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Turkey 2016-oecd-economic-survey-removing-productivity-bottlenecks

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Presentation of the OECD Economic Survey of Turkey 2016.

Published in: Economy & Finance
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Turkey 2016-oecd-economic-survey-removing-productivity-bottlenecks

  1. 1. 2016 OECD ECONOMIC SURVEY OF TURKEY Removing productivity bottlenecks Gaziantep, July, 15th @OECD @OECDeconomy http://www.oecd.org/eco/surveys/economic-survey-turkey.htm
  2. 2. 2 Growth remained strong despite headwinds Source: OECD (2016), OECD Economic Outlook: Statistics and Projections (database). -6 -4 -2 0 2 4 6 8 10 -6 -4 -2 0 2 4 6 8 10 2008 2009 2010 2011 2012 2013 2014 2015 Annual GDP growth in %Annual GDP growth in %
  3. 3. 3 Growth is increasingly inclusive Source: Turkish Statistical Institute. 1. Employment rate in % of population with less than upper secondary education 0 10 20 30 40 50 60 70 0 10 20 30 40 50 60 70 2008 2009 2010 2011 2012 2013 2014 Low-skilled employment¹ Men Women
  4. 4. 4 Income inequality has declined Source: Turkish Statistical Institute. 0 3 6 9 12 15 18 21 0 3 6 9 12 15 18 21 Poorest 2 3 4 5 6 7 8 9 Richest %% Equivalised disposable income deciles Income convergence Growth of real average disposable incomes, 2007-13
  5. 5. 5 The external imbalance remains large Source: OECD (2016), OECD Economic Outlook: Statistics and Projections (database) -10 -8 -6 -4 -2 0 2 4 -10 -8 -6 -4 -2 0 2 4 1995 2000 2005 2010 2015 % of GDP% of GDP Current account balance
  6. 6. 6 Well-being can be further improved Source: OECD (2016), OECD Better Life Index, www.oecdbetterlifeindex.org. 0 1 2 3 4 5 6 7 8 9 Income Jobs Housing Work-life balance Community EducationEnvironment Civic engagement Health Life satisfaction Safety Turkey Low income OECD¹ High income OECD² 1. Lower third of OECD countries, other than Turkey, in terms of GDP per capita : CZE, SVN, PRT, SVK, EST, GRC, HUN, POL, CHL and MEX 2. Upper third of OECD countries in terms of GDP per capita : LUX, NOR, CHE, USA, IRL, NLD, AUT, DNK, SWE, DEU and AUS
  7. 7. 7 Inflation remains too high Source: OECD (2016), OECD Economic Outlook: Statistics and Projections (database); Central Bank of the Republic of Turkey. 0 1 2 3 4 5 6 7 8 9 10 11 12 0 1 2 3 4 5 6 7 8 9 10 11 12 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Inflation Inflation expectations (24-months ahead) Target
  8. 8. 8 Domestic savings have fallen Source: World Bank (2016), World Development Indicators. 12 14 16 18 20 22 24 26 12 14 16 18 20 22 24 26 1995 2000 2005 2010 2015 % of GDP% of GDP Gross national savings
  9. 9. 9 Many jobs are informal 1. Persons with less than secondary education. 2. Including the self-employed. Source: Turkish Statistical Institute. 0 20 40 60 80 100 0 20 40 60 80 100 Men Women The majority of low-educated workers, especially women are informally employed ¹ ² Formal Informal
  10. 10. 10 Informality drags down productivity Source: Turkish Statistical Institute; Central Bank of the Republic of Turkey. 0 50 100 150 200 250 300 0 50 100 150 200 250 300 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Thousand TRYThousand TRY Sales per worker, 2003 prices All firms (including informal ones) Fully formal firms
  11. 11. 11 Participation in global value chains is relatively low Note: The backward participation index is defined as the share of foreign value added in a country's gross exports. Forward participation is defined as the ratio of domestic value added embodied in foreign countries' exports over gross exports. Source: OECD/WTO (2016), "Trade in value added", OECD-WTO: Statistics on Trade in Value Added (database). DOI: http://dx.doi.org/10.1787/data-00648-en. 0 10 20 30 40 50 60 BRA RUS ARG HRV CHL IND ROU GRC TUR MEX CHN POL PRT EST SVN VNM THA BGR MYS CZE SVK HUN A. Backward participation 0 5 10 15 20 25 30 35 40 45 HRV MEX TUR THA CHN VNM ARG HUN BGR PRT GRC IND CZE MYS EST SVK SVN POL BRA ROU CHL RUS B. Forward participation
  12. 12. 12 Turkey’s share of high value-added exports lags Note: A high-value product's unit value exceeds the world reference by at least 15%. The world reference is the world median of all unit values weighted by the value of their trade flow for a given year. OECD peers are the 10 countries, other than Turkey, with the lowest per capita GDP in the OECD: Czech Republic, Slovenia, Portugal, Slovak Republic, Estonia, Greece, Hungary, Poland, Chile and Mexico. Non-OECD peers include Argentina, Bulgaria, Brazil, China, Croatia, India, Malaysia, Romania, Russia, Thailand and Vietnam. Source: CEPII Trade Unit Value database, see Emlinger and Piton (2014), "World trade flows characterization: Unit values, trade types and price ranges", CEPII Working Papers, No 2014-26. 0 10 20 30 40 50 60 70 0 10 20 30 40 50 60 70 Energy Food, agriculture Textiles Wood, paper Chemicals Iron & steel Non ferrous Machinery Vehicles Electrical Electronic Turkey OECD peers Non-OECD peers
  13. 13. 13 REMOVING BOTTLENECKS
  14. 14. 14 Employment regulations are rigid How to read this figure: The figure shows how far Turkey, and its OECD peers (the bottom third of OECD countries in GDP per capita) are from OECD best practice in employment regulations. OECD best practice is defined as the average practice of the best three OECD countries in each area. Source: OECD, Employment Protection Legislation indicators; OECD Minimum wage database; OECD Labour Tax Wedge Decomposition database.  Reduce labour tax wedges and employment costs for the low-skilled.  Enhance the flexibility of employment rules for all firms.  Encourage minimum wage moderation and engage social partners in a wage path consistent with disinflation and external rebalancing. 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Severance pay Standard fixed-term contracts Length of notice period Minimum wage/median wage ratio Labour tax wedge Distance to OECD best practices Turkey OECD peers
  15. 15. 15 Product market regulations are restrictive How to read this figure: The figure shows how far Turkey, and its OECD peers (the bottom third of OECD countries in GDP per capita) are from OECD best practice in product market regulations. OECD best practice is defined as the average practice of the best three OECD countries in each area. Source: OECD Indicators of Product Market Regulation.  Continue to improve the regulatory framework for doing business, using OECD product and labour market and competition policy indicators as benchmarks.  Consider an OECD Competition Assessment Review to help in this process.  Consider a “zero cost licencing” initiative for start-ups. 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Licenses and permits system Administrative burdens for corporations Administrative burdens for sole proprietors Barriers in service sectors Price controls Competition advocacy Distance to OECD best practices Turkey OECD peers
  16. 16. 16 Barriers to investment affect foreign firms Source: World Bank (2013), Enterprise Survey; and OECD calculations. Investment obstacles reported by fully formal firms Index scale 0 (no obstacle) to 4 (very severe obstacle)  Strengthen the rule of law, judiciary independence and the fight against corruption.  Reduce barriers to foreign direct investment. 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 Corruption Political instability Informal competitors Tax rates Domestic private Foreign private State-owned
  17. 17. 17 Educational outcomes are still low Note: For Brazil, Chile, France, the Russian Federation and Saudi Arabia, the year of reference is 2013, for China, 2010, for Indonesia, 2011 and for South Africa, 2012. Source: OECD (2015), Education at a Glance 2015: OECD Indicators, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/eag-2015-en. Percentage of adults who have attained at least upper secondary education Per cent, 2014  Implement the education reforms foreseen in the 2016 Action Plan to improve curricula and increase the autonomy of schools and universities. 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 CHN IDN MEX TUR CRI PRT BRA SAU COL ESP ITA CHL ZAF GRC ISL BEL NZL FRA NLD AUS IRL GBR DNK SWE NOR HUN AUT KOR ISR SVN FIN DEU CHE LVA USA CAN POL SVK EST LTU CZE RUS
  18. 18. 18 Professional management is still scarce Note: Survey average to the question: "In your country, who holds senior management positions?" [1 = usually relatives or friends without regard to merit; 7 = mostly professional managers chosen for merit and qualifications]. Source: World Economic Forum (2015), Executive Opinion Survey. Reliance on professional management  Focus upskilling programmes for small entrepreneurs on basic management, foreign languages and digitalisation. 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7 ITA BGR VNM HUN HRV GRC ROU IND RUS SVN PRT TUR MEX POL SVK ARG BRA CHN ESP THA CHL KOR ISR FRA CZE AUT JPN MYS DEU AUS CAN GBR BEL SWE USA DNK IRL CHE NLD FIN NOR NZL
  19. 19. 19 ICT is under-used Note: Enterprise resource planning (ERP) systems are software-based tools that can integrate the management of internal and external information flows. Supply chain management refers to the use of automated data exchange (ADE) applications. Radio Frequency Identification (RFID) is a technology that enables contactless transmission of information via radio waves. Reported as a percentage of enterprises with ten or more persons employed. Source: OECD (2015), OECD Science, Technology and Industry Scoreboard 2015: Innovation for growth and society, OECD Publishing, Paris, DOI: http://dx.doi.org/10.1787/sti_scoreboard-2015-en Diffusion of selected ICT tools and activities in enterprises, 2014  Improve the ICT infrastructure. Use public campaigns to disseminate international best management practices. 0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 Broadband Website E-purchases Social media ERP E-sales Supply chain mngt. (ADE) RFID Turkey OECD average
  20. 20. 20 KEY RECOMMENDATIONS
  21. 21. 21 Strengthening resilience and social cohesion  Fully implement the reforms of the 2016 Action Plan and enact systematic monitoring and reporting on actual implementation.  Strengthen the rule of law, judiciary independence and the fight against corruption.  Upgrade child care facilities throughout the country.  Reduce barriers to foreign direct investment.  Publish consolidated quarterly general government accounts according to international accounting standards.  Publish a regular Fiscal Policy Report including all contingent and long-term liabilities.
  22. 22. 22 Increasing savings and reducing inflation  Continue to contain consumer credit.  Promote private pension savings.  Increase foreign exchange reserves.  Simplify the monetary policy framework.  Tighten monetary policy unless inflation declines faster than projected.  Encourage minimum wage moderation and engage social partners in a wage path consistent with disinflation and external rebalancing.
  23. 23. 23 Boosting productivity  Implement the education reforms foreseen in the 2016 Action Plan to improve curricula and increase the autonomy of schools and universities.  Reduce labour tax wedges and employment costs for the low-skilled.  Enhance the flexibility of employment rules for all firms.  Avoid tax thresholds for higher productivity and larger firms.  Focus upskilling programmes for small entrepreneurs on basic management, foreign languages and digitalisation.  Improve the social safety net for displaced workers by upgrading active labour market programmes, including those adapted to refugees.
  24. 24. 24 Participating in global value chains  Align the Customs Union agreement with the EU with the most open and all-encompassing international trade agreements, and develop similar agreements with other countries.  Invest more in vocational training and research-and-development.  Improve the monitoring of polluting activities and the enforcement of environmental regulations, and use economic instruments such as pollution taxes, carbon taxes and emission permits.
  25. 25. 25 For more information http://www.oecd.org/eco/surveys/economic-survey-turkey.htm Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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