TURKISH ECONOMIC DEVELOPMENT

TURKEY TODAY AND TOMORROWWhere is Turkey now? How did it get there, and where is it going? Read on for a summary of economic development, a review of key policy challenges, and our recommendations.

Group ENatalie Dong, Zoe Kemprecos, Dalia Safadi, Xajavion Seabrum, Jon Tabernero

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ContentsIntroduction 2

1.0 A Brief History of Turkey 2

1.1 The birth of extractive institutions 2

1.2 Urban and rural development 4

1.3 Conflict in modern Turkey 5

2.0 Economic Overview 6

2.1 Other Indicators: Health 8

2.2 Other Indicators: Education 9

Conclusion 11

Policy Challenge: Syrian Refugee Crisis 11

References 18

The AK Party logo, from akparti.org.tr

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IntroductionTurkey today lies in between the relative calm of the European Union and the fractious Middle East, a bridge between worlds. Turkey has long seen herself as the intermediary between Europe and Asia, and desired at different times to belong to both. Today, Turkey faces challenges unique to that region, as the war in Syria spills across her borders, an old ethnic conflict flares up, and politics heat up in Istanbul, the most “European” city she has. We discuss how Turkey came to be where she is now, and our recommendations for Turkey going forward.

1.0 A Brief History of TurkeyNo single experience has been more central to modern-day Turkey than her first. The Turkish Republic was born out of a war of independence fought against Allied occupation after the Great War, and the commander of that movement would become the founder of the Turkish state. Mustafa Kemal, later called “Atatürk,” or “Father of the Turks,” established a democracy grounded in European-liberal ideals; chief among them were republicanism, secularism, and nationalism (Keylor). Atatürk’s reforms followed those principles, banning headscarves in government buildings, overseeing an overhaul of written Turkish to a more accessible form, and fostering the feeling of a liberal democracy across the country.

The modern Turkish state still reflects many of these founding ambitions, but there is a distance between the Kemalist origins and present-day Turkey. Since 2002, the ruling party is the AK Party. The name “Adalet ve Kalkınma Partisi,” or Justice and Development Party, neatly forms the acronym AK, which is Turkish for “light” or “pure” – hence their bright logo (AK Parti).

The AK Party’s rise to power in the new millennium came with the election of Recep Tayyip Erdoğan to the office of Prime Minister. The party appeals to religious and socially conservative Turks, not to mention the pro-business element the party introduced. The initial economic growth experienced under the AKP and Erdoğan has kept them in power for long enough to implement a series of laws that many have seen as a shift away from those founding ideals (The Economist).

Under Erdoğan, Turkey experienced an economic boom, discussed further below under GDP growth. Growth-focussed reforms, liberalisation of the economy, and antipathy towards the sporadic seizure of power by the military all pointed towards Turkey’s transition into a thriving Western democracy. Turkey, long seen as a stable Muslim democracy in a region riddled with strife, became a much-lauded model for other countries. Liberal thinkers in and around Turkey anticipated a lasting adoption of democratic principles, and a real end to the corrupt or illegitimate (or both) regimes that had preceded the AKP’s tenure (Akyol).

1.1 The birth of extractive institutions But after a few years of exemplary growth and development, the AKP began a slide into social conservatism and away from their promising, reform-oriented path. The threat of anti-AKP conspiracies started floating around, and gained traction when the party began accusing military and government offices of deep-state conspiracies. The Ergenekon conspiracy, where a large circle of influential people in the military, the bureaucracy, and civil society found themselves on the receiving end of accusations to overthrow the government, was followed by more conspiracy theories. The Ergenekon trials were built on the pessimistic precedent of previous deep-state networks, which seek

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to take over weak governments and have historically had some success (Ünver). The case was interpreted by some observers as the AKP purging elements that opposed its expansion (Akyol, Ünver) .

The plot thickened as an erstwhile ally came under fire. Fetullah Gülen, a well-known cleric living in the US, is a former friend to Turkey’s rulers. Gülen teaches his own strand of Islam, drawing on Sufism and resting on peace and tolerance, to his millions of followers – Gülen is the leader of one of the largest movements in Islam today (Berlinski). As a fellow religious conservative, Erdoğan was happy to work with Gülen and garner support from the Gülenists’ backing. But recently the two have split, and now the Gülenist movement is blamed for a whole host of problems within Turkey. (Harris) Whispers abound that the students and alumni of the schools run by Gülen, not to mention his many followers in the military and civil service, are an army ready to strike (Arsu).

And it’s a good time for Erdoğan’s party to cast blame outward. Dozens of people connected to the AKP have been arrested for corruption; Erdoğan himself was caught on tape urging his son Bilal to hide astounding sums of money. A raid on the home of a bank director found some $4.5 million, reportedly in shoeboxes. The corruption scandal, which implicated 52 people, seems to have been a money-laundering scheme to get around sanctions on Iran (Orucoglu). The week of December 17th, 2013, was the worst week in the AKP’s history, as ministers stepped down and cabinet members’ families were continuously implicated in the scandal (Arango).

The surprise here is perhaps only that law enforcement was so thorough in their investigation of people in power. Through various mechanisms, Erdoğan has jailed nosy journalists and purged the ranks of the civil and military services, but he still has enough opponents to be accused of even deeper involvement in robbing the Turkish state. Observers note the preponderance of construction as an economic force; construction jobs and investment have been a key factor in the economic flourishing of the past 15 years (Steinvorth). Without the economic rewards to reap from the AKP’s leadership, voters would naturally shift away from the party that has increasingly vaunted religious conservatism in the long-secular state.

Simply “building more” isn’t enough investment for the future of the country, but it certainly does provide opportunities for graft (and maybe money-laundering). It’s hard to determine how much is skimmed, particularly during a period of economic growth (Fisman). But so much appears to be linked to construction that it gives pause to a more conspiracy-minded observer. Massive housing projects have sprung from empty fields, widening the AKP’s net of grateful voters as people move out of substandard housing, called “gecekondu,” or “built overnight.” The developments have sprung up nearly as quickly as their slum-like predecessors, under the federal housing authority, TOKİ (Kaylan).

Building affordable housing is much-appreciated, but may not be born simply out of good intentions. The Gezi Park protests which made international headlines arose over new construction; one of the accused in the December 2013 raids was a construction tycoon (Kaylan, Arango). Whether these theories that dance around the periphery of the Turkish consciousness could be proven is up for debate. But Erdoğan’s government employs so many red-herring tactics that it’s difficult for citizens to determine what his government might be obscuring. Among other distractions, Erdoğan’s government has redirected attention towards the Gülenist movement, the Kurds (discussed in greater

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detail below), the Americans, and Israel (Orucoglu). When there is trouble at home, the strongman knows to point away from himself.

Turkish institutions like the judiciary, the press, the military, and the executive and legislative branches are modelled on those of Western democracies, and they all ought to be good institutions – they were designed to encourage market and civic engagement, justice is constitutionally guaranteed – they ought to promote human development. But the obscure workings of Erdoğan’s Justice and Development Party, beset with corruption charges and shadowed by conspiracies, have turned those ostensibly positive institutions into much more extractive versions of their originals.

1.2 Urban and rural developmentTurkey has come a long way from when it was the Sick Man of Europe. As Turkey modernized and industrialized, various leaderships have sought to increase ties with Turkey’s Western neighbours. The formation of the EU and the tantalizing prospect of membership have sometimes enticed, sometimes forced Turkey closer to meeting Western European standards of development, but the relationship is rocky.

Despite being an upper middle income (per the World Bank) and OECD country, Turkish development is unequally spread across rural and urban areas. To gain a sense of this inequality, see the table below comparing the poverty headcount ratio between rural and urban areas.

Calculated using World Bank data.

The EU Commission points to specific problems with Turkey’s rural-agrarian population, namely inefficiency, insufficient development, high rates of subsistence farming, and hidden unemployment (Köse). An OECD report also noted the lack of off-farm opportunity in rural areas, which might explain the high rate of movement to urban centres denoted in the figure below (OECD).

Calculated using World Bank data.

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This divide has been a factor in the troubled relationship between Turkey and the single European market; after years of negotiations, the deal looks like it might finally be off the table as an irate Erdoğan suggests reinstating the death penalty (The Economist).

1.3 Conflict in modern TurkeyAn inter-ethnic conflict that still rattles the nation today, the Turkish-Kurdish tension has periodically escalated into violence, and, since the armed group the Kurdistan Workers’ Party (PKK) launched attacks in 1984, 37,000 people have died. The relationship between the dominant Turkish ethnic group and the large Kurdish minority has long been a fractious one (O'Toole).

Calculated using World Bank data.

The violence peaked in the mid-90s, above; in 2004, after stalled negotiation attempts, the PKK began a new campaign against the state.

If we use battle-related deaths as a proxy for overall violence, we notice that, set against rising income, conflict has not necessarily fallen. GDP per capita has risen fairly steadily (see below), but conflict rises at the same time. But it is difficult to test this against leading theories of conflict. The opportunity cost of going to war, for example, is more difficult to gauge for the Kurds, many of whom live in the rural southeast of the country away from the opportunities of a city.

Using ethnic fractionalization as a measure, Turkey is typically fractured into different ethnic groups next to other countries in the Middle East & North Africa. One study marks Turkey’s cultural fractionalization at 0.299, identical to the region’s average (Fearon). This suggests that there are roughly two chief ethnic groups making up about 80% and 20% of the population. Within the Esteban and Ray model, this ethnic composition puts Turkey at a very high risk of conflict – where there are two distinct ethnic groups, there is the highest preponderance of ethnic-based conflict (Ray). Indeed, there is no Turkish word for a citizen of Turkey who is not an ethnic Turk; this precarious situation has been a causal factor in most of the conflict Turkey has experienced over the past few decades.

2.0 Economic OverviewAt the end of the Second World War, while many European countries were experiencing post-war economic boom caused by large scales of capital infusion by the United States, Turkey experienced sluggish and rather stagnant growth. The primary reason being that the Turkish economy was until then, primarily driven by capital accumulation and labor force growth and featured low levels of productivity and technology adoption growth (Macovei). Figure x reflects that when comparing Turkey to neighbors that started off with similar GDP per capita in 1960, a significant trend of divergence is clear.

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Source: World Bank

What could be the reason for this divergence? The prevailing reason for this economic divergence lies in the political divergence of Turkey occurring in this same timeline. In 1958, in order to mitigate a balance of payments crisis, the Turkish government adopted a number of measures such as high tariffs, import restrictions, price controls and other measures such as exchange control programs that heavily curtailed foreign trade. This lack of trade was one of the prime reasons for the low growth in productivity within Turkey that made long term economic growth lag significantly. The estimated costs of the adoption of such measures is the opportunity cost of producing twice as much output, if the regime instead focused on economic trade liberalization policies (Kruger).

By the 1980’s, the Turkish government had begun to adopt more liberalized trade policies by lifting such high tariffs but primarily through export promotion through subsidies, import liberalization and managed floating exchange rates. As seen in this table from 1977-1980 to 1981-1982, imports grew 25% from 11. to 14, while exports grew 102% from 4.2 to 8.5 (Taylor). These measures resulted in a number of benefits to Turkey, including initially reigning in growing inflation and increasing export revenues. However, without sound macroeconomic policy and institutional reforms aimed at regulating the unstable banking system, Turkey’s economy throughout this period still remained rather volatile.

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Source: Lance Taylor (2006)Throughout the 1990’s, though Turkey’s economic growth was significant, it was mired by frequent boom and bust cycles illustrated in figure y.

Source: Authors own calculations using World Bank data.

The Turkish government in this period continued to modify its financial system by implementing financial reforms such as liberalizing capital transactions and making the Turkish Lira fully convertible (Yeldan). The result of these reforms without proper regulatory standards put in place, had multiple negative impacts. One notable impact was the growing inflation which had initially gone down in the early 1980’s but then increased exponentially beginning in 1984 as seen in figure y. These effects, and more, ultimately culminated in the financial crisis in 1999 and subsequently 2001.

Riding on the negative attitudes of Turkish citizens regarding the economic downturn in 2001 caused by the fragility of an unregulated banking sector (Tansuhaj), Tayyip Erdogan’s Justice and

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Development Party seized a majority in the government after the November elections in 2002 (The Economist). Under this new government, Turkey adopted multiple radical structural reforms imposed by the IMF and World Bank in exchange for a $15 billion bailout of its tattered economy. These reforms allowed for the large drop in inflation rate from about 50% in 2001 to slightly over 5% in the later 2000’s as seen in figure y. As shown in the previous graph, from the 5-year period beginning in 2002 and ending in 2007, Turkey displayed consistent economic growth with the economy growing on average at 6% per year. Acemoglu of MIT points to 2 main causes of such growth: firm level productivity catch-up due to investments in infrastructure, as well as the decline in inequality and expansion of the middle class (Atun).

Source: Authors own calculations using World Bank data.2.1 Other Indicators: HealthCoinciding with this period of economic growth beginning in 2002, multiple health indicators significantly improved under the new administration in Turkey. The negligence of the previous coalition governments of the health care system lead to structural problems such as unequal access to health care. Therefore, in 2003, the government introduced the Health Transformation Program primarily aimed at improving public health, providing universal health care for all citizens and developing a patient centered system. The program proved to be a tremendous success in accomplishing its goals.

The Health Transfer Program primarily enabled changes by increasing public expenditure on the health industry, leading to increases in the number of hospitals and increasing patient capacity. Furthermore, the Health Transfer Program heavily restructured the overall health care system by putting all the existing health institutions under the umbrella of the Ministry of Health. While now combined, the administration made sure to specify roles and responsibilities within the organization, resulting in increased efficiency in running the country’s universal health care plan by allowing each manager to specialize within their experienced field (Ucer). The program also drastically increased the number of workers in the healthcare industry to accommodate for the entire population having health care.

Infant mortality rates dropped from 2003 levels of 26.5 % to 16.4% in 2010, a decrease of 56%. Immunization rates contributed to this decline, according to the World Health Organization (WHO), with the rate of full vaccination coverage increasing from 78% in 2002 to 97% in 2011. Life expectancy also saw some meaningful gains as the life expectancy increased from 71 years old in 2002 to 75 in 2015.                                                     

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Source: Calculated using data from the World Bank2.2 Other Indicators: EducationOn the topic of education, it seems that over the course of the last two decades, education indicators in Turkey paint an overall picture of gradual development following the same direction as many economic indicators, albeit at a different rate. The education sector in Turkey shows much more of a convex trend of development over time similar to the economic growth when compared to the health indicators present in the country. In enrollment rates seen in the table below, total primary education enrollment rate increased from 95% to 98% in 2007, but shows a steep decline eventually dropping to 92% in 2013. However, tertiary education enrollment rates were most pronounced as it was hovering around 36% to 79% in 2013.

Source: UNESCO: Institute for Statistics

What exactly is causing this sort of discrepancy?  According to the Daily Sabah "Modern Turkey's New Liberal Education System" article, as of 2012, Turkey implemented a system in where the mandatory number of years for education is 12 (Daily Sabah).  This is a significant change over the previous mandate of only eight years.  Specifically, children are mandated to attend school from ages 6 to 13.  This change in policy has caused primary education to rise to near 100% and for and secondary education to be around 85% according to recent World Bank data (World Bank). This is a great improvement as that same dataset shows that Turkey had only about 30% of the population achieving secondary education. The big push for such policy is for Turkey to continue its development it needs more people with higher levels of human capital.  This increase in human capital due to more educated individuals contributes to a higher total factor productivity growth within the country -- which is one of the driving factors of the Solow growth model.  

Most significant however in analyzing the education in Turkey is noting its convergence in terms of gender differences across indicators. In 2006, females accounted for 98% of out of school children but by 2013 this number falls drastically to 68%.  Similarly, in secondary education the difference between male and female net enrollment rates decreases from 2006 difference of 11% to only 2.11% indicating that more girls in Turkey are getting access to education.

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Data source: UNESCO: Institute for Statistics

Additionally, the adult literacy rate for instance, grew only moderately during the period of high economic growth but really took off beginning in the post-recession world. From 2002 to 2005 we see a very moderate increase from 87.36% to 88.65%, an overall measly increase of 1.48% in the span of 3 years. During the years preceding the recession the change is more pronounced at 3.62% from 2007 to 2009 but then falls drastically at 0.45%. Yet, given all the educational attainment for both sexes, the literacy rates between the two are still significant.  Recent data from the World Bank reveals that the literacy rate amongst females aged 15 and above is 93% as of 2015 whereas the literacy rate amongst males aged 15 and above is 98%. While both literacy numbers are quite high for Turkey, this discrepancy hints that some sort of socioeconomic bias or biases are causing this discrepancy to arise. In Duman’s paper titled “Female Education Inequality in Turkey: Factors Affecting Girls’ Schooling”, Duman notes and econometrically explains that the factors that affect female educational attainment in Turkey are: family size, mother’s educational attainment, father’s educational attainment, household income levels, and region in which the family lives (Duman). Specifically, if a female child lives in a large, low-income family with a father with a higher educational attainment than the mother and they live in either the Central Anatolia, East Anatolia, Southeast Anatolia or the Black Sea regions of the country, then that child will be less likely to attend school.

Looking back at more World Bank data, the fertility rate in Turkey has fallen from 6.3 in 1960 to 2.07 in 2015.  This is a good sign for the country as a whole, regarding the discrepancy between education attainment for females and males.  However, what is more striking is that Duman found that the mother’s educational attainment has a larger effect on a female child’s educational attainment than the father’s educational attainment.  This finding is illuminating as this means that one possible solution to achieving parity and closing the five-percentage point gap between males’ and females’ in educational attainment is to keep on the same course that Turkey is currently on by funding mandatory schooling of up to 12 years.

Overall, the current state of education in Turkey has improved in the last two decades especially looking at gender specific variation throughout indicators such as enrollment rates, and literacy rates. However, many challenges remain in the path towards development in Turkey. The raw numbers of out of school children are alarmingly high, PISA scores (a test used to evaluate educational learning on an international standard) are far below OECD average and there remains a significant problem matching educational attainment to occupation.

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ConclusionTurkey’s future economic growth is dependent on multiple factors. As discussed in the first section, Turkey has accumulated vast amounts of capital in recent memory and is therefore poised to do well. However, we discussed Health and Education for the very reason that to further develop their economy, Turkey must increase its investments on its people and thereby labor. Another important barrier is the current political environment in Turkey. Once the political situation is calmed and a return to progressive institutions that increase human capital through channels like education and health is completed, Turkey can follow a more sustainable growth path.

Policy Challenge: Syrian Refugee CrisisTo date, the Syrian civil conflict has lasted for nearly six years and has resulted in an estimated 400,000 deaths, according to the United Nations (CNN). The first indication of civil unrest came in March 2011, when a series of anti-government protests were staged and met with a violent military crackdown that killed 100 demonstrators (Al Jazeera). The Syrian protests were inspired by similar demonstrations throughout the Arab world, collectively known as the Arab Spring. While the unrest has dissipated in most other Arab countries, the conflict in Syria persists.

Anti-government demonstrators turned rebels oppose the Assad regime; Hafez al-Assad ruled as president of Syria from 1970 until his death in 2000, after which he was succeeded by his son Bashar al-Assad. Currently, there are four main factions in conflict throughout Syria - the Assad regime, the Kurds, the Islamic State, and a collective alliance of other rebels (CNN). Coordination between opponents of the Assad regime has been complicated, perpetuating the conflict; Jabhat al-Nusra has proven to be one of the most effective factions of rebels, but it is also the Syrian branch of al-Qaeda and has been designated as a terrorist organization by the United Nations, United States, United Kingdom, Australia, and Turkey (Al Jazeera). As of March 2016, the conflict has displaced 6.6 million people within Syria and 4.8 million people have left the country, fleeing incessant airstrikes and chemical warfare (CNN).

As of November 3, 2016, the United Nations High Commission for Refugees and the Turkish government report that Turkey has received 2,764,500 registered Syrian refugees, more than any other country (United Nations High Commissioner for Refugees). The following figure is from September 2015 and does not reflect current numbers of refugees, but it illustrates the disproportionate burden that Turkey has shouldered:

The sudden and dramatic influx of refugees has presented Turkey with a monumental policy challenge. How Turkey responds to the crisis will have enormous effects on its labor and financial markets as well as its relationship to the European Union.

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The refugee crisis has been blamed for a series of terrorist attacks that have recently occurred throughout Turkey - the largest of which being the Istanbul Ataturk Airport Attack on June 28, 2016. Although the tourism industry has suffered some losses in response to the instability, the Turkish economy has proven fairly resilient overall. Since June 2015, Turkey has suffered eleven mass civilian casualty terrorist attacks that have killed more than 250 civilians (Unver). At least one of these attacks has been attributed to an Islamic State militant who registered as a Syrian refugee while entering the country before committing a suicide bombing in Istanbul (Nissenbaum). These attacks have heightened fears in Turkey and internationally that the Islamic State is exploiting the Syrian refugee crisis to cross borders and commit acts of terrorism.

This uncertainty threatened the stability of the Turkish economy, but such apprehension has proven to be unfounded thus far. The increase in internal migration, driven by both the Kurdish conflict and the Syrian refugee crisis, has actually boosted consumption by 5% in the first quarter of 2016. In 2015, Turkey saw an increase of 32% in foreign direct investment, with growth concentrated in manufacturing and energy sectors. Tourism is down 23% compared to 2015, but even so, Turkey remains the sixth most visited country in the world (Unver). Despite a decline in tourism, Turkey still had more than 35 million tourists in 2015 pour approximately $30 billion US dollars into its economy.

Interestingly, while the refugee crisis and the associated rise in terrorist attacks hasn’t done any lasting damage to the Turkish economy, the unsuccessful military coup attempt against President Recep Tayyip Erdogan on July 15, 2016 triggered a skittish reaction from financial markets. According the World Travel and Tourism Council, it typically takes 13 months for a country to recover from a terrorist attack, significantly less than the amount of time it takes to recover from a natural disaster or political unrest. The Borsa Istanbul 100 stock market index dropped from 82,825.36 to 71,594.98 after the coup attempt - a 13.56% decrease (“XU 100”). A few weeks later, the financial markets had stabilized, but the Borsa Istanbul 100 was still down by about 8% and the Turkish lira depreciated against the dollar by about 4% (Kozok).

The Syrian refugee crisis presents Turkey with challenges as well as opportunities. As stated earlier, the increase in internal migration has boosted consumption significantly. Another opportunity the crisis presents is the chance to supplement Turkey’s shrinking workforce and aging population. As

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with most other countries, Turkish women have started to have fewer and fewer children as their country developed and became richer. The fertility rate has declined to 2.14 children per woman in 2015, which is half of what it was in 1980. President Erdogan has even gone so far as to encourage Muslim women to reject contraception in order to have more children and “multiply [their] descendants” (BBC News).

          Source: World Bank Indicators

Gradual and consistent population growth is generally considered to be vital to the growth of an economy. Turkish fertility has not yet fallen to alarmingly low rates, but that could change in coming years. As it falls, the proportion of elderly citizens in the general population increases and exacerbates a burden on the economy. In 2015, the percentage of Turkish citizens over the age of 65 was 8.2% and it is expected to swell to 10.2% by 2023. Erdogan’s comments reflect both a vaguely sexist, nationalist appeal to his conservative Islamist supporter base and a legitimate concern for the future of the Turkish economy. Various attempts have been made to encourage Turkish women to have more children, including cash transfers from the government and paid maternity leave. However, experts say these programs are insufficient alone (Hürriyet Daily News). Another solution to the economic problem could potentially be found in the 1.2 million Syrian refugees under the age of 18 who have entered the country since 2011 (United Nations High Commissioner for Refugees). These young Syrian refugees could potentially supplement the Turkish workforce and reinvigorate its economy for decades to come, but their ability to fully integrate is dependent upon several factors.

Source: United Nations Office for the Coordination of Humanitarian Affairs

The United Nations has identified Turkey as the largest host country for Syrian refugees as of 2016. Of the 4.8 million refugees outside of Syria, 2.5 of them are residing within Turkey’s borders

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(Amnesty International). The European fear of alarmingly large refugee numbers has contributed to an overall misconception about the economic opportunities that the refugee crisis presents. Excluding Sweden and Germany, the remaining 26 European Union members have pledged to support 30,093 resettlement places as of 2016, a number that is only around 0.7% of the Syrian refugee population supported in the main host countries of Turkey, Lebanon, Jordan, Egypt, and Iraq. Lebanon, the second largest Syrian refugee host country, only holds 1.1 million refugees - less than half the number Turkey does (Amnesty International). Given Turkey’s significantly large refugee intake, it is presented with the most economic opportunities to enable the refugee crisis to cater towards is economic growth.

So now the policy question becomes what is the best way for Turkey to handle the Syrian refugee crisis while at the same time save its economy from its gradual gentrification.  This two-sided question needs to be viewed in each of its constituent parts.

Looking at Turkey’s nearest neighbors in both the Middle East, North Africa, Central Asia, and Europe can help provide some insights as to what Turkey might do to successfully integrate Syrian refugees into the Turkish way of life. As of recent years, Western and Eastern Europe have been either cautious of accepting Syrian refugees or have outright denied Syrian refugees, even though it was one of the goals that the EU set for its member states. Even if Syrians make it all the way to Western Europe, they might find that integrating to life there is much more difficult than first imagined.  Not to mention that Europe tends to have its own socioeconomic issues that it is dealing with (Ganea). Looking toward the Middle East, most of the countries there too have severely limited the number of refugees allowed to come into the countries in question or have rejected them outright. North Africa, on the other hand, has accepted some refugees.  For example, Egypt has accepted the largest number of Syrian refugees in North Africa; however, Egypt “generally refrains from providing state-funded services directly to individuals” (Rawan Arar).

Recent Turkish policy is awash in both negative and positive light. It took Turkey until 2016 to realise that the refugees were “a long-term situation” and have at least started to provide “increased personnel needs and the language and professional training programs” across the country (International Crisis Group). While this policy helps with nationalizing Syrians, the deal that Turkey made with the European Union is seen more negatively and has had much controversy and debate around it (Collett).

Because current examples of how Turkey’s neighbors are dealing with the refugee crisis are proving to be unfruitful or don’t provide an example of how Turkey can help invigorate the Turkish economy with these refugees, looking at the past is the next best option in figuring out what else Turkey can do with the number of Syrian refugees in its borders.  A vaguely similar circumstance can be looked at on across the Atlantic Ocean with how the United States treats Cuban refugees. While the number of Cuban refugees into the United States will never equal the amount the Syrian refugees in Turkey, some key takeaways and ideas can still come out of analysing this situation.  

In the United States a law called the Cuban Adjustment Act of 1996 state that all Cubans are refugees seeking asylum, this all Cubans who set foot in the United States are admitted into the United States and are given a green card after being in the country for one year and one day.  After that, Cubans can either renew their green card indefinitely or seek a path to citizenship like any other immigrant to the United States after which they, naturally, gain the same Constitutional rights that every other citizen of the United States has.  This approach essentially cuts down on the bureaucratic red tape present for a certain group of individuals and presents them with a clear path to citizenship.  Such a system could work in Turkey but under different set of circumstances given the magnitude of Syrian refugees Turkey has taken in.

Thus, an ideal policy approach to the Syrian refugee crisis in Turkey is to allow Syrians a clear pathway to citizenship in Turkey.  Of course, this would require rescreening of every Syrian who takes place in the naturalization process however, should all go to plan, the number of Syrians now

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integrated formally into the Turkish economy should help start to address the issues of declining fertility rates and Turkey’s aging population.

However, there is one caveat that should be implemented in such a program.  As stated above, certain areas of Turkey are economically less well-off than other parts of the country, specifically the Central Anatolia, East Anatolia, Southeast Anatolia and the Black Sea regions. In other words…

Source: http://www.transanatolie.com/

...the central and eastern parts of the country, of which two of the regions listed above border Syria.  

What is interesting, however, is that most of the Syrian refugees are in the Marmara region because they either want economic opportunity found in Istanbul, the capital.  However, there are a select few who seek for an illegal pathway to enter Europe.  Additionally, there are Syrian refugee camps in the southern part of the country.  What Turkey can do in this situation is create a difference-in-difference approach to handling the crisis so that a causal relation can be ascertained between ease naturalization and economic invigoration in certain regions of the country.

Randomly select Syrian refugees from the refugee camps in the Marmara Region and in the southern parts of the country and allow them the chance to take part in a naturalization process.  There will be some portion of that population that refuses the offer, but for simplicity’s sake we will consider the case that all the randomly selected Syrians in both camp areas accept the offer.

Next, after the naturalization process is complete, randomly assign an equal amount of the newly-naturalized to live, work, start a business in any one of the regions in Turkey except one.  The excluded region will more than likely be Southeast Anatolia as it directly borders Syria and is a hotspot for future Syrian refugees to come into the country.  After some time, assuming the Syrian refugee crisis dies down and the naturalized-Syrians find work, a measurement in the increase in economic activity pre- and post-treatment can be assessed.  

The control group is the Southeast Anatolia region of the country.  A pre-experiment measurement of the region must be conducted before any of this suggested policy change can take place. Such measurements to consider are: fertility rates, economic activity (GDP per capita in the region, unemployment) and educational attainment in the regions.  Thus, provided that all trends stay the same, the control group should essentially have a parallel trend line of growth for each of these metrics.  Then, the pre-treatment metrics must be taken into consideration. Likewise, with regard to the control group, there should be a trend line that each region should follow and the effects of the randomized treatment of allowing for easier naturalization should cause the actual post-treatment

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measurements of the metrics to be on a trendline that is not parallel to the original trendline.  Should all go to plan, there should be some effect of easier naturalization in Turkey.

In fact, some preliminary evidence of a similar difference-in-difference approach to the Syrian Refugee Crisis on Turkey’s labor markets. Akgündüz et al.’s paper “The Impact of Refugee Crises on Host Labor Markets: The Case of the Syrian Refugee Crisis in Turkey” looks at how Syrian refugees “[have] affected food and housing prices, employment rates and internal migration patterns in regions of Turkey where refugees are being accommodated” by letting the already in place camps be the treatment group and the rest of Turkey the control group (Akgündüz). Because there hasn’t been an effort on the Turkish government’s part to help speed up the process of naturalization, as discussed earlier with Turkey only considering providing language classes for Syrians as of 2016, this paper cannot assess the effectiveness of naturalizing Syrians into Turkey so that they may be able to take part in the formal markets.  Nonetheless, the finding in Akgündüz et al.’s paper is that “that housing and to a lesser degree food prices increased, but employmentrates of natives in various skill groups are largely unaffected” but also notes that “there is littleevidence of refugees crowding out natives in local labor markets” (Akgündüz).

This last piece of evidence proves to be consoling.  If it is that case that refugees are not crowding out natives in local labor markets, then the above policy recommendation should help Turkey with its aging population problem.  Naturally with an aging population, there will be an excess amount of demand for workers as the older generation retires out of work.  Thus, if Syrians are able to naturalize easily, they can fill up these vacant spots and thus help Turkey out with these job vacancies in the short term and in the long term should naturalized-Syrians decide to have children within the country. This should provide more momentum to the Turkish economy so that Turkey can continue down its path to further develop economically as a country.

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