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TRANSCRIPT
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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 122166
IMPLEMENTATION COMPLETION AND RESULTS REPORT
(LOAN NO. IBRD-8412-TR)
FOR
SUSTAINING SHARED GROWTH
DEVELOPMENT POLICY OPERATION (SSG-DPL)
IN THE AMOUNT OF EUR 367.4 MILLION
(US$500 MILLION EQUIVALENT)
TO
THE REPUBLIC OF TURKEY
December 27, 2017
Macroeconomics and Fiscal Management Global Practice
EU and Turkey
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CURRENCY EQUIVALENTS
(Exchange Rate Effective as of December 27, 2017)
Currency Unit
TL 3.8002 = US$ 1
TL 4.5085 = EUR 1
FISCAL YEAR
January 1 - December 31
ABBREVIATIONS AND ACRONYMS
AKP Justice and Development Party IPR Intellectual Property Rights
BOTAS Petroleum Pipeline Corporation M&E Monitoring and Evaluation
Central Bank of the Republic of Turkey MERSIS Central Registration System
CEM Country Economic Memorandum NES National Employment Strategy
CMA Capital Markets Association OECD
Organization for Economic
Cooperation and Development
CMB Capital Markets Board POA Public Oversight Authority
CML Capital Markets Law SCD Systematic Country Diagnostic
CPF Country Partnership Framework SME
Small and Medium Size
Enterprise
CPS Country Partnership Strategy SOE State Owned Enterprise
CSDPL Competitiveness and Savings
Development Policy Loan TA Technical Assistance
DP National Development Plan
DPL Development Policy Loan TCA Turkish Courts of Accounts
EPIAS Energy Market Operation Corporation TCDD Turkish State Railways
ESES Environmental Sustainability and Energy
Sector Development Policy Loan
ESMAP Energy Sector Management Assistance
Program TurkStat Turkish Statistical Institute
Country Director: Johannes Zutt
Senior Global Practice Director: Carlos Felipe Jaramillo
Practice Manager: Lalita Moorty
Task Team Leader: Kamer Karakurum-Ozdemir
ICR Team Leader: Anil Onal
ICR Author: Anil Onal
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TURKEY
SUSTAINING SHARED GROWTH DEVELOPMENT POLICY OPERATION
(SSG-DPL)
IMPLEMENTATION COMPLETION REPORT AND RESULTS REPORT
CONTENTS
A. Basic Information ........................................................................................................... ii B. Key Dates ....................................................................................................................... ii
C. Ratings Summary ........................................................................................................... ii D. Sector and Theme Codes ............................................................................................... iii
F. Results Framework Analysis ......................................................................................... iv G. Ratings of Program Performance in ISRs ..................................................................... vi H. Restructuring ................................................................................................................. vi
1. Program Context, Development Objectives and Design ................................................ 1 2. Key Factors Affecting Implementation and Outcomes .................................................. 4
3. Assessment of Outcomes ................................................................................................ 8 4. Assessment of Risk to Development Outcome ............................................................. 19
5. Assessment of Bank and Borrower Performance ......................................................... 20 6. Lessons Learned............................................................................................................ 21 7. Comments on Issues Raised by Borrower .................................................................... 22
Annex 1. Bank Lending and Implementation Support/Supervision Processes ................. 23 Annex 2. Beneficiary Survey Results ............................................................................... 24
Not applicable. .................................................................................................................. 24 Annex 3. Stakeholder Workshop Reports and Results ..................................................... 25 Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR ......................... 26 Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders ........................... 30 Annex 6. List of Supporting Documents .......................................................................... 31
Annex 7. Analytical underpinnings .................................................................................. 32 Annex 8. Key indicators ................................................................................................... 33
MAP .................................................................................................................................. 35
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A. Basic Information
First operation – P146322
Country Turkey Program Name Sustaining Shared
Growth
Program ID P146322 L/C/TF Number(s) IBRD-8412-TR
ICR Date 12/27/2017 ICR Type Core ICR
Lending Instrument DPL Borrower Republic of Turkey
Original Total
Commitment
US$500 million
equivalent Disbursed Amount EUR 367.4 million
Implementing Agencies:
The Undersecretariat of Treasury, Ministry of Customs and Trade, the Central Bank, Ministry of
Labor and Social Security, Ministry of Energy and Natural Resources, Ministry of Transport,
Maritime Affairs and Communications.
Cofinanciers and Other External Partners:
B. Key Dates
First operation - P146322
Process Date Process Original Date Revised / Actual
Date(s)
Concept Review: 2/6/2014 Effectiveness: 10/2/2014
Appraisal: 6/4/2014 Restructuring(s):
Approval: 7/24/2014 Mid-term Review:
Closing: 6/30/2015 6/30/2015
C. Ratings Summary
C.1 Performance Rating by ICR
Outcomes Moderately satisfactory
Risk to Development Outcome Substantial
Bank Performance Moderately satisfactory
Borrower Performance Moderately satisfactory
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)
Bank Ratings Borrower Ratings
Quality at Entry Satisfactory Government: Satisfactory
Quality of Supervision: Moderately
unsatisfactory
Implementing
Agency/Agencies: Moderately satisfactory
Overall Bank
Performance Moderately satisfactory
Overall Borrower
Performance Moderately satisfactory
iii
C.3 Quality at Entry and Implementation Performance Indicators
Implementation
Performance Indicators
QAG Assessments
(if any) Rating:
Potential Problem
Program at any time
(Yes/No):
No Quality at Entry
(QEA) None
Problem Program at any
time (Yes/No): No
Quality of
Supervision (QSA) None
DO rating before
Closing/Inactive status Moderately satisfactory
D. Sector and Theme Codes
Original Actual
Sector Code (as % of total Bank financing)
Other Non-bank Financial Institutions 30 30
Other Industry, Trade and Services 30 30
Other Energy and Extractives 20 20
Social protection 10 10
Railways 10 10
Theme Code (as % of total Bank financing)
Rural Development 07 07
Urban Development 07 07
Labor Market Policy and Programs 10 10
Jobs 07 07
Business Enabling Environment 60 60
E. Bank Staff
Positions At ICR At Approval
Vice President: Cyril Muller Laura Tuck
Country Director: Johannes Zutt Martin Raiser
Senior Practice Director: Carlos Felipe Jaramillo
Practice Director: John Panzer Roumeen Islam
Practice Manager: Lalita Moorty Ivailo Izvorski
Task Team Leader: Kamer Karakurum-Ozdemir Marina Wes
ICR Team Leader: Anil Onal
ICR Primary Author: Anil Onal
iv
F. Results Framework Analysis
Program Development Objectives
The objective of the programmatic Sustaining Shared Growth development policy loan series
(SSG-DPL) of two operations was to support reforms around the following three pillars: (A)
improving the business climate and enhancing transparency; (B) boosting labor force participation
and widening access to finance; and (C) deepening Turkey’s infrastructure reforms. While focusing
on Turkey’s medium-term growth agenda, the series contained measures to promote transparency
and good governance in the context of building investor confidence and strengthening the
regulatory framework in selected infrastructure areas.
The series was supported by one operation (SSG-DPL-1) with the aim to support Turkey’s socially
and environmentally sustainable growth, which was key to fostering shared prosperity and
particularly income growth for the bottom 40 percent of the population.
Revised Program Development Objectives
Program development objectives or indicators were not revised
(a) PDO Indicator(s)
PDO Indicators for the programmatic SSG-DPL
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised
Target
Values
Actual Value
Achieved at
Completion or
Target Years
Indicator 1: Steady decline in non-agriculture labor informality rates
Value
(quantitative or
Qualitative)
22.9 percent
(Turkstat revised
value as 22.4
percent)
21.5 percent - 21.2 percent
Date achieved 2013 2015 2015
Comments
(incl. % achievement)
PARTLY MET. The target decline was 1.4 percentage points and the actual
decline was 1.2 percentage points. 86 percent of the target reduction was
achieved. Turkstat revised the baseline value from 22.9 percent to 22.4 percent.
Source: TurkStat Household Labor Force Survey.
Indicator 2: Increase in domestic patent applications
Value
(quantitative or
qualitative)
5,600
(Turkish Patent and
Trademark Office
showed value as
4,528)
6,720 - 6,445
Date achieved 2013 2016 2016
Comments
(incl. % achievement)
MET. The target increase was 20 percent and the actual increase was 42
percent. The target increase was exceeded. Turkish Patent and Trademark
Office showed (checked on November 15, 2017) the baseline value as 4,528.
Source: Turkish Patent and Trademark Office.
v
Indicator 3: Increase in corporate bond issuance
Value
(quantitative or
qualitative)
TL43 billion TL50 billion - TL44 billion
Date achieved 2013 2015 2015
Comments
(incl. % achievement)
NOT MET. The target increase was 16.3 percent and the actual increase was 2.3
percent. Only 14 percent of the target increase was achieved. By 2016, the target
was fully achieved.
Indicator 4: Increase in female labor force participation rate
Value
(quantitative or
qualitative)
30.6 percent for
October 2013 32.6 percent - 31.8 percent
Date achieved October 2013 2015 October 2015
Comments
(incl. % achievement)
PARTLY MET. The period for the target value was not specified. The ICR
team used October 2015 for comparability. The target increase was 2 percentage
points and the actual increase was 1.2 percentage points. 60 percent of the target
increase was achieved. Source: TurkStat Household Labor Force Survey.
Indicator 5: Increase in female depositors in financial institutions per 1,000 women (aged 15
and over)
Value
(quantitative or
qualitative)
2 percent 3.3 percent - 5.3 percent
Date achieved 2011 2015 2015
Comments
(incl. % achievement) MET. Source: Findex.
Indicator 6: Companies using auto-enrollment into private pensions
Value
(quantitative or
qualitative)
0 5 0
Date achieved 2012 2015 2015
Comments
(incl. % achievement) NOT MET.
Indicator 7: Increased private sector investment in new electricity generation capacity
Value
(quantitative or
qualitative)
Generation
capacity: 57,058
MW
Generation capacity
> 68,000 MW 73,371 MW
Date achieved 2012 2015 2015
Comments
(incl. % achievement) MET.
Indicator 8: At least one private sector freight operators licensed to operate on the TCDD
infrastructure
Value
(quantitative or
qualitative)
0 At least 1 0
Date achieved 2012 2015 2015
Comments
(incl. % achievement)
NOT MET. In July 2017, a private sector operator signed a licensing agreement
to use the TCDD infrastructure.
(b) Intermediate Outcome Indicator(s)
Not applicable.
vi
G. Ratings of Program Performance in ISRs
Not applicable.
H. Restructuring
Not applicable.
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1. Program Context, Development Objectives and Design This implementation completion and results report (ICR) assesses the results of the programmatic
“Sustaining Shared Growth” development policy loan series (SSG-DPL) in Turkey. The original series
aimed for two operations. The first operation (SSG-DPL-1) of EUR 367.4 million (US$500 million
equivalent) proceeded as planned. After the approval of SSG-DPL-1, the political risks identified at
appraisal materialized. Exacerbated by unexpected political developments, significant spillovers from the
escalated tensions in the Middle East and a failed coup attempt in 2016, they delayed the full
implementation of the program. Consequently, the series lapsed and the second operation (SSG-DPL-2 of
US$500 equivalent) did not proceed as planned. As per the guidelines, the ICR still covers the entire
programmatic series.
1.1 Context at Appraisal
The request for SSG-DPL came at a time of growing economic challenges for Turkey. The U.S. Federal
Reserve’s announcement in May 2013 on monetary policy tightening triggered capital outflows from
emerging markets. Turkey was particularly vulnerable given its large current account deficit (7.6 percent
of GDP in 2013) financed mostly by short-term foreign currency-denominated inflows to the corporate
sector. An accommodative monetary policy stance helped shield Turkey’s economy from short-term
macroeconomic shocks. However, medium-term growth prospects were expected to moderate as global
liquidity conditions tightened further.
Economic challenges for Turkey were exacerbated by investors’ risk perceptions, fueled in part by political
developments in the country. Despite strong popular support for the governing Justice and Development
Party (AKP), which has been in power since 2002, challenges began to emerge starting with the protests
initially linked to Istanbul’s Gezi Park in May 2013. In December 2013, a corruption probe was launched
against senior government officials, leading to a Cabinet reshuffle. With the local elections in March 2014,
Turkey entered a long election cycle including the Presidential elections in August 2014 and parliamentary
elections in 2015.
Against these developments, the authorities were keen to accelerate progress on structural reforms, on
which the Bank had a strong, ongoing policy dialogue. Solid fiscal balances, a partially hedged foreign
exchange position, and a well-capitalized banking sector, kept the risk of an imminent economic crisis low.
The EU’s economic recovery and falling energy prices were the external offsetting factors. However, in
the medium term, improving competitiveness and boosting exports were still critical for mitigating
vulnerabilities and increasing Turkey’s growth potential. Moreover, at a time when Turkey faced growing
economic and political challenges, the government’s request to the Bank to support structural reforms were
important to restore investor confidence.
The government’s Tenth Development Plan for 2014-18 (DP), approved by the Parliament in July 2013,
served as the basis for prioritizing reforms in SSG-DPL. DP aimed at enabling Turkey to transition to
high-income status through high and stable economic growth. To this end, DP had four high level
objectives: (A) “Innovative Production, Stable and High Growth” (targeting macroeconomic measures,
productivity improvements, energy, logistics, infrastructure and greater innovation and technological
capacity); (B) “Qualified Individuals and Strong Society” (targeting social welfare, health, education,
public services, and employment); (C) “Livable Places and Sustainable Environment” (targeting reduced
regional disparities, sustainable cities and services, and responsible use of natural resources); and (D)
“International Cooperation for Development” (targeting sharing of Turkey’s positive development
experiences with other countries).
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SSG-DPL was central to the Bank’s engagement in Turkey, as described in the Country Partnership
Strategy (CPS) endorsed in FY12. The series aimed at advancing selected outcomes under the first and
third pillars of CPS (enhanced competitiveness & employment and deepened sustainable development).
SSG-DPL built on the previous Competitiveness and Savings development policy loan (CS-DPL, FY13),
Environmental Sustainability and Energy Sector Development Policy Loan (FY12), and a wide range of
advisory services and analytics products.
1.2 Original Program Development Objectives (PDO) and Key Indicators
The objective of SSG-DPL was to support reforms around the following three pillars: (A)
improving the business climate and enhancing transparency; (B) boosting labor force
participation and widening access to finance; and (C) deepening Turkey’s infrastructure reforms.
While focusing on Turkey’s medium-term growth agenda, the series contained measures to
promote transparency and good governance in the context of building investor confidence and
strengthening the regulatory framework in selected infrastructure areas.
SSG-DPL-1 aimed at supporting Turkey’s socially and environmentally sustainable growth,
which was key to fostering shared prosperity and particularly income growth for the bottom 40
percent of the population.
Eight key indicators were identified for the entire series and grouped under the same three pillars:
Pillar A. Improving the business climate and enhancing transparency:
i. Steady decline in non-agriculture informality rates (measured by labor informality);
ii. Increase in domestic patent applications; and
iii. Increase in corporate bond issuance.
Pillar B. Boosting labor force participation and widening access to finance:
i. Increase in the female labor force participation rate;
ii. Increase in female depositors in financial institutions per 1,000 women (% aged 15
and over); and
iii. Companies using auto-enrolment into private pensions.
Pillar C. Deepening Turkey’s infrastructure reforms:
i. Increased private sector investment in new electricity generation capacity; and
ii. At least one private sector freight operator licensed to operate on Turkish State
Railways (TCDD) infrastructure.
1.3 Revised PDO and Key Indicators, and Reasons/Justification
Program development objectives or key indicators were not revised.
1.4 Original Policy Areas Supported by the Program:
3
Pillar A. Improving the business climate and enhancing transparency:
In Turkey, informality is widespread, which has adverse implications in terms of economic & social
vulnerability, social cohesion & rule of law, fiscal outcomes, and productivity & growth. Addressing
informality requires an integrated policy mix and eliminating barriers to private sector activity is an
essential element. In Turkey, gradual implementation of the Commercial Code has been central to
enhancing the business climate and increasing private sector activity. The code provided a modern
framework for commercial activity and entrepreneurship, grounded in financial transparency and
strong corporate governance. SSG-DPL-1 supported implementation of the Commercial Code through
prior action #2.
Further simplification of business procedures through the introduction of a Central Registration
System (MERSIS) was central to reducing the high cost of establishing and operating a formal
business, and lowering informality. SSG-DPL-1 supported full operationalization of MERSIS through
prior action #1. These efforts were expected to be complemented with an income tax reform,
simplifying the existing tax legislation and reducing costs of tax compliance and formality, which was
supported by SSG-DPL-2’s indicative trigger #1. Enhancing transparency in the governance of public
institutions was key to ensuring a level playing field across formal businesses and strengthening formal
business activity. To this end, SSG-DPL-2 supported the implementation of the Turkish Courts of
Accounts Law (adopted in 2010) through indicative trigger #2.
Low domestic savings and resulting reliance on external and mostly short-term financing are one of
the key challenges for Turkey. In this context, implementation of the Capital Markets Law (adopted
in 2012) was central to broaden domestic financing sources and reduce external financing needs
through institutional and regulatory enhancements. SSG-DPL-1 supported the adoption of the key
secondary legislation for the implementation of the Capital Markets Law through prior action #3.
Moreover, SSG-DPL-2 supported improved capital market governance, conduct (including liquidity),
and oversight arrangements through indicative trigger #4.
Turkey’s transition to high-income status requires a shift to higher value added activities. To this end,
a well-developed intellectual property rights (IPR) regime was the initial building block of an
innovation policy mix to help increase research & development activities and their commercialization.
SSG-DPL-2 supported the adoption of a new patents law and a new IPR strategy through indicative
trigger #3.
Pillar B. Boosting labor force participation and widening access to finance:
Between 2008 and 2013, 4 million jobs were created in Turkey, accompanied by increased labor force
participation rates, particularly among women. This benefited from targeted support measures
implemented during the global financial crisis. However, female labor force participation still
remained far below the rates observed in the peer countries. In this context, eliminating the rigidity in
the overall employment system and measures that targeted increased employment of vulnerable groups
including women were central. The adoption of the National Employment Strategy (NES) and its
implementation were key to these efforts, which were supported by SSG-DPL-1’s prior action #4 and
SSG-DPL-2’s indicative trigger #5.
Low labor market participation and prevailing practices in the financial sector limited some vulnerable
groups’ including women’s access to finance. To widen access to finance, the full operationalization
of the new Risk Center and expanding its coverage were key to improving availability of credit
information, particularly for the vulnerable groups. SSG-DPL supported these efforts through policy
action#5 and indicative trigger #6. Moreover, measures to protect consumers of financial products,
4
increase their awareness, and enhance transparency in the practices of different financial institutions
were expected to benefit the consumers, particularly the vulnerable groups including women. SSG-
DPL-1 supported these efforts through prior action #6 and 7. SSG-DPL-2 supported the
implementation of a financial inclusion strategy through indicative trigger #7.
Measures to increase voluntary savings were also a part of the reform agenda to not only support
sustained shared growth but also help Turkey raise the overall saving rate, enhancing the country’s
growth prospects by making it less dependent on volatile external inflows. SSG-DPL-2 supported
these efforts through piloting of auto-enrollment to the voluntary pension system (indicative trigger
#8).
Pillar C. Deepening Turkey’s infrastructure reforms:
Turkey’s past growth performance benefited from large infrastructure investments. Going forward,
continuing these investments, but in a more transparent and growth-enhancing manner, was on the
agenda. This required increased competition in the energy and transport markets.
More specifically, in the energy market, modernization and consolidation of the regulatory
frameworks for electric power and natural gas sectors were essential. This was a part of the overall
efforts to enhance transparency and competition in the energy sector. These efforts were supported by
SSG-DPL’s prior action#8 and 9, and indicative trigger #9 and 10.
In the railway transportation sector, unbundling the transport and infrastructure and creating a
commercial environment for open access in rail were underway through the implementation of the
new railway transportation law (adopted in 2013). SSG-DPL supported these efforts through prior
action #10 and indicative trigger #11, 12, and 13.
Complementary efforts were underway to improve the performance and governance of the state-
owned enterprise sector, including in the context of the Commercial Code (see the policy actions under
Pillar A).
1.5 Revised Policy Areas
Policy areas supported by the program were not revised.
1.6 Other significant changes
As the political risks identified during appraisal materialized and unexpected political developments took
place, the series lapsed and SSG-DPL-2 was dropped.
2. Key Factors Affecting Implementation and Outcomes
2.1 Program Performance
With ten prior actions, SSG-DPL-1 was approved by the Bank’s Board of Directors on July 24, 2014. 13
indicative triggers were identified for SSG-DPL-2 with a planned approval date of May 28, 2015. In the
24 month-period following the approval of SSG-DPL-1, only seven of the indicative triggers were fulfilled.
Therefore, the series lapsed. After the lapse of the series, four of the six remaining indicative triggers were
implemented. At the time of the ICR, two remaining indicative triggers were not fulfilled.
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Table 1: Status of the policy actions
SSG-DPL-1
Prior action Status
#1: The Borrower has fully operationalized the Central Registration System (“MERSIS”) by
the end of 2013, by transferring data from 238 separate trade registries to the central database.
The data is accessible to government institutions and the MERSIS system permits companies
to complete all transactions related to company establishment (including payments) online.
FULFILLED.
#2: The Borrower’s Public Oversight Authority (POA) has published in the Official Gazette
the full set of 37 Turkish Standards on Auditing foreseen in the Commercial Code, which are
in line with the international standards on auditing. The Borrower also has published the
Council of Ministers Decree 2014/5973 in Official Gazette No. 28941 on March 14, 2014,
which reduced the thresholds for independent audit, thereby increasing the number of
companies subject to independent audit.
FULFILLED.
#3: The Borrower has adopted Capital Markets Secondary Legislation to implement the
Capital Markets Law, which Capital Markets Secondary Legislation will enable the creation
of a new securities exchange that will replace the existing Istanbul Stock Exchange, merge
the exchange with the gold and derivatives exchanges, introduce a new prospectus review
process aligned with European Union requirements, enhance investor protection (including
through improved disclosure requirements and improved corporate governance principles),
and introduce new corporate bonds and mutual funds regulations, as well as new capital
markets instruments (including different types of sukuks and asset-backed securities).6
FULFILLED.
#4: The Borrower’s High Planning Council has approved on May 6, 2014 and has published
in Official Gazette No. 29015 on May 30, 2014, the National Employment Strategy 2014-
2023, which aims to put in place a policy framework to address constraints to hiring and to
further promote employment, particularly for vulnerable groups.
FULFILLED.
#5: The Risk Center of the Banks Association of Turkey became fully operational in June
2013, which aims to improve the depth of credit information belonging to firms and
individuals, thereby providing cost effective systematic information on potential borrowers,
laying the basis for orderly growth of the financial services industry and promoting
management of credit risk.
FULFILLED.
#6: The Borrower has published Consumer Protection Law No. 6502 in Official Gazette No.
28835 on November 28, 2013, which aims to increase transparency and awareness about the
financial services, improve disclosure requirements, promote competition in the marketplace,
prevent fraud and eliminate unfair practices. The Borrower published Payment and Securities
Settlement Systems, Payment Services and Electronic Money Institutions Law No. 6493 in
Official Gazette No. 28690 on June 27, 2013, which sets out the principles and procedures
applicable to: payment and securities settlement systems, payment services, payment
institutions and electronic money institutions.
FULFILLED.
#7: The Borrower has published Regulation on Principles for Establishment and Operations
of Financial Leasing, Factoring and Finance Companies in Official Gazette No. 28627 on
April 24, 2013, which sets out the principles and conditions for establishment and operation
of leasing, factoring and financing companies. The Borrower also has published Regulation
on Accounting Practices and Financial Statements for Leasing, Factoring and Financing
Companies in Official Gazette No. 28861 on December 24, 2013, which sets out: the
principles of accounting, financial statements to be disclosed and provisioning requirements.
FULFILLED.
#8: The Borrower has published Electricity Market Law No. 6446 in Official Gazette No.
28603 on March 30, 2013, which aims to ensure the development of a financially sound,
stable and transparent electricity market operating in a competitive environment and covers
electricity generation, transmission, distribution, wholesale and retail sale, import, export and
market operation activities; and the rights and obligations of all real persons and legal entities
involved in these activities. The Borrower’s energy regulator starting from May 2013 has
issued Electricity Market Secondary Regulations, which are intended to provide a modern
legal framework for the electricity market.
FULFILLED.
6
#9: The Borrower has initiated the establishment of an independent energy market operation
corporation (EPIAS) with the approval of the articles of association of EPIAS by EMRA’s
Board in September 2013 and by the Borrower’s High Planning Council in March 2014 (with
Türkiye Elektrik İletim A.Ş. as a shareholder of EPIAS).
FULFILLED.
#10: The Borrower has published Liberalization of Turkish Railway Transportation Law No.
6461 in Official Gazette No. 28634 on May 1, 2013, which permits qualified train operators
to be licensed to operate in Turkey and to have non-discriminatory access to use the railway
infrastructure in Turkey, and has conducted consultations on secondary legislation for
implementation of said law.
FULFILLED.
SSG-DPL-2
Indicative trigger Status
#1: Enactment of a new income tax law. NOT
FULFILLED.
#2: TCA audit reports of all general government institutions excluding the general budget
institutions, to include the financial statements of relevant institutions.
FULFILLED.
#3: Strengthening innovation through the approval of the patents law and the finalization of
an Intellectual Property Rights Strategy.
FULLFILLED
WITH DELAY.
#4: Measures to further enhance investor confidence in capital markets: full implementation
of the Capital Markets Association (CMA) of Turkey; and implementation of liquidity
arrangements for corporate bond markets.
FULFILLED.
# 5: Implementation of the National Employment Strategy. UNDERWAY.
#6: The Banks Association of Turkey Risk Centre expanding the base of credit/payment
information providers by signing new protocols with Social Security, Tax authority, and
utility providers.
FULFILLED.
#7: Implementation of a strategy for financial inclusion. FULFILLED.
#8: Adoption of pilot of auto-enrolment into the voluntary pension system. FULFILLED
WITH DELAY.
#9: Start of operations and private sector participation in EPIAS. FULFILLED.
#10: Amendment of the Natural Gas Market Law. NOT
FULFILLED.
#11: Adoption of critical secondary legislation of the new railway law. FULFILLED.
#12: Registration of TCDD Infrastructure and TCDD Transport. FULFILLED.
#13: Allocation of staff, fixed assets, rolling stock and financial resources/liabilities between
TCDD infrastructure and TCDD Trains, and TCDD issuance of its Network Statement.
FULFILLED
WITH DELAY.
2.2 Major Factors Affecting Implementation:
Two factors adversely affected the implementation:
A. Slowdown due to external factors:
Political risks identified at appraisal materialized (see risk management paragraph below). In addition,
unexpected political developments took place. The geopolitical turmoil in the Middle East had
spillover effects on Turkey and there was a failed coup attempt in July 2016, leading to significant
turnover. Consequently, reform implementation was delayed.
B. Program ambition:
7
Even though Turkey had a strong implementation capacity, given the macroeconomic and political
outlook at the time, SSG-DPL appears to have been an ambitious program. The programmatic
structure was fit given the government’s commitment at the time and the need for continuity in the
implementation of the reform agenda. A programmatic series, rather than a stand-alone operation,
helped set a medium-term trajectory for policy and institutional reforms. However, SSG-DPL
consisted of a total of 23 policy actions, 13 of them as indicative triggers for SSG-DPL-2. The
indicative triggers included two new laws, the income tax law and the natural gas law, that had been
long in the talks; implementation of two strategies; and liberalization of the railway transportation
sector. Together these may have been overly ambitious given the context at the time.
Three factors supported the implementation:
C. Alignment with government priorities:
Against the backdrop of growing economic challenges and a shifting investor sentiment, the
government committed to implementing DP, supported by the Bank through a programmatic series.
In less than a year after the Bank’s commitment to the government (August 2013), the government
fulfilled seven of the ten prior actions for SSG-DPL-1. The remaining three were already completed
in March-June 2013 period. The initial momentum in came on the back of the government’s extensive
consultations with different stakeholders. Turkey has participatory processes underpinning short-term
and long-term policy formulation. Groups involved in this process include unions, employer
organizations, chambers of commerce and industry, civil society organizations, academics, and private
sector representatives. The legislative process in Turkey also requires ensuring participation of all
public stakeholders during the preparation of any draft legislation.
D. Sound analytical underpinnings:
SSG-DPL was based on an extensive body of analytical work carried out by the Bank in partnership
with the authorities, and by other partners. This analytical work provided the basis for a strong dialogue
with the government, supported the design of SSG-DPL, and culminated in “Turkey’s Transitions”
report by the Bank. The table in Annex 7 shows how the prior analytical work links to specific policy
actions in SSG-SPL.
E. Risk management:
SSG-DPL had a clear assessment of economic and political risks with mitigating factors that
contributed to implementation progress. Political developments in mid-2013 and early 2014, together
with a long election cycle (Presidential and parliamentary elections in 2014 and 2015) and turnover at
the political and technical levels were identified as main political risks to the continuity of the reform
program. Mitigating these risks were the extensive consultations undertaken by the authorities. This
contributed to wide support for the proposed reforms, and gradual implementation with the exception
of the income tax and natural gas laws, which did not proceed. This was in part due to unforeseen risks
that were beyond the control of the Bank and the authorities that led to a stalling of progress.
2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization:
Design. Eight key indicators were identified to monitor the progress of SSG-DPL in meeting its PDO.
These indicators were grouped under the same three pillars used in the PDO. The indicators were easy to
8
monitor and the data were publicly available through the statistical office and implementing agency
websites.
Implementation. As in the preceding operations, the Undersecretariat of Treasury was responsible for
coordinating actions among the agencies involved in the program. There was scope to further strengthen
systematic monitoring of performance under SSG-DPL. There was no evidence of central collection of
M&E data and its monitoring by the Undersecretariat of Treasury. However, this was mitigated through
SSG-DPL’s M&E design, which was based on eight easy-to-monitor indicators.
Utilization. Under SSG-DPL, M&E data was not collected centrally. There is scope to enhance the
utilization of the M&E data that was available to the individual ministries and institutions. As M&E
systems in Turkey were still developing, the data that was collected were not always linked to the broader
government policy agenda.
2.4 Expected Next Phase/Follow-up Operation:
On July 14, 2017, the Bank’s Board of Directors approved a stand-alone Resilience, Inclusion, and Growth
development policy financing operation (RIG-DPF) for Turkey. The operation disbursed EUR 350.9
million (US$400 million equivalent). The PDO of the operation were to: (A) increase domestic savings
and enhance fiscal transparency; (B) support the economic inclusion of vulnerable groups; and (C) address
structural bottlenecks to sustainable growth. RIG-DPF followed up on the reform agenda supported by the
SSG-DPL. Six out of nine prior actions in RIG-DPF were based on the indicative triggers of SSG-DPL-2
(#2, 3, 5, 8, 11, 12, and 13 in SSG-DPL) and deepened them.
3. Assessment of Outcomes
3.1 Relevance of Objectives, Design and Implementation
Overall relevance rating: Modest
Objectives: High
At the time of the ICR, the government’s development priorities were still defined by DP (2014-2018),
which diagnosed the key challenges that Turkey needed to overcome to escape the “middle income
trap” as explained in section 1.1. The DP objectives were aligned with the Bank’s systematic country
diagnostic (SCD) completed in March 2017.The Bank Board of Directors endorsed a new Country
Partnership Framework for FY18-21 (CPF) in August 2017. The CPF used three filters to define the
World Bank Group’s (WBG’s) work program: (A) Alignment with DP; (B) Focus on SCD priority
challenges; and (C) Focus on WBG’s comparative advantage. Based on these criteria, nine CPF
objectives were defined under three pillars : (A) Growth (the CPF objectives under this pillar were
increased fiscal space, enhanced access to finance for underserved markets, and enhanced
competitiveness & employment in selected industries); (B) Inclusion (the CPF objectives under this
pillar were increased effectiveness of social assistance, increased labor force participation of women
& vulnerable groups, strengthened performance of education & health sectors); and (C) Sustainability
(the CPF objectives under this pillar were improved reliability of energy supply & generation of green
energy, improved sustainability & resilience of cities, and increase sustainability of infrastructure
assets & natural capital).
9
SSG-DPL’s PDO were fully consistent with the government’s development priorities and the Bank’s
CPF and analytical work at the time of the ICR. For this reason, the relevance of objectives is rated as
high.
Design: Modest
SSG-DPL was based on ten prior actions and 13 indicative triggers, linked to eight key performance
indicators to support a three-pillar PDO. The indicators were linked to the key aspects of the policy
areas under the PDO. Policy actions were relevant to the PDO as well. However, the causality between
the policy actions and key indicators was not strong in all cases, particularly considering the short
implementation period and the small size of intended improvements. For instance, Turkey’s
informality is multi-dimensional and requires an integrated policy response. Therefore, it is not
possible to attribute marginal changes observed in a few years to a specific set of policy actions,
particularly in the presence of other demand- and supply-side factors with potential effects on
informality.
SSG-DPL’s programmatic structure was fit given the government’s commitment to the
implementation of DP at the time and the need for continuity in the implementation of key structural
reforms in Turkey. On the other hand, the series lapsed in light of the factors discussed in section 2.2
above. Evaluated against this, with 23 policy actions, 13 of them identified as indicative triggers for
SSG-DPL-2, including two new laws, the income tax law and the natural gas law, that had been long
in the talks; implementation of two strategies; and liberalization of the railway transportation sector,
SSG-DPL appears to be an ambitious program. The program was further challenged by being spread
across more than 7 different ministries, which is particularly difficult at a time of political and
economic uncertainty. For the above reasons, the relevance of the design of the program is rated as
modest.
Implementation arrangements: Modest
Implementation arrangements were a continuation of practices from the previous DPLs. The
Undersecretariat of Treasury was responsible for coordinating among the relevant ministries and
agencies. The first operation was quickly processed and represented a continuation of the Bank’s
engagement, building on efficient cooperation arrangements between the Bank and the authorities
while enhancing the basis for future policy dialogue. At the same time, this was a challenging program
with actions spread across many agencies in government. This required strong convening power,
integration of multiple actions around a common objective and systematic performance monitoring,
which were only partially fulfilled. For this reason, the relevance of the implementation arrangements
is rated as modest.
3.2 Achievement of Program Development Objectives
Overall achievement of PDO rating: Moderately satisfactory
The macroeconomic context in Turkey changed over the course of SSG-DPL, which affected the
achievement of program objectives. External factors discussed above led to a sharp depreciation in the
Lira with spillover effects on inflation, growth and financial sector risks given the corporate sector’s
high exposure to foreign currency-denominated borrowing. Consequently, external debt increased.
The current account deficit was contained thanks to the EU’s recovery and declining global commodity
prices. Economic growth was also supported by a large fiscal stimulus, which worsened the fiscal
situation sharply (Annex 8).
10
Despite the challenging economic and political circumstances, SSG-DPL provided timely support to
high priority reforms, which helped move forward on the overall PDO. Although the progress against
specific results indicators was mixed due to attribution challenges, the policy actions were critical in
ensuring continuity and impact of the reform program. Despite a period of political turmoil leading to
delays in reform progress, most of the policy actions were implemented even in the absence of the
second operation.
This section outlines in more detail the progress under each of the policy areas. As the key performance
indicators identified under each pillar is a good representative of the key policy areas, the overall rating
for each pillar is calculated as the simple average of the ratings for individual indicators.
Pillar A: Improving the business climate and enhancing transparency: Moderately satisfactory
Reducing non-agriculture labor informality: Moderately unsatisfactory
This indicator was supported by four policy actions: prior actions #1 and 2 for SSG-DPL-1; and
indicative triggers #1 and 2 for SSG-DPL-2.
Between 2013 and 2015, the non-agriculture
labor informality rate continued to decline,
mostly achieving the SSG-DPL target. The
rate fell by 1.2 percentage points, from 22.4
percent in 2013 to 21.2 percent in 2015
(Figure 1). The target decline was 1.4
percentage points. The fall between 2013
and 2015 followed the trend after 2005.
Labor informality increased slightly after
2015 as an increase in minimum wage made
hiring decisions costlier and an influx of
foreigners (particularly Syrians under
Temporary Protection) continued to
constrain formalization of employment.
SSG-DPL actions supported the government’s strategy for tackling informality. The government put
in place three three-year action plans on informality. The action plan for 2011-13 included the SSG-
DPL’s prior action #1, full implementation of the Central Registration Sistem (MERSIS). By the end
of 2013, data on capital companies, cooperatives, individual enterprises, branches of foreign
companies, enterprises of associations and foundations was compiled from 238 separate trade
registries and transferred to MERSIS. By the beginning of 2015, MERSIS was fully operationalized
with all company information accessible to various government institutions and other companies
within a confidentiality framework in line with the EU rules.
Full operationalization of MERSIS complements other policy actions on informality by providing a
single comprehensive electronic registry with information accessible to the auditing institutions. It
also helps reduce barriers to establishing and operating a formal business, which is another driver of
informality. Turkey has made progress in simplifying business regulations as measured by the Bank’s
Doing Business and become closer to the best practice (distance-to-frontier increased from 64.8 in
2008/09 to 69.1 in 2016/17) even though new regulatory burdens were also introduced. MERSIS, by
simplifying procedures to establish and operate a business, contributed to the improvements.
Figure 1: Non-agriculture labor informality rate
Source: TurkStat.
31.6
34.332.3
30.127.8
22.421.2
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The implementation of the Commercial Code that came into effect on July 1, 2012, was the cornerstone
of the business climate reforms to address informality. The code introduced greater transparency and
accountability to the governance of private and state-owned enterprises as well as to the activities of
the Public Oversight Authority (POA). POA was established in 2011 to deal with the implementation
of the accounting and auditing provisions of the new Commercial Code. SSG-DPL supported the
implementation of the code through prior action #2 and helped the POA become more transparent by
publishing the auditing standards and increasing the number of enterprises subject to independent audit.
As a result, the total number of enterprises that were subject to an audit increased from 3,396 in 2013
to 5,378 in 2016, an increase of 58 percent.
For the public sector, despite significant improvements in the external audit framework introduced by
the 2010 Turkish Court of Accounts (TCA) law, implementation challenges have continued to limit
accountability. When the law became effective, the individual financial statements of line agencies
(general budget institutions) were not available. Accordingly, in 2013 when it became a requirement,
TCA submitted audit reports for all general government (including general budget) institutions with
two major issues left to be addressed. First, the audit reports of the special budget, regulatory and
supervisory authorities and local administrations had audit opinions on the financial statements but
did not include the financial statements themselves. Second, the TCA issued disclaimers of audit
opinions on the general budget institutions because of unavailability of financial statements. The first
issue was addressed by SSG-DPL (indicative trigger #2) in 2014 when the TCA included the financial
statements of general government institutions (excluding general budget institutions) in its audit
reports prepared for 2013. To address the second issue, the TCA and the Ministry of Finance agreed
on a three-year transition period (2013-2015) for the preparation of entity level financial statements
for general budget institutions.
One of the indicative triggers (indicative trigger #1) for the second operation under SSG-DPL was the
enactment of a new income tax law. Years of amendments to both the personal and corporate income
tax laws have made the Turkey’s tax system complex and costly to comply with, negatively impacting
the business environment and raising the costs of formality. On June 12, 2013, a draft new income tax
law was submitted to the Parliament, merging the existing income and corporate tax laws into a single
code with the aim to expand the tax base and simplify the existing legislation by re-introducing the
obligation to file an income tax return, applying a single marginal tax structure (15 to 35 percent) to
income from most revenue sources, and limiting exemptions on speculative capital and property gains.
The law was a substantial first step towards overhauling the income tax system for enhanced efficiency,
effectiveness, and equity. However, it did not reach the approval stage.
The performance on this indicator is assessed as moderately unsatisfactory. Even though the target
reduction was mostly achieved, the causality between the SSG-DPL’s policy actions is not strong
considering the short observation period and the small size of the change in the indicator value.
Moreover, one of the indicative triggers that aimed to support this indicator, the adoption of the income
tax law, was not fulfilled.
Increasing domestic patent applications: Satisfactory
This indicator was supported by one policy action, indicative trigger #3 for SSG-DPL-2.
Between 2013 and 2016, the number of domestic patent applications in Turkey continued to increase,
exceeding the SSG-DPL target (Figure 2). In 2013, there were 4,528 applications. By 2016, the number
reached 6,445, an increase of 42 percent. The target increase was 20 percent. The increase was
continuation of the trend after 2006.
12
SSG-DPL was central in this through
support for formulation of a national
Intellectual Property Strategy and the new
Industrial Property Law (indicative
trigger #3). The Government approved
the strategy and the related action plan for
2015-18 in November 2014, which is
gradually being implemented. The new
Law was issued in the Official Gazette on
January 10, 2017.
Before the new law, intellectual property
rights were managed in a fragmented
way. They were covered by a series of old
decrees on patents, trademarks, industrial
designs, and geographical signs, as well
as laws on the functions of the Turkish Patent Institute (now renamed to the Turkish Patent and
Trademark Office) and on the protection of integrated circuits. The new law combines and rationalizes
the legal framework for these issues, bringing them largely in line with the EU standards. It
incorporates appropriate incentive systems to motivate the rapid commercialization of innovations
derived at universities and with the assistance of government research funds. It eliminates registration
protection of unexamined patents, a practice that had created two classes of patents in Turkey, while
providing for a substantive examination to ensure that all patented innovations incorporate novelty, an
inventive step, and an industrial application. The new law also incorporates provisions allowing the
new patent authority to cancel patents, either through a post-grant review or due to extended periods
of non-use. In addition to harmonizing Turkey’s legislation with the EU, the new law makes the legal
framework more systemic, understandable, and user-friendly, and therefore, is expected to increase
patent applications.
The performance in this area is assessed as satisfactory. Even though the target increase between 2013
and 2016 was surpassed, the causality between the policy action and the indicator was not strong as
the new Industrial Property Law was adopted only in January 2017. However, the new law was a
necessary initial step to build a fully functioning intellectual property rights system, which is a key
component of an efficient and effective policy mix and therefore, likely to create impact.
Increasing domestic corporate bond issuance: Satisfactory
This indicator was supported by two policy actions: prior action #3 for SSG-DPL-1; and indicative
trigger #4 for SSG-DPL-2.
Between 2013 and 2015, domestic corporate bond issuances remained below the SSG-DPL target. In
2013, corporate debt issuances were TL 43 million. In 2015, they increased marginally to TL 44
million. The SSG-DPL target was TL 50 million corporate bond issuances for 2015. The target was
attained in 2016.
Two policy actions supported by SSG-DPL were instrumental to thperformance increase in corporate
bond issuances. The prior action #3 supported the government in adopting a set of secondary
legislations to implement the Capital Markets Law that was enacted in 2012. These legislations
included the Mutual Funds Regulation, Pension Funds Regulation, Merging of the Exchanges, IPO
Regulation, Corporate Governance Regulation, Regulation on Notification Requirements, Regulation
on Inspections of Information Misconduct and Market Fraud, Regulation on Actions Creating Market
Figure 2: The number of domestic patent
applications
Source: Turkish Patent and Trademark Office.
0
1000
2000
3000
4000
5000
6000
7000
19
95
19
96
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97
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13
Disruptions, and Regulation on Principles of Public Statements for Special Conditions. Building on
these secondary legislations, the government also implemented the Capital Markets Association of
Turkey and liquidity arrangements for corporate bond markets (indicative trigger #4).
Supported by this comprehensive reform package, Turkey’s domestic capital markets reached greater
level of development in recent years. Today, the domestic yield curve spans up to ten years for both
fixed-rate and inflation-linked instruments and the volume of corporate debt issuances grew from their
average of TL 160 million during 2006-09 to TL 50 billion in 2016. These developments were
supported by a solid market infrastructure; improvements in the regulatory framework for instruments
such as corporate bonds, covered bonds and Sukuk; and the recent growth of pension funds. In the
equity markets, 400 companies were listed as of December 2016 at Borsa Istanbul (BIST) that
combined the former Istanbul Stock Exchange, Istanbul Gold Exchange, and the Derivatives Exchange
of Turkey. BIST plays a proactive role in enhancing the infrastructure and implementing initiatives to
develop the segment and enhance access to a wider group of firms.
Performance in this area is assessed as satisfactory. Even though the target increase in new corporate
bond issuances was achieved with a one-year lag, the policy actions supported by SSG-DPL in this
area are expected deepen Turkey’s financial sector and reduce the economy’s dependency to foreign
financing, which is one of Turkey’s main sources of macroeconomic vulnerability. In the two-year
observation period, corporate bond issuances were subject to external influences as well. Some of
these were related to the supply and some were related to the demand. On the demand side, the
domestic institutional investor base was small albeit growing. On the supply side, the key factors were
a fall in planned investments and costlier corporate bond financing compared to bank loans that were
available on more favorable terms.
Pillar B: Boosting labor force participation and widening access to finance: Satisfactory
Increasing female labor force participation rate: Satisfactory
This indicator was supported by two policy actions: prior action #4 for SSG-DPL-1; and indicative
trigger #5 for SSG-DPL-2.
Between 2013 and 2015, female labor force
participation rate increased, partially achieving
the SSG-DPL target (Figure 3). In October
2013, 30.6 percent of the female population
(aged 15 and over) were active in the labor
market. In October 2015, this ratio reached 31.8
percent, an increase of 1.2 percentage points.
The target increase was 2 percentage points.
SSG-DPL supported the government’s efforts
to increase female labor force participation
through adoption (prior action #4) and
implementation of the National Employment
Strategy (NES, 2014-2023, indicative trigger
#5). In line with the NES priorities, several measures were undertaken in recent years. For example,
Law no: 6745 was adopted in 2016, introducing tax incentives for private nursing schools through
amendments to the Income Tax Law. Analytical work conducted by the Bank found that incentivizing
availability of affordable childcare can help relax important barriers to increased female labor force
participation.
Figure 3: Female activity rate
Source: Eurostat and TurkStat.
48.5 49.4 50.0 50.3 50.9 51.3 51.6
23.3 23.6 24.527.6
29.5 30.332.5
EU Turkey
14
The Law built on the reforms introduced through Law no: 6663, issued in the same year, which
contributed to increasing female labor force participation by enhancing working rights. The reforms
included promoting the involvement of both spouses to childcare, increasing paternity leave,
introducing flexible working hours, and preventing employment termination or redundancy during
paternity/maternity leave. Accessible and affordable childcare services and stronger maternity and
paternity leave rights of employees were key to bridging the gap between women’s median monthly
earnings and the cost of care.
Another important development was the introduction of flexible work modalities through the Law no:
6715 adopted in 2016. The Law legalized formal temporary relations and introduced various
telecommuting work arrangements such as remote, home, mobile, virtual or cloud working and
affording them equal protections as other workers under the Turkish labor law. There were also
supporting measures to incentivize female employment. For example, the government introduced
grants to subsidize social security premiums of women. Active labor market programs that aimed at
increasing the employability of the vulnerable groups, particularly women, was expanded in terms of
budget and the number of beneficiaries.
The performance in this area is assessed as satisfactory. The target increase was partially achieved by
2015 and fully achieved by 2016. The policy actions supported by SSG-DPL in this area were
comprehensive. Turkey’s low female labor force participation is a multi-faceted issue, influenced by
low levels of education, inflexible work arrangements, inadequate supply of quality affordable child
and elderly care, and overall cultural norms. Therefore, it requires an integrated policy mix, of which
the reforms supported by SSG-DPL are an essential component.
Increasing female depositors in financial institutions: Highly satisfactory
This indicator was supported by five policy actions: prior actions #5, 6, and 7 for SSG-DPL-1; and
indicative triggers #6 and 7 for SSG-DPL-2.
Between 2011 and 2015, the number of female depositors in financial institutions increased
significantly, surpassing the SSG-DPL target. According to the Findex, the proportion of female adults
saving at a financial institution rose from 2 percent in 2011 to 5.3 percent in 2015. The SSG-DPL
target 3.3 percent for 2015.
SSG-DPL supported the government’s efforts to increase women’s access to finance through full
operationalization of the Risk Center of the Banks Association of Turkey (prior action #5) in June
2013. The Center enhanced the availability of firms’ and individuals’ credit information and alleviated
the information asymmetry between lenders and borrowers by providing cost effective and systematic
information on the borrowers. The Center increased the number and types of financial institutions
included to the system beyond banks. It also increased the coverage ratio to over 80 percent of adults.
Available information was also expanded beyond negative credit information to include the payment
patterns. Increased availability and coverage of credit information was particularly beneficial for
individuals and firms with shorter or no credit history. The Centre has been expanding the base of
information providers. Protocols with seven telecommunication service providers are expected to be
signed by the end of 2017. The aim is to expand the coverage to other utility companies including, gas
and water utility providers, and to the Social Security and the Tax Authority.
The adoption of the new Consumer Protection Law and the new Law on Payment and Security
Settlement Systems (prior action #6) also contributed to increasing female participation to the financial
system. The new Consumer Protection Law aimed at increasing transparency and awareness about
financial services, improving disclosure requirements, promoting competition in the marketplace,
15
preventing fraud, and eliminating unfair practices. Following the enactment of the Law, secondary
regulations were issued to define and limit the fees that banks could charge to the customers, and
strengthen the disclosure requirements.The Law on Payment and Security Settlement Systems,
Payment Services and Electronic Money Institutions improved financial sector diversification by
enabling greater competition, ensuring better quality in financial services, decreasing costs for the
financial consumer and increasing access to financial services.
SSG-DPL also supported the formulation and implementation of a financial inclusion strategy
(indicative trigger #7). The strategy was prepared and coordinated by the Undersecretariat of Treasury
and included action plans on consumer protection and financial education. The strategy and action
plans have been implemented in coordination with Banking Regulation and Supervision Agency and
Capital Markets Board.
The performance in this area is assessed as highly satisfactory. The target increase was surpassed, the
policy actions supported by SSG-DPL in this area were comprehensive, and the causality between the
actions and the indicator was strong.
Increasing auto-enrollment to private pensions: Moderately satisfactory
This indicator was linked to one policy action: indicative trigger #8 for SSG-DPL-2.
The pilot for auto-enrollment into the private pension system (indicative trigger #8) was not adopted
until the series lapsed. Therefore, the target auto-enrollment rate was not achieved. However, an
amendment to the Private Pension Saving and Investment System Law was enacted and published in
the Official Gazette on August 25, 2016. This amendment went beyond the pilot to initiate nationwide
implementation of auto-enrollment to private pensions, which became effective on January 1, 2017.
As of December 1, 2017, there were 3,405,229 workers enrolled to private pension schemes through
auto-enrollment.
Auto-enrollment is being rolled out in stages, starting with the largest employers and continuing to
cover all employers with more than five employees by January 2019. Regulations and guidelines on
fees, investments, duties of employers and other issues have been introduced. The Bank supported
Turkey’s Treasury in creating the new system, together with an improved model for regulation and
supervision of the private pension system. Auto-enrollment compels employers to automatically enroll
employees into a pension saving scheme, leaving employees the choice to opt out. Because of inertia
and because employees receive matches and incentives only if they stay, international experience
confirms that higher coverage and increased contributions can be achieved (e.g. over 7 million extra
savers in the UK).
The introduction of auto-enrollment into private pensions is a major advance for the pension system.
A much higher proportion of the population needs to have complementary pension saving – to create
a more balanced system and to protect them for the time when the public system will inevitably have
to be made less generous.
Against this backdrop, the reform is (i) helping increase the coverage of private pensions, by enhancing
retirement security and reducing fiscal pressure in the future from a public pension pillar which is
already cash negative; (ii) helping increase the stock of assets through extra contributions and reduced
costs (which have been cut significantly in the new pillar), thus aiding total and long term and illiquid
investments and reducing macroeconomic vulnerabilities; and (iii) supporting development of the
capital market by generating an increased supply of assets to fund investment, adding diversity to the
institutional investor base, and helping diversify a traditionally bank-dominated lending market.
16
The performance in this area is assessed as moderately satisfactory. Even though, the SSG-DPL policy
action linked to this area was not fulfilled, a stronger policy action that was based on SSG-DPL was
implemented, but only after the series lapsed. The effect on auto-enrollment rate was substantial.
Pillar C: Deepening Turkey’s infrastructure reforms: Moderately satisfactory
Increase in private sector investment in new generation capacity: Satisfactory
This indicator was linked to four policy actions: Prior actions #8 and 9 for SSG-DPL-1 and indicative
triggers #9 and 10 for SSG-DPL-2.
Between 2012 and 2015, private sector
investments to new generation capacity
exceeded the SSG-DPL target (Figure 4). In
2012 total generation capacity was 57,058
MW. By 2015, the capacity reached 74,636
MW. The target was 68,000 MW. Over 90
percent of the increase came from the private
sector investments.
SSG-DPL supported the government’s
continued efforts to enhance competition and
transparency in the energy sector through
enactment of the electricity market law (prior
action #8), establishment of EPIAS (prior
action #9), and full operationalization of EPIAS (indicative trigger #9).
Electricity Market Law No. 6446 (EML) was published in the Official Gazette No. 28603 on March
30, 2013, which aimed to ensure the development of a financially sound, stable and transparent
electricity market operating in a competitive environment to cover electricity generation, transmission,
distribution, wholesale and retail sale, import, export and market operation activities; and the rights
and obligations of all real persons and legal entities involved in these activities. The Energy Market
Regulatory Authority (EMRA, energy regulator) starting from May 2013 issued secondary regulations
to provide a modern legal framework for the electricity market.
The EML unbundled electricity market operations from electricity transmission. Before the EML,
market operations were carried out by the Turkish Electricity Transmission Company (TEİAŞ). The
EML defined any activity related to market operations as “the operations of organized wholesale
power markets and the financial settlement of the transactions performed in these markets.” It required
these activities to be carried out under a market operations license and separated from TEİAŞ. Since
then, market operations have been carried out by an independent company, Energy Market Operations
Company (EPİAŞ).
EPİAŞ was established on March 12, 2015 as a joint venture of TEİAŞ (30 percent), Borsa Istanbul
(30 percent) and the private sector (40 percent). The latter is composed of nearly 100 companies that
are active in the electricity and gas markets. EPİAŞ has been operational since September 1, 2015 and
has been a major step toward enhancing transparency, efficiency, and effectiveness in energy exchange.
It has taken over market operations formerly carried out by TEİAŞ, namely day-ahead market, intra-
day market, and reconciliation of balancing activities. TEİAŞ has continued to operate the balancing
power and ancillary services markets.
Figure 4: Electricity Generation Capacity (MW)
30000
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With EPİAŞ, electricity market operations have expanded significant and reached nearly 1,000 market
participants. Almost 30 percent of electricity is traded through EPİAŞ. Transparency Platform, where
market information, real-time generation and demand data, and transmission system constraints are
shared with the public, was introduced by EPİAŞ in March 2016; and enhanced transparency and trust
among the existing and potential market participants.
SSG-DPL also aimed at supporting the government’s efforts to enhance competition and transparency
in the natural gas market through a new Natural Gas Market Law (indicative trigger #10). However,
in contrast to significant progress in the electricity sector, the Law was not adopted. A 2015 Bank
report, “Turkey’s Energy Transition – Milestones and Challenges,” provided an assessment of the gas
sector reforms and emphasized the importance of adopting the Law. At the time of the negotiations
for the BOTAŞ Additional Finance Loan for the Gas Sector Development Project in early 2014, the
Law was submitted to the Parliament and was expected to be enacted and become effective by the end
of 2014.
Still, there was some progress in the gas sector reforms. Under the Instrument for Pre-Accession
Energy Sector Technical Assistance (TA) Program, funded by the EU and administered by the Bank,
the establishment of a centralized gas trading platform and restructuring of BOTAS have been
supported. Thishas assisted the government in fostering competition, increasing transparency; and
eliminating cross-subsidies in the gas market.
The performance on this indicator is assessed as satisfactory. Even though one of the indicative triggers
that were linked to this indicator, the adoption of the new natural gas market law, was not fulfilled,
there was progress in other gas sector reforms, supported by the Bank. Moreover, the causality between
the fulfilled SSG-DPL policy actions and the observed impact was strong, which surpassed the target
increase.
Licensing of at least one private sector freight operator on the Turkish State Railways (TCDD)
infrastructure: Moderately satisfactory
This indicator was linked to three policy actions: prior action #10 for SSG-DPL-1 and indicative
triggers #11, 12 and 13 for SSG-DPL-2.
The SSG-DPL target was not met. As the implementation of the policy actions were delayed, there
was not any private sector freight operator licensed to operate on the TCDD infrastructure by 2015.
However, in July 2017, the first private sector operator signed a licensing agreement to start operations.
A second operator is in negotiations.
SSG-DPL supported the efforts to liberalize the sector through the Law on Liberalization of Railway
Transport, which became effective in May 2013 (prior action #10) The law established the overarching
principles for railway sector restructuring. The endpoint of the reform, in compliance with EU
Directive 91-440, was to separate the infrastructure, which will remain in the public domain, from
operations, which would be opened to private operators.
In 2015-2016, the government issued the secondary legislation (indicative trigger #11) to define
technical conditions and regulatory provisions for the reform to become operational. In June 2016, the
public monopoly TCDD was unbundled into two separate legal entities as infrastructure and operation
(indicative trigger #12) with separate financial accounts (indicative trigger #13). The secondary
legislation covered, inter alia, network statement, licensing of train operators, non-discriminatory
access to infrastructure, and registration of railway vehicles, safety, and public service obligations.
18
The issuance of the Network Statement for 2017 on November 29, 2016 (indicative trigger #13)
constituted a major step towards the finalization of the sector reform. The Network Statement
described the physical infrastructure, the current operational conditions, the process for reserving train
paths and the adopted charging methodology for using infrastructure and ancillary services. The public
operator (TCDD Transport) shortly afterwards signed its licensing agreement in January 2017,
becoming the first train operator of the new era. Unbundled legal entities for TCDD infrastructure and
operation were fully operationalized. As of beginning of 2017, TCDD infrastructure employed 14,264
personnel and TCDD transport employed 10,618.
Supported by the SSG-DPL policy actions, private sector participation to railway operation is a key
vehicle to modernize the transport sector. It brings know-how and investments to better manage
commercial services, rolling stock and dedicated freight logistic terminals. This can enhance the
efficiency of rail freight services, allowing rail customers to benefit from higher connectivity to the
railway network, additional capacity and more reliable services.
The performance on this indicator is assessed as moderately satisfactory. The causality between the
SSG-DPL policy actions and the indicator was strong. However, the implementation of these actions
was delayed. Therefore, the expected outcome was achieved only with a lag.
3.3 Justification of Overall Outcome Rating
Overall outcome rating: Moderately satisfactory
The overall outcome is rated as moderately satisfactory as the relevance of objectives, design, and
implementation of SSG-DPL is assed as modest and the achievement of PDO is assessed as moderately
satisfactory.
Table 2: Summary of performance Indicator Status SSG-DPL-1
prior actions
SSG-DPL-2
indicative
triggers
Assessment
Pillar A: Improving the business climate and enhancing transparency
Steady decline in non-agriculture
informality rates
PM 1, 2 1 (NF), 2 (F) MU
Increase in domestic patent
applications
M 3 (F with delay) S
Increase in corporate bond
issuance
NM 3 4 (F) S
Pillar B: Boosting labor force participation and widening access to finance
Increase in the female labor force
participation rate
PM 4 5 S
Increase in female depositors in
financial institutions
M 5, 6, 7 6, 7 S
Companies using auto-enrolment
into private pensions
NM 8 MS
Pillar C: Deepening Turkey’s infrastructure reforms
Increased private sector
investment in new electricity
generation capacity
M 8, 9 9, 10 S
At least one private sector freight
operator licensed to operate on
NM 10 11, 12, 13 MS
19
Turkish State Railways (TCDD)
infrastructure Notes: M: Met; PM: Partly met; NM: Not met; F: Fulfilled; NF: Not fulfilled.
3.4 Overarching Themes, Other Outcomes and Impacts
(a) Poverty Impacts, Gender Aspects, and Social Development
SSG-DPL supported the government in increasing female labor force participation rate, from 30.8 percent
in 2013 to 32.5 percent in 2016. In addition, it helped the government in widening female’s access to
finance. The number of female depositors in an institution increased from 2 percent in 2011 ro 5.3 percent
in 2015.
(b) Institutional Change/Strengthening
SSG-DPL supported a significant upgrade to Turkey’s institutions in several areas. Above all, SSG-DPL
focused on enhancing transparency in public as well as private dealings and to an extent, has been
successful. However, the remaining agenda to improve institutional quality and governance is substantial
and would require consistent and sustained effort. SSG-DPL also included policy actions to strengthen the
institutional frameworks governing the financial sector, energy sector, and railway transportation.
(c) Other Unintended Outcomes and Impacts
Not applicable.
3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops
Not applicable.
4. Assessment of Risk to Development Outcome
Rating: Substantial
SSG-DPL was moderately successful in achieving the expected outcomes and contributing to
improvements in business climate and transparency; labor force participation and widening access to
finance; and deepening Turkey’s infrastructure reforms. Substantial risks identified during its preparation
materialized. Exacerbated by external factors, they led to the lapse of the series. On the positive side, RIG-
DPF partly mitigated the risk to the development outcomes by following up on seven of the 13 indicative
triggers identified for the second operation. However, the reform agenda remains significant and the risk
to the ultimate achievement of the outcomes is substantial.
Based on a set of standard indicators (Worldwide Governance Indicators and Doing Business), the
institutional quality in Turkey remains below the levels observed in countries at similar income levels.
Since June 2014, a series of political challenges, including a long election cycle (with the presidential
election in August 2014 and parliamentary elections in both June and November 2015), a Cabinet reshuffle
in May 2016, and a failed coup attempt in July 2016 have also delayed the reform progress in the country.
Following the failed coup attempt, the government decreed a state of emergency and undertook measures
including the dismissal of some civil servants and the transfer of assets of some entities. In April 2017,
20
voters approved a set of constitutional reforms that will create an executive presidency and bring about
important changes in the relations between Government branches. Significant turnover at the technical and
political levels resulting from these political developments elevated the implementation risks.
External financing and the corporate sector’s large foreign currency exposure were the main economic
risks identified in the preparation SSG-DPL. As the political developments and global liquidity conditions
reflected on the exchange rate, Turkey’s private external debt has increased significantly since 2013. The
current account balance, on the other hand, improved on the back of low commodity prices and the EU’s
economic recovery. Overall, Turkey showed resilience to deteriorating conditions, supported by its strong
fiscal position. However, going forward, countercyclical fiscal policy space will be more limited as the
impact of the recent measures kick in and contingent liabilities and quasi-fiscal activities continue to grow.
5. Assessment of Bank and Borrower Performance
5.1 Bank Performance
(a) Bank Performance in Ensuring Quality at Entry
Rating: Satisfactory
SSG-DPL was prepared and approved by the Bank’s Board of Directors in less than a year after the
Bank committed, in early August 2013, to sharing with the government a detailed note on the possible
focus areas for a two-tranche programmatic DPL series (US$500 million each in FY14 and FY15).
Between the sharing of the note and the approval, PDO and the policy actions were broadly maintained
except that enhancing transparency gained more prominence within the program. The smooth
preparation phase reflected the close cooperation between the Bank and the authorities and the solid
knowledge and experience gained through the preceding series of DPLs and extensive analytical work
in areas covered by the operation.
A strong team based in the field, including the task team leader for the operation, ensured regular and
active dialogue with the authorities during the preparation of SSG-DPL. In addition, there was strong
cross-sectoral collaboration. The core team preparing SSG-DPL was the same team who worked on
the flagship “Turkey’s Transitions: Integration, Inclusion, Institutions” report, other supporting
analytical work, the previous CS-DPL, allowing them to have a comprehensive overview of the
achievements of the country and the main bottlenecks towards transitioning to high income in
sustainable way.
During preparation, the team addressed many comments that they received at different stages of the
approval process and identified the risks to the achievement of the development outcomes
appropriately. However, the proposed mitigating measures at the time and the design of SSG-DPL did
not help to eliminate the impacts of the unforeseen political developments that took place; and the
second operation had to be dropped.
(b) Quality of Supervision
Rating: Moderately unsatisfactory
During implementation, exogenous developments impacted significantly the dialogue between the
Bank and the authorities prevailing at the time of the preparation of SSG-DPL. At the Bank side, there
was no evidence of systematic monitoring of program-level progress. Even though the team was
21
required to submit implementation status and results reports on a 12-month cycle and before the first
operation was closed, there was not an ISR prepared during the life of the operation. However,
progress was monitored at the sectoral level, which later supported the preparation of RIG-DPF.
(c) Justification of Rating for Overall Bank Performance
Rating: Moderately satisfactory
The rating for the overall Bank performance is the simple average of the ratings for the performance
in ensuring the quality at entry (satisfactory) and the quality of supervision (moderately unsatisfactory).
5.2 Borrower Performance
(a) Government Performance
Rating: Satisfactory
SSG-DPL was, in many ways, a continuation of the earlier DPLs and relied on the already established
institutional infrastructure regarding the government’s dealings with the Bank. The government had a
clear and well-articulated agenda on the areas covered by SSG-DPL, as indicated in DP. Importantly,
through DP, the authorities actively involved various stakeholders (non-bank financial institutions,
various professional associations, businesses etc.) resulting in shared views on reform priorities and
implementation arrangements.
(b) Implementing Agency or Agencies Performance
Rating: Moderately satisfactory
The Undersecretariat of Treasury was in charge of coordinating the activities on the part of the
government. SSG-DPL was an additional and welcome tool to establish dialogue with a broader
number of agencies. The agencies in charge of implementation of the reforms were, at the beginning,
generally well-equipped and resourced to undertake the tasks. However, during the implementation,
significant turnover at the technical and political levels along with external factors delayed the reform
agenda and challenged the inter-agency coordination. A stronger M&E framework could have helped
to further guide reform efforts of the authorities.
(c) Justification of Rating for Overall Borrower Performance
Rating: Moderately satisfactory
The rating for the borrower performance is the simple average of the ratings for the Government
performance (satisfactory) and the implementing agency or agencies performance (moderately
satisfactory).
6. Lessons Learned
• The DPL engagement in an upper middle-income country like Turkey needs to be based on shared
priorities and high quality analytic work. The value proposition for the government is less about the
Bank’s financial resources and more about the programming process, associated analytic support
(including just-in-time TA, evaluations, analytic notes etc.), and the overall signaling effect. The initial
22
engagement for SSG-DPL benefited from all. However, this engagement was later affected by the
unforeseen political developments.
• A programmatic structure helps to anchor policy actions to the overarching development priorities and
ensure continuity through different operations. Based on SSG-DPL experience, two factors appear to
be particularly important to ensure successful implementation of a programmatic series: (A)
Identifying risks that might materialize over a longer time horizon relative to a standalone operation
with well-developed mitigating measures; and (B) careful balancing of policy actions across
successive operations with room for flexibility, avoiding being overly ambitious from the start.
• Establishing clear linkages between the policy actions and indicators is essential to assess the
performance of an operation. To this end, the indicator, target impact and the observation period should
be carefully selected to make the attribution of the observed impact to policy actions possible. For
instance, in SSG-DPL, in the area of labor informality, a very high-level indicator was defined with
only marginal intended impact over a short observation period, which made the attribution difficult.
• In programmatic development policy financing operations, regular monitoring of implementation
status and performance would support and enhance the final reporting, particularly when the
implementation period for the entire series is long and teams change. For SSG-DPL, there was not
enough evidence for systematic monitoring of program-level progress. Even though the team was
required to submit implementation status and results reports on a 12-month cycle and before the first
operation was closed, there was not an ISR prepared during the life of the operation.
7. Comments on Issues Raised by Borrower
(a) Borrower/Implementing agencies
The draft ICR was shared with the authorities for their comments. The contribution of the authorities to
the ICR is included as Annex 4. The final ICR addresses their comments.
(b) Cofinanciers
Not applicable.
(c) Other partners and stakeholders
Not applicable.
23
Annex 1. Bank Lending and Implementation Support/Supervision Processes
(a) Task Team members
Names Title Unit Responsibility/
Specialty
Marina Wes Lead Economist ECSP1
Mediha Agar Senior Economist ECSPSIR
Kamer Karakurum-Ozdemir Senior Economist ECSP1
Cevdet Cagdas Unal Research Analyst ECSP1
Ayberk Yilmaz Consultant ECSP1
Ewelina Lajch Program Assistant ECSP1
Francis Rowe Senior Economist ECSP2
Joao Pedro Wagner De Azevedo Senior Economist ECS03
Judy Yang Consultant ECS03
Jose Guilherme Reis Sector Leader ECSPF
Alper Oguz Senior financial Sector Specialist ECSF2
Can Selcuki Consultant ECSF2
William Wiseman Sector Leader ECSH3
Ahmet Levent Yener Senior Human Development Specialist ECSH4
Altan Aldan Human Development Specialist ECSH4
Stephen Karam Sector Leader ECSSD
Kari J. Nyman Lead Specialist ECSEG
Yesim Akcollu Senior Energy Specialist ECSEN
Ayse Yasemin Orucu Consultant ECSEN
Elif Ayhan Sr Urban Spec ECSUWSS
Pinar Baydar Senior Program Assistant ECC
Tunya Celasin Sr External Affairs Off ECC
Esra Arikan Environmental Specialist ECA
Seda Aroymak Senior Financial Management Specialist ECS03
Zeynep Lalik Senior Financial Management Specialist ECS03
Rebekka E. Grun Senior Economist ECSHD
Joseph Paul Formoso Senior Finance Officer LOA
Jasna Mestnik Finance Officer LOA
Margaret Png Lead Counsel LEG
Martha B. Lawrence Sr Transport. Spec. ECSTR
Antoine Kunth Sr Transport. Spec. ECSTR
(b) Staff Time and Cost
Stage
Staff Time and Cost (Bank Budget Only)
No. of staff weeks USD Thousands (including travel
and consultant costs)
Lending 282,872.70
Supervision
24
Annex 2. Beneficiary Survey Results
Not applicable.
25
Annex 3. Stakeholder Workshop Reports and Results
Not applicable.
26
Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR
27
COMMENTS of GOVERNMENT on IMPLEMENTATION COMPLETION and RESULTS
REPORT of SSGDPL
Introduction
1. Sustaining Shared Growth Development Policy Loan (SSGDPL) set out our mutual understanding
with the World Bank to address our Government’s programs for focusing on structural reforms to enhance
competitiveness, to improve transparency, to develop functioning of labor market, and to promote the
development of Turkey’s infrastructure. The three pillars of the SSGDPL program are (i) improving
business climate and enhancing transparency; (ii) boosting labor force participation and widening access
to finance; (iii) sustaining Turkey’s infrastructure reforms.
2. Our Government started to prepare 11th National Development Plan for the 2019-2023 period
which will focus on critical structural transformation areas. In this context, our long term development
policies will have an approach that includes human development, rule of law, information-centered society,
international competitiveness, institutionalization, sustainability and inclusiveness - as well as economic
growth. Implementation of this plan will be one of the most important priorities for all government
institutions.
3. Our comments about the implementation of the structural reform program supported by the
SSGDPL are as follows:
Improving Business Climate and Enhancing Transparency
4. Our government is dedicated to make structural reforms which will create a more transparent and
competitive business environment. We strongly believe that good governance with a focus on building
investor confidence will lead us to success. Within this direction, we have priorities such as; ensuring firm
productivity, deepening capital markets, and strengthening auditing facilities.
6. We established the Central Trade Registry System (MERSIS) with the aim of improving
competitive and transparent business environment. By this means, all trade registries in the country were
transferred to a central database, making all company information accessible to government institutions.
Implementation of MERSIS has been minimizing the bureaucracy and increasing the security in
transactions as well as ensuring rapid access to information.
7. In Turkey, Public Oversight, Accounting and Auditing Standards Authority (POA) is responsible
for setting and issuing Turkish Accounting and Auditing Standards compliant with the international
standards. In 2014, all auditing standards have been published by POA. Besides, POA has also the
authority to license independent auditors and audit firms according to the new Commercial Code. The
companies that are subject to independent audit were determined by a Council of Ministers Decision no.
2012/4213 in 2013. Later, the criteria was amended to include more companies with Decision No.
2014/5973 in 2014 and then with Decision No. 2014/7149 in 2015. Lastly, the scope of independent audit
was expanded with the Council of Ministers Decision No. 2016/8549 which was published in the Official
Gazette on March 19, 2016. According to this amendment companies who meet at least two of the
following criteria are subject to independent audit; i) Total asset size of TL 40 million or more. ii) Annual
net sales revenue of TL 80 million or more. iii)Minimum of 200 employees or more. By this means, the
numbers of the companies which are exposed to auditing are increasing gradually.
8. We enacted new Capital Market Law No. 6362 in 2012 in order to regulate and control capital
markets and to ensure good functioning capital markets in a transparent, competitive and secure manner.
28
Since the adoption of the law, several secondary regulations have been issued on; i)capital market
instruments and issuance ii)investment services, activities, and investment firms, iii)collective investment
schemes, iv)publicly held corporations, v)public disclosure, vi)clearing and custody services legislation,
operations, central counterparties and, vii)exchange regulations and operations, viii)licensing on capital
market professionals.
Boosting Labor Force Participation and Widening Access to Finance
9. Our Government puts special emphasis on improving inclusive growth by creating better jobs and
investing in training facilities to improve quality and efficiency in the labor market. Also, our Government
has made tremendous efforts to improve access to finance since it is essential for a successful development
and growth of the private sector. In line with this purpose, we have enacted required legislations and we
are dedicated to make progress in this area with an innovative perspective.
10. A High Planning Council Decision was approved on May 6, 2014 to prepare a National
Employment Strategy covering the period between 2014 and 2023. The aims of the strategy were to
strengthen the relationship between education and employment, to reduce the unemployment rate, to create
flexible work arrangements, to provide employment for vulnerable groups, and to strengthen the
relationship between social protection and employment. In order to determine new action plans for the
period between 2017 and 2019 a High Planning Council Decision was also approved on July 4, 2017 with
the same aims of the previous one. It lays emphasis on specific areas namely; information technology,
finance, construction, health, agriculture, textiles and tourism.
11. The Banks Association of Risk Center (the Center) was established according to the Banking Law
No. 5411 in 2012. The Center signed a protocol with Credit Bureau to cooperate with in 2012; and signed
a service contract with the Central Bank of the Republic of Turkey Risk Center to receive its data and
undertake its operations in 2013. From that time, it has been acting as an information-sharing platform by
collecting risk information about customers of crediting institutions and other financial institutions and
sharing such information with the said institutions, persons and legal entities.
12. We published Consumer Protection Law No. 6502 in 2013 to cover all consumer transactions and
consumer oriented implementations in a more extended way as compared to the former Law. We also
published Payment and Securities Settlement Systems, Payment Services and Electronic Money
Institutions Law No. 6493 in the same year in order to set out the principles and procedures for payment
and securities settlement systems, payment services, payment institutions and electronic money
institutions.
13. In 2013, we published Regulation on Principles for Establishment and Operations of Financial
Leasing, Factoring and Finance Companies to clarify the principles and conditions for establishment and
operations of such companies. Same year we also published the Regulation on Accounting Practices and
Financial Statements for Leasing, Factoring and Financing Companies to set out the principles of
accounting, financial statements and provisioning requirements. Then, we included the participation banks
and interest-free financial institutions in the scope of aforementioned regulations with amendments that
were published in the Official Gazette, No.30217 on October 21, 2017.
Sustaining Turkey’s Infrastructure Reforms
14. One of the most important priorities of Turkish Government is to support Turkey’s infrastructure
in a transparent manner that paves the way a commercial environment for the electric power, gas and
29
railway sectors. In that vein, we succeeded to create open access for the private sector by setting required
legislative and regulatory framework.
15. We enacted Electricity Market Law No. 6446 in 2013 and from that time we have been issuing
secondary legislations as follows; (i) Regulation on the Technical Evaluation of License Applications
based on Solar Energy, (ii) Regulation on Certification and Promotion of Renewable Energy Resources,
(iii) Regulation on Non-licensed Electricity Generation in the Electricity Market, (iv) Environmental
Impact Analysis Regulation, (v) Electricity Market Licensing Regulation, (vi) Regulation on Granting
New Generation License to the Facilities whose Construction have begun in the Electricity Market, (vii)
Communique on the Implementation of the Regulation on Non-licensed Electricity Generation, (viii)
Regulation on the Measures regarding the Distribution and Supply Licenses in the Electricity Market,
(viii)Electricity Grid Regulation, (ix) Electricity Market Export and Import Regulation, (x) Electricity
Market Connection and System Utilization Regulation, (xi) Regulation on Electricity Generation Without
License in Electricity Market and, (xii)Regulation on Distribution in Electricity Market.
16. EPİAŞ (Energy Exchange İstanbul) was established according to the Electricity Market Law No.
6446 and it is authorized as the main body to establish, develop and manage energy market with the aim
of ensuring transparency and stabilizing the energy prices in Turkey. Company shares are divided into 3
parts. Type A %30 shares belong to TEİAS (Electricity Transmission Company) and BOTAS (Petroleum
Pipeline Corporation); Type B %30 shares belong to BIST (Istanbul Stock Exchange) and type C %40
shares belong to private energy companies.
17. We published Law on Liberalization of Railway Transport No. 6461 in 2013 which allows private
sector participation in railway infrastructure and transportation. In the following years, all secondary
legislations providing the basis for the liberalization of Turkish railways have been issued successfully.
TCDD was unbundled into two entities as infrastructure and operation with the aim of ensuring private
sector participation in railway infrastructure and transportation. TCDD Transport Company’s commercial
registration, as a train operator, was completed in 2016.
30
Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders Not applicable.
31
Annex 6. List of Supporting Documents
Ministry of Development, Republic of Turkey, July 1, 2013, The Tenth Development Plan,
2014-18.
World Bank, 2010, Country Economic Memorandum: Informality: Causes, Consequences, and
Policies.
World Bank, September 18, 2013, Letter to the Government.
World Bank, June 18, 2014, Agreed Minutes of Negotiations for SSG-DPL.
World Bank, Doing Business Reports 2014, 2015, 2016, 2017, and 2018.
World Bank, 2014, Program Documents for SSG-DPL at various stages of the operation.
World Bank, June 18, 2014, Agreed Minutes of Negotiations for SSG-DPL.
World Bank, June 25, 2014, Implementation Completion and Results Report for
Competitiveness and Savings Development Policy Operation.
World Bank, Country Partnership Strategy for Turkey, 2012-15.
World Bank, Country Partnership Framework for Turkey, 2018-21.
World Bank, 2016, Turkey's Future Transitions: Republic of Turkey Systematic Country
Diagnostic.
World Bank, September 20, 2016, Brief for the Annual Meetings.
World Bank, July 25, 2017, Program Document for Resilience, Inclusion and Growth
Development Policy Financing.
Worldwide Governance Indicators, 2017 Update.
32
Annex 7. Analytical underpinnings
PILLAR A - IMPROVING THE BUSINESS CLIMATE AND ENHANCING TRANSPARENCY
- The World Bank. 2010. Turkey Investment Climate Assessment: From Crisis to
Private Sector Led Growth.
- Doing Business 2014: Smarter Regulations for Small and Medium-Size
Enterprises.
- The World Bank. 2013. TURKEY: Fostering Open and Efficient Markets through
Effective Competition Policies.
- The World Bank. 2009. Turkey - National Innovation and Technology System:
Recent Progress and Ongoing Challenges.
Recommendations to further
reform and strengthen the
regulatory environment and
to alleviate the main
obstacles to SME growth are
linked to prior actions #1 and
- The World Bank. 2011. Turkey: Corporate Bond Market Development: Priorities
and Challenges.
- The World Bank. 2012. International Organization of Securities Commissions
(IOSCO) Securities Settlement System Review.
- The World Bank. 2013. “Case Studies for a Study on Key Impediments to the
Growth of Mutual Funds Industries in Developing Countries – Turkey”.
- The World Bank and Ministry of Development. 2012. Turkey Country Economic
Memorandum (CEM) on Sustaining High Growth: The Role of Domestic Savings.
Recommendations to
restructure the private
pension scheme, making
capital markets regulation
more rules focused to
increase the domestic saving
rate and allow for innovation
are linked to prior action #3.
PILLAR A - BOOSTING LABOR FORCE PARTICIPATION AND WIDENING ACCESS TO FINANCE
- The World Bank. 2013. “Turkey: Managing Labor Markets through the Economic
Cycle”, Report No: 70130-TR.
- The World Bank. 2014.a. “Good Jobs in Turkey”.
- The World Bank. 2014.b. “Activating Vulnerable People into Good Jobs in
Turkey”.
- OECD. 2013. OECD Employment Outlook 2013, OECD Publishing,
http://dx.doi.org/10.1787/empl_outlook-2013-en.
Recommendations to
strengthen Turkey’s job
creation potential in the
future are linked to prior
action #4.
- The World Bank. 2011. Turkey: Improving Conditions for SME Growth - Finance
and Innovation.
- The World Bank and Ministry of Development. 2012. Turkey Country Economic
Memorandum on Sustaining High Growth: The Role of Domestic Savings.
Recommendations to
alleviate the main obstacles
to SME growth are linked to
prior action #5.
- The World Bank. 2012. IOSCO Securities Settlement System Review.
- Ongoing analytical work
Recommendations are linked
to prior action #6.
- The World Bank. 2011. Turkey: Improving Conditions for SME Growth - Finance
and Innovation.
Recommendations to
promote the development of
the NBFI sector by
enhancing regulation to
encourage new entrants,
enhance legislation to
allow operational leases and
sale and lease back to allow
the
leasing industry to develop
further are linked to prior
action #7.
PILLAR C – DEEPENING TURKEY’S INFRASTRUCTURE REFORMS
- Dialogue has been informed by the Bank and International Finance Corporation
(IFC) financed electric power, renewable energy, energy efficiency and natural gas
projects, and TA including theelectrcitiy generation planning, restructuring and
capacity building for energy institutions, renewable energy, and energy efficiency.
Recommendations are linked
to prior action #8.
- An Energy Sector Management Assistance Program (ESMAP)-financed World
Bank managed study assessed options for improving the operational effectiveness
of TEIAS.
Recommendations are linked
to prior action #9.
- The World Bank. 2012. Turkey Transport Sector Expenditure Review.
- The World Bank. 2011. Railway Reform: Toolkit for Improving Rail Sector
Performance (presented Sept 2011.
- Word Bank. 2013. Technical Assistance for Reform of Turkish Railways Action
Plans for Regulation of Turkish Railways, EU Instrument for Pre-Accession
Assistance Turkey (March 2013).
Recommendations are linked
to prior action #10.
33
Annex 8. Key indicators In 2016, Turkstat changed the national accounts methodology. Even though this makes a direct comparison of the SSG-DPL’s and today’s
macroeconomic frameworks impossible, it is still possible to do an indirect comparison by analyzing the direction of changes.
Table A7.1: Realism of the SSG-DPL’s macroeconomic framework (old methodology)
At the time of SSG-
DPL At the time of ICR Difference (ICR-
SSGDPL)
2013 2014 2015 2013 2014 2015 2013 2014 2015
National Accounts
Real GDP Growth (%) 4.0 3.5 3.5 4.2 3.0 4.0 0.2 (0.5) 0.5
Investment (% of GDP) 20.3 20.1 20.4
Domestic savings (% of GDP) 14.1 15.8 15.2
Fiscal Accounts (% of GDP)
Revenues 39.7 40.1 40.7 39.9 39.5 40.9 0.2 (0.6) 0.2
Expenditures 40.8 42.1 42.3 40.6 40.1 41.0 (0.2) (2.0) (1.3)
Fiscal Balance (1.0) (1.9) (1.5) (0.7) (0.6) (0.1) 0.3 1.3 1.4
Government Debt 40.0 39.1 37.8 38.7 36.2 36.0 (1.3) (2.9) (1.8)
External Accounts (% of GDP)
Exports of Goods and Services 25.6 27.0 27.3 25.6 27.9 28.0 0.0 0.9 0.7
Imports of Goods and Services 32.5 32.3 32.2 32.2 32.1 30.8 (0.3) (0.2) (1.4)
Current Account Balance (7.9) (6.3) (6.2) (7.7) (5.5) (4.5) 0.2 0.8 1.7
FDI 1.2 1.2 1.4 1.1 0.7 1.7 (0.1) (0.5) 0.3
Official Reserves (Months of
Imports c.i.f.) 5.1
6.2 6.3 6.4 1.1
External Debt
Gross External Debt (% of
GDP) 47.3 48.0 48.3 47.5 50.3 55.3 0.2 2.3 7.0
Consumer Prices (e-o-p) 7.4 8.2 6.2 7.4 8.2 8.8 0.0 (0.0) 2.6
Source: International Monetary Fund, Turkish Statistical Institute, Central bank of the Republic of Turkey, Ministry of
Finance, Ministry of Development.
34
Table 2: Macroeconomic Indicators (new methodology) 2013 2014 2015 2016 2016:H1 2017:H1
National Accounts
Real GDP Growth (%) 8.5 5.2 6.1 3.2 4.9 5.1
Investment (% of GDP) 28.5 28.9 29.7 29.3
29.6
30.2
Domestic savings (% of GDP) 24.0 25.1 25.8 25.3
24.1
25.7
Fiscal Accounts (% of GDP)
Revenues 21.5 20.8 20.6 21.3 23.0 21.6
Expenditures 22.6 21.9 21.6 22.4 20.7 21.5
Fiscal Balance -1.0 -1.1 -1.0 -1.1 0.1 -1.8
Government Debt 33.5 31.0 30.0 30.3
29.3
30.3
External Accounts (% of GDP)
Exports of Goods and Services 22.0 23.6 23.1 21.8 22.6 26.1
Imports of Goods and Services 27.9 27.6 25.9 24.6 26.3 30.4
Current Account Balance -6.7 -4.7 -3.7 -3.8 -4.7 -5.5
Net FDI 1.0 0.6 1.4 1.1 0.9 0.8
Official Reserves (Months of Imports c.i.f.) 6.2 6.3 6.4 6.4 7.4 6.2
External Debt
Gross External Debt (% of GDP) 41.1 43.0 46.2 46.9
49.3
51.8
Consumer Prices (e-o-p) 7.4 8.2 8.8 8.5 7.6 10.9
Source: International Monetary Fund, Turkish Statistical Institute, Central bank of the Republic of Turkey,
Ministry of Finance, Ministry of Development.
35
MAP