Transcript Development of Sectors

Prof. Dr. Sedef AKGUNGOR
Developments of Sectors
 Traditionally, the sectoral division of the economy is based
on a three sector approach, namely agriculture, industry
and services.
 Each of these have their own subsectors.
 Agriculture has cereals and other crops or animal farming;
industry has mining, manufacturing and energy; services
have trade, banking, transportation, education and health.
 This is called the classical division, in which sectors are
seperated according to types of their value added.
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Agriculture
 Agriculture includes all types of land produce, plus animal
husbandry and also forest and water products.
 The primary factor of production of agriculture is land.
 According to GCA 2001 (General Census of Agriculture 2001) ,
the total agricultural workforce is more than eight million.
 One of the largest groups among agricultural workers is
proprietors, i.e. those that work for themselves.
 The largest group of workers in agriculture is called unpaid
family workers.
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 One of the most important characteristics of agricultural
employment is that unlike the economy as a whole and of
course in all other sectors, the share of women in the work
force is higher.
 However, this high level of women participation is not
supported qualitatively.
 In terms of wage labour, daliy or seasonal labour, the
position of women is much worse tham men’s.
 The only superiority of women in agricultural work force is
their numbers;in fact they are working as unpaid family
workers and cannot be considered as real labourers.
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Structure of Agricultural Employment,2010
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Details of the Structure of the Agricultural Employment, 2010
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 The most important non-human factor of production af agriculture is
land.
 Thus, the land utilisation process and ownership should be taken as
the basis for analysing developments in the sector.
 According to GCA 2001, in 2001, more than 3 million agricultural
enterprises were using 184.3 million decars of land.
 In 1991, these figures were 4.07 million and 234.51 million respectively.
 Thus the total amount of used agricultural land decreased between
1991 and 2001 by more than 50 million decares.
 On the other hand , the number of enterprises also decreased by more
than 25 per cent ,which is more than the amount of used land.
 As a result, the average land per enterprise increased somehow from
57.6 decares to more than 61 decares.
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Sizes of Agricultural Establishments, 1991, 2001
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For example,
 In 1991, the smallest enterprises which were using less
than 5 decares were 6,34 per cent of the total
enterprises,while using only 0,28 per cent of total land.
 In 2001, the smallest enterprises which were using less
than 5 decares were 5,86 per cent of the total
enterprises,while using only 0,26 per cent of total land.
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 Overall size distribution figures do not give any
information about the natural aspects of land, such as
its chemical and physical qualities, fertility, availability
of water sources, weather conditions and location.
 Infrastructural elements and investments are not
considered as well.
 There are two additional points that should be
included in the analysis of the land.
 One is how agricultural land is utilised, and the other
is information about the ownership.
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Inputs-Other than Land
 The use of agricultural inputs other than land, such as
machinery, irrigation, fertilisers and credits provides
more information about the level of overall
development as well as the productivity improvements
in the sector.
 For example, the use of tractors and other machinery
played an important role historically in this regard.
 It had increased more than 154 per cent from 16 to 42
thousand , between 1950-60.
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 During the planned 15 years from 1963 to 1977, the number of tractors
increased more than 625 per cent to 370 thousand.
 This rapid mechanisation of agriculture pushed agricultural labour
outside the sector; to cities and even outside the country.
 This migration process created manifold consequences , in both
agriculture itself and in places where these people migrated.
 The rate of increase of tractors was relatively slower during the 1980s
and 1990s; 87 per cent and 36 per cent respectively.
 The number of tractors reached more than one million in the 2000s.
 Numbers of tractors can be considered as an important “direct”
indicator of the trend of the mechanisation of the sector in general.
 The use of all other inputs is facilitated by tractors.
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 Use of fertilizers also increased rapidly until the 1990s
when it stabilised at around 10 million tons.
 The same trend can be observed in irrigation , and
more than a quarter of agricultural land is irrigated.
 Agricultural credits also stabilised at around three
billion TL during the 2000s.
 This amounts to roughly 5-10 per cent of the ttal
domestic credits supplied by the deposit banks.
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Agricultural Incentıves-Disincentives
 The policies of supporting agriculture can take two forms:
direct and indirect
 Indirect support can be taken to mean the infrastructure ,
which also includes the construction of roads, providing
electricity, construction of irrigation facilities, silos and
depots.
 On the other hand, providing credits, setting minimum
prices and practicing buying or purchasing guarantees
constitute direct support.
 Direct support was at its peak during the second half of the
1970s.
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 Even in the state monopoly cases, like tea leaves and tobacco , the amount of output was
more than the capacity to process it.
 Because of such shortcomings of the support, during the late 1970s and in some cases
support meant total loss of resources.
 Because of the change in the main economic policies of industrialisation, support
purchases, reduced rapidly after 1980.
 For some products, like tea leaves and tobacco processes the state monopoly was
abolished around the mid 1980s.
 Moreover almost all other support practices were gradually excluded from the support
system.
 The process of removing agricultural support was intensified by the World Bank and
IMF-backed programs.
 In 2000, input subsidies were substantially reduced and DIS (Direct Income Support)
was put into practice.
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 There were some minimal but extremely diversified support practices
around the end of the first decade of 2000s.
 These included support purchases for some crops,as well as for
tobacco, sugar beets and hazelnuts;in addition there were fertilizer
subsidies,aand supports for all types of animal and animal products.
 DIS set upper limits for the level of maximum output and paid for that.
 Agricultural support policies change almost every year.
 The total amount of agricultural support came about 2,8 per cent of
GDP yearly between 2002-2007.
 During 2006-2008, the total supports to agricultural producers were 21
per cent of the gross farm receipts.
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Is Agriculture Stagnating?

Physical quantities of agricultural production, except tobacco and sugar beets, stabilised in the 2000s.

Agriculture as a sector approached a standstill with a share of around 10 per cent in the GDP.

And since the other sectors are growing more rapidly than agriculture share of agriculture in GDP is
decreasing continuously.

There are several reasons for the agricultural stagnation that the country is passing through.

One of the most important reasons was the big shift of economic policy after 1980.

With more liberalised market conditions, the manufacturing sectors which were using agricultural
outputs as their inputs started to import relatively cheaper ones.

Also in connection with incentives the DIS (direct income support) policy had a negative effect on
agricultural production.

Moreover, there was market saturation for some products like hazelnuts, and probably sugar
beets,tobacco and tea leaves at the beginning of the 2000s.

Finally, agriculture was losing its qualified labour power and capital sources almost continuously, not
only because of general negligence of the sector but also the rent creation on the land in the big cities.
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Industry: A Changed Track
 “Industry” means all manufacturing plus the mining and energy , gas
and water sectors.
 Until 1980 industrialisation policies were characterised by the ISI
(import substituting industrialisation) during the both Etatist and
Planned Periods.
 The ISI policies until the 1960s can be specified as the first stage of the
ISI, i.e. domestic production of basic consumer goods,like food textiles
and some intermediate goods such as cement,paper,iron and steel.
 During the 1960s,planned period, came the second stage of the ISI, that
is producing consumer durables,such as refrigerators, automobiles,
washing machines and TV receivers.
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 During the implementation of the second ISI , it was stated that
protection would be temporary; that is to say infant industry argument
is used in designing the policies.
 At that time the country had followed absolute protectionism.
 That is if the quantity of domestic production of a commodity was
enough for domestic demand then its import would be completely
prohibited, irrespective of its price and quality.
 With this approach, and with incentives and punishments as well,
industrial establishments were required to use domestically produced
inputs so far as they were available.
 For some other commodities, relative protectionism, that is using
devices such as customs duties and quotas was practiced.
 It can be said that the second stage of the ISI, practiced for about two
decades, created an industrial base.
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 Considering the industrialization policy there were some
very important shortcomings of the ISI.
 First, there were no policies to specify the concept of
optimum size of the establishments.
 Second, the cost of production was very high.
 Moreover, almost all the former importers of consumer
durables transformed themselves into producers within the
ISI process. Each producer had a “mother company” which
supplied not only more important parts produced
domestically but also types of economic and technical
support,including top management. This type of structure
created some bottlenecks for further industrialisation later.
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 In 1980 the country witnssed shocking economic policy and
political changes.
 After 1980, there was no specific industrialisation policy except
an export-led growth approach that treats all foreign currency
generating sectors on an equal footing.
 At the beginning of 1980, all the public industrial investment
projects previously designed and partly implemented were
cursorily put aside.
 In addition, the PEEs(public economic enterprises) were put up
for sale, i.e. privatisation.
 These were the most decisive steps of completely withdrawing
the public sector from manufacturing.
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 During the 1980s and 1990s, there was a gradual but continuous decrease in the
role of the public industrial sectors in the economy.
 It was presupposed that the PEE were useless or even harmful, because they
were creating a burden on the state budget, sitorting free market principles and
curtailing the development of private businesses by using capital resources.
 They were producing expensively, and they had excess employment ,thus they
had to be eliminated forever.
 As the domestic market was opened more to the foreign products by reducing
custom duties and eliminating other restrictions, industrial inputs were
supplied via imports.
 Thus the need for the public industrial establishments decreased considerably.
 The government followed a policy stating that the sale of commodities of the
PEE to private enterprises could not be below their cost.
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 In the development plans that were put forward after
1980 an export oriented and a more competitive
industrial production structure was proposed.
 Beyond this, the country had no defined
industrialisation policy, including any specification of
the leading or key industries.
 In fact, industrialisation policies just before and after
1980 were rather like the two ends of a pendulum
coming from one end and going to the other.
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 In addition, if technological changes are taken into
account, Turkey missed an important opportunity during
the 1980s and 1990s.
 The Third Industrial Revolution was taking place with the
unprecedented improvements in the ICT(information and
communication technologies) during those years.
 All the developed countries put more emphasis on science
,technology and education in a systemic manner by
creating their NIS (national innovation systems).
 Having no specific industrialisation policy in mind, Turkey
missed this technological locomotive.
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Structure of Manufacturing
 The structure of manufacturing can be properly analysed either
by using input-output tables or the statistical surveys and
censuses which follow the value added approach.
 One of the most important structural indicators is the size of the
establishments.
 According to the GCI(General Census of Industry and
Establishments) 2002, the average size, that is the total number
of the employed in the sector divided by the number of
establishments, is 8,3 , which is very small.
 That is to say per enterprise only alittle more than eight people
are affiliated as employee and employer on average.
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 Manufacturinf sector has mostly small scale
businesses or according to some definitions micro
enterprises.
 Because of the qualitative changes of the production
structures ignited by Third Technological Revolution,
the small scale production units have become more
dominant in the industrially more advanced countries.
 In the case of Turkey, the small scale is an outcome of
being relatively less developed in terms of capital
formation; the organisational and institutional
formations and technological capabilities.
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Size Distribution of Manufacturing Enterprises
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 The size distribution of industrial enterprises is
extremely uneven, that is they are cumulated within
the 1-9 region which takes about 89.7 per cent of the
total.
 If the SMEs (small and medium sized enterprises) are
considered, that is to say establishments less than 50
individuals, they approach 97.9 and those having less
than 100 are equal to 98.9 per cent.
 Thus, it can be concluded that Turkish manufacturing
consists of only SMEs.
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Manufacturing Sectors Having More than five per cent of Total Employment
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 However limited it may be, the data about the structure of
manufacturing clearly shows that industrial establishments
are small sized and they are concentrated essentially in the
traditional sectors producing primarily consumer and
intermediate commodities.
 The structural characteristics of manufacturing have some
negative and positive elements.
 From the positive side these types of establishments, since
they contain limited capital stock, are more flexiblein
terms of adapting themselves to the conditions and
working according to the special preferences of customers.
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 Howevet their small size does not permit them to become institutionalised,
that is; the future of most small firms dependds on the owner-manager
personally.
 In addition, a small size sets limitations on the quantity and quality of the
product, including product differentiation and the capacity to produce more at
short notice,i.e. flexibility.
 In addition being small will have relatively more limitations regarding
technological and institutional innovation processes.
 That is, conducting in R&D research and development activities and making
institutional renovations which are related to the size is relatively difficult if
not totally impossible, except that the SME is not an R&D enterprise itself.
 These characteristics of the subsectors of manufacturing do not allow
establishments to compete in international markets with a high technological
edge.
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Mining
 During the implementation of more liberal economic policies the
mining sector has been and still is a playground for private capital
 There are some very important problems that the sector is facing .
 First, the process of exploring natural resources and processing the
products domestically before exporting is not well programmed and
practiced.
 That is to say the country’s natural resources are not fully utilised even
in the case of boron and chromium, of which Turkey has a very high
proportion of the world reserves and their quality is very high.
 Second, there is a lack of institutional set up.
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Energy
 Traditionally the energy sector is considered to be in the public
domain.
 This approach changed completely after the 1980s and the place of
private ownership increased in the sector.
 Until 1980, the share of energy in GDP was less than one per cent; this
increased to around two per cent during the 1980s, three per cent
during the 1990s and more than foyr per cent during the 2000s.
 Thus, it can be concluded that energy production increased faster than
the growth of the toatl economy, and the sector gained strength in
terms of production, transportation and internationalisation.
 Capital formation in the sector had a similar trend.
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SERVICES
 Service sectors include all economic activities which are not included
in agriculture and industry.
 Service sectors can be considered as infrastructures of economic and
social developments and well being, not only in the short term but in
the long term as well.
 Total services made upless than 50 per cent of total GDP until the
1980s.
 This ratio had an increasing trend during the 1980s and 1990s.
 By 200s it reached more than 60 per cent of GDP.
 The same trend can be followed in constant capital investments.
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 There are three subsectors under services sector .
 The first is the sectors directed to the improvement of
human capital,namely education and health.
 Thes econd is those sectors making economic
activities more feasible, such as trade,financial
services, transportation and communication.
 The third group is all the others.
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Education
 One of the most important indicators of education is the number of
students at each school level, which is called the schooling rate.
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Health
 Health services include not only illnesses and their
cures but also sheltering, feeding, woring and
environmental conditions.
 Health is a very important aspect of human capital.
 However in Turkey, even in 2010 , on average about 45
per cent of the labour force do not have any social
security coverage according to the Labour Force
Surveys, while in rural areas the rate is almost double.
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Facilitating Services
 Finance
 Transportation
 Conmmunication
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Other Services
 Trade
 Housing
 Tourism etc.
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Public Services
 After 1980, in addition to the decreasing role of the state,
the Central Bank was made independent of government
intervention in terms of its functions but not in its
administration.
 Furthermore, even basic public service like education and
health were subject to privatisation.
 The computerisation of information flows in public
institutions is a new development of the late 1990s and
2000s and has been expending rapidly.
 Governments are trying to create an “e-state”.
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