About the CBI

September 2005
Background Note: Turkey

Flag of Turkey is red with a vertical white crescent (the closed portion is
toward the hoist side) and white five-pointed star centered just outside the
crescent opening.

PROFILE

OFFICIAL NAME:
Republic of Turkey

Geography
Area: 780,580 sq. km.
Cities: Capital--Ankara (pop. 4.0 million). Other cities--Istanbul (8.8
million), Izmir (2.3 million), Bursa (2.1 million), Adana (1.8 million).
Terrain: Narrow coastal plain surrounds Anatolia, an inland plateau becomes
increasingly rugged as it progresses eastward. Turkey includes one of the
more earthquake-prone areas of the world.
Climate: Moderate in coastal areas, harsher temperatures inland.

People
Nationality: Noun--Turk(s). Adjective--Turkish.
Population (2003): 68.1 million.
Annual population growth rate (2004 est.): 1.13%.
Ethnic groups: Turkish, Kurdish, other.
Religions: Muslim 99%, Christian, Bahai and Jewish.
Languages: Turkish (official), Kurdish, Zaza, Arabic, Armenian, Greek.
Education: Years compulsory--8. Attendance--95%. Literacy--86.5%.
Health: Infant mortality rate--39.4/1,000. Life expectancy--68.5 yrs.
Work force (23 million): Agriculture--35.6%; industry--17.5%;
services--42.2%.

Government
Type: Republic.
Independence: October 29, 1923.
Constitution: November 7, 1982.
Branches: Executive--president (chief of state), prime minister (head of
government), Council of Ministers (cabinet--appointed by the president on the
nomination of the prime minister). Legislative--Grand National Assembly (550
members) chosen by national elections at least every 5 years.
Judicial--Constitutional Court, Court of Cassation, Council of State, and
other courts.
Political parties in Parliament: Justice and Development Party (AK),
Republican People's Party (CHP), and True Path Party (DYP).
Suffrage: Universal, 18 and older.
National holiday: Republic Day, October 29.

Economy
GNP: (2002) $179.9 billion; (2003) $239.1 billion; (2004) $293.6 billion
(projected).
Annual real GNP growth rate: (2002) (+) 7.8%; (2003) (+) 5.9%; (2004) (+)
5.0% (projected).
GNP per capita: (2002) $2,584; (2003) $3,383.
Annual inflation rate /CPI (2002) 29.7%; (2003) 18.4%; (2004) 3.87%
(Jan-August).
Natural resources: Coal, chromium, mercury, copper, boron, oil, gold.
Agriculture (11.8% of GNP): Major cash crops--cotton, sugar beets, hazelnuts,
wheat, barley, and tobacco. Provides more than 40% of jobs, 6% of exports.
Industry (24.9% of GNP): Major growth sector, types--automotive, electronics,
food processing, textiles, basic metals, chemicals, and petrochemicals.
Trade: Exports (merchandise) (2002) $35.1 billion; (2003) $46.8 billion;
(2004 January-June) $28.6 billion: textiles and apparel, iron and steel,
electronics, tobacco, and motor vehicles. Imports (merchandise) (2002) $50.8
billion; (2003) $68.7 billion: petroleum, machinery, motor vehicles,
electronics, iron and steel, plastics. Major partners--Germany, U.S., Italy,
France, Russian Federation, Italy, Japan, Netherlands, U.K.

PEOPLE
Modern Turkey spans bustling cosmopolitan centers, pastoral farming villages,
barren wastelands, peaceful Aegean coastlines, and steep mountain regions.
More than half of Turkey's population lives in urban areas that juxtapose
Western lifestyles with traditional-style mosques and markets.

Turkey has been officially secular since 1924, although 99% of the population
is Muslim. Most Turkish Muslims belong to the Sunni branch of Islam, but a
significant number are Alevi Muslims. Questions of the goals of political
Islam and the aftermath of the 1984-99 PKK Kurdish insurgency continue to
fuel public debate on several aspects of Turkish society, including the role
of religion, the necessity for human rights protections, and the expectation
of security. Turkish citizens of Kurdish origin constitute an ethnic and
linguistic group. Estimates of their population range up to 12 million.

HISTORY
Mustafa Kemal, celebrated by the Turkish State as a Turkish World War I hero
and later known as "Ataturk" or "father of the Turks," led the founding of
the Republic of Turkey in 1923 after the collapse of the 600-year-old Ottoman
Empire and a three-year war of independence. The empire, which at its peak
controlled vast stretches of northern Africa, southeastern Europe, and
western Asia, had failed to keep pace with European social and technological
developments. The rise of national consciousness impelled several captive
nations to seek to regain lost independence, leading to the empire's
fragmentation. This process culminated in the disastrous Ottoman
participation in World War I as a German ally. Defeated, shorn of much of its
former territory, and partly occupied by forces of the victorious European
states, the Ottoman structure was repudiated by Turkish nationalists whom
Mustafa Kemal brought together under his tight leadership. The nationalists
expelled invading Greek forces from Anatolia after a bitter war. After the
proclamation of the Republic of Turkey the temporal and religious ruling
institutions of the old empire (the sultanate and caliphate) were abolished.

The leaders of the new republic concentrated on consolidating their power and
modernizing and Westernizing what had been the empire's core--Anatolia and a
small part of Thrace. Social, political, linguistic, and economic reforms and
attitudes decreed by Ataturk from 1924-1934 continue to be referred to as the
ideological base of modern Turkey. In the post-Ataturk era, and especially
after the military coup of 1960, this ideology came to be known as "Kemalism"
and his reforms began to be referred to as "revolutions." Kemalism comprises
a Turkish form of secularism, strong nationalism, statism, and to a degree a
western orientation. The continued validity and applicability of Kemalism are
the subject of lively debate in Turkey's political life. The current ruling
AK Party comes from a tradition that challenges many of the Kemalist precepts
and is driven in its reform efforts by a desire to achieve EU accession.

Turkey did not enter World War II on the Allied side until shortly before the
war ended and became a charter member of the United Nations. Difficulties
faced by Greece after World War II in quelling a communist rebellion and
demands by the Soviet Union for military bases in the Turkish Straits
prompted the United States to declare the Truman Doctrine in 1947. The
doctrine enunciated American intentions to guarantee the security of Turkey
and Greece and resulted in large scale U.S. military and economic aid. After
participating with United Nations forces in the Korean conflict, Turkey in
1952 joined the North Atlantic Treaty Organization (NATO). Turkey is
currently a European Union candidate.

GOVERNMENT AND POLITICAL CONDITIONS
The 1982 Constitution, drafted by the military in the wake of the 1980 coup,
proclaims Turkey's system of government as democratic, secular, and
parliamentary. The presidency's powers are not precisely defined in practice,
and the president's influence depends on his personality and political
weight. The president and the Council of Ministers led by the prime minister
share executive powers. The president, who has broad powers of appointment
and supervision, is chosen by Parliament for a term of 7 years and cannot be
reelected. The prime minister administers the government. The prime minister
and the Council of Ministers are responsible to Parliament.

The 550-member Parliament carries out legislative functions. Election is by
proportional representation. To participate in the distribution of seats, a
party must obtain at least 10% of the votes cast at the national level as
well as a percentage of votes in the contested district according to a
complex formula. The president enacts laws passed by Parliament within 15
days. With the exception of budgetary laws, the president may return a law to
the Parliament for reconsideration. If Parliament reenacts the law, it is
binding, although the president may then apply to the Constitutional Court
for a reversal of the law. Constitutional amendments pass with a 60% vote,
but require a popular referendum unless passed with a two-thirds majority;
the president may also submit amendments passed with a two-thirds majority to
a popular referendum.

The judiciary is declared to be independent, but the need for judicial reform
and confirmation of its independence are subjects of open debate.
Internationally recognized human rights, including freedom of thought,
expression, assembly, and travel, are officially enshrined in the
Constitution but have at times been narrowly interpreted, can be limited in
times of emergency and cannot be used to violate what the Constitution and
the courts consider the integrity of the state or to impose a system of
government based on religion, ethnicity, or the domination of one social
class. The Constitution prohibits torture or ill treatment; the current
government has focused on ensuring that practice matches principle. Labor
rights, including the right to strike, are recognized in the Constitution but
can be restricted.

The 1982 Constitution provides for a system of State Security Courts to deal
with offenses against the integrity of the state. The high court system
includes a Constitutional Court responsible for judicial review of
legislation, a Court of Cassation (or Supreme Court of Appeals), a Council of
State serving as the high administrative and appeals court, a Court of
Accounts, and a Military Court of Appeals. The High Council of Judges and
Prosecutors, appointed by the president, supervises the judiciary.

In the November 2002 election of Turkey's 58th government, the Justice and
Development Party (AK) captured 34.3% of the total votes, making Abdullah Gul
Prime Minister, followed by the Republican Peoples Party (CHP) with 19.39% of
the vote, led by Deniz Baykal. A special General Election was held again in
the province of Siirt in March 2003, resulting in the election of AK's
chairman Recep Tayyip Erdogan to a seat in parliament, allowing him to become
prime minister. AK and CHP were the only parties to surpass the 10% threshold
required to hold seats in parliament. The elections resulted in 363 of the
550 seats going to AK, 178 seats to CHP, and 9 as independent. Due to a
reshuffle in party affiliation, AK holds 367 seats, CHP holds 175 seats, five
are independent, and three joined the True Path Party (DYP). In March 2004
nationwide local elections, AKP won 57 of 81 provincial capital
municipalities and, with 41.8% of the votes for provincial council seats,
consolidated its hold on power.

Principal Government Officials
President of the Republic--Ahmet Necdet Sezer
Prime Minister--Recep Tayip Erdogan
Minister of Foreign Affairs--Abdullah Gul
Ambassador to the United States--Faruk Logoglu
Ambassador to the United Nations--Umit Pamir

Turkey maintains an embassy in the United States at 2525 Massachusetts Avenue
NW, Washington, DC 20008, tel. (202) 612-6700. Consulates general in Chicago
(360 N. Michigan Ave., Suite 1405, Chicago, IL 60601, tel: 312-263-0644, ext.
28); Los Angeles (4801 Wilshire Blvd., Suite 310, Los Angeles, CA 90010, tel:
323-937-0118); New York (821 United Nations Plaza, New York, NY 10017, tel:
212-949-0160); and Houston (1990 Post Oak Blvd., Suite 1300, Houston, TX
77056, tel: 713-622-5849). The Permanent Representative of Turkey to the
United Nations is located on 821 United Nations Plaza, 10th floor, New York,
NY 10017, tel: 212-949-0150.

ECONOMY
Turkey began a series of reforms in the 1980s designed to shift the economy
from a statist, insulated system to a more private-sector, market-based
model. The reforms spurred solid growth, but growth that has been punctuated
by sharp recessions and financial crises in 1994, 1999, and 2001. Turkey's
failure to pursue additional reforms, combined with large and growing public
sector deficits, resulted in high inflation, increasing macroeconomic
volatility, and a weak banking sector.

The Ecevit government, in power from 1999 through 2002, restarted structural
reforms in line with ongoing economic programs under the standby agreements
signed with the International Monetary Fund (IMF), including passage of
social security reform, public finance reform, state banks reform, banking
sector reform, increasing transparency in public sector, and also
introduction of related legislation to liberalize telecom, and energy
markets. Under the IMF program, the government also sought to use exchange
rate policies to curb inflation.

By late 2000, a growing current account deficit, the weak banking system, and
growing concern over the failure to implement needed structural reforms
resulted in a liquidity crisis that led to a revised IMF program. In February
2001, a public dispute between the president and prime minister triggered a
run on the lira and a dramatic increase in interest rates. The result was
rapid inflation, a severe banking crisis, a massive rise in domestic public
debt, and a deep economic downturn (GNP fell 9.5% in 2001). The government
was forced to float the lira and adopt a more ambitious economic reform
program, including a very tight fiscal policy, enhanced structural reforms,
and unprecedented levels of IMF lending.

Large IMF loans--tied to implementation of ambitious economic
reforms--enabled Turkey to stabilize interest rates and the currency and to
meet its debt obligations. In 2002 and 2003, the reforms began to show
results. With the exception of a period of market jitters in the run-up to
the Iraq war, inflation and interest rates have fallen significantly, the
currency has stabilized, and confidence has begun to return. Nonetheless, the
economy still remains fragile, and continued implementation of reforms is
essential to sustain growth and stability.

Turkey has a number of bilateral investment and tax treaties, including with
the United States, that guarantee free repatriation of capital in convertible
currencies and eliminate double taxation. Nonetheless, foreign direct
investment totaled only $16.4 billion as of June 30, 2003, a modest sum
reflecting investor concerns about political and macroeconomic uncertainty,
burdensome regulation, and a large state role in the economy.

Turkey seeks to improve its investment climate and has taken steps to improve
its investment climate through administrative streamlining, an end to foreign
investment screening, and strengthened intellectual property legislation.
However, a number of disputes involving foreign investors in Turkey and
certain policies, such as high taxation of cola products and continuing gaps
in the intellectual property regime, inhibit investment. The Turkish
privatization board is in the process of privatizing a series of state-owned
companies, including the state alcohol company and the oil refining
parastatal. The Privatization Board was scheduled to privatize the state
tobacco company and the telephone company in 2004. Under its commitments to
the World Trade Organization, the Government is liberalizing the
telecommunications sector.

Inflation and Monetary Policy. Turkey's principal economic problems remain
inflation and public sector indebtedness. Annual consumer price inflation
averaged around 80% in the 1990s and nearly 50% in 2000 through 2003.
Wholesale price inflation has been at comparable levels. In 2003, however,
Turkey's Central Bank finally succeeded in controlling inflationary
pressures: as of February 29, 2004 the previous 12-month increase in the CPI
had fallen to 27.01%.

Turkey's current economic reform program has had two main goals--conquering
the persistent high inflation of 1990s and the associated macroeconomic
instability, and reducing public debt to sustainable levels. Following the
2000-01 crisis, which saw the collapse of the crawling peg under the previous
International Monetary Fund (IMF) program, a new 3-year standby agreement was
approved by the IMF in February 2002. It focused on combating inflation
through a floating foreign exchange regime and tight monetary policy
conducted by the newly independent Central Bank. The program also required
fiscal discipline leading to a 6.5% primary surplus target in 2003 and 2004
and continued structural reforms. The program began to show its results with
lower inflation, resurgent growth and, at least, partial success in
maintaining fiscal discipline. GDP growth reached 7.8% in 2002 and 5.8% in
2003; although final figures are not yet available, the government 2003
fiscal data were expected to come close to its full-year primary surplus
target of 6.5% of GDP. The public debt-to-GNP (Net Public Debt to GNP) ratio,
after shooting up to 92 in the crisis year of 2001, fell to 79.0% in 2002 and
became 72.5% as of 2nd quarter of 2003.

Principal Growth Sectors - Energy. Installed energy generation capacity in
Turkey reached 28,332.4 MW as of the end of 2001. Fossil fuels account for
59% of the total installed capacity (16,623 MW) and hydro, geothermal, and
wind account for the remaining 41% (11,7093 MW). Total electricity
consumption reached 126.9 billion kWh at the end of 2001. The growth in
electricity generation has remained below electricity demand until recently,
which made Turkey a net importer of electricity since 1997. The growth of
energy demand slowed somewhat as a result of the 2001 economic crisis, but
has picked up again. Turkish authorities expect a significant electricity
shortfall by 2008 unless new facilities become operational. The Government of
Turkey took some important steps in 2001 to liberalize its energy sector,
including passage of the Electricity Market Law and establishment of the
Energy Market Regulatory Authority (EMRA). However, the government has done
little to follow through on plans to liberalize and privatize the electricity
and natural gas sectors. In 2004, the High Planning Council approved the
Electricity Sector Reform Strategy to renew the reform process.

Oil provides about 43% of Turkey's total energy requirements; around 90% is
imported. Domestic production is mostly from small fields in the southeast.
New exploration is taking place in the eastern Black Sea. In 2004, the
Parliament approved a petroleum market reform bill that will liberalize
consumer prices and lead to the privatization of the state refining company
TUPRAS. Turkey has a refining capacity of 719,275 barrels/day.

Turkey acts as an important link in the East-West Energy Corridor bringing
the Caspian energy to Europe and world markets. The Baku-Tbilisi-Ceyhan
pipeline, to begin operation in 2005, will deliver 1 million b/d of
petroleum, and in 2006, the Shah Deniz pipeline will bring natural gas from
Azerbaijan to Turkey. Turkey recently reached agreement with Greece to build
an interconnector pipeline, an important step in bringing Caspian natural gas
to Europe via Turkey.

Telecommunications. Parliament enacted legislation separating
telecommunications policy and regulatory functions in January 2000, by
establishing an independent regulatory body, the Telecommunication Authority.
The Authority is responsible for issuing licenses, supervising operators, and
taking necessary technical measures against violations of the rules. Most
regulatory functions of the Transport Ministry were transferred to the
Authority. The government also decided to give Turk Telekom commercial status
and to end its monopoly in fixed telephone lines by December 2003. It changed
this plan in May 2001 and announced full privatization of Turk Telekom, with
the exception of a "golden share" for the government to protect security and
public interest concerns. The new law allows up to 45% foreign ownership in
Turk Telekom and allowing foreign ownership of a majority share is under
consideration. Under the government's privatization strategy for Turk
Telekom, the Privatization Authority was to issue a tender by May 31, 2004;
however, problems relating to the privatization process were likely to
prolong the process at least through the end of 2004.

Environment. With the establishment of the Environment Ministry in 1991,
Turkey began to make significant progress addressing some of its most
pressing environmental problems. The most dramatic improvements were
significant reductions of air pollution in Istanbul and Ankara. However,
progress on the remaining -- and serious -- environmental challenges facing
Turkey have been slow.

In 2003, the Ministry of Environment was merged with the Forestry Ministry,
reducing the influence of environmental officials in government
decision-making. With its goal to join the EU, Turkey has made commendable
progress in updating and modernizing its environmental legislation. However,
environmental concerns are not adequately integrated into public
decision-making and enforcement is lacking. Turkey faces a backlog of
environmental problems, requiring enormous outlays for infrastructure. The
most pressing needs are for water treatment plants, wastewater treatment
facilities, solid waste management and conservation of biodiversity. On
average, the environmental performance of private firms is much better than
the large number of state owned enterprises.

Transport. The Turkish Government gives a special priority to major
infrastructure projects, especially in the transport sector. The government
is planning the construction of new airports, ports, and highways. The
government will realize the majority of these projects by utilizing the
build-operate-transfer (BOT) model.

Textiles. The textile sector is Turkey's largest manufacturing industry and
its largest export sector. The removal of EU quotas on textile and apparel
imports--part of the customs union--has improved growth prospects. The global
phase-out of textile quotas in 2005 will provide increased opportunities,
albeit with increased competition from other suppliers, in the U.S. and other
markets. Other principal growth sectors are defense equipment, tourism
infrastructure, building products, automobiles and automotive parts, and
electronics.

FOREIGN RELATIONS
Turkey's primary political, economic, and security ties are with the West,
although some voices call for a more "Eurasian" orientation.

Turkey entered NATO in 1952 and serves as the organization's vital eastern
anchor, controlling the straits leading from the Black Sea to the
Mediterranean and sharing a border with Syria, Iraq, and Iran. A NATO
headquarters is located in Izmir. Besides its relationships with NATO and the
EU, Turkey is a member of the OECD, the Council of Europe, and OSCE. Turkey
also is a member of the UN and the Islamic Conference Organization (OIC). In
December 1999, Turkey became a candidate for EU membership. In October 2004,
the European Commission recommended that the European Council grant Turkey a
date to begin formal accession talks during its December 2004 meeting. On
December 17, the EU decided to begin accession negotiations with Turkey in
October 2005, opening the way for what both sides expect will be a long,
complex, open-ended process.

Turkey and the EU formed a customs union beginning January 1, 1996. The
agreement covers industrial and processed agricultural goods. Turkey is
harmonizing its laws and regulations with EU standards. Turkey adopted the
EU's Common External Tariff regime, effectively lowering Turkey's tariffs for
third countries, including the United States.

Turkey is a member of the World Trade Organization (WTO). It has signed free
trade agreements with the European Free Trade Association (EFTA), Israel, and
many other countries. In 1992 Turkey and 10 other regional nations formed the
Black Sea Economic Cooperation Council to expand regional trade and economic
cooperation.

U.S.-TURKEY RELATIONS
U.S.-Turkish friendship dates to the late 18th century and was officially
sealed by a treaty in 1830. The present close relationship began with the
agreement of July 12, 1947, which implemented the Truman Doctrine. As part of
the cooperative effort to further Turkish economic and military
self-reliance, the United States has loaned and granted Turkey more than
$12.5 billion in economic aid and more than $14 billion in military
assistance.

U.S.-Turkish relations focus on areas such as strategic energy cooperation,
trade and investment, security ties, regional stability, the global war on
terrorism, and human rights progress. Relations were strained when Turkey
refused to allow U.S. troops to deploy through its territory to Iraq in
Operation Iraqi Freedom, but regained momentum steadily thereafter and mutual
interests remain strong across a wide spectrum of issues.

The U.S. and Turkey have had a Joint Economic Commission and a Trade and
Investment Framework Agreement for several years. In 2002, the two countries
indicated their joint intent to upgrade bilateral economic relations by
launching an Economic Partnership Commission. Turkey has been designated a
Big Emerging Market (BEM) for U.S. exports and investment by the Department
of Commerce. In 2001, the U.S.-Turkey trade balance was almost even, with
each country exporting approximately $3 billion to the other. The United
States is Turkey's third-largest export market.

Principal U.S. Officials
Chargé d'Affaires--Nancy McEldowney
Deputy Chief of Mission--vacant

Counselors
Political Affairs--Janice G. Weiner
Political-Military Affairs--Timothy Betts
Economic Affairs--Thomas H. Goldberger
Regional Affairs--Thaddeus W. Troy
Consular Affairs--Laura Dogu
Management Affairs--Gerri H. O'Brien
Public Affairs--James R. Moore
Agricultural Affairs--James Higgiston
Commercial Affairs--John T. Lancia
Defense/Air Attache--Col. Roman Hrycaj
Navy Attache--CDR David Renberg
Army Attache--LTC David Bartlett

The U.S. Embassy is located at 110 Ataturk Boulevard, Kavaklidere, Ankara
06100, tel: (90) (312) 455-5555.