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Turkey: Industry
Country Study > Chapter 3 > The Economy > Industry

INDUSTRY


Turkish modernizers have long struggled to build an industrial system that would help restore the country's economic power. The import-substitution strategy followed until 1980 was designed to make the country an independent producer of manufactured goods. The result was a striking unfolding of industry, especially between 1950 and 1977, when the sector (including energy and natural resources) grew at an annual average rate of 8.6 percent in real terms, expanding its share of GDP from about 12 percent to about 25 percent. Despite the retrenchment of the early 1980s, the recovery of the industrial sector -- which registered an average annual growth rate of 5.9 percent between 1987 and 1992 -- restored the sector to its pre-1980 proportion of more than 23 percent of GDP in 1993. By the early 1990s, industry was broadly based; the only individual industries accounting for more than 5 percent of industrial output were food processing, petroleum, textiles, and iron and steel.

Under the republic, the Turks have vastly improved their country's infrastructure and have achieved the ability to produce a wide range of products. The country's first factories processed food, such as sugar and flour, and nondurable consumer goods, such as textiles and footwear. Next came intermediate industrial products, including iron and steel, chemicals, cement, and fertilizer. By the end of the 1970s, the country was developing capital goods industries and high-technology products. Production of trucks and buses in cooperation with the West German firm Mercedes-Benz, and of F-16 fighter aircraft with the United States firm General Dynamics, indicated Turkey's industrial ambitions.

The press for rapid industrialization minimized the attention given to efficiency, and excessive protection forestalled competition that would have promoted efficiency; selling in the protected home market was much more attractive than attempting to export. Moreover, the rise of montage industries, which assembled such products as motor vehicles, consumer durables, and electronic goods primarily using imported components, meant that industrial growth required ever more imports. Hence, attempts at import substitution paradoxically tended to aggravate the country's trade balance. The capital-intensive nature of many industrial investments, especially those in the intermediate goods sector, caused employment in industry to grow relatively slowly, contributing to structural unemployment. Dependence on imported petroleum made the country highly vulnerable to increases in oil prices.

By the end of the 1970s, industry had reached a turning point. In the short run, the sector needed to overcome shortages of energy, imported machinery, parts, and processing materials that had caused a decline in industrial output during the last years of the decade. In the longer run, to become more efficient and to enable increased exports, the industrial structure had to be adjusted in accordance with the country's comparative advantages. In effect, industry would have to transfer resources out of uncompetitive industries to favor those that could compete in world markets. The difficult adjustment process started during the early 1980s, and substantial progress was made under the Özal team. Under the new outward-oriented development strategy, as under the old import-substitution policies, industry was to be the leading sector of the economy. Industrial performance -- especially in export markets -- would determine if that strategy would be successful.

Many of the problems of import substitution had not yet been overcome by the mid-1990s. Much progress had been made in spurring private-sector-led industrialization, particularly in light manufacturing and export promotion, however. Light manufactures and iron and steel accounted for an increasing proportion -- and since the 1980s, the majority -- of exports. Moreover, foreign investment in the industrial sector, made either directly or through the stock market, had begun to have a positive impact on Turkish industry. However, much of industry was still dominated by the public sector in early 1995, and private-sector companies still depended on crucial inputs from public-sector industries.




Last Updated: January 1995


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Turkey was first published in 1995. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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