Conference on

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Conference on Privatisation, Employment and
Employees PRIVATIZATION IN TURKEY ISSUES
REGARDING PUBLIC BALANCE, SOCIAL SECURITY AND
EMPLOYMENT Gülsüm YAZGANARIKAN 10-11 October
2002 Ataköy, Istanbul Turkey
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• OUTLINE
• THE PRIVATIZATION PROCESS IN TURKEYA BRIEF
  OUTLOOK
• EFFECT OF PRIVATIZATION ON PUBLIC BALANCE,
  MARKET EFFICIENCY AND PENSION FUNDS
• OBSTACLES TO PRIVATIZATION IN TURKEY
• CONCLUSION

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THE PRIVATIZATION PROCESS A BRIEF OUTLOOK

• Privatization implementations have started in
  1984.
• Since 1985, 219 companies have been put into the
  privatization portfolio.
• 166 companies have been completely privatized.
• Total sales since 1985 have amounted to 8 billion
  dollars.
• Out of this amount 2.7 billion dollars were
  realized in 2000.

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TARGETS OF PRIVATIZATION

• With privatization, it is aimed to reduce the
  role of the state in the market, establish a
  market mechanism based on competition, improve
  productivity and service quality and diminish the
  role of the SOEs in the economy.

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EFFECT OF PRIVATIZATION ON PUBLIC BALANCE
PUBLIC SECTOR BORROWING REQUIREMENT (Share in
GNP, )
DISTRIBUTION OF PRIVATIZATION REVENUES
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EFFECT OF PRIVATIZATION ON PUBLIC BALANCE
USES OF THE PRIVATIZATION RESOURCES (In
Percentage Of Total Expenses, )
CONSOLIDATED BUDGET REVENUES (In percentage of
total budget revenues)
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EFFECT OF PRIVATIZATION ON PENSION FUNDS
SOCIAL SECURITY SERVICES ARE PROVIDED BY THREE
DIFFERENT PUBLIC INSTITUTIONS FOR THREE DIFFERENT
EMPLOYMENT TYPES

• FUNDS (ESTABLISHED
• UNDER SSK LAW)
• BANKS
• INSURANCE
• REASSURANCE
• COMPANIES
• CHAMBERS

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EFFECT OF PRIVATIZATION ON PENSION FUNDS

• OCCUPATIONAL PENSION SCHEMES (FUNDS) IN TURKEY
• Present only in banking and insurance industries
  
• Sponsored by employers
• Cover only less than 0.5 of public employment
• SOEs in the privatization portfolio of the
  Privatization Administration do not have such
  pension schemes
• Long term liabilities and actuarial valuation of
  pension funds of the public banks, which are to
  be privatized in the coming years, should be
  evaluated accurately.

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EFFECT OF PRIVATIZATION ON MARKET EFFICIENCY

• Various surveys on analysis of privatization show
  that
• Privatization positively affected labor
  productivity and volume of output
• Privatized firm switches to a more capital
  intensive technology
• Both capital and capital labor ratio increase
• Employment decreases

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REASONS FOR THE POOR PERFORMANCE

• Lack of legal framework
• Macroeconomic conditions in and out of the
  country
• Objections coming from labor unions and
  opposition parties

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• OBSTACLES TO PRIVATIZATION WORKERS CIVIL
  SERVANTS ARE ENTITLED TO THE FOLLOWING RIGHTS AS
  A RESULT OF PRIVATISATION (LAW NO4046)
• LAID-OFF WORKERS
• Regular Severance Payments
• Job Loss Compensation
• Services provided by the Turkish Employment
  Agency in career development, vocational and
  apprenticeship training and in finding new jobs
• CIVIL SERVANTS
• Transfer to another public institution
• Receive 30 higher lump-sum payment at
  retirement if they are entitled to retirement
  according to the Turkish Pension Fund Law and if
  they accept to retire within two months

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OBSTACLES TO PRIVATIZATION
EMPLOYMENT FOLLOWING PRIVATIZATION
Privatised Company
Workers
Civil Servants
Civil servants workers
Workers
Sign a contract with new employer
State Personnel Departments Pool
Laid off
Retire
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OBSTACLES TO PRIVATIZATION PUBLIC SECTOR
PROVIDES MORE FAVOURABLE WAGES, PENSION AND OTHER
RIGHTS

• PUBLIC SECTOR EMPLOYMENT
• WORKERS
• High wages and favorable rights
• High severance payment
• High trade unionism
• Flexible working conditions
• High pension payments depending on wages
• CIVIL SERVANTS
• Better health services
• Better pension payments
• Life-time job guarantee

• PRIVATE SECTOR EMPLOYMENT
• Low wages and limited rights
• Low severance payment
• Limited trade unionism
• Low pension payments

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OBSTACLES TO PRIVATIZATION
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CONCLUSION -1

• Privatization has not been completely
  accomplished as programmed. Therefore, monetary
  impact of privatization on state owned
  enterprises, social funds and public balance in
  general were not significant.
• Being one of the main impediments, legal
  framework has been reformulated with the new laws
  and constitutional amendments.
• Employment considerations were the main issues in
  the privatization process.
• Although labor adjustment programs have
  significant impact on employment, they are not
  sufficient enough to fill the gap between
  employment conditions in public and private
  sector.
• Therefore, considering the importance of
  privatization on market efficiency, the monetary
  and non-monetary conditions of private sector
  jobs need to be improved to accelerate
  privatization in Turkey.

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CONCLUSION-2

• With the economic reform program, that was
  started at the end of 1999, it was aimed to
  reduce inflation and enhance sustainable growth
  in the economy.
• With the determined implementation of the
  program, the role of the public sector in the
  economy will be diminished.
• Various regulations have been made to enhance
  privatization of big companies such as telecom,
  sugar, tobacco and natural gas etc.
• The impact of ongoing privatizations on the
  product and labor market will be significant.
  Therefore, unemployment insurance system, various
  re-deployment projects towards dismissed workers
  after privatization, social security reform to
  improve financial positions of the social
  security institutions and introduction of
  private pension system will be important in
  lessening negative consequences of future
  privatizations.
• A sustainable macroeconomic environment together
  with structural changes towards reducing the role
  of the public sector in the economy will let
  private sector to operate in a more efficient
  environment and the gap between public and
  private sector will be lessened gradually.