American Business Forum
January 26, 2010
Speech by Mr. Mehmet Şimşek, Minister of Finance
Growth Potential of Turkey
The current crisis environment has become a “stress test”
for the Turkish Economy.
Recent improvements in the grades by the international
institutions have confirmed the success of Turkish
economic performance and the policies implemented
against the crisis.
From several aspects, Turkey has become one of the
countries affected from the crisis at the minimum level.
During our ruling period, Turkey became the largest 17th
economy in the world with its strong performances.
Despite the current crisis, Turkey maintained this position.
A recovery in the economy has started since 4Q 2009.
We expect Turkey to enter into a growth process again
Our growth forecast for 2010, first year after the crisis, is
But we acknowledge that this figure of 3.5 percent is a
moderate growth rate.
However growth forecasts of the international institutions
for Turkey are higher.
Despite the crisis, expectations for the long-term potential
of Turkey remained the same without any change.
In a report by the Goldman Sachs, Turkey is forecasted to
be the largest 3rd economy in Europe and the largest 9th
economy in the world in 2050.
We prepared the Medium Term Programme and Medium
Term Fiscal Plan in the last September.
In these documents, we set forth our fundamental policies
and targets for exit from the crisis.
Our main objectives in the Programme are the followings:
To gradually increase the growth to its potential level
To ensure a relative increase in the employment
To maintain downward trend in the inflation
To restore the public balances deteriorated by the
Private consumption and private investment expenditures
are the main growth dynamics of the Turkish economy.
We aim to take the necessary measures to grow again
under the leadership of the private sector in the
To this end we prioritize the innovative and technology-
intensive projects which will improve production capacity of
our country and increase the overall efficiency.
In line with the growth model envisaged by the
programme, it is aimed to decrease borrowing
requirements of the public sector and to increase
resources to be used by the private sector.
For the first time, interest rates have decreased to one-
digit figures in Turkey.
If we manage to keep the interest rates in the one-digit
figures, then both the interest debt of the public can be
diminished and also consumers and investors can access
to the low-cost financing.
And this will pave the way for a strong growth.
We will realize our growth under the leadership of the
In this regard, we established a regional and sectoral
investment stimulus system in accordance with the
investment stimulus system of the EU.
The purpose of this system is to:
allocate savings to investments with high value
increase production and employment,
maintain investment trend and ensure sustainable
encourage big investments with technology and R&D
components which will increase competitiveness,
increase foreign direct investments,
remove regional development differences,
support investments on environmental protection, and
support R&D activities.
Facilities ensured by the system are:
reduction of corporate or income taxes,
employer insurance premium subsidies
Land development supports
VAT exception and duties exemption for machinery-
The Law No 5084 on Encouraging Investments and
Employment is being extended.
As for the new stimulus system, incentives will be given to
11 sectors with high foreign trade deficit within the
framework of big investments.
Secondly, the R&D reform was performed in order to
increase the number of R&D activities that will ensure the
transformation to goods with high valued added.
Many companies started to move their R&D centers to
University and industrial R&D projects, especially
TUBİTAK R&D projects, are supported.
Within this framework, appropriation to TUBITAK was
increased to 625 million TL in 2010 from 500 million TL in
Thirdly, efforts continue to increase the share of national
and renewable energy sources in energy supply.
Finally, important steps were taken to improve working
Thanks to that Turkey reached the 20th rank among
countries that attract most investments.
As a result of the crisis, capital inflow to the developing-
countries decreased by 80 percent year-on-year. However,
foreign direct investments to Turkey reached 18.3 billion
While capital outflow from developing countries was
expected to be 52 billion dollar in 2009, Turkey received
foreign direct investments of 7 billion dollars in January-
Within this period, privatization activities were attached
great importance in order to improve competitiveness in
the economy and to create additional resources for the
Legislation on foreign direct investments was liberalized.
This paved the way for international investors to invest in
Turkey without any hesitation.
Within the coming period, Turkey expects to be one of the
countries with the highest growth rate.
We hope that investors will take this opportunity Turkey
New Government Policy on the Health Sector
We put into implementation the “Transformation Program
in the Health Sector”.
In this regard, we prepared a structural, well-planned and
sustainable program in accordance with the socio-
economic facts of our country.
In this period, we provide financial protection to our
citizens for their needs for the health care services.
Furthermore satisfaction level of the citizens is improved in
terms of the health services.
Our government managed to make the Social Security
Reform which could not be realized for long years. In this
Social security agencies are united under a single
Performance-based additional payment system was
Access to the services are facilitated and
The family practice is made widespread throughout
Personnel employment is provided for the regions in
scarcity of personnel.
Health information systems and automations systems
Smart medicine utilization approach was developed
and we reached a really distinct point in terms of
General health insurance system was launched,
which will provide equal, easy to access and fair
health services to all our citizens.
Total health care expenditure of the public sector was 9.9
billion dollar in 2002, whereas this figure increased to 37
billion dollar in 2009.
Reasons behind this increase by the years are as follows:
Easy access to the health services
Development of the health insurance packages
Increase in the per capita income
Improvements in the education level
Awareness on the health and increase in the
It is natural to experience such a big increase in the health
However it is obvious that this increase should be in a
reasonable ratio to be financed.
In 2010, private and university hospitals will also be
involved into the global budget implementation which has
been in effect in the hospitals affiliated to the Ministry of
Health since 2007 in order to regulate the medical fees.
In 2009, 52.7 billion TL (5.6% of the GDP) was transferred
to the Social Security Institution. In this regard, 29.2 billion
TL (3.1% of the GDP) was allocated for financing the
deficit of the Social Security Institution.
Our 2010 budget also provides support to the social
In the budget, total transfers to be made to the social
security institutions are forecasted to reach 57.7 billion
dollar (5.6 % of the GDP) in 2010.
Within this framework, it is forecasted to make a transfer of
31.8 billion TL (3.1 % of the GDP) to the Social Security
Institution for financing the deficits in 2010.
In Turkey, social security system has higher rates of
deficits despite the young population.
Ratio of the 65 year-old and older population to the total
population is only 6.8%.
This figure will be about 14 percent in 2037.
While it took 75 years to increase this rate to 14 percent
from 7 percent in the US, the Turkish population will get
older rapidly in period of 25-30 years.
One of the most important macroeconomic problems that
Turkey faces is the health issue.
Turkish citizens work for a short period whereas they
receive health services and pension for an extended
period of time.
According to OECD, Turkey is the country which pays
pensions for the longest period of time.
Therefore, pensions cannot be increased to the desired
level because of limited resources.
Today individuals can retire at the ages of 44-47 in Turkey.
Unfortunately social security regulations used to be
populist and depended on slogans but populism and
slogans are not the correct way to do this.
Today all countries have limited resources.
Especially developing countries with a young population
like Turkey are in great need of infrastructure, education
We can increase the competitiveness of Turkey only with
an increase in quality of human resources, modernization
of infrastructure and giving more importance to R&D.
So that we can have a higher revenue rate.
A higher revenue rate will affect each and every individual
sooner or later.
We have to use our resources rationally and we have to
Co-payment paid by the citizens is an important factor as
Citizens have paid co-payment since 2008.
Co-payment is an important factor to ensure a sustainable
financing balance in the health sector.
The main purpose of the increase in co-payments is to
ensure demand management.
In the EU only 35 out of 100 patients receive prescription
while this number is 85 in Turkey.
Co-payment is a factor that prevents abuse of
prescriptions and ensures demand management.
The Social Security Institution paid 15 billion 586 million TL
to 24,000 contracted pharmacies in 2009.
Pharmacies receive most their revenues from payments
made by the Social Security Institution.
Therefore, it is envisaged that the rights of pharmacies will
be protected this year and a new contract will be signed
which includes improvements.
At the end of a period of 7 years, a good progress was
made in health indicators.
When we took the office, there were 1572 health centres
and today this number tripled and reached 5268.
Number of ambulances increased to 2250 in 2009 from
618 in 2002.
Today our vaccination rate is comparable with that of the
The vaccination rate increased to 96 percent in 2009 from
78 percent in 2002.
During the last 7 years 1503 health investments were
completed and put into service.
Within this framework, 220 hospitals and 920 health
centres were established.
After the Transformation Program in the Health Sector,
139,000 new health care personnel were employed.
Delivery rate in the hospitals was 78% in 2003 and
increased to 92% in 2009.
Total number of the citizens examined in the hospitals
increased by 2.5 times from 1999 to 2009.
Total number of the visits in the Ministry of Health
hospitals increased from 90 million in 1999 to 220 million
Daily visit number per physician was increased to 21,000
from 6,100 and thus efficiency in the physician services
Development of New Investment and Trade Channels
between Turkey and the US
Turkey and the US have long-lasting economic and
The US is of utmost important for the foreign trade of
The US is among the first seven export markets of Turkey.
Similarly, it is among the first four import markets of
The US is ranked as the third country in the list of largest
exporter countries by its 8% share in the total global
exports in 2008.
As for the imports, it is ranked as the first by its 13.2%
When our relations with the US, leader of the world trade,
is examined, it is seen that our foreign trade volume
increased to 16.3 billion dollar in 2008 from 6.5 billion
dollar in 2002.
In the period of January – October 2009, it was 10.6 billon
Our exports to the US increased from 3.4 billion dollar in
2002 to 4.3 billion dollar in 2008, similarly our imports from
the US increased from 3.1 billion dollar to 12 billion dollar
during the same period.
Major export products of Turkey to the US include ready-
wear and textile, iron-steel, machines, electrical and
mechanical devices, petroleum oils, vehicles and food
Major import products of Turkey from the US are iron-
steel, machines, electrical and mechanical devices,
mineral fuels, motor vehicles, organic chemicals,
pharmaceuticals and optical instruments and medical
Recently American investors started to pay more attention
As the number of the companies with American capital
operating in Turkey was 326 at the end of 2002, this figure
increased to 1,019 by November 2009.
Similarly, while total FDI from the US to our country was 2
million dollar in 2002, it increased to 4.2 billion dollar in
2007 and reached 863 million dollar in 2008.
As a result of the global crisis, total amount of the FDI from
the US remained at 193 million dollar in the period of
There are many significant American companies operating
in and making investments to Turkey.
In 2007, Citibank purchased 20 percent of the Akbank.
General Electric established a partnership with the Gama
Enerji A.Ş. by purchasing certain amount of its share and
undersigned some important investments in both Turkey
and the Middle East.
Citigroup Venture Capital International bought the shares
of Beymen and Boyner.
The Krea Group opened big malls in Eskişehir, Adapazarı
Best Buy opened an electronic store in İzmir and intends
to open stores in more than 70 areas in Turkey.
Opus Securities, Colony Capital LL.G, Seef Foods, Carlyle
Group and The Trump Organization are among the
American companies making important investments in
However, given the fact that the US realized 312 billion
dollar FDI in 2008, it can be said that investments to
Turkey remains at a low level.
Nevertheless Turkey took important steps to improve the
investment environment in Turkey in the post period of
FDI Law was amended.
This Law provided Turkey with a legal framework which is
in accordance with international standards in terms of
This Law made it easier to set up a company by
shortening the process to 6 days from at least 2-3 months
through a new regulation.
This process takes 19 days in Greece, 30 days in India, 37
days in China, 47 days in Spain and 120 days in Brazil.
The procedure concerning sectoral licenses and permits is
The red tape was reduced in the process to get a license
to start and operate a business and it is now possible to
start a business with 6 transactions.
This number is 10 in Spain, 13 in India, 14 in China, 15 in
Greece and 16 in Brazil.
Tax and subsidiary regime has been improved in line with
increasing the competitiveness of Turkey.
Energy cost was reduced and employers’ charges were
Regulations were made in order to comply with the EU
standards on investment environment.
Customs transactions started to be carried out more
Steps were taken so as to increase R&D capacity.
New opportunities in land-area procurement were provided
for investments and the process was simplified.
Legal regulations were made to protect intellectual and
industrial rights, and audits in this field were strengthened.
Legal regulations were made to provide support for SMEs
and to develop the definition of SME in line with the EU
Foreign direct investment from Turkey to the US was 532
million dollar in 2008.
Low level of foreign direct investments points to a big loss
for both parties.
On the other hand, there is a wide range of cooperation
between two countries.
Financial services, tourism, construction, energy, health,
chemicals, information and communication technologies,
education, agriculture and defense are the areas where
cooperation can be established.
Participation to such events as fairs is of great importance
for Turkey to ensure that Turkish firms have the maximum
share in the US market which is the biggest exporter of the
world and that they can promote their goods.
Similarly, I think it will be very beneficial if the US
organizes events more frequently that brings important
global firms together and American businessmen
participate to fairs and events organized in Turkey.
These events will improve opportunities for mutual
exchange of opinions and cooperation.
It is very important for mutual investments to seek new
cooperation opportunities and to create a suitable
environment for the joint adventures.
Determination of the problems and producing solutions for
them will further develop our economic and commercial