Turkey followed a policy of economy based on the substitution of importation in the period before the year of 1980 and the production of the imported goods within the country was primarily aimed for meeting the domestic demand. The industrial branches that were newly founded were protected with customs tariffs and the other equivalent taxes for long terms. A comprehensive Stability Program that aimed radical changes in economy was arranged in the beginning of the years of 1980s and this program was put into effect on the date of 24th January 1980. Therefore, the strategy of industrialisation based on the substitution of importation was abandoned and a industrialisation model that attached priority to exportation was adopted. The reform policies that were executed brought forth a change of philosophy through the attachment of great significance to the market mechanisms rather than the centralised administration. As a result of the restructuring activities and developments in the capital markets, the Capital Market Law was enforced in the year of 1981. The purpose of this law is the provision of the participation of the people in an effective and extensive manner through the investment of savings in the stocks and shares. In the following year, the Capital Market Board was established with regulatory and supervisory duties in the Turkish capital market. Istanbul Stock Exchange (IMKB) that played extremely important role in the development of the Turkish economy was commissioned on the date of 3rd January 1986. The factors that provided the rapid development of IMKB exchange were the rapid increase in the investment funds due to the effect of the tax shelters enforced and the freedom of entrance into capital markets. There are still three markets that operate in IMKB exchange. These markets are the Stock Market, the Market of Debentures and Bonds, and the International Market.
Within IMKB Stock Market, there are five markets such as the National Market, Regional Market, Market of New Companies, Confined Market and the Wholesales Market. In Stock Market, the total transaction volume reached to 41.7 billion dollars by July 1999 and the daily average transaction volume excised as 302 million dollars. The foreign investors possess 55% of the shares offered to public pertaining to the companies that are transacted in IMKB markets.
Within IMKB exchange, there is an International Market in which the stocks and shares pertaining to the foreign crediting means and the foreign investment funds and partakers are directly transacted and the share certificates of the foreign companies are transacted as depository certificates.
IMKB is the periodical chairman of the Federation of European Stock Exchanges (FEAS) and the project leader of Initiative of the Southeastern Europe Cooperation. Besides several international projects, IMKB exchange has been pioneering the studies for the establishment of a common transaction platform in which the stocks and securities issued in the region may be transacted.
In order to maintain the outward orientation of economy and the industrialisation based on exportation, new arrangements have been carried out particularly in the fields of foreign exchange and foreign trade. Some policies have been developed for the pursuit of a realistic exchange rate policy for the Turkish Lira and the determination of the foreign exchange rates by the market powers. Since May 1981, the changes in the levels of domestic and foreign prices, the payment equilibrium, and the developments in the international foreign exchange markets have been taken into consideration. Therefore, the exchange rates that were arranged on a daily basis by the Central Bank have been determined by the foreign exchange markets since the month of August in 1988. Besides the foreign exchange market, the gold market was opened by the Central Bank in the month of April in 1989.
The foreign exchange regime has been liberalised on an extensive basis since the year of 1984. An extensive freedom has been implemented in the foreign exchange regime through the laws enforced about the Protection of the Turkish Currency Value and the relevant bulletins issued in this field. Therefore, the legal framework required for the convertibility of the Turkish currency was mostly established with the Law on the Protection of the Turkish Currency Value Numbered 32 that was enforced on the date of 11th August 1989. Since the date of 9th July 1992, Turkish Lira has been accepted as a foreign exchange in the free zones and all sorts of payments in these zones may be effected in the currency of Turkish Lira in return for the foreign exchange.
The principles of the foreign exchange regime that is enforced in Turkey and the innovations brought forth with this regime can be summarised under main headings as follows:
According to the freedoms granted, the inhabitants in Turkey are free to have foreign exchange on them, to purchase foreign exchange from the banks, the authorised institutions and the private financial corporations, to transfer foreign exchange to foreign countries and to open foreign exchange deposit accounts in the banks. The utilisation of the foreign exchange that the inhabitants of Turkey obtained within the scope of the invisible transactions such as contracting works, tourism, transportation, banking, selling insurance, etc. has been left to the free possession of the relevant persons. The corporations have been provided with the right to obtain credits from foreign countries under the name of operational credits in order to cover their financial requirements. The inhabitants of Turkey are free to operate trade businesses in foreign countries and issue capital for investment. Only the issuances of capital that exceed specific amounts are subjected to the permission of the Undersecretariat of the Treasury and the Board of Ministers.
The inhabitants of Turkey have been free to issue stocks and securities abroad and sell them in foreign countries.
The inhabitants of Turkey have been set free to stand as a surety and guarantor in the currency of foreign exchange in the foreign countries.
As a result of the new policies that encouraged the exportation, the industrialists have started to orientate towards the foreign markets on a gradually increasing basis. The production oriented towards foreign markets has increased the capacity consumption particularly in the industry. These developments have led to extension of the corporation scales and the initiation of new investments. Therefore, the costs have been decreased and the competitive power of Turkish economy has been increased in the world markets.
The quality has increased together with the exportation, and the packages have been improved and the technology has been developed. Furthermore, modern business principles have been started to be implemented. The foreign markets have been followed in close pursuit, and the relations with the international financial institutions have been increased and the new marketing methods and techniques have been brought to the country.
After the year of 1980, the public sector has concentrated its investments in the fields of infrastructure, housing, education, communication and transportation. The private sector has paid great attention to the investments in the sectors of housing, transportation, agriculture and tourism.
In the period of Seventh Five-Year Development Plan that was applied between the years of 1996-2000, the concentration of the public services mostly in the fields of education, health and social security was adopted. Privatisation has been considered as a means for narrowing the public sector and the orientation of the public sector to its fundamental duties. Furthermore, it has been targeted to support the activities of the private sector and to restrict the intervention in the markets.