Announcement of the World Bank’s Annual Report Indicating the Lending to Turkey Reached Seven Hundred Twenty-Two Million in Fiscal Year 1981

<! , . I -f-!()ll ~ H )R ~F-1 L\Sf . .World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE NO. AR 81/25 EMBARGO: For publication on Monday September 21, 1981 WORLD BANK APPROVES $722 MILLION FOP. TURKEY IN FY 1981 World Bank lending to Turkey reached $722 million in fiscal year 1981, according to the Bank's Annual Report released today. The largest loan--$300 mi 11 ion for "structural adjustment"--was approved to assist the country with its "far-reaching program of economic reforms," th~ Report notes. It was the second of its kic,d, following a $200 million loan in 1980 and a $75 million supplement in 1981. Other loans, which will contribute to six of the country's development pro- jects amount to $347 mill i~n and were earmarked for industry, development finance • companies, energy, and agriculture and rural development. The total cost of the projects is $678 million, $331 million of which is being funded by the government. World Bank loan~ include the following: $110 million to assist a fertilizer production project; $70 mill ion to help the State Investment Bank finance the completion of six top-priority projects; $62 million to expand petroleum production; $25 mi,lion to help finance petroleum studies and exploration; $40 million to assist the Sinai Yatirim ve Kredi Bankasi finance the creation of about 5,000 jobs in small and medium-scale enterprises and $25 million to help increase production of fruits and vegetables for export. As of June 30, 1981, the Bank and its soft-Joan affiliate, the International Development Association (IDA) had approved Joans to Turkey totaling $3,307.9 million for 66 of the country's development projects. Commenting on Turkey's economy, the Annual Report notes that ''faced with stag- nant growth in GDP, a massive balance-of-payments crisis, and high and accelerating rates of inflation that reached 65 percent in 1979 and topped out at 108 percent in 1980, the government in 1980 adopted a far-reaching proyram_of economic reforms, followed in the succeeding months by additional measures, such as flexible exchange rates and deregulation of interest rates." It states that "significant progress has been made in implementing structural reforms," but warns that 11 continued don,estic efforts and sustained support from the international community will be necessary before Turkey can return to a path of economic growth with a sustainable balance-of-payments position." NOTE: Money figures are expressed in U.S. dollar equivalents. I . ••  - 2 - To increase food production, the Report says the government f3 promoting pro- jects to produce and process high-value crops. In addition, it states that the government intends to improve policies for the pricing of farm products and for strengthening extension services. • In energy, the Report notes that the government has "intensified exp1oration for new oil and gas deposits" and has improved secondary-recovery techniques. It says further that the Bank is 11 reinforcing the emphasis that most of the countries of the region--including Turkey--are placing on appropriate pricing policies." The Region While the Annual Report notes that there is consider~ble economic diversity among the developing countries in the Europe, Midd1e East and North Africa region, it adds that there is a 11 common denominator, 11 in that they have adopted po 1 i ci es and measures to adjust to "the international economic developments of 1979 and 1980--sharply higher energy prices, higher food prices, rising inf1ation and slower growth in the industrial countries, a slowdown in exports and significantly higher interest rates on externa 1 loans." In the area of energy, for example, it says the oil-importers have attempted to broaden the variety of energy sources used and pursued stricter policies to manage demand and promote conservation. Oil exporters, the Report continues, have increased efforts to discover new • deposits and improve secondary-recovery techniques. To reduce externa1 deficits exacerbated by large food imports, many of the countries are '~aking greater efforts to remove or correct the impediments to more rapid agricu1tura1 growth, the Annua1 Report states. This includes developing new irrigation projects, among other measures. I . •. •  - 3 - • WORLD BANK LOANS APPROVED FOR TURKEY IN Structural Adjustment rv 1981 $300 Million to Help the Government Stabilize the Economy This second st. ·~tural-adjustment loan will give further support to the country I s program of ecom... c recovery and structura 1 reform that the government launched in January, 1980. Finance wi11 be provided for high-priority imports such as fertilizer, raw materials and l1termediate products for agriculture and industry. $75 Million ~o Supplement the First Structural Adjustment Loan of 1980 This supplement to the first structural-adjustment loan will support government policiE~s designed to improve the mobilization of domestic resources, to promote exports and liberalize imports. Other policies being assisted are in the areas of public and private investment, energy, agriculture and reform of Turkey's state economic enterprises. Industry $110 Million to Assist the Government 1 s Project to Increase Fertilizer Production This loan will assist the Turkish government's $236.6 million project to rehabilitate four fertilizer plants, with the goal of increasing output and becoming more energy efficient. To these ends, the Joan will also be used to finance tech- nical assistance and engineering services, to train staff, to complete a markating study and to improve plant operations and management. Development Finance Companies $70 Million to Assist the State Investment Bank Finance Six Projects This loan, which has the guarantee of the Turkish government, will provide funds to the State Investment Bank which is financing a project (the total cost of which is $187.4 million) to increase the productivity and efficiency of three state enterprises producing sugar, iron and steel, and copper. Technical assistance is also included. $40 Million to Assist a Labor-Intensive Industry Project Funds will be prov11ed to the Sinai Yatirim ve Kredi Bankasi, (a financial inst!tution set up by five commercial banks), to finance labor-intensive projects undertaken primarily by small and medium-scale indus~rial enterprises. The project, which will create about 5,000 jobs in 23 urban centers, is expected to provide a model for replication on a larger scale, in other high-unemployment areas. I • ••  - 4- Energy $62, Million to Support Efforts to Expand Petroleum Production • The loan will support a $102 million government project to test improved techniques of oil recovery in a large producing oil field, to drill new wells and install equipment in a newly discovered oil field. The funds will also be used to help evaluate the production potential of a gas field and to provide technical assistance to the Turkish Petroleum Company. The goal of the project is to expand recoverable oil reserves in operating fields and increase short-term production of crude oil in new fields. $25 Million to Finance Petroleum Exploration and Studies The loan will finance the foreign exchange costs of exploratory drilling, geological studies and seismic geophysical surveys in southeastern Turkey (as part of a government project totaling $45 million). Technical assistance and training will also be provided, and a program of energy audits will help identify the areas with strong potent'al for efficiency and conservation of energy. Agriculture and Rural Development • $40 Million to Help Turkey Expand Fruit and Vegetable Production for Export This first phase of a government program to increase the production of fruits and vegetables for export (whose total cost is $107 million) includes estab- lishing seven nurseries, 2,000 orchards, 100 vineyards and 150 greenhouses. The project will also provide credit to existing farms and orchards, improve extension services for farmers, provide horticultural training in Turkey and abroad, support applied horticultural research and promote links between research, extension services and the individual farmer. Further, it involves the preparation of a master plan for future horticultural development. - 0 - •