KEMAL DERVİŞ Ekonomiden Sorumlu Devlet Bakanı Minister of State in Charge of the Economy Küresel Piyasanın, Demokrasi İlkelerini Yansıtan Bir Siyasi Çerçeveye İhtiyacı Var 20. yüzyılın sonu dünyayı çok değiştirdiyse bile tarihin akışı sürüyor. Yüzyılı temel boyutlarında şekillendirmiş olan kapitalizm ile sosyalizm arasındaki büyük çekişme ortaya yeni bir sentez çıkardı. Ancak, geçen yüzyılın son yirmi yılında oluşan bu sentezi, kapitalizmin mutlak galibiyeti veya sosyalizmin yenilgisi olarak tanımlamak da yanlış olur. Kuşkusuz, piyasa mekanizmasının ve özel girişimin önemi daha da iyi anlaşıldı. Özel mülkiyet güven altına alınmadan piyasa mekanizmasının işlemeyeceği kabul edildi. Ekonomide katı merkeziyetçiliğin sonuç vermediği iyice ortaya çıktı. Yatırımlarda miktardan çok kalitenin önemli olduğu kanıtlandı. Tablo aslında bu denli basit değil. Çünkü devlet küçülmedi, tersine çok büyüdü. Çağdaş ekonomide devletin üretimden çekildiği doğrudur. Bununla birlikte, devletin hem gelir dağılımına müdahalesi, hem de piyasayı düzenleyici işlevi azalmadı, arttı. Başarılı olan, üstünlüğü kanıtlanan model, devlet ve piyasanın çelişmediği, birbirlerini tamamladığı bir senteze dayanıyor. Güçlü bir hukuk devletinin eksikliği, piyasaların sağlıklıbir rekabetle işlemesine, kaynakların yüksek etkinlikle kullanılmasına engel oluyor, makro ekonomik bunalım olasılığını da arttırıyor. Piyasanın ve özel girişimin düzenleyici devlete daima ihtiyacı vardır. Yurt içinde etkili olan, verimli çalışan, zenginlik yaratan bir piyasa ekonomisine ihtiyaç var. 20. yüzyılın sonunda egemen olan ekonomik model kapitalizmin ve sosyalizmin yararlı unsurlarını birleştiren böyle bir sentez olarak gelişti. Ne var ki, 21. yüzyılda, "piyasa" dediğimiz mekanizma artık ulusal değil, küresel düzeyde işliyor. Bu nedenle ulusal düzeyde devam eden gelir dağılımındaki bozukluğun ulus-lararası boyutu da gitgide önem kazanıyor. Ulusal devlet, kendi toplumundaki gelir dağılımını, istediğinde vergi ve sosyal harcama politikalarıyla kısmen değiştirebiliyor. Ancak, yılda ortalama kişi başına 30.000 dolardolaylarında geliri olan ülkeler ile, yılda kişi başına 300 dolarla yetinmek zorunda olan ülkeler arasındaki uçuruma karşı, hangi kamu gücü, kimin meşru kıldığı hangi hakla ve hangi kaynakla mücadele edebilir? Piyasaların etkin işlemesi konusunda, küreselleşen sermaye hareketlerini herhangi bir devletin tek başına denetleyebilmesi son derece zorlaştı. İşin ilginç yanı, küreselleşmenin ideolojik ve politik bir boşlukta gelişiyor olması. Meşruiyetini vatandaşların oyundan alan çağdaş demokratik devlet, serbest piyasanın çoğu kez haksız gözüken, herhangi bir değer veya inanç sistemini yansıtmayan işleyişini demokratik politika sonucunda dengeleyebiliyordu. Ancak, aynı davranışı, küresel piyasa söz konusu olduğunda gözlemlemek mümkün değil. Yirmi birinci yüzyıl böyle ideolojik bir çıkmazla başlıyor. Binbir zorlukla ve milyonlarca insanın ideolojik kavgalarda hayatını yitirmesinden sonra, kabul gören ve 20. yüzyıl sonunda egemen olan sosyo-ekonomik sentez, küreselleşmenin gücü yüzünden anlamını büyük ölçüde yitirmek üzere. Küresel piyasaya eşlik edecek, güçlü ve meşru bir kamu otoritesi henüz oluşmadı. Önümüzdeki büyük sorunların çözümünü sadece teknolojide ya da ekonomide bulmak mümkün değil. Küresel piyasanın yasal, kabul gören, demokrasinin ilkelerini yansıtan bir siyasi çerçeveye ihtiyacı var. Bu çerçeveyi meşru kılan ideoloji oluşmadan, küreselleşme büyük tartışmalara ve kavgalarayol açabilir. Yerel ve ulusal benliğin korunabileceği, ancak küresel piyasanın da denetlenebileceği yeni bir sentez arayışı 21.yüzyılda ideolojik tartışmaların özünü oluşturacak. Tarih bitmedi, devam ediyor ve hepimizi bugün düşlemekte bile güçlük çektiğimiz yepyeni ufuklara doğru götürüyor. Türkiye medeniyetleri bir araya getiren geçmişinden ve kıtalararası coğrafi konumundan kaynaklanan özelliğiyle, bu arayışta hiç kuşkusuz çok önemli birrol oynayacaktır. KEMAL DERVİŞ: "A POLITICAL FRAMEWORK REFLECTING THE PRINCIPALS OF THE GLOBAL MARKET AND DEMOCRACY IS NEEDED" Although the end of the 20th century changed the world considerably, time goes on. The great struggle between capitalism and socialism, both of which shaped the main dimensions of the century, created a new synthesis. However, it would not be correct to define this synthesis formed during the last 20 years of the past century as the absolute victory of capitalism or the defeat of socialism. Undoubtedly, there is now a better understanding of the significance of market mechanisms and private entrepreneurs. Market mechanisms cannot function until private property is secured. It is clear that severe economic centralism does not create results. What matters in investments is quality, not quantity. However, the situation is not that simple. The state did not get smaller; in fact, it grew a lot. It is true that the state is no longer in production in the modern economy. On the other hand, the state's intervention in the distribution of income and its role as a market regulator did not decrease but increased. The model the success of which has been proven is based on a synthesis where the state and the market complement, rather than contradict, each other. The absence ofa state based on the rule of law keeps the markets from working in a healthily competitive environment and the resources from being used efficiently, thus increasing the possibility of having a macroeconomic crisis. The market and private entrepreneurs will always be in need of a regulatory state. Effectiveness in a country requires a market economy which works efficiently and creates wealth. The economic model dominating the end of the 20th century developed as a synthesis of the beneficial aspects of capitalism and socialism. However, in the 21st century the mechanism we call "market" does not function at the national level any more but functions at the global level. Therefore, the international dimension of the problems of income distribution at the national level is becoming increasingly important. A national state can partially change the income distribution system in its own society through its tax and social spending policies. However which public force, with whichlegitimate rights and which resources can fight against the gap between countries where the per capita income is $30.000 in one and $300 in another? It is becoming increasingly difficult for one state only to monitor the globalized capital movements as far as the effective functioning of markets is concerned. What is interesting is that globalization is developing in an ideological and politicalvoid. The seemingly unfair functioning of the market economy which does not reflect a value or belief system can only be balanced by democratic policies implemented by a modern democratic state legitimized with the people's votes. However, one cannot see the same behavior in the global market. The 21st century is starting with such a political impasse. The socio-economic synthesis which was accepted only after numerous difficulties and the death of millions in ideological conflicts and which reigned at the end of the 20th century is losing its power significantly because of the power of globalization. There is yet no legitimate and strong public authority to accompany the global market. One cannot find solutions to these significant problems in only technology or economy. The global market is in need of a political framework that is legal, widely accepted and reflective of democratic principals. Unless an ideology which legitimizes this framework is formed, globalisation can cause great disputes and conflicts. The essence of ideological discussions of the 21st century will be the search for anew synthesis which not only protects the local and national identity but also regulates the global market. History is not finished, it continues and is carrying us towards new horizons whichwe may find difficulty to even imagine today. Turkey will undoubtedly play a significant role in this search as a country which brings together civilisations and is in a geographicalposition stretching over continents. Economic Program 14 April 2001 The crises experienced in November and February have further increased the vulnerabilities of especially the banking sector and caused serious fluctuations and instability in the financial markets. Against this background, the overall strategy of the new program will have three phases. In the first immediate phase, the measures dealing with the crisis in the banking sector will be taken expeditiously with the aim of lowering the uncertainties in the financial markets and overcoming the crisis environment. In the second phase, stability will be restored in the money and foreign exchangemarkets, allowing a medium-term perspective to be re-established in the economy. In the third phase, macroeconomic balances will be established to enable a sustainable growth environment starting from the second half of the year. As part of this overall approach, disinflation efforts will continue with full determination. The high monthly price increases expected in March and April will revert back to adecreasing trend with tight fiscal and active monetary policies, especially upon restoring the soundness of the banking sector. With the adoption of a floating exchange rate regime, tourism and export revenues will increase, which in turn will improve the balance of payments. Vigorous implementation of the economic program and structural reforms will raise the level of foreign direct investment. In order to expedite this process, all essential legal infrastructure will be completed speedily. Obtaining the full support of all components of society is a fundemantal target to enable the successful undertaking of the Incomes Policy which is a crucial determinant ofdisinflation efforts. On the other hand, the determination will prevail to continue with the structural reforms which started in 2000 especially in the banking sector and on the privatization front. The economic program will be based on restoring confidence and building strong political support to back the structural reform proposals prepared under the program. The prevailing conditions require that absolute priority be given to re-establishingeconomic stability during the first stage of the program. The ultimate goal of the program entails bringing down inflation to single digit levels, establishing social justice by improving income distribution and creating an environment for sustainable growth. Current conditions require the overhauling of the whole banking sector especiallythe state banks. For this reason the resolution of this problem will be a priority target under the program. This, initially, requires use of public resources. Our ongoing liberalization of the energy sector will be pursued expeditiously and vigorously. Disinflation will be supported by monetary policies and medium term inflation targeting. The package of regulations in the banking sector is a critical element of the disinflation program. In the short term, monetary policy will be applied with the aim to reestablish stability in financial markets. Another important component of the program is incomes policy (wages and prices). In this respect it is of utmost importance to secure support of all components of the society. PUBLIC FINANCE The policy measures which must be taken to attain a desirable target for the consolidated budget primary surplus in the year 2001 are as follows: Prices of imported products, mainly in the energy and petroleum sectors will be adjusted without delay, in a such a way that they reflect the changes in the exchange rate,increasing costs and economic realities. The automatic pricing mechanism of petroleum will prevail and the Petroleum Consumption Tax will be adjusted at least equal to the targeted inflation. Using direct income support rather than other mechanisms will be the basic principle governing agricultural policy. In this regard, state support prices will be increased soas to be lower than or equal to the targeted inflation (CPI) and quantity restrictions will be applied considering the financial resources of the institutions. The salaries of civil servants and contracted civil servants will be limited to compensation for inflation. Individual wage increase proposals which do not aim at achieving fair wage policy and do not concern all public employees will not be considered. The high real wage increases granted with the collective wage agreements for 1999-2000 period, budget constraints, financial ability of public enterprises and equity within the public sector will be taken into consideration in adjusting the wages of public workers. Revenue yielding measures which were undertaken in December 2000 will be strictly applied. A regulation will be issued for enabling the full tax deductibility of the loan loss provisions of the banks. Any expenditure proposal that lacks resources, including, inter alia, establishing a new organization and creating new employment that result in expenditure increases willnot be put on the agenda. No workers will be transferred from the companies in the privatization portfolio, funds and revolving funds to the SEEs and the companies under consolidated budget. Taking into account the productivity and efficiency of the public sector enterprises, public workers eligible for retirement will be retired by fully honouring their legal claims. A blockade will be imposed on all budgetary appropriations as deemed appropriate by the Ministry of Finance. Penalty rate applied on tax arrears will be determined taking into account the market interest rate and will be in a level that will deter the build up of tax arrears. The implementation and wide use of Tax Identification Number will be expedited. No new projects will be included in the investment program and partial tenderingwill not be allowed unless an immediate need is established. Besides the measures to strengthen budget discipline, revenue enhancing measures will also be explored. Possible new sources will be utilized to support social justiceand to reduce the debt stock. INCOMES POLICY Implementation of an incomes policy in line with the targeted inflation is one of the fundamentals of the program. A coordinated strategy will be carried out with the international institutions in the employment aspect of the privatization and combating with poverty. Moderate wage and price increases will be attained by establishing an enhanced dialogue with the business circles and employee representatives. Concerning the settlement of the public wages, Union of Public Employers will execute the negotiations within the context of a joint wage strategy that will be formulated with the coordination of Undersecretariat of Treasury, State Planning Organization and Ministry of Finance. The High Planning Council will meet regularly, the Economic and Social Councilwill be informed about the economic developments periodically. Social partners will be urged to set their price and wages in line with the program targets by one to one meetings. PRIVATIZATION In order to enhance the possibility of privatizing Turk Telekom, following actions will be taken: Legal amendments that enable the block sale of 51% of Turk Telekom and the sale of rest of its shares by public offering or direct sale to Turk Telekom workers will be made swiftly. Moreover, the deregulation studies regarding the transfer of licence of its value added services will be expedited. The first priority task of the Board of Turk Telekom is to prepare the company forprivatization in close collaboration with the tender committee within this context. Preparatory work will be done for the sale of the third generation mobile phone licences (UMTS). The privatization of the companies in the existing privatization portfolio of the Privatization Administration will be expedited giving the first priority to the THY, TEKEL andsugar companies. The preparatory work for the companies that will be taken under privatization portfolio will be carried out by the Undersecretariat of Treasury and the Privatization Administration in close coordination. The Civil Aviation Law will be amended quickly in order to enable Turkish Airlines to determine price tariffs for its domestic flights without the need to get the consent of the government. BANKING Situation of the banking sector is the most urgent problem that the economic program needs to address. The banking sector already suffering from grave problems has been further weakened by the crises of November 2000 and February 2001. At the moment, the problems in the banking sector threaten the overall economy. I. Public Banks Public banks need to borrow from overnight market in very large amounts. This is the most urgent problem threatening the banking sector. In order to solve this problem TL 13 quadrillion needs to be provided to 3 public banks. Apart from that, Treasury needs to inject TL 3 quadrillion as capital to those banks in order to help banks reach 8% capital adequacy ratio. To solve the problem in part, the Treasury will issue marketable domestic debt instruments to pay for the duty losses of the state banks. Later, the balance sheets of the public banks will be significantly scaled down by converting securitites issued in lieu of duty losses into cash. Any kind of financing that might be secured from abroadwill be committed to this end. Moreover, some important structural changes are needed to be in place to establish the confidence of the markets, to ensure that the proposed solutions sustain over timeand to make sure that similar problems do not surface again. To this end; A joint board of directors will be constituted for three public banks; professional bankers will be appointed to this board and there will be no political pressures on the board while carrying out its work. The joint board of directors established as described above will be authorized bythe Council of Ministers to restructure the public banks. Emlak Bank will be merged with Ziraat Bank under the framework drawn by the Banking Law. The joint board of the public banks will take necessary actions to ensure that fundmanagement of those banks is undertaken in a professional manner. Public banks will not be assigned any tasks which lead to duty losses. In cases where the Government deems proper, from a social perspective, to extend support through public banks to some needy segments of the economy, the cost will be born by the Government by making appropriate allocation in the budget. In this understanding, necessary legal amendments will be made for the repealing of laws and decrees pertaining to duty losses. In this restructuring process, every effort will be made to support the most efficient operation of the economy and especially of small and medium scale private enterprises. The key objective is the competitive and efficient functioning of the whole financialsector. The operation of the public banks on the basis of market rules and profitability isone of the fundamentals. To this end all excess branches will be closed and staff eligible for retirement will retire. II. Banks under the Savings Deposit Insurance Fund (SDIF) Liqudity requirements of the banks taken over by the SDIF will be solved by an approach similar to public banks and burden creating short term liabilities of these banks will be liquidated in the framework of a plan. While carrying out any kind of decisions on SDIF banks, all deposits and creditorsof the SDIF banks will continue to be under the full guarantee of the Government as announced in December 2000. Legal changes needed for the recovery of the bad assets of the SDIF banks should be made expeditiously. It is essential to deal with and resolve the problems of the SDIF Banks within calender year 2001. MONETARY POLICY Upon the decision to revert to a floating exchange rate regime, monetary policy framework of the Central Bank has changed. In the new period ahead, the ultimate policypurpose of the monetary policy will continue to be price stability. In order to maintain thestability in the financial markets as a means of supporting the only and ultimate goal of price stability is also among the priorities of the Central Bank. With a view to serve the purpose of establishing and sustaining the stability in the finacial markets, it is of utmost importance to initiate applications aiming to resolve the problems of the state banks and to minimize the pressures exerted by these banks on the financial system as well as to disclose the overarching policy regarding the banking sector. The Central Bank will, in accordance with the targets measured hereunder, implement a consistent and active monetary policy. Accordingly, the Central Bank will continue to monitor the Net Domestic Assets and Net International Reserves from its balance sheet as operational targets in accordance with its ultimate goal. The values determined for Net Domestic Assets will limit the ability of the Central Bank to increase the money supply higher than the money demand and will thus prevent domestic demand expansion from creating inflation. Despite the fact that the Net International Reserves level has to a great extent lost its role in the exchange rate regime prior to the program as the equilabrant variable, the fact that it can be seen as a signal mechanism reflecting the credibility of the new policies necessiates the monitoring of the Net International Reserves along with the declared target. The Central Bank's intervention in the exchange rate markets under the floating exchange rate regime will be directed towards compansating the extreme fluctuations in the short term, yet will not affect the long term equilibrium level of the exchange rate broadly. The only and ultimate goal of attaining price stability is clearly laid out in the newCentral Bank Law prepared with a view to strengthen the institutional foundations of the Central Bank. The Central Bank will, to fullfill the requirements of active policy, continue to control the expansion of domestic assets, in the medium term will use the short term interest rates more effectively and shift to inflation targeting (IT) when the prerequisites of IT are fulfilled. URGENT LEGAL CHANGES Enactment of the Supplementary Budget Law in order to reflect the financial costof the February 2001 crisis and making some amendments in some articles of the Budget Law (e.g. borrowing limits and duty losses). Necessary amendments in the Banks Act. Legal changes for closing the remaining Budgetary and Exrabudgetary funds. Making necessary amendments in The Execution and Bankruptcy Law in order to facilitate the liquidation of the banks. Enactment of the new Central Bank Law, which will bring the structure of the Central Bank in line with the EU standards. Issuing a Law that will enable the sale of majority stake of Turk Telekom. Enactment of the Tobacco Law and Sugar Law. Legal changes need to be made regarding the Public Procurement Law and expropriations. Enactment of the Public Borrowing Law. Necessary amendments in The Civil Aviation Law. Enactment of the Oil and Natural Gas Laws. Necessary legal changes to abolish the decrees and Laws regarding the existing duty losses. Legal changes that enable the "full tax deductibility of the loan loss provisions" will be adopted.