Turkey's economy is poised to take off. Completing a successful transformation, however, means Turkey needs to confront monopolies and traditionally-run businesses that are slow to modernize. MGI shows how privatization and enforcement of financial laws will boost the economy.
Representing 3 percent of Turkey's GDP, telecommunications is an important industry, whose improved productivity and lower prices will help the productivity of other services and sectors.
Turkey's electricity sector is mainly made up of state-owned monopolies. Protected from competition, it suffers from poor labor productivity though its capital productivity has generally been satisfactory.
The financial crisis of 2001 was a severe blow to Turkey's banking industry but that does not account for an anemic sector that, despite liberal laws, competition, and managerial talent, only achieves 50 percent of U.S. productivity levels.
Turkey's FMGC sector is a large and rapidly growing sector, whose performance could have an important ripple effect on the rest of the economy. Modern players perform well but traditional players still dominate the market, dragging down overall productivity numbers.
Macroeconomic volatility has undermined the significant progress made in this sector since the 1980s. Productivity improvements will only be able to reach their potential when Turkey is able to smooth out its macroeconomic cycles, injecting the necessary predictability for growth in this sector.
Modern dairy processors in Turkey enjoy high productivity rates. But with more than half of the industry controlled by traditional operators, productivity remains low overall.
The confectionary industry is mired in a situation where a few companies dominate the others and stiff barriers stop international competition. Policy changes to encourage modernization and promote competition would help address the productivity gap.
With an effective original equipment manufacturer (EOM) segment in place, Turkey's apparel industry stands poised to make great strides. Already accounting for 20 percent of Turkey's total export volume, industry leaders can still improve productivity through better management of the output side of the equation.
Competitive intensity has driven Turkey's auto parts industry to high levels of productivity. With the necessary forces in place and little market distortion, the industry is in many ways a model for what other industries can achieve.
Privatization and liberalization have led to significant improvements in Turkey's steel industry. The proliferation of traditional companies in the processor sector of the industry is holding back Turkish steel from being a world leader.
In less than 20 years, Turkey's cement industry has gone from a government monopoly to a thriving private sector. If no market distortions interrupt the progress, Turkey is on pace to reach its full potential in 10 - 12 years.
