Turkey - Country Assistance Strategy : Chairman's concluding remarks

TURKEY:COUNTRY ASSISTANCE STRATEGY CHAIRMAN'S CONLUDINGREMARKS Meeting of Executive Directors November 6,2003 The Executive Directors welcomed thejoint IBRD/IFC CountryAssistanceStrategy (CAS) and appreciatedits candid recognitionof challenges yetto be tackled by Turkey. Directors acknowledgedthe Government'seffortsin improving macroeconomic stability, and noted the strongeconomic recovery from the crisis in2001. Directors stressedthat continued adherenceto the reform program was keyto furtherreduction of Turkey'seconomic vulnerability, achievementof high and stable growth, higher levelsof foreign direct investment, and improvementof the conditions for accession tothe European Union. Directorsurged the Government to accelerateprogress on structural reforms includingthe restructuringand privatization of state banks as well as other state-owned enterprises inthe energy and telecommunicationssectors, continued modernizationof fiscal management,further overhaul of the social security system, and strengtheningof the social safety net. They emphasized that, given the needforcontinued tight fiscal policy,it was especiallyimportantto maintain social expendituresat appropriatelevels to protect the most vulnerable groupsand to improvethe targetingand qualityof social programs, especially in health and education. Directors broadly agreed thatthe CAS adequately reflectedTurkey'seconomic priorities needs. They concurred with the needfor flexibilityby the Bank in providingsupportto Turkey given to the dynamic situation and evolving strategy of the Government. Directors also broadly expressedtheir supportfor the outlined lending scenarios, together withthe proposed triggers. The importance of clear and measurable triggersfor maintaining the highcase was emphasized. However, someDirectors, noted withconcern the likely exposureof the World Bank Group in Turkey. They stressedthat Bank lending shouldbe extended onlyif there is measurable progress in implementingnecessary reforms including those which are more difficult Directors noted the continuedemphasis on programmaticlending to support public and financialsectorreforms as the core of the highcase scenario. They also urged thatgreater attention be given to infrastructure,environmentas well asto gender and related issues in theBank's program. Directors noted with concernthe slow disbursementof ongoing projects. They also noted the risks associatedwith Turkey's reform efforts and the Bank Group's assistance strategy. Directors welcomed the complementarity in the World Bank Group'splanned activities in Turkey. They welcomed the strong involvementof IFC and MIGA in privatesector and SME development. Directors also commended the close collaboration between theBank and the Fund in the area of structural reforms. Finally,Directors welcomed the decision to disclosethe CASas agreed withthe Government of Turkey.