by Selen Öztürk
Turkey’s Economic Reforms: What Businesses Should Know
In an attempt to address the Turkish economy’s ongoing turbulence, President Erdogan introduced a set of Economic Reforms on March 12, targeting a significant reduction in inflation rates and the current account deficit. Put forth by the Ministry of Treasury and Finance, the overall objectives of the Economic Reforms for the post-Covid period can be summarized as:
- Ensuring macroeconomic stability,
- Increasing competitive production and productivity,
- Adopting transparent, predictable, and accountable governance,
The reforms also embody a comprehensive list of macroeconomic and structural policies regarding investment, production, employment, and exports and imports.
Within the scope of macroeconomic policies:
Turkey aims to focus on improving Public Finance by simplifying tax regulations, employing investor-friendly and predictable strategies, strengthening public debt management and expenditure discipline, and drafting public-private cooperation legislation along with a public economic enterprise reform.
According to the Ministry’s reform package, to ensure Price Stability; a price stability committee will be established, an early warning system will be attained, better policies will be implemented to prevent food waste and inertial inflation will be reduced by determining prices in line with domestic inflation targets.
Furthermore, the Financial Sector is expected to maneuver through capacity building and an overall strengthening of; banking quality, asset management firms, a zero-interest finance system, institutional infrastructure, capital markets, and financial inclusion.
The economic reforms also envision reducing the Current Account Deficit by boosting exports and export competitiveness, creating a new market for valuable metals and gems in line with international standards, and supporting the green industrial transformation.
Finally, the macroeconomic policies regarding the new economic reforms aim to cultivate Employment by; revising employment incentives and increasing financing to reinforce youth employment and labor quality. Additionally, they advocate for modern working methods and aspire to accelerate future-oriented workforce transformation.
The structural policies to be implemented along with the new economic reforms underline corporate governance by forming new committees for financial stability and economic coordination. The reforms feature state-supported incentives for investment promotion that cut back on bureaucratic procedures and boost private sector investments.
In terms of consolidating the Turkish corporate/institutional governance, two brand new institutions, namely the “Financial Stability Committee (FSC)” and “Economy Coordination Board (ECB)” are to come into effect soon. The FSC will replace the Financial Stability and Development Committee and review its responsibilities under the supervision of the Ministry of Treasury and Finance. The new committee will be composed of the Central Bank of the Republic of Turkey, the Banking Regulation and Supervision Agency, the Capital Markets Board, the Insurance and Private Pension Regulation and Supervision Agency, the Savings Deposit Insurance Fund of Turkey and the President of the Strategy and Budget of the Turkish Presidency, and by focusing on financial stability; it will identify, monitor, and manage systemic risks. Furthermore, the FSC will focus on improving financial markets and increasing savings whilst prioritizing policies that will ensure public/private confidence. The committee will gather every month on a regular basis, share its meeting notes with the public and publish a report in every three months.
On the other hand, the Economic Coordination Board chaired by the Vice President will be composed of the Minister of Treasury and Finance, the Minister of Industry and Technology, the Minister of Agriculture and Forestry, the Minister of Trade, the Minister of Energy, the Minister of Family, Labor and Social Services and the President of the Strategy and Budget of the Turkish Presidency. The board will ensure the coordination and implementation success of the Development Plan, Medium Term Program and Annual Program. It will meet every month, and similar to the FSC’s routine, share its meeting notes with the public and publish a report in every three months.
To strengthen corporate structures, the professional experience criteria required to occupy senior public positions will be elevated for such institutions. Senior public officials will be assigned only one extra duty in the management / supervisory boards of other entities. In principle, the heads of the regulatory and supervisory institutions will not take part in other private/governmental institutions’ management and supervisory boards.
A new law proposal aiming to boost predictability, reduce bureaucracy and offer viable solutions to the issues experienced in investment processes swiftly will be introduced to protect private sector investors and investments, as well. With the purpose of facilitating and accelerating private sector investments, a government agency called “Investment Dispute Authority” will be established, and under the relevant ministries, “Investment Coordination Departments” will start monitoring the investments issued by the Investment Office of the Turkish Presidency.
Facilitating domestic trade seems to be an important area of action, for which the state is determined to employ new measures in line with the EU regulations to strengthen audits and improve the fair management of supply-chains. The new economic reforms make it clear that the state is preparing to impose new rules on domestic e-commerce activities in the post-covid era. New legislation regarding the regulation of digital markets and competition will be proposed to protect Turkish nationals’ personal data from being transferred abroad and promote competition among different providers within the framework of the European General Data Protection Regulation (GDPR). In this context, a domestic law proposal preventing prominent online platforms from abusing their powers will be drafted. Additionally, the usage of personal data stored on digital platforms for purposes other than the users’ intended use or in a way that restricts competition will be prohibited. It is important to highlight that necessary arrangements will be made to protect the rights of member companies that participate in marketplace platforms and produce goods for sale within the scope of new regulations. Turkish Personal Data Protection Law No.6698 will also be amended in conformity with the GDPR regarding the transfer of personal data abroad. Such changes are expected to result in a more competitive and fair market environment.
Finally, market surveillance and inspection measures are expected to rise under the supervision of a new “Surveillance and Inspection Agency”, which will consolidate the existing market structure operating under various administrations, ensure the uniformity of policy implementation and prevent duplications. The agency will be authorized to make autonomous regulations and conduct inspections independently to sustain a fair and competitive market environment. Furthermore, it will implement effective measures against the market supply of products that do not meet the minimum safety criteria in terms of human health, life and property safety, animal and plant health, as well as environment and consumer protection. Under the new agency, a “Council for Surveillance and Inspection Agency Consultancy” consisting of private sector and consumer rights representatives will be formed, as well.
For further information, please visit https://hmb.gov.tr/haberler/ekonomi-reformu-tanitim-kitapcigi