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Enhancing Turkey's Growth Prospects by Improving Formal Sector Business Conditions

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Author Info
Rauf Gönenç
Willi Leibfritz
Gökhan Yilmaz
Abstract

Turkey's business sector has achieved high growth over the past few years and - on average - has coped well with increased competition. However, some labour-intensive sectors lost competitiveness prior to the currency depreciation in mid-2006 and faced employment losses, raising political pressure for interventionist policies. This paper argues that the government should resist such pressure and instead follow a broad-based strategy to improve framework conditions for firms, irrespective of their size, sector and legal status. Overcoming the duality between the formal and informal sectors should be the central point of this strategy. In particular, the cost of labour should be reduced and regulatory hurdles in labour and product markets should be minimised, to help formal firms to remain competitive and increase employment. This would also make it easier for the many small and medium-sized firms to move into the formal sector, thereby raising productivity through economies of scale. This would increase the growth potential of the whole economy, broaden the tax base and level the playing field for doing business in Turkey, not only for the wide variety of domestic firms but also for foreign investors.

Accélérer la croissance en Turquie en améliorant les conditions d'activité dans le secteur formel
Ces dernières années, le secteur des entreprises de la Turquie a affiché une croissance élevée et, en moyenne, s'est bien comporté face à une concurrence plus vive. Mais la compétitivité de certains secteurs à forte intensité de main-d'oeuvre a baissé avant la dépréciation de la monnaie intervenue au milieu de l'année 2006, et l'emploi du secteur formel a reculé, augmentant les pressions politiques favorables à des mesures interventionnistes. Nous soutenons dans ce document que les autorités devraient résister à ces pressions et opter pour une stratégie globale d'amélioration des conditions-cadres offertes à toutes les entreprises, indépendamment de la taille, du secteur d'activité et du statut juridique de ces dernières. Cette stratégie devrait d'abord et avant tout viser à estomper la dichotomie entre secteur formel et secteur informel. Il faudrait en particulier réduire le coût du travail et atténuer le plus possible les obstacles présents sur le marché du travail et les marchés de produits, afin d'aider les entreprises du secteur formel à rester concurrentielles et embaucher davantage. Grâce à une telle politique, les nombreuses petites et moyennes entreprises pourraient aussi plus facilement rejoindre le secteur formel, ce qui augmenterait la productivité par le jeu des économies d'échelle. Toute l'économie verrait son potentiel de croissance augmenter, l'assiette fiscale s'élargirait et les entreprises - des firmes nationales les plus diverses aux investisseurs étrangers - pourraient opérer à conditions égales en Turquie.

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Paper provided by OECD, Economics Department in its series OECD Economics Department Working Papers with number 542.

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Date of creation: 24 Jan 2007
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Handle: RePEc:oec:ecoaaa:542-en

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Related research
Keywords: industrial competitiveness; informal economy; regulatory reforms; Turkey; compétitivité industrielle; économie informelle; réforme réglementaire; Turquie;

Find related papers by JEL classification:
K20 - Law and Economics - - Regulation and Business Law - - - General
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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