State-owned enterprises and privatization in Turkey: policy, performance and reform experience, 1985-95

Abstract

Against the backdrop of major changes in Turkey’s development strategy and policy regimes, the paper provides an assessment of the aggregate performance of the non financial state-owned enterprise (SOE) sector, and examines the nature and process of reform initiatives during the decade of 1985-95. The paper argues that the performance of the SOE sector should be evaluated not only against the background of its institutional framework, but also in relation to the economic policy mix at the macro level. In this vein, the recently revised SOE data have been processed in a form that matches the policy cycle identified in the 1985-95 period. The analysis brings out the strong sensitivity of SOE financial indicators to changes in major policy characteristics, including Government’s stance on income distribution, real wages and modes of deficit financing. Following the assessment of overall SOE performance over time, the paper critically reviews Turkey’s privatization experience, examines legal setbacks, and documents major asset sales and related expenditures. The implications of the present analysis for future SOE reform are also discussed.