Turkey: Effects Of Turkey's Parliamentary Election On Economy

As Parliamentary Election of Turkey which will be held on June 7 approaches, Turkey's economy continues to fluctuate. Like in any other country, economy is the leading factor affecting votes of citizens in parliamentary elections. The situation is not different in Turkey as economy becoming the main concern for politicians lately. Considering the general principle that economy slows down as elections get closer, it is not surprising for Turkey to witness fall in investments. Turkey's economic fluctuation may be observed in several areas from the fall in currency to the unemployment rates and even in rapidly increasing oil prices. These changes not only harm the prestige of the country in international arena but also affect citizens who will cast their votes almost in a month.

Constituents' fear of unstable economy is recently reflexed in polls. According to a poll conducted by one of the major research companies of Turkey, voters worry about the economy more than anything else. The poll reveals that 53 per cent of Turkish citizens think that the most important hardship facing the country is economic problems and unemployment rate.Thus, politicians make statements about the economy hoping that they can attract more votes from people. Both the ruling Justice and Development party and opposition parties dedicate a great deal of work in order to impress the voters with their economic policies. The main opposition party has recently suggested increasing the minimum wage for workers which was followed by opposition from the governing party claiming that increasing the minimum wage would cause further unemployment.

Being one of the most important factors affecting economy, unemployment rate, is increasing rapidly in the past couple of years. With 11.3 per cent in January 2015, unemployment rate is at its highest when compared to last 4 years. An important portion of unemployed people of Turkey is young people. The fact that 20 per cent of the youth is unemployed is a challenging barrier that Turkey has to face both in economic and in social levels.

11-Step Economic Package

In order to overcome this challenge, Turkish Government has recently unveiled a plan to create employment and encourage investments. The new package has 11 articles and aims to create 120,000 new jobs. The cost of the package is expected to be 7.5 billion liras ( $2.9 billion) with job training opportunities for employees and tax relief for employers in order to stimulate investments. Although Prime Minister Ahmet Davutogluhighlighted that the government is not following an election-oriented policy, timing of the package indicates the efforts made by the government for the improvement of economy while the election gets closer. Davutoglu also added that the new plan would not increase the burden on economy as it creates employment and will cause increase in tax income. In his speech, Prime Minister stated that economic crisis in Europe brought out the fact that the higher the unemployment rate the greater the effects of an economic crisis would be. He underlined the necessity of creating new employment opportunities in order to avoid from an economic crisis. Government's 11-step-package foresees to hire 120,000 new employees to work in social services. However, these jobs are expected to be temporary, thus, it is arguable whether or not they would provide benefit in the long term.Some critics review government's promises as hoodwinking to voters.

Another measure mentioned in the package is tax relief for new investors. Investments rendered in 2015-2016 periods will be supported by tax reliefs. Advanced technology investments will be considered priority investments and they will be supported under the 5th zone supports. 5th zone supports normally include tax reliefs and incentives in particular sectors for particular cities such as Erzurum, Kahramanmaras, Giresun, Tunceli. Turkey is divided into 6 zones according to their development levels to prevent inequalities in investments by providing more support to the less developed zones. Investments in advanced technology will benefit from 5th zone support regardless of the city. Further, the Resource Utilization Support Fund will be increased and this will result in decreasing input expenses of industrialists. The package also encourages women to invest more. Access to financial opportunities for women entrepreneurs is facilitated with the package. With these supports, gender equality in investments and business life is tried to be maintained.

In an attempt to increase qualified employees and to encourage employers to hire more, the package introduces short term job training programs which will be supported by İŞKUR (Institution for Providing Jobs and Employees). Private sector companies that provide job training programs will deduct the training expenses from their taxes. If the trained employee is hired in the same sector, his/her social security expenses will be paid by İŞKUR for 42 months for construction sector and 30 months for other business lines.

Ahead of the parliamentary election, 11-step package of the government focuses on incentives for investments, decreasing unemployment rate and provide gender equality while supporting production. Whether these precautions would be enough to keep the country away from an economic crisis is a question for critics that can only be answered after the election. While Turkish government strongly supports the idea that economy will be improved after the election, critics claim that a potential domestic tension following the election would drag Turkey into an economic crisis.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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