Cooperation of International Funding Organizations for Developing                      Countries: The Case of Turkey      ...
Project CoordinatorErgul HaliscelikSenior Treasury ControllerMSPPM, CIA, MSERepublic of Turkey Prime Ministry Undersecreta...
Table of ContentsList of Figures ............................................................................................
Chapter 2: Recent Collaboration of International Funding Organizations ........................................ 42     Int...
Chapter 4: Conclusions and Recommendations ..................................................................................
List of FiguresFigure 1: IMF Financial Assistance ...........................................................................
List of TablesTable 1: IBRD FY08 Performance* ...............................................................................
List of Abbreviations    AA      Audit Authority    ADF     Africa Development Fund    BETF    Bank Executed Trust Funds  ...
GNI        Gross National Income    HIPC       Heavily Indebted Poor Countries    IADB       United Nations Children’s Fun...
                                                                                                                          ...
Executive SummaryMany international funding organizations are operating in Turkey to provide assistance in socialand econo...
The European Union (EU) was actualized in 1993 by the Maastricht Treaty. The EU,consisting of 27 member countries, mainly ...
Turkey. From 2002 to 2008 the unemployment rate was over 9 percent. Due to its export-oriented economy and a high rate of ...
IntroductionIncreased globalization in the latter half of the Twentieth Century has created a global economystarkly differ...
today’s more globalized world. The global economy has changed and so too must the policiesand practices of the internation...
Chapter 1: International Funding Organizations and their Relations withTurkeyInternational Monetary FundHistorySince its i...
current crisis poses new challenges in surveillance and efficiency for the IMF and its members asthey move forward.Activit...
order to draw funds from the IMF, member countries must work closely to with the IMF todevelop and implement sound macroec...
payments need” and is disbursed in installme as defin in the bor        s                        d            ents      ne...
of the program were: floating exchange rate continuation; financial system reform andstrengthening; expenditure and tax re...
While the policies laid out in the Program were deemed strong by the IMF, the Program facedrisks, including the uncertaint...
environmental issues. Today, the Bank is playing an important role in the global policy arena. Ithas effectively engaged w...
Table 1: IBRD FY08 Performance, Number of Projects and Some Indicators in millions of USD     Number of projects          ...
The International Finance Corporation was established in 1956. It has 181 member countries.IFC promotes growth in the deve...
provide a road map and a framework for measuring progress for active members andorganizations of the global community who ...
IBRD and IDA’s lending not only differs at the regional level, but also at the thematic andsectoral levels. Figure 5 shows...
Types of FundsThe World Bank Group focuses on helping the poorest people in the poorest countries. It usesfinancial resour...
contributes to the achievement of the Millennium Development Goals’ overall challenge ofreducing poverty.CreditsThese are ...
Figure 7: World Bank’s Funding by Sector in Turkey since 1991, in millions of US dollars                                  ...
Country Assistance StrategiesThe World Bank prepares a Country Assistance Strategy (CAS) for active borrowers from theInte...
FY 2004-2007 CAS for TurkeyThe Country Assistance Strategy for FY04-06 aimed at reducing the risk of reemergence ofcrises,...
A substantial Bank Group program has been planned for the four years in partnership with theauthorities in achieving their...
European UnionHistoryThe idea of uniting Europe emerged after World War II. In order to terminate the long lastingdisputes...
While the EU could be seen as a regional union, the global relations of the EU in economic,trade, and financial areas make...
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey
Upcoming SlideShare
Loading in …5
×

Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey

2,421 views

Published on

Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey: Improving the economy, efficiency effectiveness of the IMF, World Bank and European Union funds in a country by coordinating their activities, Coordinator of the Project, Heinz College, Carnegie Mellon University, May 2009

This report concludes with recommendations for International Funding Organizations and for Turkey. All the policies and agreements with international funding organizations should be recipient country oriented. They should perform complementarily with their expertise and collaboratively solve the basic, urgent issues in recipient countries. As for Turkey, there should be more active coordination between different international organizations to meet Turkey’s needs. At the same time, Turkey should firmly adhere to its policies as laid out in its development plan and restructure collaboration among the institutions related to international projects and programs.

Published in: Education, Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
2,421
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
31
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Cooperation of the International Funding Organizations for Developing Countries - The Case of Turkey

  1. 1. Cooperation of International Funding Organizations for Developing Countries: The Case of Turkey FUNDING FOR DEVELOPMENT     Project, 2009 H. John Heinz III College, Carnegie Mellon University 1   
  2. 2. Project CoordinatorErgul HaliscelikSenior Treasury ControllerMSPPM, CIA, MSERepublic of Turkey Prime Ministry Undersecretariat of Treasury Project AdvisorsSilvia BorzutzkyTeaching Professor of Political Science and International RelationsH. John Heinz III College, Carnegie Mellon UniversityLee BranstetterAssociate Professor of Economics and Public PolicyH. John Heinz III College, Carnegie Mellon UniversityGordon LewisDirector, Master of Public Policy ProgramAssociate Professor of SociologyH. John Heinz III College, Carnegie Mellon UniversityProject TeamAkif AksamAlison CaseBilal El-GhaliYildiz ErkmenLini Fu i  
  3. 3. Table of ContentsList of Figures .............................................................................................................................................. iv List of Tables ................................................................................................................................................ v List of Abbreviations ................................................................................................................................... vi Executive Summary .................................................................................................................................... 1 Introduction ................................................................................................................................................. 4 Chapter 1: International Funding Organizations and their Relations with Turkey ............................ 6  International Monetary Fund .................................................................................................................... 6  History .................................................................................................................................................. 6  Activities ............................................................................................................................................... 7  Types of Funds ...................................................................................................................................... 8  Turkey Relations ................................................................................................................................... 9  18th Stand-By Arrangement .................................................................................................................. 9  19th Stand-By Arrangement ................................................................................................................ 10  World Bank ............................................................................................................................................. 11  History ................................................................................................................................................ 11  Mission  ............................................................................................................................................... 12  . World Bank Group Institutions and FY08 Activities ......................................................................... 12  World Bank and the Millennium Development Goals ........................................................................ 14  Evaluation of World Bank Operations in FY 2008 ............................................................................. 15  Types of Funds .................................................................................................................................... 17  World Bank-Turkey Relations ............................................................................................................ 18  European Union ...................................................................................................................................... 23  History ................................................................................................................................................ 23  Mission of the European Union .......................................................................................................... 23  EU Institutions .................................................................................................................................... 24  Member Countries and Enlargement .................................................................................................. 25  Candidate Countries and Potential Candidate Countries .................................................................... 25  Copenhagen and Maastricht Criteria  .................................................................................................. 26  . Types of Funds .................................................................................................................................... 28  EU – Turkey Relations  ....................................................................................................................... 38  . i  
  4. 4. Chapter 2: Recent Collaboration of International Funding Organizations ........................................ 42  Introduction ............................................................................................................................................. 42  IMF – World Bank – EU Collaboration  ................................................................................................. 43  . Introduction ......................................................................................................................................... 43  Millennium Development Goals ......................................................................................................... 43  Debt Relief .......................................................................................................................................... 44  Responses to the Economic Crisis ...................................................................................................... 46  EU-IMF Collaboration ............................................................................................................................ 50  EU-World Bank Collaboration ............................................................................................................... 51  European Union Accession and the World Bank ................................................................................ 53  European Union and World Bank partnership in Africa ..................................................................... 54  European Union and World Bank partnership in Middle East- Southern Mediterranean and North Africa Region ...................................................................................................................................... 55  Trust Funds ......................................................................................................................................... 55  IMF - World Bank Collaboration  ........................................................................................................... 57  . Report of the External Review Committee on Bank-Fund Collaboration .......................................... 57  Enhancing Collaboration: Joint Management Action Plan ................................................................. 58  International Aid Effectiveness Movements ........................................................................................... 58  International Conference on Financing for Development, Monterrey Mexico, March 2002 ............. 58  Rome High Level Forum, February 2003 ........................................................................................... 59  Paris High Level Forum, March 2005 ................................................................................................ 60  Accra High Level Forum, September 2008 ........................................................................................ 61  Chapter 3: Background Information on the Turkish Economy ........................................................... 62  Key Economic Indicators ........................................................................................................................ 62  Development Plans and Turkey’s Priorities  ........................................................................................... 70  . Government Agencies in Turkey Related with the International Funding Organizations ...................... 72  World Bank ......................................................................................................................................... 72  European Union .................................................................................................................................. 74  International Monetary Fund .............................................................................................................. 78    ii  
  5. 5. Chapter 4: Conclusions and Recommendations .................................................................................... 79  Opportunities for Collaboration .......................................................................................................... 79  Globalization ....................................................................................................................................... 79  Current Financial Crisis ...................................................................................................................... 79  Complementary Missions ................................................................................................................... 79  Debt Relief – Africa ............................................................................................................................ 80  Millennium Development Goals ......................................................................................................... 80  Turkey’s Ninth Development Plan ..................................................................................................... 80  IMF Stand-By Arrangements .............................................................................................................. 80  Coordination among Turkish Government Organizations .................................................................. 81  Recommendations ................................................................................................................................. 81  Recommendations for International Funding Organizations .............................................................. 81  Recommendations for Turkey ............................................................................................................. 82  Recommendations for Further Research ..................................................................................................... 86 Appendix 1: Regional Disparities in Poverty Levels ................................................................................. 87 Appendix 2: International Funding Organizations’ Net Financial Flows ................................................... 88 Appendix 3: Millennium Development Goals ............................................................................................ 91 Appendix 4: Joint Activity Plan .................................................................................................................. 92 Appendix 5: EU Funding System 2007 ...................................................................................................... 95 Appendix 6: Paris Declaration Indicators ................................................................................................... 96 Appendix 7: Important Economic Indicators of Turkey ............................................................................. 98 Appendix 8: World Bank Major Development Partners in Turkey (CPS 2008-2011) ............................. 102 Bibliography ............................................................................................................................................. 103  iii  
  6. 6. List of FiguresFigure 1: IMF Financial Assistance .............................................................................................................. 8 Figure 2: Recent IMF Stand-By Arrangements in Turkey  ........................................................................... 9  .Figure 3: IDA Commitments by Region ..................................................................................................... 13 Figure 4: Regional Distribution of World Bank Funds ............................................................................... 15 Figure 5: Thematic Distribution of World Bank Funds .............................................................................. 16 Figure 6: Sectoral Distribution of World Bank Funds ................................................................................ 16 Figure 7: World Bank’s Funding by Sector in Turkey since 1991 ............................................................. 19 Figure 8: 2007 ODA Amounts .................................................................................................................... 52 Figure 9: 2008 World’s Biggest Economies ............................................................................................... 63 Figure 10: GDP Growth Rate ..................................................................................................................... 64 Figure 11: Inflation Rate ............................................................................................................................. 65 Figure 12: Demographic Profile ................................................................................................................. 66 Figure 13: Sectoral Distribution of Employment ........................................................................................ 66 Figure 14: Unemployment Rate .................................................................................................................. 67 Figure 15: Foreign Trade ............................................................................................................................ 67 Figure 16: Current Account Deficit/GDP Ratio.......................................................................................... 68 Figure 17: EU Defined Government Budget Deficit/GDP ......................................................................... 69 Figure 18: Public Sector Debt Stock ........................................................................................................... 69 Figure 19: IPA structure and authorities in Turkey .................................................................................... 75 Figure 20: Projections for Regional Poverty Disparities ............................................................................ 87 Figure 21: IMF Net Financial Flows for the year 2006 .............................................................................. 88 Figure 22: World Bank Net Financial Flows for the year 2006 .................................................................. 89 Figure 23: European Commission Net Financial Flows for the year 2006 ................................................. 90 Figure 24: EU Funding System 2007 – Based on EU Budgetary Headings ............................................... 95 Figure 25: 2008 Europe’s Biggest Economies ............................................................................................ 98 Figure 26: GDP Growth Rate ..................................................................................................................... 98 Figure 27: GDP Growth Rate  ..................................................................................................................... 99  .Figure 28: Per capita GDP and Targets ...................................................................................................... 99 Figure 29: Periodic Inflation ..................................................................................................................... 100 Figure 30: Foreign Direct Investment Inflow ........................................................................................... 100 Figure 31: Public Sector Primary Surplus  ................................................................................................ 101  . iv  
  7. 7. List of TablesTable 1: IBRD FY08 Performance* ........................................................................................................... 13 Table 2: IDA FY08 Performance ................................................................................................................ 13 Table 3: IFC FY08 Performance ................................................................................................................. 14 Table 4: MIGA FY08 Performances ........................................................................................................... 14 Table 5: Summary of Cumulative World Bank Funds in Turkey as of Year End 2008 ............................. 19 Table 6: EU Enlargement Process .............................................................................................................. 25 Table 7: Copenhagen Criteria ..................................................................................................................... 26 Table 8: Maastricht Criteria ........................................................................................................................ 27 Table 9: Financial Framework 2007-2013 Revised For European Economic Recovery Plan .................... 28 Table 10: IPA for Eligible Countries .......................................................................................................... 33 Table 11: Regional EIB Funds for past 5 years .......................................................................................... 37 Table 12: Regional EBRD Commitments in 2007 ...................................................................................... 38 Table 13: EU Financial Support before IPA for Turkey ............................................................................. 39 Table 14: Sectoral Distribution of EU Support between 2002 and 2006 .................................................... 40 Table 15: IPA for Turkey between 2007 and 2012 ..................................................................................... 41 Table 16: Conditionalities of Economic Package for Hungary .................................................................. 48 Table 17: Major Trust-Funded Programs  ................................................................................................... 56  .Table 18: Financing of Current Account Deficit ........................................................................................ 68 Table 19: Development Axes and Target of the Ninth Development Plan ................................................. 71 Table 20: Key Institutions in IPA ............................................................................................................... 74 Table 21: EU Community Programs ........................................................................................................... 77 Table 22: Millennium Development Goals ................................................................................................. 91 Table 23: Paris Declaration Indicators ........................................................................................................ 96 *Abbreviations are listed on page vi v  
  8. 8. List of Abbreviations AA Audit Authority ADF Africa Development Fund BETF Bank Executed Trust Funds CAE Country Assistance Evaluation CAO Competent Accrediting Officer CAP Common Agriculture Policy CARDS Community Assistance for Reconstruction, Development and Stabilization CBRT Central Bank of Republic of Turkey CAS Country Assistance Strategy CFP Common Fishery Policy CPS Country Partnership Strategy DCI Development Cooperation Instrument DPL Development Policy Loan DRF Debt Reduction Facility EAEC European Atomic Energy Community EAFRD European Agricultural Rural Development Fund EAGF European Agricultural Guarantee Fund EBRD European Bank for Reconstruction and Development EC European Commission ECSC European Coal and Steel Community EDF European Development Fund EEC European Economic Community EFF European Fund for Fisheries EFRD European Fund for Regional Development EIB European Investment Bank EIDHR European Instrument for Democracy and Human Rights EIF European Investment Fund EMU Economic and Monetary Union ENPI European Neighborhood and partnership Instrument EP European Parliament ESF The European Social Fund EU European Union FCB Financial Cooperation Board FDI Foreign Direct Investment FIF Financial Intermediary Funds FY Fiscal Year GEF Global Environment Facility GFATM Global Fund to Fight AIDS, Tuberculosis and Malaria vi  
  9. 9. GNI Gross National Income HIPC Heavily Indebted Poor Countries IADB United Nations Children’s Fund IBRD International Bank for Reconstruction and Development ICI Instrument for Cooperation with Industrialized Countries ICSID International Centre for Settlement of Investment Disputes ICT Information and Communication Technologies IDA International Development Association IEG Independent Evaluation Group IFC International Finance Corporation IFFI International Finance Facility for Immunization IMF International Monetary Fund IPA Instrument for Pre-Accession IS Instrument for Stability ISPA Instrument for Structural Policies for Pre-Accession JMAP Joint Management Action Plan MDG Millennium Development Goals MDRI Multilateral Debt Relief Initiative MEDA The Euro-Mediterranean Partnership MIGA Multilateral Investment Guarantee Agency MOU Memorandum of Understanding NAO National Authorising Officer NF National Fund NIPAC National IPA Coordinator OS Operating Structure PHARE Poland-Hungary Assistance for the Reconstruction of the Economy PRS Poverty Reduction Strategy RD Research and Development RETF Recipient-Executed Trust Funds SAPARD Special Action Programme for Pre-Accession Aid for Agricultural and Rural Development SBA Stand-By Arrangement SDR Special Drawing Rights TURKSTAT Turkish Statistical Institute SME Small to Medium Enterprises UN United Nation UNDP United Nations Development Programme UNFPA United Nations Population Fund UNICEF United Nations Children’s Fund VAT Value Added Taxes WBG World Bank Group   vii  
  10. 10.                             “This Page Intentionally Left Blank” viii  
  11. 11. Executive SummaryMany international funding organizations are operating in Turkey to provide assistance in socialand economic issues, often generating positive effects. Among these organizations, the IMF,World Bank and EU supported projects, programs, and funds are vital for Turkey. They havesupported stabilization policies, economic and social reforms, sustainable development projectsand programs through their grants, credits and loans.While the operations of the IMF, World Bank, and EU have positive effects in countries likeTurkey, their assistance could be even more successful. If these three organizations could focuson the needs of specific countries and collaborate effectively, they have the potential to achieveeven more. Further, it is imperative that borrower countries help these three organizations to beeconomic, efficient and effective in their activities.This project focuses on the following: • A thorough understanding of the IMF, World Bank and EU • The activities of these three organizations in the world, including their collaboration • Strengths and weaknesses of these three organizations on global issues, on developing countries, and specifically on development of Turkey • The social and economic situation of Turkey and Turkey’s relations with international funding organizations • Potential actions IMF, World Bank and EU can take to increase their working efficiency in borrower countries • Potential actions Turkey can do to take advantage of these three organizations’ assistanceResearch for this project has mainly been conducted through literature review, using quantitativeand qualitative data obtained from the documents of each institution, such as Stand-ByArrangements for the IMF, Country Partnership Strategies for the World Bank, agreementsbetween Turkey and the EU and other related documents. Due to time constraints, the researchconducted for this project is limited; suggestions for future research are discussed in theRecommendations for Further Research section at the conclusion of this report.Turkey has a rich history of collaboration with multilateral International FundingOrganizations. The International Monetary Fund (IMF) works towards fostering internationalmonetary cooperation to advance a healthy global economy. The IMF implements its activitiesfor the benefit of its 185 member countries. The relationship between Turkey and the IMF isapproaching its 50th year with almost 20 Stand-By-Agreements.The World Bank, founded in 1944, serves 185 member countries, both developed anddeveloping. The Bank assists countries in dealing with development issues. Its five institutionscollaborate to reduce poverty and encourage economic growth. The Bank works closely withTurkey to overcome a series of economic crises, set the country on a path of sustained economicdevelopment, and contribute to improvements in the living conditions of its people. 1  
  12. 12. The European Union (EU) was actualized in 1993 by the Maastricht Treaty. The EU,consisting of 27 member countries, mainly works to improve the living standards of people inEurope through providing peace, prosperity and stability for its peoples, ensuring safety andsecurity of its members, and promoting balanced economic and social development andeconomic growth. The Ankara Agreement in 1963 offered Turkey full membership in theEuropean Economic Community (EEC) through the establishment in three phases of a customsunion. In 1999, Turkey gained “candidate status” at the Helsinki Summit in 1999. Afterbeginning accession negotiations with EU in 2005, Turkey gained eligibility to receive a greatproportion of EU funds.International Funding Organizations have increased their collaboration in recent years.Globalization in recent decades has intensified the need for increased international cooperation.Interrelationships of economies have created the need for international funding organizations tosupport the stability and sustained growth of all countries around the world. In addition it isobvious that the subjects of development and funding development are diverse in nature andinvolve various organizations. Therefore, thematic and geographic coordination should beensured in funding development.Within this framework there are challenges and efforts to align organizations, working together toachieve desired results and facilitate the efficiency of their funds. The common development goals,specifically the Millennium Development Goals and recent financial crises are both challenges andopportunities that push the IMF, World Bank, and EU together with other development partners andinternational financial institutions to work more collaboratively. IMF, World Bank and EU activitieson achieving MDGs and on economic crises, specifically in Hungary, Latvia and Romania, are recentexamples of collaboration. World Bank assistance in EU candidate countries and EU contributionsfor World Bank trust funds are other aspects of collaboration. Although there are different kinds ofcollaborative activities, more systematic action is needed in terms of collaboration.International aid movements have been more effective recently. IMF, World Bank and EUcollaboration can be characterized by thematic and geographic areas. However, major donorcountries and aid agencies use different approaches and techniques in financing for developmentaround the world, yielding huge costs and making aid efforts less effective. This inefficiency hasbeen a great source of concern, from which an aid effectiveness movement has emerged.The aid effectiveness movement picked up steam at the International Conference on Financingfor Development, held in Monterrey Mexico in 2002 where the international community agreedto increase its funding for development but acknowledged that more money alone was notenough. Donors and developing countries alike wanted to know that aid would be used aseffectively as possible. From that perspective, the international funding community gatheredtogether again at the Rome High Level Forum in 2003, Paris High Level Forum in March 2005and Accra High Level Forum in 2008. Twelve indicators and targets that were determined in theParis Declaration to provide a measurable and evidence-based way to track progress will bemonitored in future activities.Turkey has considerably one of the largest economies in the World and Europe. The Turkisheconomy has grown by 5.9 percent annually during the period of 2002-2008. According to theIMF World Economic Outlook Database, the (estimated) Gross Domestic Product of Turkey for2008 is about US$798 billion. The amounts of exports and imports reached US$132 and $202billion respectively in 2008. The high unemployment rate remains one of the major problems for 2  
  13. 13. Turkey. From 2002 to 2008 the unemployment rate was over 9 percent. Due to its export-oriented economy and a high rate of unemployment, Turkey has been considerably affected bythe current economic crisis. The growth rate dropped to 1.1 percent and unemployment rateincreased to 13.6 percent.Turkey developed a number of Development Plans in order to address the country’s priorities.The Ninth Development Plan is the fundamental policy document that sets the transformations ineconomic, social, and cultural areas of Turkey in an integrated approach. The necessarydocuments in the EU accession process, like the Pre-Accession Economic Program and theStrategic Coherence Framework, are based on the Plan. The vision of the Plan is “Turkey, acountry of information society, growing in stability, sharing more equitably, globally competitiveand fully completed her coherence with the European Union.”This report concludes with recommendations for International Funding Organizations andfor Turkey. All the policies and agreements with international funding organizations should berecipient country oriented. They should perform complementarily with their expertise andcollaboratively solve the basic, urgent issues in recipient countries. As for Turkey, there shouldbe more active coordination between different international organizations to meet Turkey’sneeds. At the same time, Turkey should firmly adhere to its policies as laid out in itsdevelopment plan and restructure collaboration among the institutions related to internationalprojects and programs.Collaboration and possible collaboration of international funding organizations should befurther assessed. Future research should devise an econometric model to analyze thedistribution of international funds by sector in Turkey and study the changes in pertinentindicators in order to determine the effectiveness and efficiency of international funding inTurkey. The effect of projects funded by international funding organizations on country specificindicators could be measured using cost-benefit analyses of the projects. Additionally, theinternational funding organizations’ responses to economic crises and the MillenniumDevelopment Goals could also serve as potential areas for the research on collaboration. 3  
  14. 14. IntroductionIncreased globalization in the latter half of the Twentieth Century has created a global economystarkly different from that of the post-World War II environment from which the internationalfunding organizations emerged. Countries that had seen little economic prosperity or growthprior to the signing of Bretton Woods are now growing faster than the United States during itsIndustrial Revolution. India and China have been experiencing decades of sustained, highgrowth, shifting power balances in the global economic landscape. These successes show theimportance of advances in technology and education, but also highlight the fact that the world isinterconnected. In order to participate in the successes of the modern world, countries needaccess to resources, technology and quality education, which China and India can undertake, buttoo many of the poor countries cannot.1According to the World Bank, living standards for the poor have improved over the past fewdecades. The proportion of the developing worlds population living on less than $1.25 per dayhas fallen from 52 percent in 1981 to 26 percent in 2005. However, reductions in poverty havebeen uneven, leading to stark regional disparities (See Appendix 1). Since 1981, East Asia hasseen the greatest reduction in its poverty rate and the extreme poverty rate in most other regionshas declined. In some regions, like Eastern Europe, the proportion of people living under $2 perday had increased in the 1990s but later decreased. While the poverty rates in much of the worldtend to be decreasing, massive population growth in much of the world means that absolutenumbers of people living in poverty is, in many cases, nearly the same as it was twenty yearsago.2 Despite the international community’s efforts, poverty remains a global problem.One of the key problems in international development and aid is the proliferation of internationalaid, development, and funding organizations. Worldwide, aid is extremely fragmented; there aretoo many organizations financing small projects and programs using different procedures andtypes of funds. The more organizations acting in a country, the less efficient development tendsto be; the recipient countries are forced to expend too much time and resources on paperwork.3According to OECD, in 2007, donors carried out over 15,000 missions in 54 recipient countries,overwhelming most poor countries. In Tanzania alone, the civil service had to complete 2,400quarterly reports for projects. Also, in many countries, health workers are so busy meeting withrepresentatives of the aid organizations that they can only meet with their patients in theevenings. Similarly problematic is that many countries simply cannot manage all of thenecessary bureaucratic processes; in 2007, only 48 percent of aid was accounted for, showing aslight increase from the previous year.4“Global problems require global solutions,”5 stated Prime Minister Gordon Brown in a 2008foreign policy speech in Boston. He called on the international financial organizations,specifically the World Bank and International Monetary Fund to reform in order to cope with                                                            1  Stiglitz, Joseph. 2008: 174. 2  World Bank. “Poverty: Overview.” 2009 3  Mulvey, Stephen.  2007.  4  ACCRA. “A scramble in Africa.” 2008. 5  Watt, Nichlas. 2008: 6  4  
  15. 15. today’s more globalized world. The global economy has changed and so too must the policiesand practices of the international funding organizations, which were founded in a bygone era.These reforms, however, should not be made in a vacuum, as many of the international fundingorganizations’ missions and activities complement and overlap one another. "For the first timein human history we have the opportunity to come together around a global covenant, to reframethe international architecture and build the truly global society," acknowledged Brown.6 Thisnew international architecture should include institutionalized collaboration reforms that respondto globalization and its effects on development; these reforms should emphasize efficiency andeffectiveness, as resources are scarce. When the international funding organizationscommunicate, coordinate, and harmonize their activities, they can more effectively addresstoday’s global and country- and sector-specific problems, ensuring that resources are distributedrationally and efficiently. Likewise, when the recipient countries more clearly definedevelopment priorities and coordinate with the international financial organizations, they too canmore effectively utilize development assistance.                                                            6  Watt, Nicholas.  2008: 6  5  
  16. 16. Chapter 1: International Funding Organizations and their Relations withTurkeyInternational Monetary FundHistorySince its inception amidst the unstable post-World War II global economic environment of 1945,the International Monetary Fund has fostered international monetary cooperation to advance ahealthy global economy. The IMF was born out of the Bretton Woods Agreement of 1944, inwhich delegates from the WWII allied nations established the procedures to regulate theinternational monetary system. It was originally designed to help member countries managetheir currencies to prevent recurrence of the unsuccessful policies that played a part in the GreatDepression. A part of this aim involved providing loans and technical and policy advice tosupport sound macroeconomic policies in order to stabilize the international financialenvironment. Within the framework of these aims, the IMF provided its first loan in 1947 toFrance; since then, the IMF has issued loans to countries in need around the world.7 The Articlesof Agreement of the International Monetary Fund has set out the main responsibilities of theIMF: promoting international monetary cooperation; facilitating the expansion and balancedgrowth of international trade; promoting exchange stability; assisting in the establishment of amultilateral system of payments; making its resources available (with adequate safeguards) tomembers experiencing balance of payments difficulties.8Twentieth Century international financial crises, revolving around such events as the oil shocksof the 1970s and the fall of the Soviet Union in 1989, have strengthened the IMF as a responderto global financial instability and extended the IMF’s initiatives to heavily indebted poorcountries by means of debt-service relief. Additionally, the IMF has evolved into a lender oflast-resort to distressed emerging-market nations; since the 1990s, it has influenced the formerSoviet Republics to adopt structural adjustment policies, saved Mexico’s currency crisis, andbailed out most of Southeast Asia.9 These activities, combined with its special lending facilitiesdirected toward low-income countries, have contributed to global progress toward the UnitedNations’ Millennium Development Goals (MDGs).Continued globalization since the end of the 20th Century, along with the current financial crisisand food and oil price shocks, has advanced a strong movement for reforms in the IMF, withcritics calling for a narrowing of the IMF’s scope to its original mission of managing economiccrises.10 The IMF has taken this reform movement and lessons learned from its past into accountas it adapts to the new challenges of the 21st Century and the IMF’s expanding membership. TheIMF continues to provide economic analysis and consultation. Additionally, as the currentinternational financial crisis deepens, the IMF has created a new $100 billion fund that willprovide condition-free loans to members with sound policies and balanced budgets.11 The                                                            7 International Monetary Fund. About the IMF History.  2009 8  Article I, Articles of Agreement of International Monetary Fund 9  LeVine, Steve. 2008: 30 10  Stiglitz, Joseph E. 2003: 232‐233. 11  Sheridan, Barrett. 2008: 0.  6  
  17. 17. current crisis poses new challenges in surveillance and efficiency for the IMF and its members asthey move forward.ActivitiesThe IMF implements its activities for the benefit of its 185 member countries. Member countriesgovern and monitor the accountability of the IMF through the Board of Governors, whichconsists of one governor and one alternate governor for each country. Members have votingrights apportioned according to their rank in the global economy. The United States, with 16.8%of total voting rights, has the most voting power in the IMF, with Japan, Germany, France andthe United Kingdom immediately following in voting power. Turkey holds 0.55% of the totalvoting rights.12For the IMF, supporting its members entails providing economic surveillance, technicalassistance, lending through policy advice to governments and central banks; economic andmarket research, statistics, forecasts and analyses; loans to countries in need of economicassistance; concessional loans to fight poverty; and technical assistance and training to fosterbetter economic management of countries.13Providing economic surveillance helps the IMF meet its goal of promoting global growth andeconomic stability. Economic surveillance includes country surveillance, regional surveillanceand global surveillance. IMF’s regular monitoring of economies and associated provision ofpolicy advice is intended to identify weaknesses that are causing or could lead to financial oreconomic instability. 14The IMF implements this by regularly conducting in depth appraisals ofmember countries’ economies and discussing the most effective policies for growth with membercountries; member countries have the option to publish these assessments, promotingtransparency in the IMF system. Additionally, the IMF occasionally organizes multilateralconsultations, meetings of relevant members, to discuss economic issues of global importance inorder to reduce global imbalances. The IMF also collaborates with the World Bank through itsFinancial Sector Assistance Program, bringing together experts from various national agencies toassess member countries’ financial sector strengths and vulnerabilities, risks, needs, and policysolutions.15The IMF provides technical assistance and training to assist member countries in order topromote sustainable capacity building in the countries’ abilities to adopt and implement soundfinancial policies. The main areas of technical assistance and training include monetary andfinancial policies; fiscal policy and management; compilation, management, dissemination, andimprovement of statistical data; and economic and financial legislation.16The IMF can also provide financial assistance in order to facilitate recovery to members whenthey have difficulties financing their balance payments (See Figure 1). Funding is provided inSpecial Drawing Rights (SDR), an international reserve asset with a value set to a basket ofinternational currencies, including the Euro, Pound Sterling, U.S. Dollar, and Japanese Yen. In                                                            12  International Monetary Fund. IMF Members’ Quotas and Voting Power, and IMF Board of Governors. 2009. 13  International Monetary Fund. About the MIF: Overview: What We Do. 2009. 14  Economic surveillance, 2009. 15  International Monetary Fund. About the IMF: Overview: How We Do It. 2009.  16  Ibid  7  
  18. 18. order to draw funds from the IMF, member countries must work closely to with the IMF todevelop and implement sound macroeconomic policies.Figure 1: IMF Financial Assistance, in SDRsSource: IMFTypes of FundsThe IMF seeks to support countries in tackling their financial obligations, stabilizing theireconomies, and achieving sustained growth. Therefore, the IMF mainly provides loans tosupport sound macroeconomic policies, rather than specific development projects. IMF loans aretypically designed for economic programs lasting up to three years and payments are disbursedin multiple installments during the programs; in 2008, the IMF disbursed a total of US$28.36billion in financial assistance. Prior to the implementation of a new economic program, theborrowing government outlines the details of its new economic program in a “Letter of Intent”and both the IMF and borrowing country must reach agreement on program policies before thedisbursement of loans. 17The IMF has six main lending facilities, as well as additional facilities specifically for low-income countries. The Stand-By Arrangement, which deals mainly with short-term balance ofpayments problems; Short-Term Liquidity Facility, Supplemental Reserve Facility, whichprovides large loans quickly with very short maturities to countries experiencing a capitalaccount crisis; Extended Fund Facility, which helps countries address balance of paymentsdifficulties related partly to structural problems that may take longer to correct thanmacroeconomic imbalances; Emergency Assistance, which helps countries coping with balanceof payments problems stemming from natural disasters or military conflicts; and TradeIntegration Mechanisms are the lending facilities mainly for middle-income countries.18 In orderto reduce poverty, the Poverty Reduction and Growth Facility and Exogenous Shocks Facility, aswell as the debt relief initiatives Heavily Indebted Poor Countries and Multilateral Debt ReliefInitiative are provided for low-income countries.The largest and most popular lending facility for middle-income countries is the Stand-ByArrangement (SBA), which provides “financing in support of adjustment to a balance of                                                            17  International Monetary Fund. About the IMF: Work: Lending. 2009.  18  International Monetary Fund. What is IMF? 2009.   8  
  19. 19. payments need” and is disbursed in installme as defin in the bor s d ents ned rrowing cou untry’s 19program. SBAs typ . pically are appproved for 12-24 mont although they can so ths, h ometimes beapproved for 36-mon program. The IMF g d nth . generally exp pects repaym of SBA within two to ment As ofour year after the en of the pro rs nd ogram.Turkey R RelationsThe relattionship betw ween Turkey and the IM is approac y MF ching its 50th year. Turk and the IMF h keyhave sign into agre ned eement a tota of 19 SBA with the most recent three active between al As,Decembe 1999 and May 2008 (S Figure 2 The 20th SBA is curr er See 2). rently under rigorousnegotiations, with tal beginning in early Ja lks anuary 2009. Prime Min . nister Recep Tayyip Erdo oğanhas accus the IMF of seeking t “squeeze T sed to Turkey’s thr roat” by curbbing necessa spending ary gprograms 20 Talks will continue after disagr s. w e reements on certain poin are resolv Turkish nts ved;authoritie claim to have no inten es h ntions of del laying the SB agreement after the M BA March 2009 ctions.21local elecFigure 2 Recent IM Stand-By Arrangemen in Turkey in billions of US dolla 2: MF nts y, s arsSource: IM MF18th Stan nd-By Arran ngementIn Februa 2002, IM approved a three-yea SBA for SDR 12.8 bill ary MF d ar lion (about U US$16 billioon),including the remaining undisbur g rsed SDR 3.3 billion (ab bout US$4 bi illion) from the previous sSBA. Th decision enabled Turk to draw SDR 7.3 billion (about U his e key US$9 billion from IMF n)immediat upon sig tely gning. 22The goals of this thre ee-year proggram included protecting the econom against fu g my uture crises a andlaying the basis for su ustainable ec conomic gro owth. In orde to meet th er hese goals, th key eleme he ents                                                            19  International Monetar ry Fund. About the IMF: Work k: Lending. 20009.  20  Turkey v vying for controol of IMF stand d‐by negotiatio ons. 2009. 21  BBC Worldwide Monitoring. “Turkish h minister says talks with IMF F ‘paused’.” 20 009. 22  "IMF Maanaging Directoor Sees Impres ssive Commitm ment by Turkey y to Economic R Reforms; Execu utive Board Approves U US$16 Billion S Stand‐By Credit t.” 2009  9  
  20. 20. of the program were: floating exchange rate continuation; financial system reform andstrengthening; expenditure and tax reform; fiscal adjustment, including disinflation under theplanned inflation targeting framework; and structural reform. 2319th Stand-By ArrangementIn May 2005, the IMF approved a three-year SBA under the exceptional access procedures forTurkey’s macroeconomic and financial program, totaling SDR 6.66 billion (approximatelyUS$10 billion). Discussions for the SBA began in September 2004 and concluded in April 2005.Turkey is also requesting that the repurchase expectations for a total of SDR 2.5 billion(approximately US$ 3.75 billion) falling due in 2006 be extended to an obligations basis. Aninitial amount of SDR 555.17 (about US$837.5 million) was distributed in May 2005 and theremaining balance was disbursed in eleven installments until the program expired in May 2008.24In support of their request for funds under exceptional access procedures, the Turkish authoritiesdeveloped a comprehensive three-year economic program. The goals of three-year programincluded creating conditions for sustained growth; facilitating union towards European Union(EU) economies; and facilitating an orderly exit from IMF fund support.In order to meet these goals, Turkey identified six aims: (i) manage short-term macroeconomic challenges; (ii) bring inflation closer to EU levels; (iii) make the government debt position more sustainable; (iv) restore Turkey’s net foreign exchange reserve position and lower its vulnerability to balance of payment shocks; (v) maintain financial stability; and (vi) implement a structural reform agenda.25The Three-Year Program would require substantial financing and, therefore, would requirestrong capital inflows from: foreign direct investment (FDI); portfolio flows; bank and corporateforeign financing; the World Bank. The requested funds from the IMF would help meet theneeds of the Program and ensure manageable debt rollover rates.26Indicators of Turkey’s capacity to repay the Fund have improved over time. Unblemished recordof payments to the Fund, the authorities’ commitment to strong reform program, and the likelycontinued improvement in access to international capital markets as debt ratios decline assuredTurkey’s position to discharge its obligations to the Fund in a timely manner. By the end of thearrangement, Fund exposure was expected to decline by more than half to 652 percent of quota,or 2 percent of GNP.27                                                            23  Turkey: Request for Stand‐By Arrangement‐Staff Report; Staff Supplement and Staff Statement; and Press Release on the Executive Board Discussion. 2002:13 24  Request for Stand‐By Arrangement and Extension of Repurchase Expectation. 2005:1  25  Ibid: 17‐18 26  Ibid: 39‐41 27  Ibid: 44  10  
  21. 21. While the policies laid out in the Program were deemed strong by the IMF, the Program facedrisks, including the uncertainties surrounding the balance of payment projections, the demandingset of fiscal reforms with implementation risks, and the use of the Treasury to repay purchases.28The SBA would run for three years and would be subject to regular reviews. Programperformance would be monitored by quarterly quantitative performance criteria. Also, theProgram would include one continuous performance criterion and two structural performancecriteria. The Central Bank of Turkey would be subject to a complete safeguards assessmentrelating to the SBA.29Turkey’s strong economic success in 2004 and its continued accession negotiations with the EUsignaled a “sea of change for Turkey’s prospects.” The IMF staff felt that there were strongsigns of continued economic growth and inflation reduction for Turkey, but also expressed thatTurkey’s financial situation was still fragile and there should be no relaxation of policies. Theyfelt that the Three-Year Program developed by the Turkish authorities was well-suited foraddressing these concerns. The IMF noted also that Turkey’s tax reform should aim forefficiency and EU convergence, the new Banking Law would be a major improvement andwould require many operational changes at the supervisory agency, the restructuring of thebanking system needed to be completed during the three-year period, and the privatization ofstate banks would be a lengthy process.30World BankHistoryThe World Bank was founded in 1944 to help rebuild Europe after World War II. In 1947, itgave its first loan of $250 million to France for post-war reconstruction. The Bank began itsoperations with 38 members, which has since increased to reach 185 member countries, bothdeveloped and developing. Today, the Bank remains focused on reconstruction, but its emphasishas been channeled towards the reduction of poverty around the world. With this shift in focus,the Bank became an increasingly multidisciplinary organization that became bigger, broader, andmore complex, and grew into a Group.Working separately but collaboratively to achieve the Bank’s mission, the World Bank Group isconstituted of five closely associated development institutions: • International Bank for Reconstruction and Development (IBRD) • International Development Association (IDA) • International Finance Corporation (IFC) • Multilateral Investment Guarantee Agency (MIGA) • International Centre for Settlement of Investment Disputes (ICSID)The World Bank Group went through several transitions in its history. During the 1980’s, itfocused on macroeconomic and debt rescheduling issues, later shifting to social and                                                            28  Ibid: 41‐44 29  Ibid: 44‐45 30  Ibid: 45‐50  11  
  22. 22. environmental issues. Today, the Bank is playing an important role in the global policy arena. Ithas effectively engaged with partners and clients in complex emergencies from post-conflictwork in Bosnia to post-crisis assistance in East Asia to post-hurricane clean-up in CentralAmerica to post-earthquake support in Turkey.31MissionThe World Bank Group is an international multilateral organization that assists countries indealing with development issues. It provides a vital source of financial and technical assistanceparticularly to developing countries around the world. The mission of the World Bank Group isto reduce poverty and encourage economic growth. The five different institutions collaborate toadvance the Bank’s vision of an inclusive and sustainable globalization. The World Bank Groupworks to reduce poverty worldwide by promoting growth to create economic opportunities andhelping poor people to take advantage of these opportunities.32World Bank Group Institutions and FY08 ActivitiesThe World Bank Group’s five organizations work independently but closely together at the sametime to address the priorities set forth by the Bank’s mission. Each of the World Bank Grouporganizations operates according to the procedures established by its articles of agreement or anequivalent founding document. These documents outline the conditions of membership and thegeneral principles of organization, management, and operations.33 For example, the Bankspurposes have been rearranged according to the articles of agreement, such as the InternationalBank for Reconstruction and Development’s Article I (as amended effective February 16,1989).34It is critical to distinguish between two terms that have been used interchangeably: the WorldBank Group and the World Bank. The World Bank Group is used to describe the fiveinstitutions affiliated with the Bank. As for the World Bank, it is used to describe twoinstitutions: the IBRD and the IDA. The following section provides a brief description of eachof the World Bank Group’s organizations and their respective activities and fiscal year 2008(FY08) performances.IBRDThe International Bank for Reconstruction and Development was established in 1944. Itsoriginal mission was to finance the reconstruction of nations devastated by World War II.However, today the IBRD works on reducing poverty by providing loans and developmentassistance to middle income and credit-worthy poorer countries. IBRD acquires most of itsfunds by selling bonds in international capital markets. IBRD has three business lines: Strategyand Coordination Services, Financial Services, and Knowledge Services. Among the activitiesIBRD undertakes, it overhauls financial and risk management products, broadens the provisionof free-standing knowledge services and makes it easier for clients to deal with the Bank. Mainindicators of IBRD activities for FY08 are summarized in Table 1.                                                            31  The World Bank. World Bank History. 2009. 32  The World Bank. About Us. 2009.  33  The World Bank. Articles of Agreement. 2009.  34  The World Bank. IBRD Articles of Agreement: Article I. 2009.   12  
  23. 23. Table 1: IBRD FY08 Performance, Number of Projects and Some Indicators in millions of USD Number of projects 99 Operating income $ 2,271 Loans outstanding $ 99,050 Total assets $ 38,176 Total equity $ 2,271 Source: World Bank Group Fiscal Year Highlights FY08 (2008)IDAThe International Development Association was established in 1960. Working with the poorestcountries, IDA plays an important role in the Bank’s mission to reduce poverty. It providesinterest-free loans and grants to the countries it helps with repayment periods of 35 to 40 years.IDA depends on contributions from its wealthier member countries (including some developingcountries) for most of its financial resources. IDA loans address primary education, basic healthservices, clean water supply and sanitation, environmental safeguards, business-climateimprovements, infrastructure and institutional reforms.35 IDA commitments in FY08 reached$11.2 billion (See Figure 3). Africa received the largest share of funding from IDA during 2008.Table 2: IDA FY08 Performance, Number of Projects and Some Indicators in millions of USDNumber of projects 199  Operating income $ 1,818  Loans outstanding $ 113,542Total development resources/Equity $ 123,619Source: World Bank Group Fiscal Year Highlights FY08 (2008)Figure 3: IDA Commitments by Region  IFC                                                            35  The World Bank. World Bank Group: Working for a World Free of Poverty. 2007:12.    13  
  24. 24. The International Finance Corporation was established in 1956. It has 181 member countries.IFC promotes growth in the developing world by financing private-sector investments andproviding technical support and advice to governments and businesses. In partnership withprivate investors, IFC provides loans and equity finance for business ventures in developingcountries. Like a bank, IFC lends or invests its own funds and borrowed funds to its customersand expects to make a sufficient risk-adjusted return on its global portfolio of projects.However, IFC’s activities also address a greater goal of reducing poverty. 36Table 3: IFC FY08 Performance, Some Indicators in millions of USDOperating income $ 1,438Liquid assets net of associated derivatives $ 14,622Loans, equity investments, and debt $ 23,319securities, netTotal capital $ 18,261 Source: World Bank Group Fiscal Year Highlights FY08 (2008)MIGAThe Multilateral Investment Guarantee Agency was established in 1988. It encourages foreigninvestment in developing countries by providing guarantees to foreign investors against losscaused by noncommercial risks. MIGA also provides technical support to help developingcountries promote investment opportunities and uses its legal services to reduce possible barriersto investment.37Table 4: MIGA FY08 Performances, Some Indicators in millions of USD Operating income $ 55Operating capital $ 1,019Net exposure $ 3,578Net exposure in IDA-eligible countries $ 1,477Source: World Bank Group Fiscal Year Highlights FY08 (2008)ICSIDThe International Centre for the Settlement of Investment Disputes was established in 1966.With its 144 members, it provides facilities for settling investment disputes between foreigninvestors and their host countries. ICSID also conducts research and publishing activities in theareas of international arbitration and foreign investment law.38World Bank and the Millennium Development Goals In September 2000, the international community committed to a specific agenda for reducingpoverty. This declaration, which was initiated by the United Nations and later listed eightMillennium Development Goals (See Appendix 3), was signed by 189 countries. The goals                                                            36  Ibid: 12. 37  Ibid: 12. 38  Ibid: 12.  14  
  25. 25. provide a road map and a framework for measuring progress for active members andorganizations of the global community who work in issues of development39:The international community set these goals as part of a comprehensive strategy to overcome andreduce poverty around the world. In the spirit of addressing these goals, the Bank set threepriorities in fighting poverty: promoting opportunity, giving voice to the poor, and enhancingsecurity of the poor. Overall, the Bank’s strategy for reducing poverty, promoting thesepriorities and working towards achieving the Millennium Development Goals is to partner withgovernments, donors, civil society, the private sector, and religious and other groups.Evaluation of World Bank Operations in FY 2008  The World Bank carries out projects and provides a wide variety of analytical and advisoryservices to help meet the development needs of individual countries and the internationalcommunity.40 During FY08, the World Bank committed $24.7 billion in loans, credits, andgrants to its member countries. IDA commitments, to the world’s poorest countries, were $11.2billion, and the IBRD commitments in FY08 totaled $13.5 billion. The projects financed by theBank are generally designed to overcome poverty and enhance growth by improving educationand health services, promoting private sector development, building infrastructure, andstrengthening governance and institutions. They are practical plans to help developing countriesmove from poverty and become more competitive in a globalizing world.41The World Bank’s lending is tailored to individual country needs. As shown in Figure 4, theIBRD and IDA lending was mostly concentrated in Africa for FY08. Other regions in the worldreceived equal amounts of lending, except for the Middle East and North African region, whichreceived only 6%.Figure 4: Regional Distribution of World Bank FundsSource: World Bank Annual Report, 2008: 55                                                            39  The World Bank. Millennium Development Goals. 2009.  40  The World Bank. Projects and Operations. 2009.  41  World Bank Group. 2008 Annual Report. Multicultural Investment Guarantee Agency.   15  
  26. 26. IBRD and IDA’s lending not only differs at the regional level, but also at the thematic andsectoral levels. Figure 5 shows IBRD and IDA’s lending by theme, which accumulates to a totalof $24.7 billion during FY08. The financial and private sector development received the lion’sshare of IBRD and IDA lending for 2008 followed by the public sector governance. This wasparalleled by 21% of the lending by sector to law, justice, and public administration, as shown inFigure 6. Transportation, energy, and mining were other sectors that received a large portion ofthe World Bank’s lending share for FY08.Figure 5: Thematic Distribution of World Bank FundsSource: World Bank Annual Report, 2008: 55Figure 6: Sectoral Distribution of World Bank Funds Source: World Bank Annual Report, 2008: 55    16  
  27. 27. Types of FundsThe World Bank Group focuses on helping the poorest people in the poorest countries. It usesfinancial resources, staff, and extensive experience to help developing countries reduce poverty,increase economic growth, and improve their quality of life. In doing so, the Bank uses a varietyof funding approaches, ranging from different kinds of loans to an array of services. Investment- Project LoansThese loans are made for the support of economic and social development projects. In this typeof loans, the World Bank Group funds activities aimed at creating the physical and socialinfrastructure necessary to reduce poverty and create sustainable development. They compriseabout 75 to 80 percent of the Bank’s funding approaches. These loans are available for theIBRD and the IDA borrowers. They are disbursed against pre-identified conditions. The largemajority of investment loans are either Specific Investment Loans or Sector Investment andMaintenance Loans. Other categories within this type of funding are the Adaptable ProgramLoans, Learning and Innovation Loans, which were recently introduced to provide moreinnovation and flexibility in how funds can be used, the Technical Assistance Loans, theFinancial Intermediary Loans, and the Emergency Recovery Loans.42Program-Development Policy-Adjustment LoansThese loans provide the quick disbursement of funds to support countries’ policy andinstitutional reforms. They allow countries to deal with actual or anticipated developmentfinancing requirements of domestic or external origins. They typically support the achievementof a set of development results through a medium-term program of policy and institutionalactions consistent with a countrys economic and sectoral policies. These types of loans accountfor much less than the Bank’s Investment- Project Loans. Funds are disbursed in one or morestages.Hybrid LoansHybrid loans are a combination between a pure investment loan and an adjustment loan. Theytypically include a portion that pays interest; a payment- in-kind portion, on which interest doesnot have to be paid until the end of the loan term; and warrants that give the Bank an equitystake.Other ServicesGuaranteesThe World Bank Group created the Guarantees Program to address the growing need to offerpolitical risk mitigation products to commercial lenders contemplating financial investment indeveloping countries. It aims to accelerate growth in developing countries by mobilizing privatefinancing for infrastructure development and other projects of national importance. The WorldBank’s guarantee mobilizes new sources of financing at reduced financing costs and extendedmaturities. This program leads to greater job and income opportunities for people, and thus                                                            42  The World Bank. Investment and Development Policy Operations. 2009.    17  
  28. 28. contributes to the achievement of the Millennium Development Goals’ overall challenge ofreducing poverty.CreditsThese are a loan type of funding that is specific to the IDA. They are unique in that they areinterest-free. They address a wide array of purposes that include education, health, publicadministration, infrastructure, agriculture, and environmental and natural resource management.GrantsThe Bank distributes grants for the facilitation of development projects through theencouragement of innovation, cooperation between organizations, and the participation of localstakeholders in projects. These grants are usually given to address issues such as debt relief,sanitation and water supply, vaccination and immunization programs, HIV/AIDS treatment andpreventive programs, and civil society organizations.Analysis and Technical Assistance and Consultancy ServicesThese services are provided to facilitate the implementation of the lasting economic and socialimprovements that are needed in many developing countries, as well as educating members withthe knowledge necessary to resolve their development problems.World Bank-Turkey RelationsTurkey joined the World Bank in 1947 and the International Finance Corporation in 1956. TheWorld Bank has helped Turkey overcome a series of economic crises, set the country on a pathof sustained economic development, and contributed to improvements in the living conditions ofits people. Turkey is the World Banks largest borrower in the Europe and Central Asia Regionand has been among the top three largest Bank borrowers each year over the past four years interms of new commitments, which have totaled around$6 billion during this time period.43Figure 7 illustrates the Bank’s funding for Turkey by sector. Similar to the Bank’s sectoralfunding in general, the largest shares of this funding in Turkey went to the law and publicadministration and finance sectors.                                                             43  The World Bank. Country Lending Summaries: Turkey. 2009  18  
  29. 29. Figure 7: World Bank’s Funding by Sector in Turkey since 1991, in millions of US dollars                                  Source: World BankTable 5 provides a snapshot of the Bank’s lending summary showing the cumulative number ofloans, credits, and grants in Turkey as of December 31st, 2008.Table 5: Summary of Cumulative World Bank Funds in Turkey as of Year End 2008  IBRD IDA Credits IDA Total GrantsOriginal 28,540,686,000 178,500,000 0 28,719,186,000PrincipalCancellations 3,700,791,913 1,091,048 0 3,701,882,962Disbursed 21,014,169,797 196,148,396 0 21,210,318,194Undisbursed 3,733,156,740 0 0 3,733,156,740Repaid 13,079,526,767 142,607,673 0 13,222,134,441Due 7,980,605,940 53,540,722 0 8,034,146,663Exchange -93,218,674 0 0 -93,218,674AdjustmentBorrower 7,887,387,266 53,540,722 0 7,940,927,989ObligationSource: The World Bank Projects and Operations: Country Lending Summary (2008). 19  
  30. 30. Country Assistance StrategiesThe World Bank prepares a Country Assistance Strategy (CAS) for active borrowers from theInternational Development Association and the International Bank for Reconstruction andDevelopment. Each CAS is catered to meet the needs of the country it is designed for.Each CAS: • starts with the country’s own vision for its development, as defined in a Poverty Reduction Strategy Paper or other country-owned process. • sets out a selective program of Bank Group support linked to the country’s development strategy • designs a framework of clear targets and indicators to monitor Bank Group and country performance in achieving stated outcomes. • promotes collaboration and coordination among development partners in a country. • draws on analytic work by the Bank, the government, and/or other partners to produce a comprehensive diagnosis of the development challenges facing the country, including the incidence, trends, and causes of poverty.The CAS is developed in consultation with country authorities, civil society organizations,development partners, and other stakeholders in ways that lead to tangible results. The CAStakes into account the performance of the Bank’s portfolio in the country, the country’screditworthiness, state of institutional development, implementation capacity, governance, andother sectoral and cross-cutting issues. From this assessment, the level and composition of BankGroup financial, advisory, and/or technical support to the country is determined.44FY 2000-2003 CAS for TurkeyThe Country Assistance Strategy for the period FY01-03, based on careful analysis of economicreforms, living standards, and social welfare, assisted Turkey in reducing its economicvulnerability. Unemployment and lack of education partially explain this economicvulnerability. Therefore, the CAS aimed to: implement reforms for growth and employmentgeneration; improve public management and accountability; expand social protection andservices; strengthen environmental management and disaster mitigation; and accelerateconnectivity and technological capabilities. The strategy continued with a high case program, inparallel with the International Monetary Funds Stand-By Arrangements, which assisted Turkeyseconomic reforms, as well as catalyzed substantial private inflows to meet external financingneeds. It included additional adjustment lending to help complete reforms, including theFinancial Sector Adjustment Loan and the Privatization Social Support projects, while the IFCand MIGA programs also continued the catalytic effect by providing guarantees and attractinginvestments. Despite political pressure, the Government ensured the funding of safety netprovisions and expected social programs to minimize political risks.45                                                            44  The World Bank. Country Assistance Strategies. 2009.  45  The World Bank. Turkey – Country Assistance Strategy. 2009.   20  
  31. 31. FY 2004-2007 CAS for TurkeyThe Country Assistance Strategy for FY04-06 aimed at reducing the risk of reemergence ofcrises, natural disasters and financial crisis, and helped continue Turkey’s path towardsimplementing fundamental reforms and strengthening governance. Such assistance wasstructured around four development themes in line with the Governments priorities: i. sound macroeconomics and governance ii. equitable human and social development iii. attractive business climate and knowledge iv. strong environmental management and disaster preventionThe Bank lending scenarios described in this CAS were very different both in size andcomposition, which reflected the risks associated with the assistance strategy. Under the highcase scenario, the program would include support for economic reform, focusing on public sectormanagement, the financial sector and business climate, addressing underlying economicproblems. Unsuccessful reforms would lead to a low case lending program, where the Bankwould support human development, disaster and environment management, and localinterventions to reduce poverty. The Bank strategy recognized that the complex secondgeneration policy and institutional reforms being undertaken needed to be supported over themedium term, a program that entailed significant risks, which could not be sustained by theimplementation of reforms alone. The CAS envisaged a graduated response in parallel with thestrong economic program, which would allow the Bank to mitigate the risks and increaseconcrete improvements in Turkeys economic fundamentals. 46Country Partnership StrategyFY 2008-2011 CPS for TurkeyTurkeys economic development has global significance, given its size, role as a regional power,and strategic location, bridging East and West. Turkey has succeeded in reducing poverty, fromabout 28 percent of the population in 2003 to about 18 percent in 2006, pulling more than 7million people out of poverty. The goal of the new Bank Group Country Partnership Strategy(CPS) for FY08-11 is for the Bank Group to partner with Turkey in realizing its developmentvision-to achieve fast and sustained growth with equity through full integration into theGovernments formulated development strategy. Accordingly, the CPS is shaped directly byTurkeys Ninth Development Plan and by the Governments Program and aims at contributing tothree main development pillars: (i) improved competitiveness and employment, (ii) equitable human and social development, and (iii) efficient provision of high-quality public services.                                                            46  The World Bank. Turkey – Country Assistance Strategy FY04‐06. 2009.   21  
  32. 32. A substantial Bank Group program has been planned for the four years in partnership with theauthorities in achieving their vision of a prosperous Turkey, with income convergence with thecountries of the EU. 47The CPS set forth for Turkey is characterized by its flexibility. This flexibility is reflected in thedemand driven feature of the CPS that is set to respond to evolving priorities.48 The country’spriorities will be the driving force for the CPS and the World Bank Group’s role will beproviding the needed expertise to achieve these goals. The two main reasons for flexibility in thecomposition and phasing of World Bank Group financing, reflecting the Turkish authorities’preference, are the intrinsic and persistent uncertainties and volatility in global financial marketsand the rapid evolution of the Turkish economy. Moreover, the Bank provides Turkey with itsfull range of analytic, advisory, and financing instruments, such as investment and policy lendingand contingent financing tools.The CPS reflects expected levels of actual Bank financing that are equivalent to newcommitments up to US$6.2 billion, which will also depend substantially on the availability andterms of other financing, such as from domestic and international financial markets, the EIB, EU,IMF, and other development partners (See Appendix 8).Among the numerous features of the CPS is that it reflects lessons learned that have emergedfrom close collaboration with the authorities, the Completion Report for the FY03-07 CAS, andthe Independent Evaluation Group (IEG’s) Country Assistance Evaluation (CAE), whichcovered the 1993-2004 period. There are three main lessons reflected in this CPS: (i) the programmatic approach to development policy lending has proven useful, (ii) high quality analytical work has been critical as a basis for the in-country policy dialogue on key development challenges, and (iii) ownership and flexibility will be essential for the effectiveness of the new CPS— specifically, reliance on the leadership of the authorities in defining the program, and increased flexibility in terms of lending levels and instruments, content to respond to emerging priorities, and portfolio implementation.This CPS clearly specifies that the Bank Group, and not only the World Bank, will continue toclosely collaborate with Turkey’s development partners, among which are the EU and the IMF.Turkey’s economic program and its Bank Group support continue to entail non-negligible riskfactors, such as political economy risks, external vulnerabilities, risk of natural disasters, andreform implementation risks. The promising aspect for the CPS was that as of January 2008,Turkey enjoyed a combination of political and economic stability. However, with the recentglobal economic crisis, Turkey’s economic stability is threatened, consequently threatening itsprospects of EU accession and thus the hopes for a sustained high income growth and better livesfor the Turkish people. This CPS aims for the World Bank Group to be a partner with Turkey inrealizing this opportunity.                                                            47  The World Bank. Turkey – Country Partnership Strategy FY08‐11. 2009.  48  Ibid   22  
  33. 33. European UnionHistoryThe idea of uniting Europe emerged after World War II. In order to terminate the long lastingdisputes and competition among European countries and to secure peace between Europeannations, politicians such as Robert Schuman (Prime Minister of France), Konrad Adenauer(Chancellor of Germany), Alcide de Gasperi (President of the Italian Republic) and WinstonChurchill (Prime Minister of the United Kingdom) revealed their ideas to persuade their peopleto enter a new era. The ideas mainly focused on creating new structures in Western Europewhich would be based on shared interests and which would guarantee equality among allcountries.49The Schuman Declaration, a plan for deeper cooperation among European countries presented byRobert Schuman on May 9th, 1950, is generally considered the first step in the realization of aunited Europe, which proposed the establishment of a European Coal and Steel Community(ECSC). Based on the Schuman Declaration, the Treaty of Paris which was signed by sixcountries on April 18th, 1951; Belgium, the Federal Republic of Germany, France, Italy,Luxembourg and the Netherlands, put in place a common market for coal and steel.50Building the success of the ECSC, the six founder countries signed the Treaties of Rome inMarch 1957, which aimed to start the process of developing a wider common market for goodsand services. The idea was for people, goods, and services to move freely across borders, whichcreated the European Economic Community (EEC) and the European Atomic EnergyCommunity (EAEC).The Treaty of the European Union, also known as the Maastricht Treaty, entered into force onNovember 1st, 1993, which introduced the term European Union (EU). However the changeswere not only in the name of community, the Maastricht Treaty determined more responsibilitiesfor the community institutions as it established a new area of cooperation in foreign and securitypolicy, justice and home affairs, development aid, culture, education, and economic andmonetary union.Mission of the European UnionThe European Union, consisting of 27 member countries, mainly works to improve the livingstandards of people in Europe. Within this perspective, its general objectives can be listed asbringing Europe together to provide peace, prosperity and stability for its peoples, ensuring thesafety and security of its members, and promoting balanced economic and social developmentand economic growth to make the European Union and member countries more able to competeon the world stage with other major economies.51                                                            49  European Union. The History of the European Union.  2009.  50  Nugent, Neill. The Government and Politics of the European Union. 1994:34‐35. 51  Fontaine, Pascal. 2006:3  23  
  34. 34. While the EU could be seen as a regional union, the global relations of the EU in economic,trade, and financial areas make it also a world player. Additionally, the EU and member statesprovide just over half of all international official development assistance (ODA) to poorcountries.52 EU InstitutionsThe EU has a unique structure which makes it different from a federation or an organization forcooperation between governments. In fact the member countries remain independent but theydelegate some of their decision powers to EU institutions. The Institutions of the EuropeanUnion are the governing bodies of the Union and have different roles and responsibilities in thedecision making process.The European Parliament (EP) is the parliamentary institution of the European Union. Its 785members are directly elected once every five years by the citizens of the EU member countries.Its main roles are passing European laws jointly with the Council, adopting the EU budget, andproviding democratic supervision over the other EU institutions. 53Council of the European Union is the EUs main decision-making body. It represents theindividual member countries. Council members are ministers from each of the members and aredetermined by the subjects on the agenda. Each EU country in turn takes charge of the Councilagenda and chairs all the meetings for a six-month period. The main responsibilities of theCouncil include passing European laws jointly with the EP, coordinating the broad economicpolicies of the member states, developing the Common Foreign and Security Policy of the EU,and concluding international agreements between the EU and other countries or internationalorganizations.54European Commission is independent of national governments. Its main responsibilities aredrafting proposals for new legislation and managing the day-to-day business of the EuropeanUnion, which includes implementing the decisions, policies, programs, and budget approved bythe European Parliament and Council. Members of the Commission are appointed every fiveyears, within six months of the elections to the European Parliament.55The three main institutions in the decision-making process make up the ‘institutional triangle.”In addition to this triangle, the other institutions are the Court of Justice, which monitors theimplementation of EU laws, and the Court of Auditors, which controls the financing issues of theUnion.                                                            52  European Commission Directorate‐General for Communication Publications. The EU in the World.  2007:13 53  European Parliament. Parliament‐ An Overview. 2009.  54  Europa. The Council of the European Union. 2009.  55  Europa. What Does the Commission Do. 2009.   24  

×