Turkey - Industrial Export Development Project

Document of The World Bank FOR OFFICIAL VSE ONLY 1-4/ rLI Report No. 6885-TU STAFF APPRAISAL REPORT REPUBLIC OF TURKEY INDUSTRIAL EXPORT DEVELOPMENT PROJECT December 14, 1987 Industry, Trade and Finance Division Country Department I Europe, Middle East and North Africa Regional Office This document has a restricted distrlbWon and may be used by recipients only in the perfonnance of theilr official duties. Its contents may not otherwise be disdosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Turkish Lira (TL) Value of US$ 1976 T/ IL 16.05 1977 TL 18.00 1978 TL 24.28 1979 TL 31.08 1980 January TL 70.00 1981 January TL 91.00 1982 January TL 139.60 1983 January TL 191.15 1984 January TL 309.20 1985 January TL 451.40 1986 January TL 586.40 1987 Ja:.uary TL 752.93 1987 November TL 950.00 A' Annual averages through 1979. FISCAL YEAR January 1 - December 31 GLOSSARY OF ABBREVIATIONS AIs Administrating Institutions cBT Central Bank of Turkey CMB Capital Market Board DYB Devlet Yatirim Bankasi EIB European Investment Bank ERR Economic Rate of Return Ex-Im Bank Export-Credit Bank of Turkey FE Foreign Exchange FERIS Foreign Exchange Risk Insurance Scbeme GDP Gross Domestic Product GNP Gross National Product GOT Government of Turkey IFRR Internal Financial Rate of Return IGEME Export Promotion Research Center IMF International Monetary Fund KfW Kreditanstalt fur Wiederaufbau PCBs Participating Commercial Banks SEEs State Economic Enterprises SPO State Planning Organization SSIs Small Scale Industries SYKB Sinai Yatirim ve Kredi Bankasi TSKB Turkiye Sinai Kalkipma Bankasi  FMORMIA USE ONLY REIU IC OF TURKEY STAFF APPRAUEL REPOLT IDUSDIAL EXCPORT DEVELOPMENT PROJEC Tabl2 of Cnstenst Page No. PROJECT SUMIARY .................................,.,...... i I. BACKGROUND ..............,............................... 1 II. TEE MANUFACTURING SECTOR AND POLICIES ........... ...... .... 2 A. Mf_ro-economic Developments in the 80s ........... ,..... 2 B. Impact on Manufae.turing Industry .., .................... 3 C. Policy Issues Affecting the Future Development of Private Inkdustry .................................... 6 D. The Bank's Strategy in the Manufacturing Sector ........ 9 III. THE FINANCIAL SECTOR .................. ..................... 10 A. The Structure of the Financial System .................. 10 B. The Size of the Financial System ....................... 12 C. Credit Growth and Allocation ............., ............. 13 D. Industrial Fiuance . ........ . 4 . .............. .. 14 E. Financial Markets ...... ..............................,. 15 IV* THE PROJECT 17 V.E T. PRJC............................................... 1 A. Project Objectives ....... .............................. 17 B. Project Description and Design ........... ............... 17 C. Technical Assistance ................................... 17 D. Beneficiaries ............................................ 18000*90* i E. Project Cost and Financing Plan ........................ 19 F. Participating Banks and Eligibility Criteria 44444444444 19 V. THE PROPOSED LOAN AND MAIN FEATURES ............4............ 24 A. Amount and Allocation of Funds ............. ............ 24 B. On-lending Rates and Foreign Exchange Risk ............. 24 C. Administration ........ ................................ 25 D. Procurement and Disbursemnts ..... ..................... 26 VI. PROJECTS BENEFITS AND RISKS 44.4............... ............ 27 VII. RECOMMENDATIONS ............................................ 28 This report is based on the findings of an appraisal mission to Turkey in April 1987. TIh mission consisted of Messrs. Dalla (Chief), Banerji, Behbehani, Rocha (EMPID), and Joshi (Consultant). This document has a nstricted disibution and may be used by ncipient osnlyin b pwomas of dhir officl duties. Its contents may not otherwi be disclosed witKWh onu Banakjuthxiaon.  Page No. ANNEX 1 - Selected Performance Indicators for the Manufacturing Sector (1979-86) .0. *.***ee.e e* 30 ANNE 2 - Comodity Composition of Exports (1977-87) .... 31 ANNEX 3 - Turkey - Exports by Destination ............... 32 A=EX 4 - Turkey - Shares of Financial Institutions in Total Credit (1980-86) .................... 33 ANNEX 5 - Turkey - Composition of Credit (1980-45) *...... 34 ANNEX 6 - Industrial Development Bank of Turkey (TSKB) ... 35 ANNEX 7 - Industrial Development Credit Bank (SYKB) ...... 50 ANNEX 8 - Terms of Reference of a Proposed Study of Credit Delivery System for Industrial Finance ...... 68 ANNX 9 -- Distribution by Sector of the Nedium-term Rediscounts for Project Finance provided by the Central Bank (1981-86) ................... 70 ANNE 10 - Projected Disburseumntu o**e