,017KmTotal of State andProvincial DualCarriagewaysTotal: 22,253 KmDual CarriagewayNetwork(March 05, 2012)63
  64. 64. İSTANBULESKİŞEHİR POLATLIANKARAKONYASİVAS212 km533 km405 kmYOZGATYerköyAFYONİZMİRMANİSA624 kmBURSABİLECİK110 kmUnder constructionCompletedAt tender phase64High Speed Railway ProjectsSource: Ministry of Transport
  65. 65. • The number of airports servingscheduled flights = 262003• The number of airports servingscheduled flights = 492012Airports Available For Civil Aviation Traffic inTurkeyAirports serving ScheduledFlight (49)Airports under Construction (5)Airports Planned(2) 65
  66. 66. Challenge #11:Reducing Poverty66
  67. 67. What did we do?Targeted SocialSpendingNo GeneralSubsidy67
  68. 68. Targeted Social Safety NetsDuring our governing periods, we havespent $60.5 billion for social assistance• General Health Insurance• Targeted programs to the poor and the needy• Heating• Transportation68
  69. 69. Job Creation69The most effective way of eliminatingpoverty is job-creation• Improving the business environment• 5 ppt contribution to employer’s social securitycontribution• Wage subsidy for youth and female employment• Wage subsidy for part-time employment• Support for job-training programs
  70. 70. Source: Ministry of DevelopmentReducing Regional Development Gaps - IGAPPublicSpending(BillionTL,2012Prices)21,328,3182022242628301990-2002 2003-1270
  71. 71. 71Fight Against PovertySource:TURKSTAT0,200,010,020,010 0 0 0 0 00,00,10,10,20,20,32002 2003 2004 2005 2006 2007 2008 2009 2010 2011Below $1 per capita per day(%)
  72. 72. 72Fight Against PovertySource:TURKSTAT3,042,392,491,551,410,52 0,470,22 0,210,14011223342002 2003 2004 2005 2006 2007 2008 2009 2010 2011Below $2,15 per capita per day(%)
  73. 73. 73Fight Against PovertySource:TURKSTAT30,3023,7520,8916,3613,338,416,834,353,662,79051015202530352002 2003 2004 2005 2006 2007 2008 2009 2010 2011Below $4,3 per capita per day(%)
  74. 74. Income Distribution ImprovedSource: Turkstat, OECD74But still along wayto goGiniCoefficient2002•0.44GiniCoefficient2011•0.40
  75. 75. Challenge #12:Minimizing Regional Development Gaps75
  76. 76. New Investment Incentive SchemeObjectives:- Reduce regional development gaps- Reduce current account deficit- Promote efficient allocation of resources to high value-added investmentsGeneralIncentivesRegionalIncentivesIncentives forLarge-ScaleProjectsIncentives forStrategicInvestments76
  77. 77. YENİ TEŞVİK SİSTEMİRegional Customs DutyExemption VAT Exemption Lower CIT rate Support for theemployer’s share ofinsurance premium Allocation of Land Customs DutyExemption VAT Exemption Lower CIT rate Support for theemployer’s shareof insurancepremium Allocation ofLand Interest Support Customs DutyExemption VAT Exemption Customs DutyExemption VAT Exemption Lower CIT rate Support for theemployer’s shareof insurancepremium Allocation ofLand Interest Support VAT RebateGeneralIn the 6th Region, additional support for The employee’s share of insurance premium Income tax stoppageIncentivesLarge-Scale Strategic77
  78. 78. All These Efforts forMENA&TurkeyMoreProsperousEconomiesBetterStandards ofDemocracyImprovedQuality ofLife78
  79. 79. THANK YOU…79

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