The World Bank in Turkey, 1993-2004 Country Assistance Evaluation
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Report No. 34783 The World Bank in Turkey, 1993-2004 Country Assistance Evaluation December 20, 2005 Independent Evaluation Group Document of the World Bank Acronyms and Abbreviations APL Adaptable Program Loan ARIP Agricultural Reform Implementation Program BRSA Banking Regulation and Supervision Agency CAE Country Assistance Evaluation CAS Country Assistance Strategies CEM Country Economic Memorandum EBFs extra-budgetary funds ECA Europe and Central Asia Region EFIL Export Finance Loan ERL Economic Reform Loan ESMAP Energy Sector Management Assistance Program ESW Economic and Sector Work EU European Union FDI Foreign Direct Investment FSAL Financial Sector Adjustment Loan GDP Gross Domestic Product GNP Gross National Product IEG Independent Evaluation Group IFC International Finance Corporation IMF International Monetary Fund IEG-MIGA Multilateral Investment Guarantee Agency MoH Ministry of Health MONE Ministry of National Education NGO Non-governmental Organization ODS Ozone Depleting Substances OECD Organization for Economic Co-operation and Development OED Operations Evaluation Department * PA Poverty Assessment PEIR Public Expenditure and Institutional Review PFPSAL Programmatic Financial and Public Sector Adjustment Loan PIU Project Implementation Units SAL Structural Adjustment Loan SOE State-Owned Enterprise SRMP Social Risk Mitigation Project TCA Turkish Court of Accounts TEK Turkish Electricity Authority UNDP United Nations Development Programme UNOPS United Nations Office for Project Services WSS Water Supply and Sanitation * OED has changed its official name to Independent Evaluation Group (IEG). The new designation "IEG" will be inserted in all of IEG's publications, review forms, da- tabases and web sites in the next few weeks. Contents Evaluation Managers Vinod Thomas Director-General, PREFACE................................................................................................................... V Evaluation R. Kyle Peters SUMMARY ................................................................................................................ IX Senior Manager, IEGCR Basil Kavalsky 1. BACKGROUND ............................................................................................1 Task Manager *Note: Since Ajay Chhibber—the Director, IEG-WB—was World Bank 2. THE BANK IN TURKEY: FISCAL 1994-2004..............................................5 Country Director for Turkey during part of the period covered by the CAE, he recused himself from all The Policy Dialogue.................................................................................................5 review and supervisory functions The Bank’s Country Assistance Objectives ..........................................................7 related to it. The Lending Program............................................................................................10 The Quality of Bank Lending ................................................................................12 Knowledge Services ..............................................................................................13 Partnerships ...........................................................................................................15 Assessing Program Outcomes.............................................................................17 3. FIRST PILLAR: MACROECONOMIC STABILITY ...................................19 Improve Public Sector Financial Management....................................................19 Support Structural Reforms..................................................................................21 Reduce the Deficit of the State-Owned Enterprises.......................................................21 Reduce Agricultural Subsidies........................................................................................22 Lower the Deficit of the Pension System........................................................................22 Improve the Functioning and Financial Viability of the State Banks...............................23 Assessing First Pillar Outcomes..........................................................................24 The Bank’s Contribution to First Pillar Outcomes..............................................26 4. SECOND PILLAR: GROWTH, COMPETITIVENESS, AND PRODUCTIVITY ........................................................................................................27 Strengthen the Banking System and Deepen Financial Intermediation ...........28 Improve the Management of Infrastructure .........................................................30 Enhance Productivity ............................................................................................34 Help Transform Agriculture.............................................................................................34 Develop Institutional Support for Technology.................................................................35 Better Governance to Improve the Investment Climate .................................................36 Assessing Second Pillar Outcomes.....................................................................37 The Bank’s Contribution to Second Pillar Outcomes.........................................40 i 5. THIRD PILLAR: POVERTY REDUCTION AND SOCIAL DEVELOPMENT........................................................................................................41 Equity, Employment and Social Protection ........................................................ 41 Improving the Health of the People ..................................................................... 45 Improving Education Access and Quality........................................................... 48 Assessing Third Pillar Outcomes ........................................................................ 51 The Bank’s Contribution to Third Pillar Outcomes ............................................ 54 6. THE FOURTH PILLAR: ENVIRONMENT AND NATURAL RESOURCE MANAGEMENT.........................................................................................................55 Meeting Environmental Challenges..................................................................... 55 Disaster Management............................................................................................ 56 Assessing Fourth Pillar Outcomes & the Bank’s Contribution......................... 57 7. OVERALL ASSESSMENT, LESSONS, AND RECOMMENDATIONS.......59 Rating the Overall Outcomes ............................................................................... 59 Lessons and Recommendations.......................................................................... 61 Boxes Box 1. Perceptions of Bank Impact Differ between Bank Staff and Turkish Authorities .....................................................................................................13 Box 2. Pillar Two Outcomes: Mixed Results .............................................................39 Box 3. Changes in Turkey’s Social Indicators............................................................53 Box 4. Summary of Recommendations......................................................................64 Tables Table 1. Key Macroeconomic Indicators 1993-2003 ................................................... 2 Table 2. Country Performance Can be Measured Against 10 Objectives ................... 8 Table 3. Summary of Bank Lending to Turkey by Major CAS Objectives (in US$m) .11 Table 4. IEG Ratings of Operations Closed from FY94-04 ........................................12 Table 5. Turkey Has a Lower Percentage of Projects at Risk than Comparators ......13 Table 6. First Pillar: Macroeconomic Stability Outcomes ...........................................25 Table 7. Regulatory Frameworks Created or Enhanced During 1993-2004...............31 Table 8. Second Pillar: Growth, Competitiveness and Productivity Outcomes ..........38 Table 9. Slow GDP and Job Growth Meant a Declining Employment Rate ...............42 Table 10. Regional Differences in Health Outcomes .................................................46 Table 11. Third Pillar: Poverty Reduction and Social Development Outcomes..........52 ii Table 12. Fourth Pillar: Environment and Natural Resource Management Outcomes .................................................................................................................58 Table 13. Rating the Overall Outcomes.....................................................................59 Figures Figure 1. Bank Lending to Turkey FY94-04 ...............................................................10 Figure 2. Three Times Turkey Slipped into Financial Crisis (annual percent GDP growth, 1990-2003)....................................................................................................20 Annexes ANNEX A: THE RELATION BETWEEN THE BANK STRATEGY AND PROGRAM ................................................................................................................65 ANNEX B: STATISTICAL TABLES.........................................................................75 ANNEX C: LIST OF PEOPLE MET..........................................................................93 ANNEX D. MANAGEMENT ACTION RECORD .......................................................97 ANNEX E. SUMMARY OVERVIEW OF IEG-MIGA’S ACTIVITIES IN TURKEY ......99 ANNEX F. GUIDE TO IEG’S COUNTRY ASSISTANCE EVALUATION METHODOLOGY ....................................................................................................103 ATTACHMENT