Government intervention

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In the past, the Turkish Government has intervened heavily in its agricultural sector through price supports, input subsidies, Import protection, marketing monopolies and export subsidies or taxes. Some government objectives have been to increase food self-sufficiency and rural development, stabilize farmers' incomes, provide adequate nutrition and affordable food and promote exports. Since implementing its first SAP in 1980, Turkey has developed an ongoing series of agricultural policy reforms designed to privatize markets, reduce agricultural subsidies, remove trade barriers and integrate Turkey into the global economy. Policy measures adopted under the SAP included currency devaluation, price and trade liberalization and the opening of financial markets.

Crop production was supported primarily through domestic price supports and input subsidies and was bolstered by restraints on imports. These policies raised yields and improved cultivation practices, thereby increasing production and farmers' incomes. Levies were also introduced to protect domestic production of agricultural inputs. in the livestock sector, the government sought to raise productivity, particularly milk yields, by improving genetic characteristics and nutrition of the herd as well as veterinary services and the marketing of livestock products.

Since 1980, the government has departed from its traditional agricultural trade policies which included quantitative restrictions, a heavy reliance on public production and administered prices. Instead, trade barriers have been substantially reduced in accordance with the government's overall move towards a market-oriented agricultural policy. Both the IMF and the World Bank supported this strategy; the World Bank provided five structural adjustment loans (SALs).

During this period currency overvaluation ceased, duties were reduced, many prices were liberalized, nearly all quantitative border restrictions were removed and financial markets opened. As a result, trade increased and imports as a share of GDP rose from 17 percent in 1980 to 30 percent in 1990. Exports as a share of GDP rose from 6 percent to 17 percent, with both value and volume rising. Rapid growth occurred throughout the 1980s, led by manufacturing but also by agro-industry and a resurgence of both domestic and foreign investment in Turkey. Reform of the foreign exchange system left exporters largely free of restrictions in international transactions. Trade policies, which included tax rebates, export credits and credit subsidies, also enhanced export performance. Furthermore, the war between Iran and Iraq greatly increased demand for Turkish agricultural products by both countries.

At times, especially during the early 1980s, the government sought to protect consumers by moderating food price increases through price control and, until the mid-1980s, by restraining taxes on exports, thereby moderating rises, in domestic producer prices. This has frequently been the case for ex-factory prices of sugar, and occasionally for cereals. Although there was a value added tax (VAT) on food, it was kept below that of most other goods: in late 1993 the VAT for food was 8 percent while the general VAT was 15 percent.

In 1980, as part of a package of economic reforms, crop support subsidies were reduced and the number of supported commodities dropped from 30 to 17. During the next several years, the share of support purchases in total agricultural GNP declined and the number of supported crops fell to 11 by 1990. However, the number rose again in the early 1990s owing to a government programme to improve farming conditions and the social welfare of farmers and villagers. The programme sought to reduce rural unemployment and improve extension and research capacities by organizing rural industries. By 1992, input subsidies were increased so that producer prices for wheat and other crops were above border prices, even though the price support scheme had not been enlarged.

Government policies have been implemented through government-owned state economic enterprises, agricultural sales cooperative unions, agricultural credit cooperatives, state-owned banks and other agencies. Despite the move towards liberalization and reduced government intervention, a large number of ministries, agencies, state economic enterprises and banks continue to administer price supports, credit measures, extension and research activities and irrigation projects. Overlapping responsibilities and a lack of coordination have often diluted the effectiveness of government activities, while political considerations have caused yearly variations in the number of supported commodities.

The effects of intervention on output. Turkey's SAP created a steady real depreciation of the lira which improved agricultural export competitiveness and increased output and trade. From 1980 through 1992, the overall volume of agricultural production rose by an average of 3 percent per year. Output and yields of the major grains (wheat, barley and maize), sugar beet, oilseeds, potatoes and cotton increased steadily. The index of agricultural production reached an average of 130 in 1991-93 (1979-81 = 100), while the index of per caput agricultural production dropped slightly below 100.

During this period a number of changes occurred. Cultivated land area rose by an estimated 2.4 million ha, approximately 14.5 percent. The most dramatic change occurred from 1981 to 1982, when fallow area dropped by 1.6 million ha, as a result of large input imports, particularly seed and fertilizer. In the last 12 years, rice area fell by almost half because of water shortages and attractive import prices, supported by exporter credit in other countries. The area sown to barley rose by 23 percent because of high support prices, HYVs and, more recently, wheat disease problems. A strong push in the production and export of pulses tripled the area devoted to those crops. While overall yields have risen, there are often wide regional differences. Field crop yields are usually two to three times higher in the milder coastal areas (Aegean and Mediterranean regions) than in the colder and generally drier areas of central and eastern Turkey - on the Anatolian plateau.

Wheat is the major grain produced in Turkey. Although its output stagnated in the early 1980s, it has recently expanded because of increased fertilizer and irrigation use, a result of price and input subsidies, particularly for fertilizer. Per caput consumption of wheat has been one of the highest in the world but continues to decline as incomes rise and urbanization increases consumption of fruit, vegetables and meats particularly poultry. In the past, Turkey imported wheat during shortfalls and exported during surpluses. More recently, lower-quality wheat has been exported while higher-quality wheat has been imported for blending.

Over the past decade, the government has initiated measures to raise the productivity of its livestock sector. Among these are genetic improvement of meat and dairy herds through dairy cattle and bull semen imports and improved nutrition and veterinary services. During the 1980s, milk production per cow more than doubled to 1 350 kg per year. This is still low by European standards because approximately two-thirds of the national herd comprises local breeds (only 7 percent are pure-bred animals) and much of the expansion is taking place without selective breeding. Similarly, most of the sheep are domestic breeds. Insufficient attention to the special nutrient and micronutrient needs of imported cattle may also be a contributing factor to low yields. Special emphasis has been placed on developing animal husbandry in the eastern and southern Anatolia regions and on expanding fodder crop production.

Domestic animal output is below domestic demand, thus animal slaughter has tended to exceed animal birth rates; animal and meat imports are on the rise and exports of live animals and meat have declined. Without serious policy changes, Turkey will become increasingly dependent on imports of livestock products."

In 1993, with FAO's assistance, the government undertook a comprehensive study of the livestock sector, which brought to light some policy shortcomings. For example, in the 1980s livestock sector subsidies were 7 percent compared with 32 percent for crop subsidies. Credit is not properly utilized by livestock producers owing to a lack of programme support. Also, since the producers are Smallholders, the servicing and marketing of produce is difficult and marketing systems, when they exist, are poorly organized and inefficient.

As the livestock sector began to expand and demand for feed rose, the government strongly supported maize production by introducing hybrid seeds, new irrigation facilities, fertilizers and improved cultivation practices. In the 1980s, area declined by 6 percent but maize yields rose sharply.

A desire to shift consumption from red to white meat and to raise feed efficiency spurred a major effort to increase the output of poultry meat, particularly chicken meat. The government provided poultry producers with limited incentives such as a rebate on capital investments and an export subsidy. Although support has been far below that provided by other major producing countries, output has grown steadily since 1980 to a record 436 000 tonnes in 1992.

Among Industrial crops, cotton has been strongly supported by the government with PSEs rising to a high of 71 percent in 1987 and declining to about half that level by 1992. Raw cotton was a major export prior to' the 1980s but, owing to the dramatic expansion of textile manufacturing and high internal prices, most cotton is now processed. in the three-year period 1990-1992, Turkey became a net importer of cotton.

More recently, a new cotton production support system has been introduced which is somewhat similar to that of the United States and the EC. It provides a larger role for the private sector and allows for market-determined prices while guaranteeing a premium to all cotton producers. The deficiency between the selling price and the government-set target price is covered by the government. This system requires the documentation of all cotton transactions and sales must be registered at commodity exchanges. This will eventually help to create future markets and stronger commodity exchanges and to assist the government in tax revenue collection.

Despite a large and widening overall trade deficit, the agricultural trade balance is significantly positive, providing some relief to external accounts. Trade liberalization arid rising regional demand resulted in agricultural exports rising from $1.8 billion in 1980 to $3.4 billion in 1992. In recent years, food and animal exports constituted 17 percent of total export earnings, a figure that would be substantially higher if other agriculture-based products, such as textiles and cigarettes, were included. Livestock exports rose dramatically from $123 million in 1980 to a record $528 million by 1982. However, production could not keep pace with demand arid, for some commodities, domestic prices rose and, consumption declined. As livestock prices rose, exports declined and, by 1983, had fallen to $312 million. Restrictions resulting from animal health problems exacerbated the decline of live animal exports and, by 1992, they had fallen to $173 million.

Reduced import restrictions under the SAP also led to a dramatic rise in agricultural imports - from an average $326 million in 1980-82 to an average $1.7 billion in 1990-92. In the past, imports were constrained by strong domestic production, import substitution policies and restrictive government regulations on expenditure of foreign exchange. As economic growth increased domestic demand, it became necessary to import chemical fertilizers, machinery, seeds, dairy animals arid raw commodities to supply an expanding processing sector. Major agricultural imports Included vegetable oils, bides and skins, WWI, tobacco, cotton, rice, wheat and feedgrains.

Changes in rural and urban consumer demand

A longstanding goal of the Turkish Government and a central component of the five-year development plan is to provide an adequate and balanced diet for a growing population and, In particular, to increase per caput consumption of animal proteins. As economic development increases dietary diversity, the country's caloric intake is approaching European levels. However, Turkey remains one of the world's largest per caput grain consumers and the average diet, particularly in rural areas, continues to be derived largely from grains, fruit and vegetables.

Over the last three decades, Turkey's population has been migrating not only to urban areas but also to other countries. In 1950 the rural population represented 75 percent of the total; four decades later, it has dropped to 40 percent. In the 1980s, urbanization grew at an annual rate of 6 percent.

As Turkey has urbanized, food consumption and dietary patterns have changed. From 1980 to 1990, the caloric intake of vegetable-based products rose by 10 percent, while those of animal origin dropped by 19 percent. There was a marginal change in the consumption of cereal products but pulse consumption doubled to 15 kg per caput per year. The steady supply of fruit and vegetables increased consumption by 15 percent over the same period.

Despite a steady increase, consumption of livestock products remains significantly below the regional average. Livestock products account for only 7 percent of the 3 200 calories consumed on average by Turks, although demand has grown in recent years. Poultry meat and dairy product consumption have grown most quickly, largely displacing traditional meats such as lamb, mutton and goat. Poultry consumption - which was about 6 kg per caput per year in 1992 - remains more than 50 percent below regional consumption levels. Turkey is the largest milk producer in the region.

However, per caput milk consumption, although approaching the regional average, remains well below European standards and, in fact, declined by one-third during the 1980s. Overall milk production has stagnated output of cow's milk has increased but milk from other sources has decreased.

Production outlook

Within the Near East and North Africa region, Turkey probably has the greatest potential to expand agricultural output. However, to meet its agricultural sector objectives, many ongoing programmes will have to be accelerated. Trade liberalization and reduced market intervention should continue, including the removal of export levies, the phasing out of input subsidies and a reduction in costly purchase and storage price support operations.

Policy reform continues within the framework of Turkey's Five-Year Development Plans. Some of the goals are to raise farmers' incomes and improve dietary diversification through increased crop and livestock production and to expand agricultural export markets, particularly in Central Asia, Eastern Europe and the Baltic states. Targets include production growth rates of 3.7 percent per annum for crops and 5 percent for livestock; an increased use of hybrid seeds, pesticides, fertilizers and irrigation; the expansion of double cropping programmes; and the continued reduction of fallow land.

The government has conducted a comprehensive study of the horticultural industry, seeking to improve internal marketing, quality, standards and yields. The study also examined export potential and opportunities and noted that the, global market for Turkey's products is becoming increasingly competitive.

Although Turkey has a comparative advantage in producing wheat, barley, cotton, oriental tobacco, sunflower seeds, olive oil and melons, crop yields are below the rates of many of its competitors. For example, wheat yields stagnated in the 1980s at 1.9 tonnes per hectare and were only slightly higher in 1992. By comparison, United States wheat yields were 2.3 tonnes per hectare in 1991 and those of the EC countries were 5.4 tonnes per hectare.

There are large economic disparities between rural and urban areas and between the more developed western part of the country and the underdeveloped and relatively isolated eastern and southeastern portions of the country. .

Consequently, developing these areas is a high priority. The government will strengthen infrastructure, communications, and the agricultural resource base and expand employment opportunities by upgrading local enterprises and attracting new industry. The focus of this policy is the development of the Southeastern Anatolia Project.

Resource and environmental issues

Turkey's agriculture still suffers from chronic structural and institutional weaknesses. Farm size and land fragmentation are major obstacles to agricultural progress and efficiency. In 1980, less than 10 percent of the total number of farm holdings were single-plot units whereas 64 percent were highly fragmented. The recent agricultural census indicates an increase in the total number of farms from approximately 3.6 million in the early 1980s to an estimated 4.2 million a decade later. This is an alarming development because the average farm size declined from 6.4 ha to an estimated 5.3 ha. In the mid-1980s, the government set up a programme to encourage neighbouring farmers to exchange landholdings and initiate land consolidation but the programme has been ineffective.

Turkey is subject to sharp weather changes which have a profound effect on agriculture because of the relatively low percentage of irrigated land - currently about 13 percent of the cultivated area, or 3.5 million ha." This figure represents about 40 percent of the country's potential irrigated land and results from delayed project completions, particularly of secondary and tertiary canals and drainage works. Irrigation is a means of reducing weather-induced production variations. Therefore, the government is giving high priority to improving land and water resources and expanding Irrigation. It has designated about two-thirds of total public agricultural investment for land and water improvement.

Low education levels remain a major problem in rural populations. In 1985, it was estimated that one-third of persons over 12 years of age and employed in agriculture (about four million people) were illiterate, compared with an estimated 5 percent of workers employed in manufacturing. Most of the remaining one-third of agricultural workers had only completed primary school. As a result, productivity and incomes among agricultural workers are considerably below those of workers in the non-agricultural sector despite the fact that, since 1988, both sectors have had the same minimum wage (except for workers younger than 16).

Environmental degradation and resource conservation are of increasing concern to the agricultural sector. Intensifying production, especially by using subsidized chemical fertilizers, pesticides and irrigation, puts further pressure on the environment Moreover, the practice of using polluted water for irrigation is still common, posing an immediate threat to human and livestock health and contaminating the soil. The need for adequate drainage for irrigation systems is now widely recognized in Turkey and investments to improve drainage are under way.

Soil erosion has been one of the most serious aspects of soil deterioration in Turkey. It is exacerbated by inappropriate agricultural practices, such as downhill ploughing on steep-gradient land (about 6 million ha of steep-gradient land are currently being farmed) and overgrazing. Some 72 percent of the cultivated area is affected by waterborne erosion and some areas, mainly in central Anatolia and certain coastal regions, are affected by wind erosion.

Environmental problems caused by agriculture are compounded by burgeoning volumes of urban solid waste a result of rapid population increases, urbanization, industrialization, tourism and rising living standards. Waste materials necessitate numerous rubbish dumps on the outskirts of urban areas, rendering the affected soil unfit for agricultural use. Rapid urbanization is also leading to the uncontrolled construction of housing and factories on fertile arable land. Effluent and sewage are discharged into water from which irrigation water is often drawn.

Government responses to these problems have been stepped up in recent years. Regulations on the use of arable land for purposes other than agriculture were brought into force in 1989 to reduce urban encroachment on agricultural land. In 1991, new regulations were introduced to control solid waste disposal and the use and disposal of hazardous chemical substances and products. It will be some time before the effect of such programmes is evident.

Projects are being carried out to gather information about agriculture's contribution to water pollution and the results will help policy-makers in formulating their decisions. These include establishing the extent of water pollution and its effect on fisheries. Measures are being taken to combat agricultural pests such as grasshoppers, sunn pest and plant lice, some of which come from neighbouring countries.

After a decade of experimenting with liberalization and structural adjustment, Turkey's economic performance has been mixed. Externally, the SAP policies achieved an impressive growth in exports and contributed to restoring international creditworthiness. GDP growth has also been impressive, increasing by 4 percent annually during the 1980s and by 6 percent in 1993. Prior to the SAP, economic growth in the 1970s stagnated and declined sharply in 1979 and 1980 while, in the 1960s, very fast growth prevailed.

Reforms moved Turkey further into the international arena because growth was primarily driven by an increase in domestic demand. However, they also resurrected problems which originally forced the 1980 policy reforms, primarily high fiscal deficits and inflation. Thus, while the external sector continued to benefit from growing tourism, foreign investments and worker remittances, this surge was accompanied by a sharp rise in budget and current account deficits.

Continuing economic liberalization resulted in a sharp divergence between external and domestic sector performance. Imports continue to outpace exports because excess demand is absorbed by higher imports. In 1993, Turkey's trade deficit reached an alarming record of $12 billion while its current account deficit, which was $937 million in 1992, rose to an estimated $5 billion. Part of this trend is due to the trade embargo on Iraq which has closed the substantial trade between Turkey and Iraq. The embargo has also curtailed remuneration from Iraq's petroleum pipelines running through Turkish territory to the Mediterranean Sea as well as transit fees from vehicles traversing Turkish territory to Iraq.

Economic policies of the current and past governments have openly and widely criticized support and subsidy programmes of the state economic enterprises. These enterprises are under review as the agricultural sector and government initiate privatization. Privatization has featured prominently in government economic programmes since 1986 but it has progressed slowly. Many state economic enterprises have a large workforce and operations that are inefficient and costly. In 1992, the government decided to privatize the Turkish Feed Industries (YEM SAN), Meat and Fish Organization (EBK), Turkish Dairy Industries (SEK) and Wood Products Industry (ORUS). Since these constitute only a small component of the state economic enterprise system, eliminating the resource waste indicated by the huge government assistance for the public sector will require more drastic measures.

Turkey has already taken steps to improve its agricultural support for cotton and this support is being expanded to include other commodities such as tobacco, tea and hazelnuts. The government's grain purchasing agent (TMO) has begun offering storage services, charging farmers or other market agents a daily fee until the grain is sold. Plans to introduce grain commodity exchanges are under way. The government has signalled the important change in its approach to supporting producers by beginning to replace intervention purchases with deficiency payments. This change is expected to benefit consumers, improve the efficiency of assistance to producers and, perhaps, foster a market environment that will develop the institutions and expertise required by a market-driven agricultural sector.

Despite agriculture's diminished role, Turkey's economic well-being still depends on the viability of its agricultural sector. Nearly 40 percent (just over 23 million) of people still live in villages where job opportunities are scarce and incomes are considerably below those of urban dwellers. The government has pursued policies to raise rural incomes and levels of living by generating employment through cottage industries, handicrafts and non-agricultural jobs. Several projects supported by international institutions are aimed at providing employment opportunities and, therefore, higher incomes. The Southeastern Anatolia Project is one such project that is being developed to redress regional disparities in income and technology. A second project aims at reducing fallow land and increasing irrigation. The ongoing double cropping programme has made substantial gains, particularly in maize output. The government has been very active in pricing and marketing agricultural products and now seeks to establish regional commodity markets.

Despite great progress, problems remain. Inputs are available for many commodities but are not optimized. Seed generation is insufficient for the country's needs and the situation is exacerbated by a poor distribution system. Problems also arise with seed certification and origination rights. Artificial insemination of dairy animals has expanded but falls far short of the livestock industry's requirements. The programme still rests primarily in the public sector, with the private sector relegated to a small role. The use of pastoral land and rangeland remains a problem. Since these lands are considered community property, they tend to be overgrazed and overstocked, thereby losing substantial productive resources. Land fragmentation is a major obstacle to crop optimization. Where irrigation has been established, land consolidation has occurred; where rain-fed agriculture remains, fragmentation has increased.

Recently, government involvement has been limited but intervention is viewed as a social contract. In the context of the sector's lower income, government supports have been a measure used to reduce the income gap. However, this has not often resulted in optimal production and economies of size.

Agricultural potential has not been fully realized nationwide. The government is looking to agriculture to meet the increasing demands of a growing higher-income population. To fulfil that challenge, agriculture must become more efficient, more competitive and economically viable, with minimal intervention.


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