The roots of Turkey’s current reforms can be traced back to the 1980s. A state-directed and inwardly focused model of economic development served Turkey well before then, but was no longer adapted to Turkey’s needs, and reforms to open up the economy were started. The most impressive development was in trade liberalisation. By 2000, exports accounted for 40% of GDP. The Customs Union with the EU, which became effective in January 1996, was another major step forward. But the crisis of 2000/2001, based on unsustainable fiscal and external imbalances, highlighted how far Turkey still had to go....

Among the OECD countries, Turkey figures as a comparative latecomer to regulatory reform. Yet, there is a crucial need for it. Over the last three decades, the Turkish economy has suffered from macroeconomic instability and chronic inflation, with implications for both investment and growth. Governance and regulatory structures remained weak and contributed also to the 2001 economic crisis. Nonetheless, this review notes the highly encouraging efforts currently being undertaken to reform key economic sectors, the public administration and regulatory frameworks. These developments appear to mark a fundamental break with the past. Important elements, such as a clear competition policy, are already in place. Fighting corruption, among other measures, is high on the policy agenda, and constitutional amendments are reshaping the relationship between citizens and the state. The "depoliticisation" of the public sector and its renewal on a merit basis is underway. Future success will depend crucially on the continuing implementation of the programme. In particular, sustained political commitment is required well beyond the recovery from the recent crisis.

The regulatory reform agenda is developing in Turkey in response to both domestic and international factors. Internationally, the key element is Turkey’s drive towards European Union membership, which will require a major overhaul of regulatory regimes and practices. As well, economic crises have lead major international organisations like the World Bank and IMF to argue strongly for the need for reforms to Turkish regulatory governance. Domestically, economic crisis has accelerated needed reforms and brought an unprecedented sense of urgency. Regulatory reform is increasingly seen as an essential element of the policy responses needed to restore economic stability and growth....

Competition policy institutions are in place and active, but competition policy is not yet fully integrated into the general policy framework for regulation. Many features of state-led development remain. Reforms have been announced, but implementation is slowed by crisis. The lack of public awareness about competition policy and the new institutions is indicative of the uncertain status of competition in Turkish public policy and debate. Turkey’s conception of competition policy supports a broad program of pro-competitive reform. The competition laws and enforcement structures, the Competition Authority and its decision-making Competition Board, are well-considered and supported by adequate resources. But the institutions have not yet had to weather a serious political storm. The Competition Board’s ambition, to be at the centre of a broad reform programme, does not quite match its present circumstances, but it is not necessarily unrealistic in the long run....

For the past two decades, Turkey has moved toward increased reliance on market forces and exposure to international competition. In the early 1980s the government replaced its import substitution strategy with a market-oriented economic policy, while trade liberalisation was given new impetus in the mid 1990s with the signature of the customs union with the European Union (EU), which has strengthened Turkey’s economic ties with Europe. Governments have, however, failed to achieve macroeconomic stabilisation. For two decades, fiscal imbalances have fuelled high inflation and undermined growth. At the end of 1999, the government launched a reform programme, supported by the World Bank and the International Monetary Fund (IMF), to stabilise the economy. The programme collapsed with the financial crisis in November 2000 and February 2001, which lead to severe recession....

The electricity sector in Turkey has been a key element in the "state led development" of the economy. For the time being it remains dominated by state owned entities. Their current financial condition is extremely weak. Without reform, the sector is headed for financial collapse. Widespread theft and non-payment for electricity has weakened cash inflow and earlier moves to promote private participation in needed generation investment generally resulted in expensive electricity being purchased by the state enterprises....

Telecommunications have been given a high priority by policy-makers in recent years and the sector has grown substantially in relative terms during this time. It increased its weight in GDP from 1.03% in 1985 to 3.82% in 1999, while the penetration of fixed telephone lines increased from 4.5 to 28.3 per 100 inhabitants as of end of 2001. However, Turkey still ranks far below the OECD average of 52.8 lines per 100 inhabitants....