Investment and employment plan to boost Turkish economy

An ambitious plan to boost the Turkish economy through an investment and employment package was unveiled last week.

The government plan aims to bolster Turkey’s US$800 billion economy, which has slowed in the last two years. Prime Minister Ahmet Davutoglu revealed the $2.9 billion package, which encompasses job training schemes, tax breaks for investments, treasury guarantees and state insurance premium contributions. 

Employment boost

The government wants to create 120,000 jobs by helping companies hire new employees. This will be achieved by offering minimum wage salaries to workers who enrol in private job-training programs. The wages will be paid for six months, and if companies then hire the trainees, the state will cover the new employees’ social security premiums for 42 months.

Tax breaks for investors

The program will is also aiming to foster investment confidence - a lot of investments have been shelved over the past two years, with investors holding onto their cash and waiting for an improved economy. By instituting a 50 percent tax break in industrialised provinces like Istanbul, the government is encouraging dormant investors to rear their heads. 

Top 10 economy

Davutoglu pledged that Turkey’s ruling party, the Justice and Development Party (AKP) will build a $2 trillion economy in less than a decade, propelling the country into the top 10 global economies.

"We are enacting a comprehensive incentive package for our industrialists and manufacturers," Davutoglu said. "We will continue structural reforms to make Turkey one of the world's 10 biggest economies."

Political future

It’s not just Turkey’s economy that’s in the balance - its political future is also in question. AKP has overseen an average of 5 percent growth each year since it came to power in 2002. However, the last three years have seen an annual economic growth of 3 percent. Faced with a slowing economy ahead of the elections, AKP’s aims in presenting the economic package is to secure itself a fourth term.

President Recep Tayyip Erdogan is campaigning to turn Turkey’s parliamentary government into a US-style executive presidency. Erdogan has argued that this format will allow for more streamlined decision-making, allowing him to build a “New Turkey” that will be run like an efficient corporation.

Growth debate

Last week the state statistics agency reported that Turkey’s gross domestic product grew by 2.9 percent last year, missing the official 3.3 percent target, and slowing from 4.2 percent in 2013. However, Davutoglu stated that the country is on track to “comfortably” reach 4 percent growth this year.

Davutoglu also pointed out that Turkey’s economy outperformed its emerging market peers, while experiencing the global slowdown and currency selloffs. The sluggish EU economy has played a large part in Turkey’s slowdown, due to the EU buying around half of Turkey’s exports. The fortunes of Turkey and its European neighbours are inextricably tied.