Turkey - Employment and Training Project

Docmmmt of The World Bank FMR OMCLL USE ONLY MICROFICHE COPY Report No.:P- 5718 TU Type: (PM) Tit1e: EMPLOYMENT & TRAININOG PROJECT RePWNo P-5718-TI Author: MERTAUGH, M. Ext.:32244 Room:H12111 Dept.:EC12HR KOUNRANDWU AMD RECOPM NATION OF THE PRESIDENT OF THE MNETRATIONL BAK VOR RECONSTRUCTION AND DEVEPMT TO THE CEECUTIVE DIRECTORS ON A PROPOSED LOAN IN ANl AMO EQIVALENT TO US$67.0 KIELION TO THE REPUBLIC OF TURY FOR AN LOIME AND TRAINIG PROJECT NOVEIB 6, 1992 This docment has a restricted distribution and may be used by recipietonlY In the perfomnce of dtir offiW dutis its contents may not otheniwse be disclosed widtout World Sauk autorization.  CURRENGY EQUIVAIENTS Currency Unit - Turkish Lira (TL) Value of USS 1.00 1987* TL 674.5 1988* TL 1,422.3 1989* TL 2,121.7 1990* TL 2,629.0 Dec. 1991 TL 5,200.0 Oct. 1992 TL 7,500.0 2/ Amal Averase ABBREVIATIONS AND ACRONYMS ATHB Research and Technical Services Unit (Arasirma ve Teknik Hizmet Birimi) of the Occupational Standards Commission CIAC Career Information Advisory Committee Ciu Career Information Unit DSPW Directorate for the Status and Problems of Women EC European ComDmuity IIBK Turkish Employment Agency (Ig ve IL Bulma Kurumu) MEKSA Foundation for Promotion of Vocational Training and Small Indusries MOE Ministry of Education MSK Occupational Standards Commisssion PCU Project Coordination Unit SOE State-Owned Enterprises SIS State Institute of Statistics SPO State Planning Organization FISCAL YEAR OF THE REPUBLIC OF TURKEY January 1 - December 31  FOR OMCL41 USE ONLY REPVBLIC OF TURKEE EMPIDYNENT AND TRAXNXNo PROJECT LOAN AND PROJECT SU.MAY Dorrovor: Republic of Turkey Implementing Agencies: Turkish Employment Agency (TIBK) State Institute of Statistics (SIS) Ministry of Education (MOE) Directorate for the Status and Problems of Women(DSPU) Research and Technical Services Unit of the Occupational Standards Commission (ATHB) Amount: US$ 67.0 million Term: Seventeen years, includlng a five-year grace period, at the IBRD standard variable interest rate. Financing Plan: Local Foreign Total -------US$ million------- Government: 40.4 0.0 40.4 IBRD: 42.1 24.9 67.0 TOTAL: A=82.5 2 107.4 Rate of Return: Not Applicable Staff Appraisal Report: 10331-TU map: IBRD 23363 This document has a restricted distribution and may -e used _y recipients only in the petformance of ther offcial duties. ts contents may not otherwise e disclosed without World Bank authorization.  NEKORAxnDJ AND OECO)QIENDATION OF THE PRESIDENT OF TEE I8RD )TO THE E ECUTIVE DIRECTORS ON A PROPOSED LOAN TO TIE REPUBLIC OF TRuKEY FOR AN EMPLOTIENT AND TRAINING PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed loan to the Republic of Turkey for the equivalent of US$ 67.0 million to help finance an Employment and Training Project. The loan would be at the Bank's standard variable interest rate for a term of 17 years, including a grace period of five years. 2. Ackgxound: In 1980, following a serious external crisis, Turkey embarked on a major economic reform program, which constituted a sharp break from earlier policies of iAport substitution, market intervention, and pervasive involvement of state-owned enterprises (SOEs) in all sectors of production. The reform program aimed to improve the efficiency of production and allocation through greater reliance on competitive market forces. It included measures intended to reduce public subsidies to the SOEs, to control the fiscal deficit, and to simplify the trade regime -- thereby exposing domestic producers to external competition. An underlying goal of the reform effort Was to raise Turkey's competitiveness in European markets, thereby bolstering Turkey's bid for European Community (EC) membership. 3. These efforts produced results. Real GDP growth averaged about 5 percent between 1980 and 1986, and exceeded 7 percent in 1986 and 1987. In 1988 there was a current account surplus for the first time in 15 years. But the fiscal discipline which marked the early years of the reform gave way to a more expansionary policy as the 1987 and 1991 elections approached. This interruption of the reform process reversed many of the early achievements of the reform. By 1990, the current account deficit had returned, inflation exceeded 60 percent, and SOBs continued to require massive operating subsidies. Unemployment, which had risen earlier in the decade, abated -- to an overall rate of 7.2 percent in 1990. Economic output grew at 9 percent in 1990, reflecting the combined effect of a tight monetary policy, expansionary fiscal policy, and large foreign capital inflows. But the situation again deteriorated in 1991 as public-sector borrowing requirements rose to 15 percent of GNP, output growth slowed to less than 1 percent, and the rate of inflation rose to 70 percent. 4. Following the October, 1991 elections, one of the first acts of the new coalition Government was to confirm its commitment to the main goals and policies of the reform strategy adopted in the early 1980s. But there has been little progress in implementation of policies under this strategy. Public enterprise reform is one key area requiring urgent government action. Successful implementation of public enterprise reform is likely to require the creation of suitable programs to train and redeploy workers who would be displaced by the reform, as well as of programs to provide temporary income support during the transition to new jobs.  2 5. Prosect Obiectives: The proposed project has four objectLves: a) to improve allocative efficiency through diversified employment services, b) to improve the absorption of unemployed, unskilled workers in productive employment, c) to improve the efficiency of labor-market decisions by providing better information on employment prospects and training requirements by occupation, and on the skills of job seekers, and d) to promote women's productive employment. 6. PrjjSt De8