Turkey-Services

Turkey has several relatively large, internationally competitive construction firms, some of which specialize in particular types of projects such as dam or pipeline construction. During the late 1970s and early 1980s, domestic demand was relatively weak, but Turkish firms were quite successful at selling their services abroad, especially in the oil-producing states of the Middle East. However, by the mid-1980s construction projects in the Middle East had slowed down because of falling oil prices. Fortunately, Turkey's major infrastructure program and housing projects saved contracting firms from financial ruin. For example, the establishment of the Mass Housing Fund in the 1980s offered opportunities to Turkish contractors. A number of large infrastructure projects--particularly the GAP and the construction of state highways--provided enormous contracts for local builders. With the demise of the Soviet Union, Turkish contractors set their sights on Central Asia and Russia, with estimates of potential business in this region around US$700 million. The end of the Iran-Iraq War in 1988 also promised new opportunities for Turkish contractors; however, the Iraqi invasion of Kuwait and subsequent Persian Gulf War damaged such hopes. Contractors estimated their combined losses as a result of the crisis at US$800 million. Nonetheless, the external market accounted for a substantial portion of the industry's revenues. At the end of 1992, Turkish contractors had contracts worth US$20.6 billion; Libya accounted for US$10.3 billion, Saudi Arabia US$5.4 billion, and the republics of the former Soviet Union US$1 billion.

Policy makers have made housing--perhaps the most deficient sector of the economy--a priority. The combination of rapid population growth and high rates of urbanization has overwhelmed available housing. In the mid-1980s, perhaps more than half of the inhabitants of urban centers lived in shanties lacking sewers, water, and electricity. According to a tradition dating back to Ottoman rule, shelters built overnight had been tolerated by the authorities. These shanties, or gecekondus (see Glossary), had been a problem since the 1950s. In the early 1980s, the government took several steps to improve the housing situation. A law was passed transferring ownership of existing gecekondus to their inhabitants but declaring that any new structures would be destroyed. In addition, a housing fund, set up in 1984 and financed by a tax on tobacco, liquor, and luxury imports, offered financing for the construction of up to 100,000 houses a year. Monies could be used to improve existing gecekondus or for new construction and could be lent to homeowners, cooperative associations, or contractors. Analysts believed it unlikely that the fund would grow fast enough to eliminate the gecekondus , although it might stem their proliferation.

Services

After seventy years of development, the services sector has grown to account for more than half of the labor force but nevertheless remains relatively unproductive. In addition to traditional enterprises, services include modern activities such as banking and engineering. The development of government services has been significant, but the state has paid little attention to increasing the efficiency of private-sector service enterprises. Services have traditionally produced only a small fraction of exports; however, after 1980 the government encouraged development of service earnings and allowed foreign enterprises to enter previously protected markets such as those in finance.

Data as of January 1995