Turkey - Economic development (Vol. 3 of 5) : Major social and economic sectors

Report No. 316a-TU FIL COPY The Economic Development of Turkey (In Five Volumes) Volume Ill: Major Social and Economic Sectors April 25, 1974 Country Programs Department II Europe, Middle East and North Africa Region Not for Public Use Document of the International Bank for Reconstruction and Development International Development Association This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS Prior to August 9, 1970 Us $1.00 TL 9.00 TL 1.00 US $0.11 August 9, 1970 to December 22, 1971 US $1.00 TL 15.00 TL 1.00 = US $0.067 After December 22, 1971 US $1.00 - TL 14.00 TL 1.00 = US $0.07  VOLUME III MAJOR SOCIAL AND ECONOMIC SECTORS Table of Contents Page No. Chapt. 8 POPULATION, ENPLOYMENT AND EDUCATION ............... 1 Population .... ....*.* ...... 0..... ....... ....** ... 1 Labor Supply and Demand. ..... . 7 Enigration ..................................... 11 Education ........ ............................... 14 Chapt. 9 REGIONAL DEVELOPMENT AND INCOME DISTRIBUTION ......... 19 Past Government Policies ............................ 20 Present Situation and Problems ................as...... 22 Third Plan Proposals .... ....... ....... ...... ......... . 24 Urban Development ..... O .............. ... ........ ..... 26 Land Policies, Controls and Housing ................. 28 Municipal Services and Financing ......... ... ....... 29 Pollution ....... ... o*........................... .o..* ..... 30 Prospects .... o....................................... * .*.O...... 30 The Distribution of Income .......................... 31 Annex 1 - Main Institutions for Regional Development. Chapt.. 10 AGRICULTURtE .. ............. .. . .. . .. . .. . .. . . .......... 34 Changes in Agricultural Production .................. 34 Performance by Key Commodity Categories ............. 38 The Use of Inputs, Services and Investment .......... 43 The Impact on Labor . ......................... 46 Trade and Export Projections ........................ 48 Agricultural Policies ........... o- ................ 52 Irrigation . ........ 52 Price Policy ........ .... ... 54 Effects of the Price Policies and Their Implications. 61 Credit ....*-*...................**.....*.*.....* 62 Agrarian Rteform .................................** * * * 64 Current Land Reform Status .............. & Chapt. 11 INDUSTRY, MINING, POWER ....................... .. .... 68 Industry ........ *..*.... 0.... 00................. 00. 68 Mining .. . o. ... .. .. .. . . . . . . . . . . . . .*. ... . .. . 85 Ehergy and Electric Power ......... .............. 88 Annex 1 - Industrial Protection, Industrial Export and and Investment Incentives in Turkey y Annex 2 - Iron and Steel ...........................- 1 of Annex 2 Chemicals, Petrochemicals, and Fertilizers. 2 of Annex 2 Forest Industries ............ ........ 5 of Annex 2 Motor Vehicles and Tractors ............... 7 of Annex 2  Table of Contents (continued) Page No. Chapt. 12 TRANSPORT ................... 94 The Transport System . ....... .94 Assessment-of the System .................... 96 Planned Targets and Performance ............. 97 Organization and Management o.o...o....o ... 1-%0 Policies and Implementation oo................ 12 The Third Five Year Plan and Prospects *...... 104 Long Term Prospects .....0................- .... 108 Chapt. 13 TOURISM * .............................. 110 Development of Tourism 1950-1972 ............ 110 Incentive and Credit to the Tourism Sector .. 111 Third Plan Targets and Prospects * ........... 112  VOLUME III Chapter 8 POPULATION, EMPLOYMENT AND EDUCATION Introduction 8.t In the post-war period Turkey has had a very high natural rate of growth of population: the population has nearly doubled in the last 25 years: it was 18.8 million in 1945, and 35.7 million in 1970, and the 1970 figure excludes the 440,000 or more Turks working abroad. The population was largely rural: less than 15% lived in cities of over 20,000 in 1950; but the ratio rose to 28% by 1970. The first two Turkish plans failed to increase productive employment fast enough to absorb the additions to the rapidly growing labor force, or to reduce appreciably underemployment in agriculture. The rate of population growth is likely to taper off in the future, partly in association with rapid industrialization and urbanization, but the labor force will in- crease at rates of around 2.5% or so in the next 15 years, as a result of rapid population growth in the past. In recent years, the demand for labor in Western Europe has siphoned off a considerable part of the increase in the Turkish labor force, and emigration is likely to continue, though perhaps at a lower rate. However, unemploymnt is likely to become a growing problem in the next 10 or 15 years, especially since the Third plan continues to em- phasize industrialization and growth, rather than employment. While unskilled labor will be in surplus, shortages of certain modern industrial skills have emerged, so that educational reform has high economic as well as social priority. Population 8.2 Turkey's population has been increasing rapidly since 1950; the aver- age annual rate of increase reached a peak of 2.9% in the intercensal period 1955-60, but fell to 2.5% in 1960-65 and 2.6% in 1965-70 (Table 1.1). Since Turkish censuses exclude Turks living abroad, the heavy emigration during this decade results in understating the rate of growth. 8.3 The crude birth rate has been declining from 1955 but the death rate has declined faster. Thus, Turkey still exhibits the typical demographic features of developing countries: a high birth rate (39.6 per 1000 in 1966-67), a reduced but still relatively high death rate (14.6 per 1000 in 1966-67 as compared to a little over 10 per 1000 in Western Europe), and a high infant mortality rate (153 per 1000). The expectation of life has risen from 48 years in 1960 to 56 in 1970. Typically, again, the 0-14 age group formed 41.6% of the total population in 1970, and the working age group (15-65) 54.2%, s0 that the dependency ratio is high.  - 2 - 8.4 The SPO expects the rate of growth of population to rise to 2.72% per annum by 1980-85, and to decline gradually thereafter to 2.01% in 1990-95. 1/ At these rates Turkey's population will be nearly 66 million in 1995. Pro- jections- of population growth must take into account projected fertility and death rates, the age and sex compositions of the population and the inter- relations between these factors; in Turkey's case the most controversial projection relates to the crude birth rate. For the Plan projection to be fulfilled, the crude birth rate must decline from its 1970 level of 39.6 per 1000, to 37.5 per 1000 during 1970-75. A particularly sharp fall is projected after 1985. (see Chart 10), and by 1995 the birth rate is expected to fall to 26.7 per 1000. 8.5 The basic assumption underlying this projection is that Turkey has entered the phase of demographic transition through which nearly all indus- trialization (and hence in female labor force participation) and in education, particularly in female literacy, will lead to a fall in the fertility rate from the present level characteristic of an underdeveloped country to rates approaching those of industrialized nations. 8.6 There are in fact very sharp differences at present in fertility rates between the urban and rural areas (43.9 per 1000 in rural areas as against. 31.4 per. 1000 in the. urban. areas)), and between the. western and the less developed eastern regions. With the. development of the latter and with increasing urbanization, fertility rates' can be expected to fall. Also, fer- tility is inversely correlated with literacy: since the-education of female children has. been increasing, the cohort of females of reproductive age will be progressively more educated. However, the rate of decline will also de- pend on the type of urbanization and the kinds of employment opportunities offered to new migrants: studies of differential fertility in Turkey have shown that the fertility of village-born women hardly changes when they move to the cities, unless. they also experience, a change in their. socio-economic. status. 2/ 8.7 The distribution,, import and manufacture of contraceptives became legal in 1965, and although both the First and Second Plans incorporated family planning programs, their implementation.has moved slowly so far. 1/ The SPO makes several alternative projections ranging. from a population of 76.4 million in 1995 with- a high birth rate, to 62.8 million with a low birth rate, but adopts the intermediate figure of 65.9 million as a reasonable projection, and it is on this "Alternative. C" that projections of labor supply and demand have been made. 2/ See Serim Timur, "Socio-Economic Determinants, of- Differential Fertility in Turkey", Institute of Population Studies., Haceteppe University, Ankara 1971, mimeographed; Table 3, p. 9. Professor-Kiray has also argued that there is a good economic reason for this fact: children of the urban poor can work as shoeshine boys, peddlers, etc., and are therefore of as much economic value- to their parents aS farm children.  CHART 10 CRUDE BIRTH RATES 50- A) B) IBRD Projections C) AC: Plan Projections "C" 45 40 . - * - * - - - - - - * C ~~~~~~~~~~~~~(Constant (Fertility Rates ,-O 35 \. B (Moderate Fertility 30 C(FP A (Fast Fertility 25 (Decline 25 2c1 l l l I I i 1965 1970 1975 1980 1985 1990 1995 YEAR World Bank-8082(R)   CHART 11 CRUDE DEATH RATES 16 A) B) IBRD Projections 14 C) AC: Plan Projection "C" 12 C) -r 10 U) 2 8 . , ~ _ C (Constant Fertility ~_* >.,~ A (Fast Fertility \ ~~ @ \ ~( Decl ine B (Moderate (Fertility (Decline 6 AC (TFYP) 4 I I I 1965 1970 1975 1980 1985 1990 1995 Year World Bank-8083(R)   The Second Five Year Plan, for example, had targeted for a coverage of 2 million women by 1972, which has not been reached. In the Third Plan, the family planning services will be integrated with maternal and child health care services, and if the planned extension of these services to the rural areas materializes, a decline in the fertility rate in these areas may well occur. Public acceptance of the need for family planning is growing among the uneducated, but knowledge of efficient techniques is sometimes lacking. 8.8 On balance, taking into account the effects of increasing education and urbanization, the SPO projection "C" would seem somewhat optimistic re- garding the fall in fertility rates, although quite possible, assuming that Government family planning programs are carried out. A more conservative projection is shown in the Graph 13. The costs of failure to reduce the fer- tility rates are high: increased expenditures on health, housing, and educa- tion; a reduction in the rate of savings; and higher unemployment. 8.9 The Plan "C" projection forecasts a fall in the death rate per 1000 from its estimated level of 12.8 in 1970 to 6.6 by 1990-95; this rate of decline again may be a little optimistic, though possible, especially if the planned reorganization and extension of the health services is brought about. A more conservative forecast would be a crude death rate of between 7.3 and 7.4 per 1000 in 1995 (see Chart 11). Turkey has suffered from a shortage of health personnel: thus while in 1970 there were 4.9 doctors (including dentists) for every 10,000 people, there were only 2.5 nurses and 3.2 midwives. The problem was compounded by the uneven distribution of health personnel: in 1960, 18% of the doctors worked in areas with a population of less than 25,000 though 80% of the population lived in such communities. The Third Plan aims at increasing the number of health personnel rapidly, and also at extending the health services in the rural areas: socialized medicine will be extended to 22 new provinces. Two thirds of the population are to be covereed by the nationalized health services by 1977. 8.10 The growth of population has been accompanied by speedy urbanization: the urban population increased from 18.5% of total population in 1950 to 35.9% in 1970. Cities with a population of 100,000 or more have grown the fastest; the fastest growing city of all has been Ankara. The rate of urbanization has slowed down a little (with the slowdown in population growth and faster emigration), from 6.6% per annum in the 1960s to 5.8% per annum in the last three years. The Third Plan foresees a rate of urbanization of 6.6% during 1972-77 and a declining rate thereafter, but there is little discussion of the social and economic forces behind urbanization and no deliberate measures are envisaged to slow it down: it is taken for granted that the demand for labor in agriculture will fall, and that the rural population will move to the cities despite the increasing unemployment there. Rapid urbanization is considered an acceptable or even desirable aspect of modernization and indus- trialization. The SPO expects by 1995 the urban population will have increased to 75% of the total population, so that Turkey will have been transformed from a predominantly rural country to a mainly urban country in less than half a century, a rapid transformation by historical standards. The largest cities are expected to grow much faster than the medium-sized and smaller urban centers.  CHART 12 POPULATION GROWTH RATES ! 4.0 A) B ) IBRD Projections C) AC: Plan Projection "C" 3.5- (Constant 30 _, _, _ * _ . - C (Fertility Rates 3-0 ............ 2_8(Moderate Fertility ID 2.5 IDecline c 10 0 2.0 A (Fast Fertility (Decline 1.5 1.0 I I 1965 1970 1975 1980 1985 1990 1995 Year 1' 'atLita qiowth rate World Batik- 8084(R)  - 7 - 8.11 The urbanization process may well present major social problems. It has already st::ained the infrastructural resources of the big cities, and slums have sprung up in all of them. The environs of Ankara are covered with small houses built by the dwellers themselves with no legal claim to the land; 70% of the population is estimated to live in residences legally defined as substandard. Continued migration to the cities will strain their infrastruc- ture further, particularly if the rate of urban unemployment increases, as the Plan expects. In this context it is particularly unfortunate that the share of housing in planned investment has been progressively falling, from 20.6% in the First Plan to 15.7% in the Third. Labor Supply and Demand 8.12 The growth of the labor force depends on the changing age structure of the population as well as its rate of growth, and on changes in the parti- cipation rate. The proportion of the population in the age group 15-64 fell from 58.3% in 1950 to 54.1% in 1965 and has remained at 54.5% in 1970. The SPO expects this proportion to fluctuate between 55 to 56% until 1985, and then rise more steeply to 58.8% in 1995. However, in recent years a decreas- ing proportion of this age group has joined the labor force, whether because of increasing education, urbanization (and the consequent decline in female participation) or simply the lack of employment opportunities. Thus, the participants of the 15-64 age group in the labor force fell from 44.3% of the total population in 1960 to 38.5% in 1970 (see Table 1.2). 1/ The Plan expects this participation rate to remain at around 38% in 1972-77, and to rise to 39% in 1987 and 41% in 1995 - presumably as a result in part of the increase in the relative strength of the group of working age. The participation rate will more likely fall as the rural exodus accelerates, since the female partici- pation rate is very much higher in agriculture than in other activities, and the overall participation rate is also somewhat higher. The pressure of unemployment and expanding education should also reinforce this tendency for the participation rate to fall, as people prolong their education so as to increase their chances of employment and earning power, especially since the cost of higher education in Turkey is very low. 8.13 While two thirds of the economically active population is still engaged in agriculture and related activities, there has been a perceptible decline in the last 10 years, from over 77% in 1962. This fall of 12 per- centage points was accounted for partly by an increase of 3 percentage points in manufacturing, the most rapid growth occurring in employment in the basic materials industries - iron and steel, chemicals and cement. How- ever, the most rapid increase has occurred in services, particularly the civil service and commerce, which includes retail trade. Many of these "jobs" are probably of very low productivity. 1/ The Plan defines the participation rate as the percentage of the economic- ally active in the 15-64 age group to the total population.  Table 31: DISTRIBUTION OF ECONOMICALLY ACTIVE POPULATION /1 (15-64 years) 1962 1967 1972 Agriculture 77.1 71.3 65.0 Manufacturing 8.3 9.2 11.3 Construction 2.6 2.9 3.2 Commerce 2.17 3.1 4.5 Transportation 2.2. 2.5 3.3 Services 6.4 8.3 11.7 Unknown 0.7 2.7 1.0 Total 100.0 100.0 100.0 /1 Excluding the armed forces. Source: TFYP, p. 658. Table 32: GROWTH OF'EMPLOYMENT 1962-72 RATES (percent per year) Firs.t Plan. Second Plan Average 1962-72 Agriculture -0.4 -0.7 -0.5 Industry 3.3. 5.4 4.3 Construction 3.8a 3.2. 3.6 Commerce 2.3 8.0 6.3 Transport 4.6 6.8 5.7 Services 10.5 4.1 7.5 Source: Calculated. from TFYP, Table 511, p. 658. 8.14 The development strategy of the Plans has emphasized a high rate of growth of output and labor productivirty rather than- employment-. The rate of growth of employment in industry, comerce- and, transpor-t.has. in.fact acceler- ated during the Second Plan, but even so failed to absorb the increments to the labor force. Thus, it is estimated that by 1972 the labor-surplus had risen to 1.6 million divided more or le8s; equally between agriculture and the rest of the economy. 8.15 The estimates of unemployment include a. large- number of partly em- ployed people, and is for that. reason imprecise... The extent of seasonal un- employment in agriculture in. any year is heavily influenced by the weather:  -9- it has been estimated that underemployment in agriculture during 1965-70 fluctuated between 0.7 and 1.3 million according to weather. These estimates are predicated on the SPO's calculation that there was an underlying trend for labor productivity in agriculture to increase by about 3% per annum be- tween 1962 and 1972 as a result of mechanization and other technological changes. If a lower rate of productivity increase is predicated - which is a reiisonable hypothesis - then the estimate of disgtised unemployment in agri- cu4ture in 1972 would be lower. 8.16 The dividing line between open and disguised unemployment is almost as blurred outside agriculture as within it. The SPO estimates disguised and open unemployment outside agriculture at 0.8 million or 14.5% of the nonagri- cultural labor force. However, only around 4.9% of the urban labor force was recorded as unemployed in 1969, the latest year for which the sample household labor force survey figures have been published. Nearly 42% of the unemployed were between the ages of 15 and 24, and over half belonged to two occupational groups: "craftsmen, production process workers and repairmen" and "unclas- sified"; agricultural workers also formed a sizeable part of the unemployed (Table 1.2). However, many of those recorded as employed were probably working at marginal jobs with very low productivity or for short working hours. The possibility of earning a living by shoe-shining, peddling or supplying tradi- tional goods and services to city dwellers (Including migrants living in slums) provides a safety valve, but their incomes are very low. 1/ 8.17 Emigration has greatly eased the pressure on employment in the last decade but this again may slow down in the future (see below). Between 1965 and 1970, net emigration amounted to 300,000, or one third the addition to the labor supply during this period. In the Third Plan, net emigration is expected to run at an annual rate of 70,000 or 17% of the addition to the labor supply. 8.18 The Third Plan continues to emphasize investment in high growth, relatively less labor-intensive industries; the consequent increase in the level of unemployment in the medium-term is seen and accepted as a price worth paying for immediate rapid growth, with full employment expected after 1995. Thus, the SPO expects the level of disguised and open unemployment out- side agriculture to grow from 0.8 million in 1972, or 14.5% of the nonagricul- tural labor force, to 1.1 million in 1977 (14.9%) and 2 million in 1987 (15.4%). It is only after 1987 that unemployment declines to 0.8 million in 1995 or 4% of the labor force; by this date too, disguised unemployment in agriculture is expected to disappear. Planned unemployment of this magnitude raises two questions: first, are the forecasts correct, and secondly, would alternative strategies not be preferable? 1/ Urbanization & Modernization in Turkey, AID Discussion Paper No. 10; Ankara, July 1972, p. 26. A peddler in Ankara, for instance, may earn TL 200 a month or less than a fifth of the average wage of a factory worker, and peddlers in Ankara are very likely better off than in smaller cities.  - 10 - 8.19 There are several reasons for believing that the Plan's implicit estimate of the magnitude of the rural exodus may be too high. On the one hand, it is based on a rising rate of participation in agriculture (as else- where), but as education spreads and incomes rise, the employment of children and women is likely to fall rather than rise (children and old people formed 17% of the agricuitural labor force in 1970). On the other hand, the estimate is predicated on very high growth rates of productivity in agriculture: 5.1% per annum in 1972-77, 9% in 1977-87, and 6.4% in 1987-95. These are unlikely to materialize: productivity increases of around 2.5% seem more likely in the medium-term (see Chapter 10). Thus, the actual extent of disguised and open unemployment in agriculture, or the rate of annual exodus, may well be less than estimated in the Plan. This conclusion is supported by projections carried out with a programming model (Annex II). All the projections but one reach the conclusion that agricultural labor force will increase slightly (by less than I 'per year) during 1972-87; the exception, which corresponds to a strategy of maximum employment, leads to a decrease of only 0.1 'of agri- cultural labor force during 1972-87, compared with 0.6% in the long-term stra- tegy of the Government. This result is reached although all solutions assume that a large volume of rural-urban migration will take place during the period (between 2.5 and 4.7 million). Table 33: PROJECTIONS OF LABOR SUPPLY AND DEMAND OUTSIDE AGRICULTURE (Increments, in millions of men) Actual Turkish development strategy 1965-70 1972-77 1977-86 1987-95 Supply of non-agricultural labor: Growth of civilian labor force 2.0 2.1 5.0 5.0 Decrease in agricultural labor force /1 - 0.2 0.6 1.8 Total additional supply 2.0 2.3 5.6 6.8 New demand for non-agricultural labor: Industry 0.3 0.6 1.3 2.2 Services 0.8 1.0 3.4 5.8 Emigration 0.3 0.4 0.0 0.0 Total additional demand 1.4 2.0 4.7 8.0 Chatge in unemplovment 0.6 0.3 0.9 -1.2 /1 Excluding changes in agricultural underemployment. Source: TFYP, Table 96, p. 147 and Table 1.2. 8.20 Similarly, the Plan estimates of productivity growth in the other sectors seem also a little on the high side, so that, assuming output targets  - 11 - are met, the increase in urban employment would be a little greater than fore- seen. In addition, labor-intensive sectors such as construction and services may expand faster than foreseen in the Plan. Nevertheless, unemployment will still present potentially grave social and political problems, and there is not sufficient discussion in the Plan of an investment plan which entails such large-scale unemployment, nor of the employment possibilities of alter- native patterns of investment. 8.21 The effects of various alternative development strategies on employ- ment and growth have been analyzed in the framework of a programming model of the Turkish economy (see details in Vol. IV). In the model growth is cons- trained by the availability of domestic savings and skilled labor and by migration costs and education costs for unskilled labor. The "basic case" which translates a strategy of growth maximization results in a rate of in- crease of urban emplovment of 5%, and a rate of increase of GDP of 7.2%, both of which are lower than the 5.8% and 8.7% respectively aimed at in the Turkish Developmenit Strategy. 8.22 Most of the difference between the two sets of projections can be explained by the skilled labor constraint and the difference in marginal domestic savings rate (26% in the basic case and 38% in the Turkish strategy). Relaxing the labor constraints increases GDP growth to 7.5% a year, and in- creasing the marginal savings rate to 30% increases growth of GDP to 7.6% and of urban employment to 5.6% (sensitivity analysis (2) and (4), Vol. IV). 8.23 A strategy of maximizing employment (sensitivity (1), Annex II A) rather than growth translates into a substantially faster growth of urban employment, 6.2% per year, at the expense of a small loss in growth of 0.2% per year. It is worth noting that the variant which maximizes employment implies annual rates of growth of 14% for totil exports and 20% for induattrial exports; it is argued in Chapter 7 that these rates are achievable (also see sensitivity analysis (7): "EEC Entry", Vol. IV). If this judgment regarding foreign trade is accepted, and the assumptions underlying the basic case are realistic, then this would suggest that a development strategy which maximized employment would imply a small loss in growth of GDP. It would also have the advantage, through increasing employment, of directly making the distribution of income more equal. Emigration 8.24 Massive emigration has been a striking, and on balance, beneficial feature of Turkey's recent economic development. By the end of 1972, there were over 625,000 Turks legally working abroad and several thousand illegal migrants - and between 1965 and 1972 migrants' remittances of foreign exchange to Turkey exceeded $2 billion, of which nearly 40% accrued in 1972 alone. Turkey was late in sharing in the mass migration of labor from the Mediterranean countries to the more industrialized Western European nations that has charac- terized the post-war era. Emigration from Turkey was relatively insignificant till the middle of the 1960s, but rose very rapidly thereafter (Table 1.3). By 1966, there were over 189,000 Turkish workers employed abroad, but even by the end of 1969, Turkish migrants were around 7% of the foreign workers  - 12 - in the European countries importing labor. Again, emigration absorbed a much smaller percentage of the potential growth in Turkish labor force than in the other labor-exporting countries such as Portugal, Spain, Italy, Yugoslavia and Greece. However, the share of Turkey has increased rapidly as the flows from the other countries, except Yugoslavia, slackened; Turkey is now the second most important supplier of labor to Western Europe. Germany has been by far the largest market for Turkish labor, though it is interesting that Germany's share in the flow of migrants has diminished from 95% in 1966 to 77% in 1972; in recent years Turkish labor has moved to several other coun- tries in Europe, particularly to Prance and Austria (Table 34). 8.25 The Third Plan estimates that net emigration during 1973-77 will amount to a further 350,000 so that there will be around one million Turkish workers abroad in 1977, and that their remittances will rise from $510 million in 1972 to $600 million, or to about $600 per head, in 1977 (in constant dollars). These estimates may turn out to be far too conservative, with im- port implications for the future course of development in Turkey. It would be useful therefore to re-examine the two components of the estimate of total remittances: numbers of migrants, and rate of remittance per migrant. 8.26 Given the surplus labor situation in Turkey, the relatively higher wage levels in Western Europe, and Turkey's association with the EEC, it can be safely assumed that the volume of emigration will be determined very largely by conditions in Europe. There are already well over a million Turks on the waiting list of the Turkish Employment Office., and the exist- ing level and likely change in the absolute level of unemployment till 1987 will ensure an elastic supply of Turkish migrants. The foreign demand for Turkish workers will therefore depend essentially on the balance between domestic labor supply and demand in the European cZuntries of immigration, on the balance in the other traditional-suppliers of migrant labor, partic- ularly in Europe, and finally on Government policies towards immigration in the various countries concerned. V 8.2i The total demand for imported labor in the countries of Western Europe (where nearly all Turkish emigrants are likely to go) depends technical- ly on past demographic trends - whose effects can be predicted with a fair degree of certainty - and on changes in participation rates, levels of econo- mic activity, technical change, and the rate of migration from agriculture to industry - all of which are much more difficult to predict. Forecasts made before the oil price changes indicated that substantial domestic shortages of manpower would continue at least in the next decade or so, in most European countries. However, the recent decisions taken by Germany indicate that these prospects might be upset, at least for a short period. 8.28 In 1971, one forecast put the probable labor shortage in the ten Western European countries of immigration at 11 million in 1980; by 1969, there were already 5.5 to 6 million foreign workers in these countries, so that between 1969 and 1980 net migration should be between 5 and 5.5 million workers. The "high" - "low" estimates on which the "central" forecast was based are as follows:  - 13 - Table 34: LABOR BALANCES IN EUROPE - 1980 (in 000's) Countries of Immigration Countries of Emigration High Low High Low 1. U.K. -3603 -1320 1. Italy +228 +18 2. Germany -4916 -2691 2. Finland +27 -221 3. Switzerland -487 -139 3. Spain +578 +144 4. Belgium -403 -74 4. Portugal +454 +300 5. Sweden -579 -273 5. Ireland +162 +39 6. Norway -29 +99 6. Yugoslavia +3028 +2675 7. Netherlands -421 +11 7. Greece +667 +273 8. France -1691 -38 8. Turkey +5315 +4336 9. Austria -344 -165 10. Denmark -333 -152 Total: 12806 -4742 Total: +10459 +7564 Source: Luisa Danieli, The Demographic and Social Pattern of Emigration from the Southern European Countries, Florence, 1971, pp. 28 and 35. These estimates are based on various assumptions regarding the growth of output in agriculture and in the other sectors, and of the growth of labor productivity in agriculture; if these assumptions turn out to be unrealistic, or if Govern- ment immigration policies are changed, the demand for migrant labor and actual emigration may differ widely from these projections. Nevertheless, the es- timates serve to show the large potential for Turkish emigration. On these estimates, between 4.3 and 5.3 million Turks could work abroad by 1980 im- plying a volume of net emigration of between 3.3 and 4.3 million over the next 7 years, as compared with the Plan estimate of only 350,000 migrants during the 5 years 1973-77. P.29 Another forecast for Germany, which is by far the largest recipient of Thrkish workers, suggested much lower figures of emigration 1/ than the above projection. This forecast gives the following numbers of foreign workers in Germany: 1/ The Institute for Employment Research, Erlangen.  - 14 - Table 35: FORECAST OF FOREIGN WORKERS IN GERMANY Year Number Change (OOOs) (000s) 1973 2455 _ 1975 2656 +201 1976 2709 +53 1977 2703 -6 1978 2672 -31 1980 2704 +32 1985 2163 -541 These estimates are considerably lower than the previous "central" ones and are very close to the "low" estimates . According to this German estimate the total iumigration into Germany between end-1973 and end-1977 will amount to 248,000. Adding an estimated 100,000 during 1973, total immigration during the Third Plan period (1973-77) would be approximately 350,000. If one as- sumes that 40-50% will be from Turkey (which is in line with past trends) and that this would represent 75% of total Turkish immigration (as in the last 3 years), then the total migration from Turkey to Germany would be about 190,000 - 230,000 during 1973-77. 8.30 In the early seventies the German Government has taken measures to restrict the-foreign population in certain areas and to make it more costly for employers to employ foreign labor. In November 1973, it announced that effective immediately there would be a temporary ban on immigration of workers from outside the EEC member countries, due to an expected stagnation of the economy in 1974. If this situation were to last, the Plan expectations of a 350,000 net emigration during 1973-1977 would not be achieved. But there are factors in favor of a more optimistic perspective in the longer term. It is likely that there will be increasing migration to other countries, such as France, the Netherlands and Austria. In the long rnm, Turkish workers will be allowed to circulate freely in the EEC under the Additional Protocol between Turkey and the EEC. This provision will come into effect between 1976 and 1986, and the exact time will be influenced strongly by the development of the demand for labor in the EEC member countries. Education 8.31 The extension and improvement of the educational system has long been one of Turkey's main social needs, and although rapid progress has been made in various fields - from the reduction of illiteracy to an increase in the number of technical personnel - the demand for education and for skilled manpower is greater than the existing system can meet. This shortfall is manifested particularly at the secondary school level, and schools are often overcrowded. The system is also wasteful, since classes are often repeated and drop-outs are common. The drop-out rate was 19-30% in the secondary  - 15 - schools and 18-35% at the lycee level in 1970-71. Furthermore, the Universities produce too many arts graduates and too few of the kinds of technical manpower the economy requires. In particular, there continues to be a great shortage of technicians in Turkey: the ratio of technicians to professionals is less than two to one in Turkey, as against a ratio of around four to one in indus- trialized countries. This imbalance is particularly serious in the field of health, though it is improving: the ratio of nurses and midwives to doctors has moved up from 0.41 in 1962 to 0.71 in 1971, compared with at least 3 to 4 per doctor in developed countries. 8.32 The formal educational system consists of three levels: basic, secondary and higher education. Basic education is divided into 2 cycles: the first cycle concists of 5 years primary school for children from 7 to 12 years of age. The second cycle consists of an additional three years of middle school. In the following 3 years of secondary education, students either attend a general lycee or go to vocational and technical lycees. Higher education is provided by eight public universities and various other academies, and it is generally much easier to obtain admission to them after a general lycee education, than from technical schools. 8.33 Considerable progress has been made in the last fifteen years in extending primary education. However, the general illiteracy rate of the population over six years of age was still 54.6 percent in 1970. Illiteracy is particularly widespread among women, the elderly and the inhabitants of the poorer regions. Although special steps have been taken to increase female literacy, it is still increasing at a slower rate than male literacy. Table 36: LITERACY IN TURKEY (in percent of Population over 6 years) Literacy level 1945 1950 1955 1960 1965 1970 Males 34.97 38.52 44.79 46.87 52.34 69.0 Females 13.70 16.55 20.59 22.56 26.85 40.0 Total 24.39 27.59 32.89 34.93 39.84 54.5 8.34 Universal primary education is a constitutional requirement, and the Second Plan had aimed at increasing primary school attendance to 100 per- cent, but by 1970-71 it had risen only to 83.6 percent, from 61 percent in 1955-56.  - 16 - Table 37: PRIMARY SCHOOL ENROLLMENT (in thousand and percent) Age Group Total Enrollment (7-12) Students Rate Z 1955-1956 3,252 1,984 61.0 1960-1961 4,245 2,867 67.5 1965-1966 5,061 3,932 7-7-.7 1970-1971 5,292 4,992 83.6 8.35 The main reason for this failure is that the remaining villa:ges without schools are those in remote parts--of the-couintry4; many6-oqfrthese:-vil- lages are extremely small and do not havet even 'the- elementaryPfacilit-ies-needed to set up a school. 8.36 The generally' high. illiteracy, fate- is also. a-10relection of' the: fact that so many of' the older age grobups.,. particular-ly.- it the r'ufa-l.areas^.and- among women, are still1'.l'literate-. Ther,i-sTa need-.not only to'*expandb the programs- for adult 'ediication-:and- training'but aLiostotgivethem-greater vo- cational content, -atid'the-Plan-aims at-vW an' extensive- reorganization of-these fa'ilities. 8.37 . In the ltstd'eicade,. ttfet"av -ins, th-'eSnt=bers- of- technical .peksonnel: betiteeii' 1!'60W anddi 9f,0i-the nnumber .o'f;eng'l'n-eers,; tech- niclans - and skilled craftsmen. douKlsd:t--.'i-Th ' thr-ee-f61d2>expansion of agronomists. Table.-38: STUPPLY- OF-TECHNICAL-MANPCOER: 1960, 19.'65!-and;1970 1960 196-5 1970 1. Engineers 15,461 1-7-,-692,- .31-,401- 2. Technicians- 2-7,.056' 37,417! 54:4,753- 3. Agronomists- 5,555- 8,957; 17,923 4. Skilled Craftsmen 9.98,902- 1,2-35;39-1' 1-,831,11'0 But -there is still an overall shortage of; scientific and' t'echaf'cal manpiwer and particularly. marked, imbalances- in.certain- lines. Thus,.in-- 1972''there were excess'suppl-ies of certain kin-ds otf engineers, such- as- construction, -chemical, and' agricultural--engineers, but.-severe-,shdrtages- of other. typest, such .as elec-- trical engineers. There- were:-shortagesod1f.all types of technicians- and iartic- ularly of skilledw building-workers-.- The Plan aims- not- only, at increasing the numbers-of trained personnel.sharply,- but.-also-at cor-recti'ng these imb'alances,  -17 - though shortages of various types of skilled manpower, and particularly of technicians are foreseen even in 1992. 8.38 The Third Five-Year Plan has an ambitious scheme of educational reform. The structure of the educational system is to be altered, and its scope considerably extended. By 1977, for example, primary school attendance will be 100 percent of the relevant age group and by 1995, 75 percent will be in the middle school; 45 percent will receivrB secondary education and 15 per- cent, university education. 8.39 The 100 percent target for primary school attendance has now been shifted to the end of the Third Plan; by 1977-78 all the 6.2 million children between 7 and 12 years of age should be in school. In 4 years facilities for an addition of over a million students will have to be created -- the Plan estimates that this task will require an expenditure of TL 3,780 million. It will also require particularly concentrated efforts in the East and South- east: the primary school attendance rate is as low as 40 percent in some parts of Southeast Anatolia. Given the difficulties of increasing facilities in the remote areas, the Plan allocation may be too low. 8.40 The Plan aims also at changing the pattern of secondary education substantially. At present, about 60 percent of the students in this level take general courses in lycees, and 40 percent are in vocational and technical institutes; the Plan aims at switching these proportions to 35 percent in the lycees and 65 percent in the vocational and technical institutes by 1995-96. The attendance at the vocational and technical institutes is to expand most rapidly (by nearly 0.4 million students) in the Third Plan, followed by the institutes of higher education. Table 39: ENROLLNENT RATIOS AT VARIOUS LEVELS OF EDUCATION: THIRD PLAN TARGETS (Percent of Relevant Age Group) Actual Target 1973-74 1977-78 Basic Education: 1st Stage (7-12) 90.0 100.0 Basic Education: 2nd Stage (13-15) 44.3 50.7 General Lycee (16-18) 13.2 13.4 Technical Vocational Schools(16-18) 6.5 11.5 Higher Education 7.1 9.0 8.41 The structure of the universities is not to be changed greatly, though there will be greater emphasis on the training of technical and scientific man- power. However, a basic issue is whether the total number of University students should be expanded-so fast, i.e. by 43.3% between the first and last years of the Third Plan, whereas the population in that age group will only increase by  - 18 - 12.6%. Over 15% of the total investments 1/ on education is to be spent on universities and higher academies, and some diversion of this expenditure to middle level technical and vocational training may weln show greater returns to the economy. There is of course considerable political pressure to expand universities since the private returns on university education, which is prac- tically free, is so high; but this return is probably also much higher than the social return. 2/ 8.42 An attempt to determine the requirements of the educational system in the next twenty years has been carried out with a programming model of the Turkish economy (Annex II A). Skilled labor is divided into four classes according to the length of training required. 3/ The calculations confirm that the Turkish labor force has at present an excess capacity of professionals and a shortage of skilled urban labor force and middle-school level adminis- trators. Growth requirements during 1972-1987 would require the training of 3 million persons in excess of what can be provided by the present educa- tional system. A large proportion of the additional training needs consists of skilled workers of the middle-school level (Class 4) and of managerial and clerical workers (Class 3). During the whole period, the ;resent educa- tional system would continue to provide an excess of technical and professional workers (Class 2) who will have to be employed at a lower grade (Class 3) in their professions. 1/ Estimates of current expenditure are not available; in the Second Plan current expenditures on education were about three times the capital expenditures. 2/ Anne Kreuger estimates at 25-27% the private rate of return and 8-9%. the social return on university training. See Duncan R. Miller, Editor, "Essays on Labor Force and Employment in Turkey". 3/ A detailed definition of the skill classes is given in Annex II A, Table A 17.  - 19 - Chapter 9 REGIONAL DEVELOPMENT AND INCOME DISTRIBUTION 9.1 Development and incomes in and around Turkey's three main cities, Istanbul, Ankara and Izmir, are ahead of those in other parts of the coun- try, particularly in the eastern provinces. Though regional economic ac- counts are not kept, it is estimated that in 1965 the East Marmara subregion, which includes Istanbul and four neighboring provinces, with 12.5% of the population contributed about 22% of the nation's GDP. By comparison, the twenty-four provinces in the Eastern Black Sea and Eastern Anatolia regions with 33% of the population contributed only 22% of GDP. Per capita value added in the Eastern provinces was therefore about one-third the level in the East Marmara provinces. 1/ The Government made a study of social and economic development by province as of 1970, using 53 economic and social indicators (Tables 11.7 and 11.8) to build a composite index of provincial development. Using this index, the ten most developed provinces are located in the western half of the country and the twelve least developed provinces lie east of a straight line drawn from Zonguldak to Gaziantep (Map 10672). However, provinces falling in the mid-range of socio-economic development may be found in both halves of the country, next to the most and the least devel- oped provinces. This composite index shows differences in development between the top and bottom provinces which are less marked than those derived from the 1965 estimates of value added. This may be due to the fact that the composite index, which reflects the numerous facets of social and economic development, gives equal weight to the 53 indicators, many of which are not indicators of production or welfare. 9.2 Table 11.16 gives the summary of results of a 1968 survey of 4,500 households in Turkey, classified by size of settlement and by rural regional differences. 2/ When viewed together with the aggregate index of development, several conclusions can be drawn: (a) The most pronounced differences in modernization and development are found between the rural population and the urban population and not between regions. (b) Although the main differences are between the rural and urban sectors, there are also considerable region- al differences between the rural populations of different regions. In par- ticular, the Black Sea, Aegean and Mediterranean areas have a more modern and economically better off rural sector reflecting their historical exper- ience, geography, and higher level of agricultural development. They survey also found that significant differences in modernization existed between the middle size cities depending on whether they were old Ottoman cities with limited recent growth or post-Ottoman cities whose growth was recent and con- nected with industrialization. 1/ For data on regional differences see Tables 11.1 to 11.8. 2/ K. Srikantan, Regional and Rural-Urban Socio-Demographic Differences in Turkey, Middle East Journal, Summer 1973.   2`5- 30- 35- 0 4'5- BULGARIA _1_B/ackSea U.SS.R r >IKIRKLARELW .. ... T_ U. S . 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