Contents

Introduction 4

Measuring Competitiveness 5

Measuring Turkey’s Competitiveness 7

Sub-index 1: Basic Requirements 10

Institutions 10

Infrastructure 11

Macroeconomy 11

Health and Primary Education 12

Sub-index 2: Efficiency Enhancers 13

Higher Education and Training 13

Market Efficiency 13

Technological Readiness 14

Innovation and Sophistication Factors 16

Business Sophistication 16

Innovation 17

Conclusions 18

References 18

Footnotes 19

Appendix 20

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Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
Introduction

Over the past half-decade, Turkey has been
undergoing a process of deep economic and
political reform. This process was triggered by the
major economic crisis in 2001 (which led to an
almost 8% contraction of GDP) and the acceleration
of the convergence process with the European
Union (EU) following Turkey’s designation as a
candidate country in 1999 and the official opening of
accession talks in 2005.
for January 2007. In this respect, among EU
countries, it sometimes seems as if speculative fears
and suspicions have prevailed over a judicious
assessment of the actual economic, social and
political implications of a fully “European” Turkey.
European suspicion has, in turn, generated a
backlash among many Turkish citizens, who have
grown increasingly impatient with the pace and
requirements of the adhesion process.

The tight fiscal and monetary policies adopted in the Against such a background, this paper attempts to
aftermath of the 2001 economic collapse provide a set of basic facts on the current state of
significantly curbed inflation to single digit figures in Turkey’s economic competitiveness. Using the World
the 2002-2005 period and the economy quickly Economic Forum’s methodological framework of the
rebounded, with GDP growth rates as high as 7%. Global Competitiveness Index, we identify Turkey’s
Meanwhile, the wave of economic and political main competitive strengths and weaknesses and
reforms to meet the Copenhagen criteria set the highlight the areas on which the country should
basis for a more market-friendly economy and focus in order to achieve sustainable growth and
reinforced the democratic fundamentals of Turkish enduring prosperity for its citizens. Comparisons
society by substantially reducing the military’s role in with EU member, accession and candidate countries
politics, adopting a new, more liberal penal code in will further provide an idea of Turkey’s economic
2005 and improving the rights of women and preparedness to move to a more advanced stage of
minorities. development and to join the EU on a mutually
beneficial basis.
These achievements highlight the pace of Turkey’s
modernization and demonstrate the increasing
readiness of the country to progress to a more
advanced stage of development. However, a
number of troubling elements of economic and
political vulnerability have yet to be addressed,
namely, large macroeconomic imbalances and the
still rather wide gap with international standards on
human rights, freedom of expression, minority rights
and judicial independence.

These concerns, combined with the sheer size of

Turkey’s population (71 million, projected to increase
to 80-85 million by 2020), its relatively low GDP per
capita (by EU standards), the continuing importance
of agriculture in the economy, cultural differences
and the extent of institutional reforms yet to be
carried out, make it easy to understand the
extraordinary challenges that the EU – and Turkey
alike – face along the integration process. This state
of affairs, combined with geopolitical disagreements
(most particularly over Cyprus), might explain the
rather ideological tone assumed from time to time in
European national debates on Turkey’s accession as
compared to the recent enlargement in 2004 and
the accession of Bulgaria and Romania scheduled

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Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
Measuring Competitiveness
The goal of the World Economic Forum’s work on
competitiveness is to contribute to a better
understanding of the key ingredients of economic
growth and prosperity. By highlighting the strengths
and weaknesses of an economy, policy-makers,
business leaders and other stakeholders are offered
an important tool for the formulation of improved
economic policies and institutional reforms.
In order to assess national competitiveness, we use
the Global Competitiveness Index (GCI), which
measures the set of institutions, policies and factors
that set the sustainable current and medium-term
levels of economic prosperity. The GCI is the most
comprehensive competitiveness index to date,
measuring both the macro- and microeconomic
drivers of productivity across a large number of
countries.1
The measurement of competitiveness represents a
complex undertaking; one cannot simply pinpoint
one or two areas as being critical for growth and
prosperity. In this light, the GCI, with its nine distinct
pillars, captures the idea that many different
elements affect competitiveness. These are identified
as: institutions, infrastructure, the macroeconomy,
health and primary education, higher education and
training, market efficiency (goods, labour, financial),
Figure 1. The Nine Pillars of Competitiveness
BASIC REQUIREMENTS
1. Institutions
2. Infrastructure
3. Macroeconomy
4. Health and Primary Education
EFFICIENCY ENHANCERS
5. Higer Education and Training
6. Market Efficency (goods, labour, financial)
7. Technological Readiness
INNOVATION & SOPHISTICATION FACTORS
8. Business Sophistication
9. Innovation
Source: The Global Competitiveness Report 2006-2007
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
technological readiness, business sophistication and
innovation. Each of these pillars plays a critical role
in driving national competitiveness.
The nine pillars are measured using both hard data
from public sources (such as inflation, Internet
penetration and school enrolment rates) and data
from the World Economic Forum’s Executive Opinion
Survey, which is conducted annually among top
executives in all of the countries assessed. The
Survey provides crucial data on a number of
qualitative issues (e.g. corruption, confidence in the
public sector, quality of schools) for which no hard
data exist.2
Another important characteristic of the GCI is that it
explicitly takes into account the fact that countries
around the world are at different levels of economic
development. What is important for improving the
competitiveness of a country at a particular stage of
development will not necessarily be the same for a
country in another stage. For example, what
presently drives productivity improvements in the
United States is different from what drives them in
Turkey. In other words, economic development
progresses in stages. Thus, the GCI separates
countries into three specific stages: factor-driven,
efficiency-driven and innovation-driven.
Key for
FACTOR-DRIVEN
economies
Key for
EFFICIENCY-DRIVEN
economies
Key for
INNOVATION-DRIVEN
economies
5
In the factor-driven stage (stage one), countries Based on its GDP per capita level, Turkey is now in
compete based on low prices. They sell the efficiency-driven stage, which means that
commodities or simple products, taking advantage efficiency enhancers are critical for the country’s
of such factors as low-cost labour and natural competitiveness (50%) and that basic requirements
resources. At this stage of development, the basic remain very important (40%), while innovation and
ingredients of competitiveness include strong sophistication factors are less so for the time being
institutions, adequate infrastructure, a stable (10%). More details on the composition of the index,
macroeconomy and sufficient health and primary the separation of countries into stages of
education levels. development and the weighting of the indexes can
be found in Chapter 1.1 of The Global
As countries move into stage two, the efficiency- Competitiveness Report 2006-2007.
driven stage, it is important for them to develop
more efficient production practices. Product quality,
rather than low price, drives competitiveness at this
stage, which depends more on efficient goods,
labour and financial markets, education and training
programmes that prepare the workforce for more
streamlined production (higher education and
training) and access to and use of the latest
technologies (technological readiness).

In the third, innovation-driven stage, countries can

no longer compete just by being efficient. At this
stage, companies must compete through innovation,
producing new and different goods using the most
sophisticated production processes.

So while all nine pillars matter to a certain extent for

all countries, the relative importance of each one
depends on a country’s particular stage of
development. To take this into account, the pillars
are organized into three sub-indexes, each critical to
one particular stage of development. The “basic
requirements” sub-index groups those pillars most
critical for countries in the factor-driven stage. The
“efficiency enhancers” sub-index includes those pillars
that are critical for countries in the efficiency-driven
stage. The “innovation and sophistication factors”
sub-index includes all pillars critical to countries in
the innovation-driven stage. Figure 1 shows how the
nine pillars relate to each stage of development.

The GCI implements the concept of developmental

stages by weighting each of the sub-indexes
differently, depending on the stage of a given
country. More specifically, the index places more
weight on those pillars that are most important at a
given stage of a country’s development.

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Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
Measuring Turkey’s Competitiveness

In this section we carry out an analysis of Turkey’s
performance in the overall GCI, as well as in each of
the sub-indexes and pillars of the index. In order to
place Turkey’s performance into a global context,
specific comparisons are made with the average
performance of the 25 EU member countries (EU25),
the average performance of the 10 countries that
joined the EU in May 2004 (accession 10) and the
performance of four accession or candidate countries
(Bulgaria, Croatia, Macedonia and Romania).
The EU25 group average demonstrates what needs
to be achieved to bring Turkey fully up to EU levels
of competitiveness. The accession 10 average
provides an example of the level of competitiveness
of those countries that have recently been granted
entry to the EU. Finally, the performance of the four
other accession or candidate countries provides a
sense of how well Turkey is presently performing
compared with the other countries most likely to join
the EU in the coming years.

Table 1. Global Competitiveness Index 2006 and 2005 comparison (Turkey and Selected Countries)

GCI GCI GCI

Country 2006 Rank 2006 Score 2005 Rank Changes 2005-2006
Switzerland 1 5.81 4  3
Finland 2 5.76 2 - 0
Sweden 3 5.74 7  4
Denmark 4 5.70 3  -1
Singapore 5 5.63 5 - 0
United States 6 5.61 1  -5
Japan 7 5.60 10  3
Germany 8 5.58 6  -2
Netherlands 9 5.56 11  2
United Kingdom 10 5.54 9  -1
Iceland 14 5.40 16  2
Austria 17 5.32 15  -2
France 18 5.31 12  -6
Belgium 20 5.27 20 - 0
Ireland 21 5.21 21 - 0
Luxembourg 22 5.16 24  2
Estonia 25 5.12 26  1
Spain 28 4.77 28 - 0
Czech Republic 29 4.74 29 - 0
Slovenia 33 4.64 30  -3
Portugal 34 4.60 31  -3
Latvia 36 4.57 39  3
Slovak Republic 37 4.55 36  -1
Malta 39 4.54 44  5
Lithuania 40 4.53 34  -6
Hungary 41 4.52 35  -6
Italy 42 4.46 38  -4
Cyprus 46 4.36 41  -5
Greece 47 4.33 47 - 0
Poland 48 4.30 43  -5
Croatia 51 4.26 64  13
Turkey 59 4.14 71  12
Romania 68 4.02 67  -1
Bulgaria 72 3.96 61  -11
Macedonia, FYR 80 3.86 75  -5

Source: The Global Competitiveness Report 2006-2007, and authors’ calculations

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Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
 Table 2. Turkey’s Competitive Performance

Turkey EU 25 EU A10** Bulgaria Romania Croatia Macedonia, FYR

Rank Score Score* Score* Rank Score Rank Score Rank Score Rank Score

Global Competitiveness Index 2006-2007 59 4.14 4.97 4.59 72 3.96 68 4.02 51 4.26 80 3.86

Basic requirements 72 4.34 5.31 4.90 62 4.50 83 4.19 55 4.60 70 4.37

Efficiency enhancers 54 4.02 4.87 4.55 70 3.67 55 3.99 52 4.07 80 3.47
Innovation factors 42 3.96 4.62 4.00 85 3.26 73 3.52 50 3.81 87 3.24

1st Pillar: Institutions 51 4.05 4.76 4.17 109 3.07 87 3.40 66 3.72 103 3.15
A. Public institutions 53 3.90 4.62 4.06 111 2.83 87 3.23 65 3.57 102 2.96
1. Property rights 53 4.81 5.66 4.98 91 3.75 76 4.07 81 3.99 107 3.47
2. Ethics and corruption 47 3.30 4.23 3.40 105 2.13 93 2.40 50 3.23 91 2.44
3. Undue Influence 52 3.70 4.38 3.66 109 2.36 100 2.56 76 3.14 97 2.58
4. Government Inefficiency 56 3.12 3.42 3.16 100 2.57 83 2.78 65 3.03 86 2.77
(red tape, bureaucracy and waste)
5. Security 63 4.60 5.40 5.08 112 3.33 70 4.35 66 4.46 105 3.54
B. Private institutions 52 4.49 5.18 4.50 94 3.80 88 3.90 72 4.18 100 3.71
1. Corporate Ethics 47 4.44 5.12 4.31 80 3.89 96 3.67 69 4.01 100 3.54
2. Accountability 63 4.55 5.23 4.69 106 3.71 84 4.13 71 4.36 96 3.88
2nd Pillar: Infrastructure 63 3.46 5.03 4.28 65 3.41 77 3.05 51 3.98 82 2.83
3rd Pillar: Macroeconomy 111 3.58 4.76 4.62 35 4.92 97 3.94 73 4.30 30 5.03
4th Pillar: Health and primary education 78 6.28 6.71 6.54 39 6.61 69 6.38 67 6.38 54 6.47
A. Health 65 6.48 6.84 6.75 52 6.63 68 6.45 37 6.74 53 6.62
B. Primary education 80 6.09 6.58 6.33 45 6.59 66 6.31 84 6.02 65 6.32
5th Pillar: Higher education and training 57 4.15 5.15 4.84 62 4.05 50 4.34 44 4.43 66 3.96
A. Quantity of education 68 4.29 5.91 5.74 37 5.37 51 4.85 48 4.91 64 4.42
B. Quality of education 60 3.92 4.79 4.60 70 3.71 40 4.41 43 4.34 50 4.07
C. On-the-job training 37 4.25 4.76 4.18 94 3.06 58 3.77 47 4.04 76 3.40
6th Pillar: Market efficiency 47 4.35 4.73 4.44 90 3.75 76 4.03 68 4.11 91 3.74
A. Good markets: distortions, 36 4.68 4.78 4.40 88 3.78 57 4.26 76 3.99 101 3.53
competition and size
1. Distortions 65 3.86 4.36 4.15 113 3.12 76 3.75 97 3.40 100 3.34
2. Competition 37 4.79 5.04 4.70 91 3.69 65 4.12 60 4.24 101 3.59
3. Size 19 5.41 4.93 4.36 57 4.53 44 4.89 62 4.33 98 3.67
B. Labour markets: flexibility and efficiency 81 4.14 4.34 4.43 96 3.99 87 4.04 66 4.27 86 4.10
1. Flexibility 92 4.18 4.22 4.60 78 4.40 88 4.26 69 4.49 71 4.47
2. Efficiency 60 4.09 4.47 4.26 104 3.59 78 3.83 63 4.05 92 3.72
C. Financial markets: 58 4.23 5.06 4.48 88 3.48 73 3.80 68 4.07 81 3.60
sophistication and openness
7th Pillar: Technological readiness 52 3.56 4.74 4.38 68 3.21 49 3.59 47 3.68 91 2.71
8th Pillar: Business sophistication 39 4.58 5.07 4.46 84 3.59 73 3.89 61 4.17 88 3.50
A. Networks and supporting industries 33 5.10 5.29 4.77 78 4.14 68 4.36 64 4.46 89 3.89
B. Sophistication of firms 47 4.06 4.86 4.15 98 3.05 77 3.42 58 3.88 94 3.11
operations and strategy
9th Pillar: Innovation 51 3.35 4.17 3.54 87 2.93 68 3.14 45 3.45 86 2.98

* For regions, score is the unweighted average across the region's countries
** EU Accession 10
Source: The Global Competitiveness Report 2006-2007, and authors’ calculations

8
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
Table 1 shows the 2006 GCI rankings and scores of
the top ten performers, the EU members, and the
four candidate and accession countries, as well as
their 2005 rankings. The table shows that Turkey
has seen an impressive improvement in competitive
performance over the past year, rising 12 places in
the GCI between 2005 and 2006. This confirms the
pace and importance of the progress made, placing
the country 59th out of 125 countries, well ahead of
Bulgaria (72nd) and Romania (68th), but still behind
all of the EU25 countries, as well as Croatia (51st).

Table 2 provides more details behind what is driving

the overall rankings this year. The table underlines
Turkey’s relative prowess in business sophistication
(39th), goods market efficiency (36th) and, to a
certain extent, innovation (51st), demonstrating the
economy’s preparedness to evolve to more
advanced stages of development. However, it also
highlights some areas of particular concern, such as
the stability of the macroeconomic environment
(111th), infrastructure (63rd) and primary education
and health (78th), pointing to the fact that Turkey
has not yet sorted out some of the basic
requirements of competitiveness. The appendix to
this study includes a more detailed table with all of
the comparative scores and rankings within each
pillar down to the individual variable level.

In this context, Turkish authorities now face the

double challenge of needing to fully prepare for a
more advanced stage of development while, at the
same time, still addressing some of the more basic
areas, such as reducing macroeconomic
vulnerability, improving the access to and quality of
education, upgrading infrastructure, as well as
achieving higher levels of institutional accountability
and transparency.

The next sections will take a closer look at Turkey’s

comparative performance in the three sub-indexes
and nine composite pillars of the GCI.

9
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
Sub-index 1: Basic Requirements

The factors included in the basic requirements sub-
index are very important for Turkey’s productivity and
competitiveness, given its present stage of
development. As Table 2 shows, and as mentioned
above, Turkey does not score particularly well on
this sub-index: with a score of 4.34, Turkey ranks
72nd out of 125 countries. Of all comparators in the
table, Turkey only outperforms Romania, and lags far
behind both the EU25 and accession 10 averages.
What are Turkey’s strengths and weaknesses in the
four pillars of this sub-index?
Institutions
The quality of the institutional framework in which
businesses operate is critical to the efficient
functioning of the economy and to the vitality and
health of businesses. An environment characterized
by strong public institutions ensures that property
rights are protected, the court system is free from
undue influence, government policies are established
in an efficient and transparent manner, and
businesses are not hindered by high levels of
corruption. Private institutions must also play their
part, with firms that function ethically and are
accountable and transparent to the public.
Turkey’s institutional environment is rated as
somewhat mediocre. Regarding public institutions,
ranked 53rd and with a score of 3.90, Turkey’s
performance is well behind that of the EU25 average
(4.62). It is therefore not surprising that the
institutional environment has been highlighted as
one of the major areas of concern within the context
of EU accession negotiations. Among the short-term
priorities for reform are the requirements to ensure
greater efficiency, transparency and accountability
within the public administration, greater
independence of the judiciary, strengthening the fight
against corruption and buttressing human and
minority rights, among others.3
While it is clear that much remains to be achieved, it
is important to note that much progress has already
been made with regard to Turkey’s public
institutions. Table 2 shows that they do not receive a
significantly lower rating than the average of the 10
recent accession countries (4.06) and, in fact,
receive a significantly better rating than the other
accession and candidate countries, with Croatia,
Romania, Macedonia and Bulgaria being ranked
65th, 87th, 102nd and 111th, respectively. While not
at EU levels, compared to these countries, Turkey’s
public institutions are characterized by better
protected property rights, a more independent
judiciary, a higher degree of even-handedness on
the part of public officials, less wasteful government
spending and better overall security in the country.
Figure 2 provides a graphical comparison between
aspects of Turkey’s institutional environment and the
EU member groups and accession countries.

Figure 2. Turkey’s Relative Performance in Public and Private Institutions

Public Institutions Private Institutions

Score Turkey EU 25 Accession 10 Bulgaria Romania Score

7 7
6 6
5 5
4 4
3 3

2 2

1 1

0 0
Property rights Ethics and corruption Undue Influence Government Inefficiency Security Corporate Ethics Accountability

Source: The Global Competitiveness Report 2006-2007, and authors’ calculations

10
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
The state of Turkey’s institutions reflects a process of
institutional reform that has been carried out in the
country in recent years. In particular, a number of
specific measures have been taken in order to meet
EU requirements such as those outlined in the
Copenhagen criteria. This includes the abolition of
the death penalty, reform of the judiciary, an increase
in the rights of political parties and freedom of
association, improved protection of human and
minority rights and greater freedom of expression.
Other reforms include a constitutional amendment
reinforcing civilian over military supremacy and the
subordination of domestic law to international law in
the area of human rights.
Turkey’s private institutions receive slightly better
comparative marks. Ranked 52nd overall and with a
score of 4.49, although again well behind overall EU
levels, they are on a par with the accession 10
average (4.50) and well ahead of the four other
accession and candidate countries. Most strikingly,
the country’s corporate ethics, ranked 47th and with
a score of 4.44, is rated as better than the
accession 10 average (4.31), also clearly shown in
Figure 2. Our research thus indicates that, while
much remains to be achieved to bring the country
up to average EU standards, the institutional
environment compares relatively well to the country’s
peers, particularly with regards to the quality of
private institutions and ethical business practices.
Infrastructure
Without quality infrastructure, it is impossible to
ensure the efficient functioning of the economy.
Efficient modes of transport for goods, people and
services, such as good quality railroads, ports and
air transport, are vitally important, as are an
electricity supply free of interruption and a solid
telecommunications network.
The quality of Turkey’s infrastructure, ranked 63rd
overall and with a score of 3.46, is significantly
below that of the EU average (5.03), and of the 10
recent accession countries (4.28). Notably, Croatia’s
infrastructure, although characterized by a number
of its own inefficiencies, gets significantly higher
marks, particularly with regard to the quality of utilities
such as telephone lines and electricity. More generally,
of the four candidate and accession countries used
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
for comparison, only two (Romania and Macedonia)
have infrastructure that is assessed as being of a
significantly lower quality than that of Turkey.
Although all infrastructure assessed is well below
European averages, of particular concern is the
general lack of quality of Turkish railroads and an
electricity supply that is characterized by relatively
frequent interruptions and shortages. Even more
worrisome is the quality of the country’s ports,
ranked 76th overall, given the importance of
maritime transport for Turkey’s economy. It is hoped
that the privatization of many of the ports will lead to
improvements in quality and efficiency in years to
come.
Macroeconomy
The importance of macroeconomic stability for
competitiveness is well known. It is impossible for
businesses to make informed decisions when
inflation is spiralling out of control or when large
government budget deficits lead to the misallocation
of resources and drive up the cost of capital. When
the repayment of government debt is devouring a
major portion of a country’s resources, they cannot
be allocated effectively. Often, where debt servicing
costs are high, governments must curtail public
investment or, worse, vital spending on education
and public health, which erodes the competitive
potential of the country.
Although progress has clearly been made since the
2001 crisis, with a number of key policy reforms,
Turkey still demonstrates a number of weaknesses in
its macroeconomic environment. Ranked a dismal
111th overall in this pillar, Turkey’s performance is
worse than the great majority of the 125 countries
covered by the GCI, including all countries in Table 2
(the second worst being Romania at 97th).
Whereas inflation has been coming down
significantly around the world in recent years,
Turkey’s inflation rate of 8.2 in 2005 (the most recent
year for which we have year-end data) still places it
94th overall, with the likes of Georgia, Botswana and
Honduras, and well below any EU member. Further,
in 2005 the government budget deficit (5.9% of
GDP) and debt (72.8% of GDP) were still very high
by international standards, putting Turkey at 115th
11
and 86th respectively. In this context, meeting the
government’s objective of an overall fiscal balance
will improve the macroeconomic framework, thus
freeing resources for essential infrastructure,
education and other programmes. Turkey must
continue to bring down its debt levels if it is to
reduce its vulnerability to rising worldwide interest
rates and exchange rate volatility.
The overall picture is that, compared with the other
emerging market economies which have
experienced financial crises in recent years, such as
Argentina, Brazil and Russia, Turkey remains highly
vulnerable to external shocks. In particular, Turkey’s
burgeoning current account deficit (estimated by the
IMF at 6.7% in 2006) raises cause for concern, as it
leaves the country prey to the whims of international
investors, as demonstrated by the recent episode of
emerging market volatility in March of this year.
Improvements in this area will continue to be critical
to Turkey’s ability to ensure sustainable economic
progress in the future.
Concerning basic education, while a great majority
of Turkish schoolchildren receive a primary education
(89%), this in fact remains quite low by international
standards given the large number of countries that
have already attained universal enrolment. In fact,
this places Turkey 80th out of the 125 countries
covered in the GCI, followed only by Croatia of the
countries shown in Table 1. This is far below the
attainment rates of existing EU member countries.
More generally, Turkish children spend on average
many fewer years in school compared with the
European standard. This is perhaps surprising given
that the country’s spending on education is among
the highest of OECD countries (7% of GDP), but can
be explained by the fact that much of this comes
from private sources, given the weaknesses of the
public school system. Turkey must work to bridge
this gap by attaining universal primary enrolment,
providing a basic education to all children in the
country and thus preparing the basis of human
resources development in the country.

Health and Primary Education

In order for a country to be competitive at all stages

of development, it must have a healthy workforce
with at least a basic level of education. This
concerns the minimum requirements for workers to
function properly when performing basic tasks and
can be measured by national health indicators such
as life expectancy and rates of illness, as well as the
attainment rate of primary education.

Turkey receives very low marks in this area, ranking

78th overall. In terms of health indicators, Turkey
performs significantly worse than the EU25 average,
as well as that of the 10 recent accession countries.
This echoes the fact that per capita spending on
healthcare remains low in the country by
international standards, while access to care
remains financially difficult for the poorest citizens. Of
the countries in Table 2, only Romania has slightly
worse health indicators. Of particular concern are
indicators such as infant mortality (79th) and life
expectancy (66th), which are significantly worse than
European averages, as shown in the table. It is clear
that improving the health of the workforce is a
priority in improving Turkey’s overall competitiveness.

12
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
Sub-index 2: Efficiency Enhancers
Given its stage of development, those factors
grouped in the efficiency enhancers sub-index are
the most critical for Turkey’s competitiveness
(accounting for 50% of the weighting in the overall
GCI). Table 2 shows that the country’s performance
in this area is quite a bit stronger than in basic
requirements (described above). Yet some
weaknesses remain in the three pillars of this area,
as described below.
Higher Education and Training
As an economy begins to take on more complex
production tasks, higher education and training
become critical. This can be measured by the
quantity of secondary and tertiary education, the
quality of the educational system and the availability
of specialized training for the workforce, all of which
become necessary for more sophisticated business
processes.
With an overall ranking of 57, the Turkish higher
education and training pillar gets better marks than
primary education attainment (discussed above). In
fact, in terms of the quantity of education obtained
within the country, its comparative enrolment rates
improve the higher the level of education in Turkey,
with its 79% secondary enrolment placing it 75th
and 29% tertiary enrolment placing it 60th. However,
these are still not high enough by European
standards, including many of the recent accession
countries, where a strong emphasis is traditionally
placed on educational attainment, as demonstrated
by the high accession 10 score in Table 2.
Concerning the quality of the educational system
and its ability to meet the needs of a competitive
economy in a rapidly changing business
environment, Turkey is also falling short compared
with the European average, which can be attributed
in part to a shortage of teachers. It is clear that
higher levels of investment in public education will be
necessary to prepare the country to be competitive.
On a more positive note, while the traditional
educational system receives rather low marks,
Turkey’s private sector is doing quite a bit better in
terms of providing on-the-job training to workers.
Here Turkey ranks a much higher 37th overall and,
with a score of 4.25, does better in this area than
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
the accession 10 countries on average (4.18) and
significantly better than any of the other accession
and candidate countries shown in Table 2.
Market Efficiency
The existence of well developed and functioning
markets is a necessary precondition for an economy
to achieve sustained levels of productivity and
growth and ensure that national resources – goods,
workers, services or capital – are allocated to their
most effective use. Market efficiency becomes
especially important as economies move from
factor-driven, lower stages of development to more
advanced stages, where competition is based more
and more on efficiency and innovation, hence its
special relevance for Turkey, presently in stage two.
Turkey’s overall ranking of 47th for this pillar masks a
rather uneven performance in the goods (36th),
labour (81st) and financial market (58th)
components. Indeed, Turkey seems to have
achieved a relatively satisfactory degree of goods
market efficiency (only marginally below the EU25
average, with a score of 4.68 versus 4.78, and
higher than the accession 10 average of 4.40 and
the other candidate countries), thanks to the size of
its internal markets (19th) but also to the recent
microeconomic reforms aimed at reducing red tape
and bureaucracy and promoting competition.4 On
the other hand, labour and, to a lesser extent,
financial markets still suffer from a number of
rigidities and shortcomings that need to be tackled
to ensure the country’s sustained competitiveness.
With respect to the labour market, flexibility (92nd) is
a major concern, with low marks for hiring and firing
practices (89th), flexibility of wage determination
(81st) and degree of cooperation between labour
and employers (84th). It seems clear that, in Turkish
labour legislation, the well-intentioned concern for
offering maximum protection to workers has
prevailed over job creation, as suggested by the
extremely low rate of employment in the country:
43.7% versus an average of 65% for the EU15 (pre-
2004), and above 50% for most countries in the
world. For example, Turkey’s severance pay is
among the most generous in the world, employment
requires a very high employee-employer contribution
rate (36.5% as compared to the 27.4% for the
13
 Figure 3. Turkey’s Relative Performance in Market
Efficiency
Score Turkey EU 25 Accession 10 Bulgaria
7 Turkey registers rather mediocre scores for the
6
5
4
3 Technological Readiness
2
1 which a country is harnessing existing technologies
Good markets Labour markets Financial markets
Source: The Global Competitiveness Report 2006-2007,
and authors’ calculations
OECD20 average), restrictions on fixed-term and
temporary work agencies are almost unique in the
OECD and, since 1992, there is no minimum
pension age.5
Given that Turkey would need to generate about 14
million jobs by 2010 to meet the 70% employment
rate envisaged by the Lisbon agenda, it is imperative
for the country to focus on labour market reforms,
combining flexibility with labour protection. This is
crucial for generating more jobs and reducing the
incentives for the informal market to prosper.
According to the World Bank, one out of three
workers in urban areas, and three out of four in rural
ones, are not registered with the social security
system. Figure 3 provides a visual comparison of
Turkey’s performance to other European countries.
The figure clearly shows that the EU on average
suffers from inflexible labour markets, although this
should not lead to complacency. Sticky labour
markets are posing difficulties for the region as a
whole, contributing to sluggish growth in many
countries, so that the EU labour markets are not
necessarily the best benchmark for Turkey to follow
in improving its competitiveness.
Financial markets are relatively more efficient, even if
with a score of 4.23 they have not yet reached the
EU25 (5.06) or accession 10 (4.48) levels. In
particular, Turkey is doing remarkably well regarding
the degree of sophistication of financial markets
(36th) and access to the local equity market (34th)
given its present stage of development. However,
14
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
the banking system is still perceived as not
sufficiently sound (99th), notwithstanding the
comprehensive legal and institutional reforms
Romania
undertaken after the 2001 financial crisis. Also,
availability of capital from the local market in terms of
loans from the banking sector (73rd) and venture
capital (77th).
Technological readiness indicates the extent to
to enhance the productivity of its industries. This
differs from technological innovation in the sense
that it is not necessary to invent the telephone or the
Internet in order to capitalize on their productivity-
enhancing qualities. Rather, it means that firms in
competitive countries are aggressive in integrating
existing and new technologies into their production
processes. In this sense, the technological readiness
pillar measures countries’ capacities to absorb
technology and this is complemented by the
innovation pillar (described below), which assesses
countries’ endogenous innovation potential.
Among new technologies, information and
communication technologies (ICT) are of particular
importance as they have evolved into the “general
purpose technology”6 of our time. ICT access and
usage have become fundamental elements
determining economies’ overall levels of
technological readiness, given the critical spillover of
ICT to the other economic sectors and its role as
efficient infrastructure for commercial transactions.
Turkey, with a score of 3.56, ranks 52nd overall in
technological readiness. This is significantly lower
than the EU25 average score (4.74) and even that of
the accession 10 average (4.38), although it is higher
than Bulgaria’s score (3.21) and has improved a bit
since last year (3.38).
In terms of technology absorption, Turkish firms are
assessed as being relatively aggressive in adopting
new technologies (25th). This underlines the
preparedness of at least part of the private sector to
use technology to upgrade production systems. On
the other hand, foreign direct investment (FDI) is not
an important source of technology for the economy,
with a mediocre ranking of 60th, inferring that much
potential remains to be tapped in this area.

Turkey’s ICT readiness should also be reinforced: the

country is placed at a rather low 55th ranking for
perceived technological readiness and at 52nd for
the quality of the regulatory framework for facilitating
ICT adoption. Moreover, ICT infrastructure and
penetration rates remain very low: the use of
personal computers (72nd), Internet (56th) and
cellular telephones (52nd) are all quite low by
European standards, even if rising from last year.

The World Economic Forum’s Networked Readiness

Index (NRI), which measures countries’ readiness to
leverage ICT for development and growth, provides
a similar assessment. Turkey was ranked 48th out of
115 countries in 2005, on an upward trend starting
in 2003. Of the various stakeholders in society, the
NRI estimates that the Turkish business community
is the most “technology/ICT ready”, with the
government and individuals lagging behind.
Considering the key role of technological readiness
for the country at its particular stage of
development, a continued effort from all actors of
Turkish society will be necessary to achieve better
levels of technology absorption and ICT penetration.

15
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
Innovation and Sophistication Factors
For the time being, the pillars included in this more
complex sub-index are not yet the most important
for Turkey’s competitiveness (10%), since the
country can still increase its productivity by
improving the factors described in the sections
above. However, they will gain importance as the
country moves towards the next stage of economic
development and with further integration with the
EU. On a hopeful note, as Table 2 and Figure 4
show, this is the area in which Turkey is already
showing the greatest competitive strength.
Business Sophistication
As countries evolve to the most advanced –
innovation-driven – stage of development, the
sophistication of their productive systems and
processes acquire increasing importance as key
drivers of competitiveness. The business
sophistication pillar looks both at the presence of
integrated and high-quality productive networks
(fostering the formation of clusters) and at the
sophistication of companies’ operations and
strategies.
Turkey presents quite an interesting case given its
stage of development since it, in fact, shows a
competitive advantage in this pillar. Turkey is
assessed as doing well regarding business
sophistication compared with its own performance
in the other GCI pillars, as well as with the accession
10 average and the other accession and candidate
countries. With a rank of 39 and a score of 4.58,
business sophistication is by far the pillar in which
Turkey does best and outperforms both the
accession 10 average (4.46) and, by a rather large
margin, Bulgaria (3.59) and Romania (3.89).
Turkey gets particularly good marks for its cluster-
related infrastructure, such as local supplier quantity
(29th) and quality (39th), as well as in variables
pertaining to the sophistication of Turkish firms’
operations and strategies, such as their control of
international distribution (29th) and the extent to
which they are producing goods higher up on the
value chain (37th).
16
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
Figure 4. Turkey’s Relative Performance in
Innovation and Sophistication Factors
Score
7
6
5
4
3
2
1
0
Business sophistication Innovation
Turkey EU 25 Accession 10 Bulgaria Romania
Source: The Global Competitiveness Report 2006-2007,
and authors’ calculations
Turkey’s prowess in business sophistication not only
bodes well for its prospects to evolve toward more
advanced stages of development, but also
corroborates the progress achieved in recent years.
Indeed, although the rural sector still accounts for
around one-third of Turkey’s labour force and is
characterized by a rather low level of average labour
productivity (value added per employed person) –
4.6 in 2004, as compared to 9.7 and 7.6
respectively for the Czech Republic and Hungary7 –
it represented only 11.3% of GDP in 2004,8
significantly less than the industrial (25%) and the
services (60%) sectors, which are characterized by
significantly higher productivity levels.
With average labour productivity of 13.5 and 15.7
respectively, the industry and services sectors are
perfectly competitive with the accession 10
countries, demonstrating comparable – if not better
– levels of business sophistication and
modernization. This “dual economy” connotation can
also, to a certain extent,9 be found within each
sector of the national economy, since modern
companies adopting advanced technology, efficient
production processes and exploiting economies of
scale have developed everywhere, side by side with
traditional companies that are generally medium-size
enterprises with lower levels of productivity and less
efficient processes.
Innovation
Given Turkey’s stage of development, the
In current knowledge-based and interconnected shortcomings underlined in this section are not
economic systems, innovation becomes the only extremely worrisome at the present time, but should
sustainable driver of productivity growth for firms be addressed in coming years as the country moves
and countries alike. By developing national dynamic to more advanced development stages and in view
competitive advantages (based on technology and of potential future EU membership.
high value-added products), as opposed to static
ones (based on natural endowments and production
factors with diminishing rates of return), countries
ensure increasing levels of prosperity and living
standards for their citizens. In particular, the capacity
to generate endogenous innovation becomes a
precondition for countries having reached the
technological frontier to generate sustained
productivity increases and achieve enduring
competitiveness.

Turkey has not reached the innovation-driven stage

and can still improve its productivity by getting more
of the “basics” right (as described above), with a
rank of 51 and a score of 3.35. However, in spite of
remaining well behind world leaders in innovation,
the economy already performs better in this area
than all accession and candidate countries with the
exception of Croatia (3.45).

Looking at the three main innovation enablers –

government, the business sector and research
institutions – Turkey scores comparatively well in
business sector and academia related variables
such as the extent of research cooperation between
the private sector and universities (46th), the
availability of scientists and engineers (44th) and
companies’ capacity for innovation (47th), mirroring
the performance of business in the technological
readiness pillar (described above).

On a more negative note, government-related

variables, such as public procurement of high
technology goods and intellectual property
protection, remain areas of concern for the country,
with rankings of 62nd and 71st respectively. More
generally, Turkey ranks a disappointing 70th place
for the number of US utility patents granted per
million inhabitants, suggesting that the domestic
innovation potential has not yet been fully tapped
with regard to the development of new processes
and products.

17
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
Conclusions
This Report has explored the drivers of Turkey’s
competitiveness, based on the findings of the Global
Competitiveness Index. In order to place Turkey’s
performance into a global context, specific
comparisons have been made with the European
Union average, the accession 10 average, and the
performance of the four other accession and
candidate countries. The analysis has shown that
while Turkey does quite well in some of the more
complex competitiveness dimensions such as
business sophistication and technological adoption,
it continues to lag behind in some of the more basic
requirements for competitiveness, such as the stability
of the macroeconomic environment, the quality of
public institutions and the educational system.
In this regard, it is notable that the country’s
competitive strengths are primarily in areas that are
normally reserved for countries at higher stages of
development, although it lags behind in more basic
factors. While this bodes well for Turkey’s ability to
References
BBC News. Country Profile, Turkey. 2006. Online:
http://newsvote.bbc,co.uk
Delegation of the European Commission in Turkey.
Historical Review. 2006. Online:
http://www.deltur.cec.eu.int
Dervis, K., Emerson M., Gros D. and Ulgen S., The
European Transformation of Modern Turkey.
Brussels: Centre for European Policy Studies, 2004.
Dincer Bacer D., Farrell D., and Meen D. E., Turkey’s
Quest for Stable Growth. The McKinsey Quarterly
Special Edition: Global Direction. 2003. Online:
http://www.mckinseyquarterly.com
European Commission. 2005. Progress Report
2005. Brussels.
European Commission. 2006. EU-Turkey Relations.
Online: http://ec.europa.eu
18
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
be competitive at a higher stage of development, it
also highlights the need to address some of the
more basic issues, which – given sufficient political
will – should ostensibly be easier to address, and
which are critical for enabling improvements in
productivity and growth at the present time.
Turkey should be commended for the great progress
it has achieved in recent years, which is reflected in
the country’s impressive rise in the competitiveness
rankings. However, this should not lead to
complacency, as there is a challenging road ahead.
For Turkey to move to a higher stage of
development and achieve European standards of
competitiveness, reforms and actions must still be
carried out on several fronts. The World Economic
Forum stands ready to support Turkey in its
development process through its annual comparative
analysis, with the aim of providing a benchmarking
and tracking tool for policy reform and
implementation in the country.
European Commission. 2006. Economic Profile.
Online: http://ec.europa.eu
European Commission. 2006. Political Profile.
Online: http://ec.europa.eu
European Commission. 2006. Key Events in Turkey-
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European Parliament, Press Service. European
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http://www.europarl.europa.eu
Financial Times. Special Report on Turkey. 26 June
2006.
Kaminski B. and Ng F., Turkey Evolving Trade
Integration into Pan-European Markets. World Bank
Policy Research Working Paper 3908. 2006.
Lopez-Claros A., Altinger L., Blanke J., Drzeniek M.
and Mia I., The Global Competitiveness Index:
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New York: Palgrave MacMillan, 2006.
Napier G., Schwoag Serger S. and Wise Hansson
E., Strengthening Innovation and Technology Policies
for SME Development in Turkey. Malmo: IKED, 2004.
The Economist. Too Big to Handle? 23 June 2005.
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The Economist. Factsheet. 2006. Online:
http://www.economist.com/countries/Turkey
Footnotes
1
The GCI was developed by Xavier Sala-i-
Martin and Elsa Artadi for the World Economic
Forum. For more details on the most recent
calculation of the GCI, see chapter 1.1 in The
Global Competitiveness Report 2006–2007.
2
Further information on the Executive Opinion
Survey can be found in Chapter 3.1 of The
Global Competitiveness Report 2006-2007,
which is available from the World Economic
Forum on request. Please send requests to
gcp@weforum.org
3
Although the penal code has been revised,
recent high-profile cases involving the
prosecution of intellectuals under article 301
for “insulting Turkishness” continues to cause
some concern in European circles.
4
However, the cost of agriculture policy, at
112th, is still perceived as an hindrance for
Turkey’s competitiveness: although Turkey is in
the process of reforming its burdensome and
inefficient agriculture policies – accounting for
4% of GDP in 2004 (K. Dervis et al, 2004) – in
a CAP sense, i.e. preserving rural income but
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
The Economist Intelligence Unit. Country Report:
Turkey. Dartford: Kent: Paterson Dartford. April
2006.
Wolfowitz P., Turkey: Embracing East and West.
Sakip Sabanci Lecture, Brookings Institution. 2006.
Online: http://www.worldbank.org.tr
World Bank. Poverty Reduction and Economic
Management Unit in Europe and Central Asia
Region. Turkey Labour Market Study. April 2006.
Yilmaz B., Turkey’s Competitiveness in the European
Union: A Comparison with Five Candidate Countries
– Bulgaria, the Czech Republic, Hungary, Poland,
Romania – and the EU15. Ezoneplus Working Paper
no. 12, Berlin: Jean Monet Centre of Excellence.
2003.
minimizing economic distortions, further
liberalization is needed in view of EU
membership and especially to modernize and
make the agriculture sector more efficient.
5
World Bank, 2006.
6
A general purpose technology (GPT),
according to Trajtenberg (2005b), is one
which, in any given period, contributes
particularly to an economy’s overall growth
thanks to its ability to transform the methods
of production in a wide array of industries.
Examples of GPT include the invention of the
steam engine or the electric dynamo.
7
K. Dervis et al, 2004.
8
EIU, 2006.
9
For example, whereas traditional companies
account for 31% of employment in the
automotive sector and are virtually absent in
telecommunications and retail banking, their
importance is more relevant in the retailing of
consumer goods, in which they represent
88% of all labour force.
19
Appendix

Turkey EU 25 EU A10** Bulgaria Romania Croatia Macedonia, FYR

Rank Score Score* Score* Rank Score Rank Score Rank Score Rank Score

Global Competitiveness Index 2006-2007 59 4.14 4.97 4.59 72 3.96 68 4.02 51 4.26 80 3.86

Basic requirements 72 4.34 5.31 4.90 62 4.50 83 4.19 55 4.60 70 4.37

Efficiency enhancers 54 4.02 4.87 4.55 70 3.67 55 3.99 52 4.07 80 3.47
Innovation factors 42 3.96 4.62 4.00 85 3.26 73 3.52 50 3.81 87 3.24

1st Pillar: Institutions 51 4.05 4.76 4.17 109 3.07 87 3.40 66 3.72 103 3.15
A. Public institutions 53 3.90 4.62 4.06 111 2.83 87 3.23 65 3.57 102 2.96
1. Property rights 53 4.81 5.66 4.98 91 3.75 76 4.07 81 3.99 107 3.47
1.01 Property rights 53 4.81 5.66 4.98 91 3.75 76 4.07 81 3.99 107 3.47
2. Ethics and corruption 47 3.30 4.23 3.40 105 2.13 93 2.40 50 3.23 91 2.44
1.02 Diversion of public funds 48 3.93 5.05 4.22 108 2.59 82 3.15 50 3.90 84 3.14
1.03 Public trust of politicians 51 2.68 3.41 2.58 105 1.68 108 1.64 54 2.57 100 1.74
3. Undue Influence 52 3.70 4.38 3.66 109 2.36 100 2.56 76 3.14 97 2.58
1.04 Judicial independence 50 4.18 5.01 4.26 100 2.51 89 2.88 82 3.21 108 2.42
1.05 Favouritism in decisions government officials 50 3.22 3.76 3.06 112 2.22 110 2.24 55 3.07 83 2.74
4. Government Inefficiency 56 3.12 3.42 3.16 100 2.57 83 2.78 65 3.03 86 2.77
(red tape, bureaucracy and waste)
1.06 Wastefulness of government spending 58 3.26 3.64 3.21 101 2.50 107 2.46 66 3.13 94 2.63
1.07 Burden of government regulation 64 2.97 3.21 3.11 92 2.65 52 3.10 69 2.93 70 2.92
5. Security 63 4.60 5.40 5.08 112 3.33 70 4.35 66 4.46 105 3.54
1.08 Business costs of terrorism 90 4.62 5.38 5.53 95 4.46 60 5.19 27 5.66 105 4.21
1.09 Reliability of police services 47 4.52 5.18 4.44 117 2.74 79 3.66 77 3.72 72 3.82
1.10 Business costs of crime and violence 51 4.69 5.44 5.17 97 3.18 72 3.92 63 4.26 95 3.21
1.11 Organized crime 70 4.56 5.59 5.20 118 2.95 69 4.62 84 4.20 119 2.92
B. Private institutions 52 4.49 5.18 4.50 94 3.80 88 3.90 72 4.18 100 3.71
1. Corporate Ethics 47 4.44 5.12 4.31 80 3.89 96 3.67 69 4.01 100 3.54
1.12 Ethical behaviour of firms 47 4.44 5.12 4.31 80 3.89 96 3.67 69 4.01 100 3.54
2. Accountability 63 4.55 5.23 4.69 106 3.71 84 4.13 71 4.36 96 3.88
1.13 Efficacy of corporate boards 83 4.29 5.09 4.69 104 3.96 61 4.52 67 4.47 117 3.76
1.14 Protection of minority shareholders' interests 58 4.51 5.01 4.29 122 2.84 97 3.68 94 3.73 93 3.73
1.15 Strength of auditing and 60 4.84 5.59 5.09 74 4.33 79 4.19 58 4.87 82 4.16
accounting standards
2nd Pillar: Infrastructure 63 3.46 5.03 4.28 65 3.41 77 3.05 51 3.98 82 2.83
2.01 Overall infrastructure quality 64 3.51 5.11 4.34 89 2.65 101 2.36 50 4.07 80 2.80
2.02 Railroad infrastructure development 67 2.28 4.37 3.43 45 3.34 54 2.86 51 3.02 69 2.22
2.03 Quality of port infrastructure 76 3.12 4.85 4.09 71 3.31 75 3.12 72 3.30 113 1.81
2.04 Quality of air transport infrastructure 54 4.74 5.40 4.67 92 3.48 90 3.63 70 4.19 109 2.93
2.05 Quality of electricity supply 71 4.11 5.97 5.46 75 4.02 81 3.83 50 5.11 67 4.31
2.06 Telephone lines (hard data) 47 26.45 46.76 35.44 35 35.13 59 20.25 30 42.74 50 25.19
3rd Pillar: Macroeconomy 111 3.58 4.76 4.62 35 4.92 97 3.94 73 4.30 30 5.03
3.01 Government surplus/deficit (hard data) 115 -5.91 -2.01 -2.86 20 2.31 50 -0.78 103 -4.19 36 0.30
3.02 National saving rate (hard data) 74 18.04 20.71 19.78 89 15.85 97 13.96 21 28.82 81 17.17
3.03 Inflation (hard data) 94 8.20 2.53 3.18 69 5.00 98 9.00 50 3.30 2 0.50
3.04 Interest rate spread (hard data) 60 5.60 3.32 3.69 52 4.83 108 13.18 90 9.48 59 5.57
3.05 Government debt (hard data) 86 72.81 52.03 42.74 29 31.91 15 18.92 48 44.24 36 39.00
3.06 Real effective exchange rate (hard data) 117 22.07 7.14 11.47 110 17.30 118 23.41 84 5.52 56 -1.11

* For regions, score is the unweighted average across the region's countries
** EU Accession 10

20
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
 Turkey EU 25 EU A10** Bulgaria Romania Croatia Macedonia, FYR
continued Rank Score Score* Score* Rank Score Rank Score Rank Score Rank Score

4th Pillar: Health and primary education 78 6.28 6.71 6.54 39 6.61 69 6.38 67 6.38 54 6.47
A. Health 65 6.48 6.84 6.75 52 6.63 68 6.45 37 6.74 53 6.62
4.01 Medium-term business impact of malaria 28 6.62 6.62 6.49 75 5.81 50 6.28 42 6.42 88 5.51
4.02 Medium-term business impact 24 6.47 6.38 6.12 81 5.45 68 5.64 35 6.32 87 5.17
of tuberculosis
4.03 Medium-term business impact of HIV/AIDS 9 6.30 5.97 5.76 66 5.10 49 5.57 30 5.86 80 4.64
4.04 Infant mortality (hard data) 79 28.00 4.92 6.10 48 12.00 60 17.00 32 6.00 52 13.00
4.05 Life expectancy at birth (hard data) 66 71.00 77.40 74.80 53 72.00 53 72.00 39 75.00 53 72.00
4.06 Tuberculosis prevalence (hard data) 49 44.82 18.97 30.91 44 36.14 86 187.92 57 65.00 41 33.65
4.07 Malaria prevalence (hard data) 76 12.93 0.00 0.00 1 0.00 1 0.00 1 0.00 1 0.00
4.08 HIV/AIDS prevalence (hard data) 1 <0.1 0.28 0.33 1 <0.1 1 <0.1 1 <0.1 1 <0.1
B. Primary education 80 6.09 6.58 6.33 45 6.59 66 6.31 84 6.02 65 6.32
4.09 Net primary enrolment (hard data) 80 89.33 94.95 92.09 45 95.15 66 91.86 84 88.50 65 92.03
5th Pillar: Higher education and training 57 4.15 5.15 4.84 62 4.05 50 4.34 44 4.43 66 3.96
A. Quantity of education 68 4.29 5.91 5.74 37 5.37 51 4.85 48 4.91 64 4.42
5.01 Secondary enrolment (hard data) 75 79.23 103.05 97.88 18 102.12 63 85.09 57 88.00 65 84.07
5.02 Tertiary enrolment (hard data) 60 29.00 58.80 54.80 40 41.00 44 40.00 46 39.00 64 28.00
B. Quality of education 60 3.92 4.79 4.60 70 3.71 40 4.41 43 4.34 50 4.07
5.03 Quality of the educational system 73 3.25 4.46 4.26 83 3.11 51 3.83 53 3.77 43 4.02
5.04 Quality of math and science education 57 4.31 4.95 4.98 51 4.40 11 5.52 31 4.93 40 4.62
5.05 Quality of management schools 61 4.20 4.95 4.57 82 3.62 70 3.87 54 4.31 85 3.57
C. On-the-job training 37 4.25 4.76 4.18 94 3.06 58 3.77 47 4.04 76 3.40
5.06 Local availability of specialized 41 4.32 4.83 4.26 80 3.48 44 4.25 34 4.47 87 3.33
research and training services
5.07 Extent of staff training 39 4.19 4.70 4.11 114 2.64 81 3.29 61 3.60 69 3.47
6th Pillar: Market efficiency 47 4.35 4.73 4.44 90 3.75 76 4.03 68 4.11 91 3.74
A. Good markets: distortions, 36 4.68 4.78 4.40 88 3.78 57 4.26 76 3.99 101 3.53
competition and size
1. Distortions 65 3.86 4.36 4.15 113 3.12 76 3.75 97 3.40 100 3.34
6.01 Agricultural policy costs 112 2.93 3.75 3.71 123 2.57 103 3.22 110 3.01 76 3.46
6.02 Efficiency of legal framework 56 3.81 4.85 4.11 113 2.53 88 3.07 75 3.42 96 2.91
6.03 Extent and effect of taxation 83 2.89 3.44 3.69 98 2.57 109 2.44 85 2.88 88 2.85
6.04 Number of procedures to 31 8.00 7.41 7.88 70 11.00 10 5.00 85 12.00 94 13.00
start business (hard data)
6.05 Time required to start a business (hard data) 8 9.00 27.55 33.88 44 32.00 10 11.00 85 49.00 81 48.00
2. Competition 37 4.79 5.04 4.70 91 3.69 65 4.12 60 4.24 101 3.59
6.06 Intensity of local competition 27 5.44 5.37 5.16 99 4.15 59 4.89 52 4.99 90 4.28
6.07 Effectiveness of anti-trust policy 34 4.68 5.08 4.47 89 3.15 67 3.63 65 3.68 109 2.82
6.08 Imports (hard data) 76 35.30 56.02 66.99 15 77.36 56 47.03 36 59.30 30 62.80
6.09 Prevalence of trade barriers 44 4.77 5.39 5.16 89 4.01 69 4.26 54 4.60 66 4.34
6.10 Foreign ownership restrictions 82 4.77 5.56 5.30 101 4.34 81 4.79 74 4.90 108 4.19
3. Size 19 5.41 4.93 4.36 57 4.53 44 4.89 62 4.33 98 3.67
6.11 Exports (hard data) 88 28.30 56.24 62.85 29 60.80 75 33.95 39 51.43 58 41.90

* For regions, score is the unweighted average across the region's countries
** EU Accession 10

21
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
 Turkey EU 25 EU A10** Bulgaria Romania Croatia Macedonia, FYR
continued Rank Score Score* Score* Rank Score Rank Score Rank Score Rank Score
6th Pillar: Market efficiency
B. Labour markets: 81 4.14 4.34 4.43 96 3.99 87 4.04 66 4.27 86 4.10
flexibility and efficiency
1. Flexibility 92 4.18 4.22 4.60 78 4.40 88 4.26 69 4.49 71 4.47
6.12 Hiring and firing practices 89 3.41 3.35 3.66 76 3.70 86 3.49 54 4.08 57 4.04
6.13 Flexibility of wage determination 81 4.83 4.44 5.36 38 5.57 26 5.72 63 5.24 32 5.68
6.14 Cooperation in labour/employer relations 84 4.30 4.85 4.79 105 3.93 120 3.55 95 4.13 117 3.70
2. Efficiency 60 4.09 4.47 4.26 104 3.59 78 3.83 63 4.05 92 3.72
6.15 Reliance on professional management 63 4.40 5.18 4.60 115 3.35 76 4.16 72 4.22 118 3.31
6.16 Pay and productivity 59 4.09 4.25 4.54 52 4.26 36 4.51 55 4.24 62 4.04
6.17 Brain drain 58 3.26 4.08 3.52 121 2.02 114 2.16 61 3.19 109 2.27
6.18 Private sector employment of women 69 4.61 4.37 4.39 56 4.72 80 4.50 78 4.52 20 5.26
C. Financial markets: 58 4.23 5.06 4.48 88 3.48 73 3.80 68 4.07 81 3.60
sophistication and openness
6.19 Financial market sophistication 36 4.63 5.20 4.36 107 2.44 85 3.09 71 3.69 87 2.95
6.20 Ease of access to loans 73 2.98 4.36 3.95 63 3.22 58 3.41 52 3.56 90 2.61
6.21 Venture capital availability 77 2.98 4.16 3.60 54 3.32 72 3.04 66 3.15 44 3.57
6.22 Soundness of banks 99 4.77 6.21 5.72 81 5.10 78 5.22 70 5.36 110 4.56
6.23 Local equity market access 34 5.79 5.40 4.78 106 3.35 79 4.23 70 4.61 76 4.33
7th Pillar: Technological readiness 52 3.56 4.74 4.38 68 3.21 49 3.59 47 3.68 91 2.71
7.01 Technological readiness 55 4.08 4.85 4.28 90 2.83 74 3.59 78 3.33 99 2.63
7.02 Firm-level technology absorption 25 5.41 5.19 5.02 116 3.46 72 4.55 80 4.43 117 3.44
7.03 Laws relating to ICT 52 3.95 4.75 4.32 36 4.29 57 3.79 41 4.17 95 2.87
7.04 FDI and technology transfer 60 4.96 5.09 5.18 89 4.63 13 5.69 106 4.36 120 3.88
7.05 Cellular telephones (hard data) 52 47.99 92.03 85.03 45 60.94 54 47.13 42 63.58 53 47.71
7.06 Internet users (hard data) 56 1413 4478 4172 53 1590 49 2076 38 2950 74 769
7.07 Personal computers (hard data) 72 5.12 38.64 26.75 66 5.94 51 11.30 37 19.07 63 6.78
8th Pillar: Business sophistication 39 4.58 5.07 4.46 84 3.59 73 3.89 61 4.17 88 3.50
A. Networks and supporting industries 33 5.10 5.29 4.77 78 4.14 68 4.36 64 4.46 89 3.89
8.01 Local supplier quantity 29 5.37 5.26 4.79 77 4.45 68 4.59 66 4.61 94 4.09
8.02 Local supplier quality 39 4.83 5.32 4.74 79 3.83 69 4.12 62 4.31 86 3.69
B. Sophistication of firms 47 4.06 4.86 4.15 98 3.05 77 3.42 58 3.88 94 3.11
operations and strategy
8.03 Production process sophistication 43 4.06 4.96 4.18 116 2.52 71 3.31 61 3.61 92 2.95
8.04 Extent of marketing 53 4.67 5.28 4.69 100 3.26 74 3.94 63 4.47 98 3.32
8.05 Control of international distribution 29 4.52 4.52 4.01 72 3.84 66 3.89 38 4.34 90 3.68
8.06 Willingness to delegate authority 50 3.75 4.51 3.89 116 2.62 65 3.47 64 3.51 90 3.08
8.07 Nature of competitive advantage 73 3.21 4.69 3.71 108 2.66 109 2.64 39 3.74 106 2.67
8.08 Value chain presence 37 4.15 5.20 4.44 69 3.38 73 3.29 59 3.60 88 2.99
9th Pillar: Innovation 51 3.35 4.17 3.54 87 2.93 68 3.14 45 3.45 86 2.98
9.01 Quality of scientific research institutions 55 3.86 4.58 4.03 68 3.67 67 3.70 46 4.04 84 3.44
9.02 Company spending on 62 3.19 4.11 3.52 97 2.73 70 3.07 52 3.30 101 2.64
research and development
9.03 University/industry research collaboration 46 3.35 4.01 3.47 96 2.50 77 2.86 35 3.58 58 3.14
9.04 Government procurement of 62 3.77 4.06 3.70 104 3.21 74 3.64 69 3.69 96 3.36
advanced technology products
9.05 Availability of scientists and engineers 44 4.76 5.12 4.72 49 4.68 41 4.85 38 4.93 51 4.66
9.06 Utility patents (hard data) 70 0.10 35.74 2.96 51 0.39 56 0.32 32 2.61 79 0.00
9.07 Intellectual property protection 71 3.28 4.99 4.04 98 2.71 80 3.13 56 3.66 105 2.51
9.08 Capacity for innovation 47 3.54 4.53 3.77 79 2.90 85 2.87 53 3.31 66 3.11

* For regions, score is the unweighted average across the region's countries
** EU Accession 10

22
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
Turkey’s Competitiveness in a European Context © 2006 World Economic Forum
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Turkey’s Competitiveness in a European Context © 2006 World Economic Forum