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

Author

Listed:
  • 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.

Suggested Citation

  • Rauf Gönenç & Willi Leibfritz & Gökhan Yilmaz, 2007. "Enhancing Turkey's Growth Prospects by Improving Formal Sector Business Conditions," OECD Economics Department Working Papers 542, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:542-en
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    File URL: http://dx.doi.org/10.1787/316551532607
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    Cited by:

    1. World Bank, 2010. "Turkey - Country Economic Memorandum Informality : Causes, Consequences, Policies," World Bank Other Operational Studies 2843, The World Bank.

    More about this item

    Keywords

    compétitivité industrielle; industrial competitiveness; informal economy; regulatory reforms; réforme réglementaire; Turkey; Turquie; économie informelle;

    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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