Economic Planning 1963-1980 and The Complete Shift after 1980

1. Economic Planning 1963-1980 and The Complete Shift after 1980

2. 1960 constitution • Economic planning framework • Started in 1960 and lasted in its proper sense until 1980 • The coverege of plans are specified • All plans had a targeted growth rate of the economy • The plans took the existing production structure as shown • Common aim was industrialization Planned Economic Growth

3. 1st five year plan: 1962-1967 • 2nd five year plan: 1967-1972 • 3rd five year plan: 1973-1977 • 4th five year plan: 1979-1983 Tarihçe: • http://www.dpt.gov.tr/PortalDesign/PortalControls/WebIcerikGosterim.aspx?Enc=83D5A6FF03C7B4FC25320C1CC3C485FB70C9008EBE56E898F05146F027CA65EC The plans during the 1960s and 1970s

4. The complete shift after 1980

5. Depression in the mid-1970s. To cope with the deepening depression, a new economic policy was set in 24th of January, 1980. Structural transformation idea led by world bank and IMF

6. Causes of economic depression; • Structure of the production, • Domestic and external developments and factors. • Some of the external factors; • Cyprus issue, • Five-fold rise in crude oil prices by OPEC in 1974, • Deep economic depression in the partner countries of Turkey. Economic depression and search for a new policy

7. Reasons for the failure of the “SAN enterprises”: • They were established without enough research which would enable the decision-makers to decide whether they were economically feasible. • Domestic and external economic conditions were not mature enough to allow them to complete their development: • financing of the public sector, • difficulties in refunding made it almost impossible to borrow from foreign markets to make new industrial investments.

8. A new economic policy was implemented in January 24, 1980. Economic policy of the 1980s

9. Prevailing prices were regarded as the sole factors to direct the market economy. Deviations from the equilibrium price level would be eliminated by the market system. Economy was left to supply and demand conditions. Prevailing prices would predominate not only in a national basis but also in an international level. Government should adjust the expenditures to create a balance between supply and demand.

10. The process of opening: • Exports was increased to diminish the trade deficits. • To increase exports; • Devaluation when necessary; devaluation makes the domestically produced goods cheaper and increases exports accordingly, however it increases the prices of imported inputs and costs of production at the same time.

11. To induce exports; • Freedom to hold more foreign currency by the exporters, • Imported inputs used in exported goods have exempted from taxation, • Exporters were subsidized, • Free zones were established and the transactions were facilitated, • Monetary support to exporters. • The idea behind this policy was to increase the competitive power of domestic industries against the foreign ones.

12. By other similar enactments to induce foreign private capital; • Foreign investments were allowed to enter the banking sector, • The access of foreign investments to agriculture, tourism, and other sectors was facilitated, • Foreign investments to crude oil industry were facilitated as well. • In this program, foreign private capital has played a key role to overcome the problems such as balance of payments deficits, insufficient domestic savings, and the transfer of technology.

13. Macroeconomic policies: Constraints imposed on the public sector: The main purpose of the policy implemented after the 24th of January was to limit the public sector. By implementig such a policy, a rapid development was aimed for the private sector. This new policy was the symbol of the predominance of the private sector in the national economic climate.

14. Optimum rate of increase in price level: In that period, there was a slowdown in price level. Increase in production level and profits were closely related with this downward movement in prices. However, it was quite difficult for a developing country to maintain such an optimal price level which would stimulate economic growth.

15. The WB wanted the developing countries to produce in accordance with the comparative advantages theory thus, it strictly recommended Turkey not to deal with heavy industries. Similarly, the recommendations were that Turkey should adapt labor intensive techniques.

16. Consequences of the policies determined on the 24th of January 1980; • Shrinking public sector, • Capital and labor markets were left to market forces, • Liberalization of domestic and foreign markets.

17. Social aspects of the issue may be summarized in two dimentions; • Distribution of income: wage rates have fallen substantially since the determination of price has been left in the hands of the market economy. • Opportunities for development in the long run: export-led growth strategy relies mainly on the foreign capital. However, that kind of policy cannot be sufficient to maintain economic growth in the LR.

18. Main properties of the transformation: Financial liberalization was adopted after 1989. Financial liberalization enabled the capital to flow freely to Turkey. Due to a substantial fall in the interest rates in most of the developed countries, developing countries had the opportunity to attract the capital in 1989, because they offer higher interest rates compared to the world level.

19. http://www.youtube.com/watch?v=BhWKUbnlLeo http://www.youtube.com/watch?v=vIibveHmaZo

20. The change in economic policies was significant • Accompanied by a destructive military coup • Caused lasting economic, social, political consequences • Economy was liberalized fast • Export promotion was the main pillar • Industrialization was left to market forces • Reduction of the role of state • Full scale privatization • Economy until severe crisis until 2000s. Conclusion

21. http://www.youtube.com/watch?v=9qjvwQrZmpk&feature=relmfu http://www.youtube.com/watch?v=x_2-Tv2GPs0&feature=relmfu http://www.youtube.com/watch?v=XIUWZnnHz2g