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Europaudvalget 2001-02 (1. samling)
EUU Alm.del Bilag 177
Offentligt

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 13.11.2001

SEC(2001) 1756

2001

REGULAR REPORT

TURKEY’S

PROGRESS TOWARDS ACCESSION

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2001

REGULAR REPORT

TURKEY'S

PROGRESS TOWARDS ACCESSION

***********************

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Table of contents

A. Introduction.................................................................................... 6

Preface ..................................................................................................................... 6

Relations between the European Union and Turkey........................................ 8

Recent developments under the Association Agreement (including bilateral trade)............ 9

Community aid ............................................................................................................ 10

Community programmes and agencies.......................................................................... 11

Preparation of the process of the analytical examination of the acquis ............................ 11

B. Criteria for membership.............................................................13

1. Enhanced political dialogue and Political criteria ........................ 13

Introduction................................................................................................................. 13

Recent Developments.................................................................................................. 14

1.1. Democracy and the rule of law ...........................................................................15

The Parliament ............................................................................................................ 15

The executive .............................................................................................................. 16

The judicial system...................................................................................................... 16

Anti-corruption measures............................................................................................. 18

The National Security Council...................................................................................... 19

1.2. Human rights and the protection of minorities .............................................19

Civil and political rights................................................................................................ 21

Economic, social and cultural rights.............................................................................. 27

Minority rights and the protection of minorities.............................................................. 29

1.3. Cyprus......................................................................................................................30

1.4. Peaceful settlements of border disputes ..........................................................31

1.5. General evaluation ...............................................................................................31

2. Economic criteria .......................................................................... 34

2.1. Introduction ...........................................................................................................34

2.2. Economic developments ......................................................................................34

2.3. Assessment in terms of the Copenhagen criteria...........................................37

The existence of a functioning market economy ............................................................ 37

The capacity to cope with competitive pressure and market forces within the Union...... 42

2.4. General evaluation ...............................................................................................45

3. Ability to assume the obligations of membership.......................... 46

Introduction................................................................................................................. 46

3.1. The chapters of the

acquis....................................................................................47

Chapter 1: Free movement of goods....................................................................48

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Overall assessment ...................................................................................................... 49

Chapter 2: Free movement of persons ................................................................51

Overall assessment ...................................................................................................... 51

Chapter 3: Freedom to provide services.............................................................51

Overall assessment ...................................................................................................... 53

Chapter 4: Free Movement of Capital ................................................................53

Overall assessment ...................................................................................................... 54

Chapter 5: Company law.......................................................................................54

Overall Assessment ..................................................................................................... 55

Chapter 6: Competition policy..............................................................................55

Overall assessment ...................................................................................................... 56

Chapter 7: Agriculture..........................................................................................57

Overall assessment ...................................................................................................... 61

Chapter 8: Fisheries..............................................................................................62

Overall assessment ...................................................................................................... 62

Chapter 9: Transport policy .................................................................................62

Overall assessment ...................................................................................................... 63

Chapter 10: Taxation ............................................................................................64

Overall assessment ...................................................................................................... 65

Chapter 11: Economic and monetary union.......................................................65

Overall assessment ...................................................................................................... 66

Chapter 12: Statistics ............................................................................................66

Overall assessment ...................................................................................................... 66

Chapter 13: Social policy and employment ........................................................67

Overall assessment ...................................................................................................... 68

Chapter 14: Energy................................................................................................70

Overall assessment ...................................................................................................... 70

Chapter 15: Industrial policy...............................................................................71

Overall assessment ...................................................................................................... 72

Chapter 16: Small and Medium-sized Enterprises ..........................................73

Overall assessment ...................................................................................................... 73

Chapter 17: Science and research......................................................................73

Overall assessment ...................................................................................................... 74

Chapter 18: Education and Training..................................................................74

Overall assessment ...................................................................................................... 74

Chapter 19: Telecommunications and information technologies...................75

Overall assessment ...................................................................................................... 75

Chapter 20: Culture and audio-visual policy.....................................................76

Overall assessment ...................................................................................................... 77

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Chapter 21: Regional policy and co-ordination of structural instruments...77

Overall assessment ...................................................................................................... 78

Chapter 22: Environment......................................................................................78

Overall assessment ...................................................................................................... 79

Chapter 23 Consumers and health protection ...................................................81

Overall assessment ...................................................................................................... 81

Chapter 24: Co- operation in the field of Justice and Home Affairs .............81

Overall assessment ...................................................................................................... 84

Chapter 25: Customs union ..................................................................................86

Overall assessment ...................................................................................................... 87

Chapter 26: External relations ............................................................................88

Overall assessment ...................................................................................................... 88

Chapter 27: Common Security and Foreign Policy...........................................89

Overall Assessment ..................................................................................................... 90

Chapter 28: Financial control .............................................................................90

Overall assessment ...................................................................................................... 90

Chapter 29: Financial and budgetary provisions .............................................92

Overall assessment ...................................................................................................... 92

3.2. General evaluation ...............................................................................................93

C. Conclusion....................................................................................96

D. Accession Partnership and National Programme for the

Adoption of the Acquis: Global assessment ..........................100

1. Accession Partnership ................................................................. 100

2. National Programme for the Adoption of the Acquis ................. 103

Annexes.............................................................................................105

Human Rights Conventions ratified by the Candidate Countries, 30

September 2001............................................................................................106

Statistical data......................................................................................................107

Report on progress in preparing the process of analytical examination of the

acquis with Turkey .......................................................................................114

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A. Introduction

Preface

The European Council in Cardiff in June 1998 noted that the Commission would present a

report on Turkey based on Article 28 of the EC-Turkey Association Agreement and the

conclusions of the Luxembourg European Council.

The Commission presented its first Regular Report on Turkey in October 1998, together with

the Regular Reports for the other candidate countries, with a view to the Vienna European

Council; a second report was adopted in October 1999, with a view to the Helsinki European

Council.

The Helsinki European Council concluded that "Turkey is a candidate State destined to join the

Union on the basis of the same criteria as applied to the other candidate States. Building on the

existing European Strategy, Turkey, like other candidate States, will benefit from a pre-

accession strategy to stimulate and support its reforms."

As part of the pre-accession strategy, the Commission reports regularly to the European

Council on progress made by each of the candidate countries in preparing for membership. The

first fully-fledged Regular Report for Turkey was presented to the Nice European Council of

December 2000.

The Commission has prepared this Regular Report with a view to the Laeken European Council

in December 2001.

The structure followed for this Regular Report is based on that used for the 2000 Regular

Report. In line with previous Regular Reports, the present Report:

describes the relations between Turkey and the Union, in particular in the framework of the

EC-Turkey Association Agreement;

analyses the situation in respect of the political criteria set by the 1993 Copenhagen

European Council (democracy, rule of law, human rights, protection of minorities) and in

respect of the Enhanced Political Dialogue undertaken pursuant to the conclusions of the

1999 Helsinki European Council;

assesses Turkey's situation and prospects in respect of the economic criteria defined by the

Copenhagen European Council (a functioning market economy and the capacity to cope

with competitive pressures and market forces within the Union);

addresses the question of Turkey’s capacity to assume the obligations of membership, that

is, the

acquis

as expressed in the Treaties, the secondary legislation, and the policies of the

Union. It encompasses not only the alignment of legislation, but also the development of the

judicial and administrative capacity necessary to implement and enforce the

acquis,

emphasised by the Madrid European Council in December 1995, and confirmed by the

Gothenburg European Council in June 2001. At Madrid, the European Council underlined

the necessity for the candidate countries to adjust their administrative structures, so as to

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create the conditions for the harmonious integration of those States. The Gothenburg

European Council emphasised the vital importance of the candidate countries’ capacity to

effectively implement and enforce the

acquis,

and added that this required important efforts

by the candidates in strengthening and reforming their administrative and judicial structures.

This Report takes into consideration progress since the 2000 Regular Report. It covers the

period until 30 September 2001. In some particular cases, however, measures taken after that

date are mentioned. This Report looks at whether intended reforms referred to in the 2000

Regular Report have been carried out and examines new initiatives. In addition, it provides an

overall assessment of the situation for each of the aspects under consideration, setting out the

main steps which remain to be taken by Turkey in preparing for accession.

In accordance with this approach, the assessment of progress in meeting the political and acquis

criteria (including Turkey's administrative capacity to implement the

acquis)

focuses on what

has been accomplished since the last Regular Report, complemented with a view of the overall

situation for each of the aspects discussed. The economic assessment provides, besides an

assessment of progress made over the reference period, a dynamic, forward-looking evaluation

of Turkey's economic performance.

The Report contains a separate section examining the extent to which Turkey has addressed the

Accession Partnership priorities. In assessing Turkey’s progress on fulfilling the short-term

priorities of the Accession Partnership, account is taken of the fact that this was adopted by the

Council on 8 March 2001.

As is the case in previous Reports, “progress” has been measured on the basis of decisions

actually taken, legislation actually adopted, international conventions actually ratified (with due

attention being given to implementation), and measures actually implemented. As a matter of

principle, legislation or measures, which are in various stages of either preparation or

parliamentary approval, have not been taken into account. This approach ensures equal

treatment for all the candidate countries and permits an objective assessment of each country in

terms of its concrete progress in preparing for accession.

The Report draws on numerous sources of information. The candidate countries have been

invited to provide information on progress made in preparations for membership since the

publication of the last Regular Report. The National Programmes for the Adoption of the

Acquis of each of the candidate countries, as well as the information they have provided in the

framework of the Association Agreement and in the context of the process of preparation of the

analytical examination of the

acquis,

have served as additional sources. Council deliberations

and European Parliament reports and resolutions

have been taken into account in the

preparations. The Commission has also drawn on assessments made by various international

organisations and in particular the contributions of the Council of Europe, the OSCE and the

International Financial Institutions, as well as that of non-governmental organisations. However,

it has become clear that, in a number of areas of the Community acquis, information has to be

broadened and deepened in order to complete the assessments made. It is mainly through the

work of the subcommittees that this additional information could be obtained.

For the European Parliament the

rapporteur

is Mr Lamassoure.

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Relations between the European Union and Turkey

The Gothenburg European Council of 15 and 16 June 2001 concluded that “the decisions in

Helsinki have brought Turkey closer to the EU and opened up new prospects for her European

aspirations. Good progress has been made in implementing the pre-accession strategy for

Turkey, including an enhanced political dialogue.”

During recent months, EU-Turkey relations have gained further momentum. Turkey is now fully

involved in the pre-accession strategy on the same basis as all candidate countries. This strategy

has stimulated the reform process in Turkey.

The implementation of the pre-accession strategy for Turkey is now well under way:

The Accession Partnership (AP) was formally adopted by the Council on 8 March 2001.

Its purpose is to set out in a single framework the priority areas for further work, identified

in the Commission's 2000 Regular Report, the financial means available to help Turkey

implement these priorities and the conditions applying to that assistance. The Accession

Partnership priorities are to be reflected in Turkey's National Programme for the Adoption

of the Acquis (NPAA), which sets out the policy framework, the schedule for adopting new

legislation, policies and practices, and the administrative and budgetary requirements

needed for Turkey to adopt the Community acquis.

The Turkish government adopted its National Programme for the Adoption of the Acquis

(NPAA) on 19 March 2001. The programme provides a wide-ranging agenda of political

and economic reform. At the same time, a government decree was adopted on the

implementation, co-ordination and monitoring of the NPAA. The Gothenburg European

Council of 15 and 16 June 2001 regarded the National Programme as a “welcome

development” and “urged Turkey at the same time to take concrete measures to implement

the priorities of the Accession Partnership, which is the cornerstone of the pre-accession

strategy.”

Enhanced political dialogue continued under the French, Swedish and Belgian Presidencies

with political directors’ Troika meetings in Ankara and Stockholm, two meetings of Political

Directors in Brussels, and political dialogue as part of the EC-Turkey Association Council

in Luxembourg on 26 June 2001. These meetings covered key issues for EU-Turkey

relations such as human rights, Cyprus, the peaceful settlement of border disputes,

European Security and Defence Policy and wider issues such as the fight against terrorism,

the situation in the Caucasus, the Middle East and the Balkans.

Eight subcommittees of the Association Committee began the process of the preparation of

the analytical examination of the acquis in two rounds, in the period June 2000 to July 2001.

This has involved more than 500 officials on both sides from a wide range of Commission

departments, ministries and public agencies. As requested by the Feira European Council, a

report to the Council on this exercise is attached and recommendations are made in the

Enlargement Strategy Paper.

On 26 February 2001, the Council adopted a regulation, which provides for the co-

ordination of EC pre-accession financial assistance to Turkey.

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A regulation was proposed by the Commission in April 2001 to simplify procedures and to

ensure that financial assistance focuses on pre-accession priorities. This Regulation is in the

process of being adopted. The proposed regulation recalls that: “in the financial

perspective 2000 – 2006, the pre-accession financial assistance was doubled for the

candidate countries; in the light of the Helsinki European Council, subject to the normal

budgetary procedures the aim should be that this principle be applied for Turkey and

continue to apply during the remaining period of the current financial perspective”.

In 2000, a total of €209 million grant assistance was committed. In the same year, ECHO

provided a further €30 million for emergency assistance.

EIB loans to Turkey under the New Mediterranean Policy totalled €545 million between

1992 and 1999. In the year 2000, €575 million was provided by the EIB for various

projects in Turkey. In all, Turkey is eligible for five different EIB-loan facilities.

Experts from Turkey participated in seminars organised by TAIEX for all candidate

countries. Turkish experts have attended over 30 multi-country workshops. A multi-

country TAIEX seminar (on chemicals) was held for the first time in Turkey. Istanbul has

been designated as a centre for multi-country seminars. TAIEX is now preparing single

country events for Turkey.

Preparations for Turkey’s participation in Community programmes and agencies went

ahead. The Council decided on 5 June 2001 to authorise the Commission to negotiate with

Turkey a framework agreement, which will simplify the legal procedures to permit Turkey’s

participation in individual Community programmes. A draft framework agreement was

transmitted by the Commission to the other institutions in August 2001. The agreement is in

the process of being adopted. Some activities under the Socrates programme should

therefore start on a pilot basis in 2002.

The latest round of negotiations for the extension of the EC-Turkey Customs Union to

services, and the mutual opening of procurements markets, took place in October 2001.

The Customs Union currently covers trade in industrial goods and processed agricultural

products.

Recent developments under the Association Agreement (including bilateral

trade)

The EC-Turkey Association Council met in Luxembourg on 26 June and reviewed Turkey's

progress under the pre-accession strategy as well as priorities for future work. The human rights

situation in Turkey, the Cyprus question and the peaceful settlement of border disputes were

discussed as part of the enhanced political dialogue.

The Joint Parliamentary Committee met in Antalya on 21-22 November 2000 and in Brussels

on 26-27 June 2001. Discussions focussed on the Turkish NPAA, the constitutional reforms,

the new economic plan as well as political issues including Cyprus, the European Security and

Defence Policy, the dissolution of the Fazilet (Virtue) party, the situation in Turkish prisons and

human rights. Financial co-operation, visa requirements for Turkish businessmen and the

conclusion of free-trade agreements with third countries in the context of the EC-Turkey

Customs Union were also among the topics discussed.

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A meeting of the EU-Turkey Joint Consultative Committee under the Economic and Social

Committee took place on 19 April in Ankara. The Committee wished to see greater priority

given to the adoption of legislation guaranteeing stronger trade union rights. The importance of

social dialogue in the reform process was underlined. A report on the liberalisation of services

was adopted.

The Customs Union Joint Committee met twice in Brussels. It confirmed the need to maintain

momentum in the implementation of the Customs Union. The functioning of the Customs Union

and a number of trade issues were discussed.

The Customs Co-operation Committee met several times to discuss the practical

implementation of the Customs Union. The Court of First Instance issued a ruling on the import

of TV sets from Turkey. The Court asked both the Commission and Turkey to ensure the

correct implementation of mutual contractual obligations under the Association Agreement and

related decisions.

A number of crucial transitional arrangements under the Customs Union expired on 31

December 2000. There is thus an urgent need for Turkey to remove technical barriers to trade,

to adopt competition implementing rules, to enforce the implementation of intellectual property

rights and to adjust state monopolies of a commercial character to ensure non-discrimination in

market access between EU and Turkish operators.

In general, manufactured goods circulate freely within the Customs Union. Some trade issues,

however, remain outstanding. Access for alcoholic beverages to the Turkish market is restricted

and there are burdensome administrative procedures and testing requirements for certain EC

products (e.g. cosmetics, ceramics, tiles, spare parts and textiles).

In the agriculture sector, the Commission has started to consult Turkey informally on a package

to compensate the EC for its current ban on imports of live bovine animals and beef from the

Community. A licensing system for the exports of Turkish hazelnuts to the EC has been

established.

A regular informal consultation mechanism on areas of relevance for the Customs Union has

been established. The Commission has also provided for Turkey's participation in technical

committees in line with established policy for candidate countries.

Trade volumes between the EC and Turkey have increased steadily. The recent economic

situation in Turkey has led to a fall in the Turkish trade deficit.

Community aid

In anticipation of the adoption of the new Regulation to bring the management of financial

assistance into line with practice in other candidate countries, the Commission asked the Turkish

Government to create new management structures for EC financial assistance. On 18 July 2001

the Turkish Government adopted on 18 July 2001 a circular entrusting the tasks of National Aid

Co-ordinator to the Minister of State and Deputy Prime Minister responsible for EU Affairs and

that of National Authorising Officer to the Minister of State responsible for the Economy . The

National Fund will be established and directed by the Under-secretariat of the Treasury, and

the Central Financing and Contracting Unit (CFCU) will be under the responsibility of the Prime

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Minister's office. Training programmes for staff are being developed. The EC representation in

Ankara is also being reinforced for the implementation of a devolved approach in the

Community's financial assistance. As regards the programming of aid, 2001 has been a

transition year for bringing assistance into line with the Accession Partnership and National

Programme priorities. This should be fully achieved by 2002. Equally, in future, the twinning

mechanism, providing public officials from Member States as “accession advisors”, will be

available to Turkey in this context.

As already indicated above regarding loan finance, Turkey will continue to receive a significant

allocation from the new EIB mandate for the Mediterranean countries (the EuroMed II Lending

Mandate). This amounts to a total of € 6.425 billion for the period January 2000-January 2007.

Moreover, Turkey was accepted by the EIB as eligible to benefit from the EIB pre-accession

facility, which amounts in total to €8.5 billion for the 13 candidate countries. The EIB also

approved the Special Action Mandate for Turkey (€450m) and the Turkey Earthquake

Reconstruction and Rehabilitation Assistance Facility (TERRA: €600m) is also available. The

EIB has also adopted a new “Mediterranean Partnership Facility” of €1billion, covering the

region, from which Turkey may also benefit.

Community programmes and agencies

Turkey currently participates in the LIFE III programme and in the Fifth Framework

Programme for Research and Development (on a project-by-project basis). Turkey intends to

start participating soon in the Multi-annual programme on Enterprise and Enterpreneurship and

European Digital Content programmes. It has also requested participation in other programmes,

e.g., in health and culture, and wishes to be fully associated with the future Framework

Programme (6

framework programme) for Research and Development.

Negotiations for Turkey’s participation in the European Environment Agency and in the

European Information and Observation Network (EIONET) have been concluded. Turkey will

become a member following its completion of the ratification process. Turkey has shown an

interest in participating in the European Monitoring Centre on Drugs and Drug Addiction in

Lisbon

(see also under Chapter 24 - Co-operation in the field of Justice and Home

Affairs).

In order to streamline Community legal procedures and thereby facilitate future participation of

Turkey in Community programmes, an Agreement is in the process of being concluded between

the European Community and Turkey establishing the general principles for such participation.

The Commission has asked Turkey to set up a National Agency to manage the education and

training programmes in which it intends to participate

(see also under Chapter 18 - Education

and training).

Preparation of the process of the analytical examination of the acquis

Subcommittees under the Association Committee have been preparing the process of the

analytical examination of the acquis. Two rounds of meetings took place, starting in June 2000

and ending in July 2001.

These meetings allowed for exchanges of views on the policy objectives and legislation of the

EU and Turkey. Turkey gained greater awareness of the acquis and the steps it needs to take to

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transpose implement and enforce it. In many cases, studies have started and new legislation or

amendments to legislation are under preparation. A favourable climate was established, which

should lead to further dialogue between EU and Turkish experts, in particular on the drafting of

legislation.

While these meetings proved useful, certain improvements in format and content to make the

process more effective and intensive have been discussed between the Commission and Turkish

officials at a senior level. In line with the conclusions of the Feira European Council, the

Commission has prepared a report to the Council on the results of this work. It is attached to

this Report Recommendations as to ways and means to intensify the process and make it more

productive are included in the Enlargement Strategy Paper.

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B. Criteria for membership

1. Enhanced political dialogue and Political criteria

Introduction

The political criteria for accession to be met by the candidate countries, as laid down by the

Copenhagen European Council in June 1993, stipulate that these countries must have achieved

"stability of institutions guaranteeing democracy, the rule of law, human rights and respect for

and protection of minorities"

In the last Regular Report 2000 on Turkey’s progress towards accession, the Commission

concluded that:

“A positive development since the last regular report is the launching in Turkish society of a

wide-ranging debate on the political reforms necessary for accession to the EU. Two important

initiatives have been taken in this context: the signing of several international human rights

instruments and the recent endorsement by the government of the work of the Supreme Board

of Co-ordination for Human Rights. However, compared to last year, the situation on the

ground has hardly improved and Turkey still does not meet the Copenhagen political criteria.”

“The basic features of a democratic system exist but Turkey is slow in implementing the

institutional reforms needed to guarantee democracy and the rule of law. Changes in the

executive have taken place with respect to EU-Turkey relations but a number of basic

institutional issues, such as civilian control over the military, remain to be addressed. With

regard to the judiciary, the new procedure facilitating the prosecution of civil servants is an

encouraging development. The important draft laws related to the functioning of the judiciary

referred to in last year’s regular report are still pending. No further improvement has taken

place concerning the State Security Courts since the last reform of these Courts in June 1999.

Corruption remains a matter of concern.”

“The death penalty is not being carried out, including in the case of Abdullah Öcalan, but many

aspects of the overall human rights situation remain worrying. Torture and ill treatment are far

from being eradicated, even though the matter is taken seriously by the authorities and the

Parliament and training programmes on human rights are being implemented. Turkey has

embarked on a substantial reform of its prison system, including the establishment of F-Type

prisons. Freedom of expression as well as freedom of association and assembly are still

regularly restricted. A positive approach seems to be adopted towards non-Muslim

communities with regard to freedom of religion, but this should be developed for all religious

communities, including non-Sunni Muslims.”

“Compared to last year, the economic, social and cultural rights situation has not improved,

particularly when it comes to the enjoyment of cultural rights for all Turks irrespective of ethnic

origin. The situation in the Southeast, where the population is predominantly Kurdish, has not

substantially changed.”

"These principles have been emphasised in the Charter of Fundamental Rights of the European Union, that was

proclaimed at the Nice European Council in December 2000."

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The section below provides an assessment of developments since the last Regular Report, as

well as the overall situation in the country, seen from the perspective of the political Copenhagen

criteria, including the overall functioning of the country’s executive and its judicial system.

Developments in this context are linked to Turkey's ability to implement the

acquis,

in particular

in the domain of justice and home affairs. Specific information on the development of Turkey's

ability to implement the

acquis

in the field of justice and home affairs can be found in the

relevant section (Chapter

24 – Co-operation in the field of justice and home affairs)

of part

B.3.1.

of this Report.

Recent Developments

Important political reforms were announced in the NPAA and incorporated in constitutional

amendments. Attention has now turned to the effective implementation of these changes.

Turkey experienced serious financial and economic crises in November 2000 and February

2001, leading to severe hardship for many Turkish citizens. These crises posed major

challenges to the Government, which has sought to restore confidence at home and abroad. A

new State Minister for the Economy, Mr Kemal Dervis, was given responsibility for co-

ordinating economic policy and on 2 March 2001 the Government adopted a major package of

financial and economic reforms. Financial support was provided by the IMF and the World

Bank and a substantial number of laws, implementing aspects of the new economic plan, were

adopted swiftly in the second quarter of 2001. These reforms are intended to overcome the

crisis, and to help meet the economic criteria for EU membership.

Constitutional reform was set in motion after the adoption of the NPAA, building on the work

of the Parliament's Conciliation Committee and on the basis of a strong cross-party consensus.

The package of thirty-four amendments to the 1982 Constitution was adopted on 3 October

2001, introducing new provisions on issues such as freedom of thought and expression, the

prevention of torture, the strengthening of civilian authority, freedom of association, and gender

equality. Several amendments are related to the Copenhagen political criteria, the Accession

Partnership and the NPAA.

The Turkish Government is finalising new draft legislation to give effect to some of the

constitutional amendments. An initial analysis of these reforms and their implications is given in

this report.

Prison reform, which is discussed below under civil and political rights, has also been a

prominent issue during the reporting period, following the violent events in prisons in December

and the continuation of the hunger strike that led to some 40 deaths.

At political level, the banning by the Constitutional Court of the Fazilet party in June, highlighted

problems of freedom of expression and association, and led to changes in the party formations.

Despite several Ministerial changes, the coalition government has held together and reached

agreement on economic and political reforms.

The Turkish government expressed support for the efforts of the United Nations Secretary

General to achieve a comprehensive settlement of the Cyprus problem. But these expressions of

support have not yet led to advance the process. Indeed, the Government expressed

understanding and support for the decision of the leader of the Turkish Cypriot community to

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withdraw from the proximity talks which were underway last year and to refuse an invitation

from the United Nations Secretary General to participate in talks in New York in September

2001.

Turkey’s involvement in decisions regarding the European Security and Defence policy

remained an unresolved issue. Currently, the EU is taking further steps to make the ESDP

operational. Various meetings took place between the EU and 6 non-EU European NATO

members (including Turkey), as well as in the EU-NATO context, on questions concerning the

nature and functions of EU-led operations using NATO assets and capabilities. Turkey should

be more forthcoming in solving the issue of the modalities for participating in decisions on EU-

led operations.

Relations between Turkey and Greece have continued to develop, with several meetings

between representatives of the two countries in which a number of joint initiatives were decided.

Turkey lent full support to the fight against terrorism following the attacks in the United States of

America of 11 September 2001 and the authorities have agreed to make military capabilities

available. It was among the first candidate countries to endorse the conclusions of the

Extraordinary European Council of 21 September 2001.

1.1.

Democracy and the rule of law

The Parliament

On 3 October 2001, the Turkish Parliament adopted a package of 34 constitutional

amendments, drawn up by its Conciliation Committee. Several of the amendments are intended

to prepare the ground to meet some of Turkey’s Accession Partnership priorities and are

evaluated under the appropriate headings below. The Parliament worked swiftly and effectively,

and there was broad cross party support for most of the amendments. However, at the end of

the process, the rejection of a draft amendment limiting parliamentary immunity was the subject

of public criticism.

Earlier, in spring 2001, the Turkish Parliament acted rapidly to adopt a series of new laws,

notably in response to the economic and financial crises. These laws introduced reforms

required by Turkey’s emergency economic programme and called for by the NPAA.

In all, 117 new laws were adopted between October 2000 and June 2001. During the same

session, Parliament simplified its internal procedures and discussed the establishment of a

Parliamentary Committee for EU integration.

On 22 June 2001, the Constitutional Court ordered the dissolution of the Fazilet (Virtue) party -

the major opposition party - on the grounds of anti-secular activities. This led to the creation of

two new political parties - Saadet (Felicity) and the AK Partisi (Justice and Development). At

the beginning of the new parliamentary session, in October 2001, 6 parties were represented in

the Turkish Parliament.

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The executive

The current three party coalition government has been in office for more than 2 years. It has

overcome a number of votes of no confidence and internal tensions.

The President of the Republic exercised his right of veto with respect to four laws and two

decrees notably on the grounds that they were not compatible with the Constitution. A

constitutional amendment has modified this right, in such a way that in future the President can

also veto parts of laws.

The General Secretariat for EU Affairs has been placed under the responsibility of Minister of

State and Deputy Prime Minister Mesut Yilmaz and has been operational for a year. By a

decree of 19 March 2001, the EU Secretariat was entrusted with the implementation, co-

ordination and monitoring of Turkey's NPAA. According to this decree, public administration

and agencies are required to make administrative arrangements to carry out their responsibilities

under the NPAA. They also have to incorporate the EU dimension in their decision making

process. Nine inter-ministerial subcommittees have been established to co-ordinate the

transposition and implementation of EU legislation. Some ministries have been restructured to

carry out tasks related to the EU pre-accession process. For example, the Ministry of Justice

was reorganised by a law of 15 May 2001.

During the reporting period, there has been little sign of increased civilian control over the

military (see also under National Security Council).

The judicial system

A number of changes have taken place in the judicial system:

- A law was adopted on 15 May 2001, which established criminal enforcement judges as a

new judicial function. These judges will be responsible for reviewing complaints by prisoners

concerning their rights. Arrangements have been made to appoint 140 such judges to form

part of criminal courts across the country

- 12 sections in the judiciary specialising in intellectual property rights issues were set up (Law

adopted on 26 March 2001)

- Judicial sections dealing with consumer protection were created in courts in Ankara, Izmir

and Istanbul (Law of 25 December 2000).

Constitutional and legal amendments adopted in 1999 regarding the restructuring of

State

Security Courts

have entered into force.

As a result of these amendments, all members of the State Security Courts are now appointed

from the civil judiciary. However, there are still several problems to be tackled to ensure fair

trial in the State Security Courts, for example with respect to access to lawyers, as well as the

competence of these courts

vis-à-vis

civilians.

As to the

military courts,

over the last year, 22 cases involving 38 civilians have been dealt

with by military courts in relation to the charges of abuse of the right to freedom of expression.

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As regards the

juvenile courts,

there is still a problem with their structure and remit of these

courts. They are too limited in number, resulting in a backlog and long duration of court cases.

An important new project has, however, been launched to move ahead with revising legal

provisions and sanctions applicable to young offenders.

There is continuing concern regarding the extent of the

independence of the judiciary

practice. Pressures were exerted on judges and prosecutors, particularly in connection with

prosecutions of state officials, for instance in relation to corruption cases. The fact that the

Supreme Board of Judges and Prosecutors, in charge of appointments and postings, is chaired

by the Minister of Justice, puts into question the separation of powers between judiciary and

executive.

Internal consultations are underway on a draft reform of the Penal Code and the Code of

criminal procedure.

As regards judgements of the European Court of Human Rights, measures need to be

incorporated into Turkey's legislation to make reparation for the consequences of convictions

that have been found contrary to the European Convention on Human Rights (ECHR). This was

stressed in Interim Resolution (2001) 106 adopted by the Council of Europe's Committee of

Ministers on 23 July 2001. There is still no possibility under the Code of Criminal Procedure to

reopen impugned proceedings or to take any other action to redress violations of the

Convention. Other measures are required to ensure the restoration of civil and political rights,

where those rights have been restricted as a result of a conviction, the reopening of proceedings

and the clearing of criminal records. The ruling of the European Court on Human Rights of 17

July 2001

highlights the issue of how the absence of a fair trial can be compensated. The

Constitutional amendments to Article 36 makes explicit the right to a fair trial and paves the way

for the necessary legislative changes in the Codes on Criminal, Legal and Administrative

corruption. There also remains the problem of direct effect of ECHR judgements (the

Constitutional reform package did not tackle any of these issues).

The implementation of the 1998 law on the increase of legal interest rates for delayed

compensation in cases involving public expropriations is a positive development. This issue has

been the focus of several judgements of the European Court of Human Rights on 18 September

2001. This law is designed to peg interest rates to inflation. Other important measures need to

be taken to speed up Turkey's compliance with the judgements of the European Court of

Human Rights.

On the functioning of the judiciary, numerous courses to train judges, prosecutors and judicial

staff have been held. Training includes EC law and human rights, language courses, European

affairs as well as seminars focusing on international co-operation and forensic medicine. At

present most training courses are prepared by the Centre for Education and Training of Judges

and Prosecutors, but there have been several other initiatives, including, for instance, a Greek-

Turkish co-operation initiative to train judges in EC law. Sixteen members of the Turkish

Constitutional Court visited the European Court of Human Rights in September 2001.

In summary, a range of initiatives, some reported in previous Regular Reports, have started to

reform the judicial system and increase its efficiency. The judiciary has been given a role in

Case Sadak and Others versus Turkey of 17 July 2001.

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Turkey’s prison reform through the creation of the function of a criminal enforcement judge.

There is still a need to guarantee the independence of the judiciary from the executive, to further

reform the system of state security and military courts and to introduce the possibility of

reparations for violations of the European Convention of Human Rights. A number of initiatives

have been taken to increase the awareness of judicial personnel and of law enforcement officers

on human rights issues, but it is too early to assess the practical impact of these.

Anti-corruption measures

President Sezer has stated that corruption is one of the most serious problems affecting Turkey

and has given his support to the fight against corruption.

Several anti-corruption measures are included in the Turkish Government's economic

programme of April 2001. Their aim is:

- to ensure transparency and accountability in resource allocation in the public sector;

- to prevent politically motivated interventions in the management of the economy;

- to strengthen good governance and the fight against corruption.

Initiatives are being taken to reinforce the independence of state owned banks, to bring public

procurement rules into line with the acquis, and to ensure that the energy market is liberalised in

transparent conditions. A number of high-level corruption investigations have started, notably in

the energy, public works, housing, and banking sectors.

The Government has now set up a high level steering committee on corruption to develop a

comprehensive strategy. An action plan was discussed at the World Bank sponsored

conference on 21 September 2001.

With the support of the Ministry of Internal Affairs, a nation-wide survey to assess the extent of

corruption in Turkey was carried out by an independent institute (TESEV). Some of the

identified factors that contribute to corruption are the lack of a properly enforced regime of

sanctions, a cumbersome bureaucracy and a widespread acceptance of corrupt practices.

Moreover, the World Bank report mentioned that corrupt practices in the bureaucracy are a

major hindrance to foreign direct investment. The report also drew attention to the existing

practice of asking donations to political parties in the context of public procurement.

In June 2001, Parliament amended the law concerning public prosecution of civil servants in

corruption cases. Under this law, the public prosecutor would have to ask permission from the

relevant authority to start proceedings related to corruption charges. President Sezer vetoed this

law on the grounds that it would have increased the immunity of civil servants in corruption

cases. The Parliament rejected the constitutional amendment limiting parliamentary immunity in

such cases.

On 27 September 2001, Turkey signed the Council of Europe Convention on Laundering,

Search, Seizure and Confiscation of the Proceeds from Crime as well as the Council of Europe

Civil Law and the Criminal Law Conventions on Corruption. Turkey is also participating in the

monitoring of anti-corruption measures effected by the OECD Working Group on Bribery in

international commercial transactions.

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The National Security Council

As part of the constitutional reform package, the provision of Article 118 concerning the role

and the composition of the National Security Council has been amended. The number of civilian

members of the NSC has been increased from five to nine while the number of the military

representatives remains at five. In addition, the new text puts emphasis on the advisory nature of

this body, stressing that its role is limited to recommendations. The Government is now required

to “evaluate” them instead of giving them "priority consideration". The extent to which the

constitutional amendment will enhance de facto civilian control over the military will need to be

monitored.

Since the last Regular Report, the National Security Council has given its opinion on a number

of governmental issues and policies including the NPAA, the Cyprus issue, European Security

and Defence Policy, measures to combat anti-secularism activism, the extension of the

compulsory age limit in primary education, the state of emergency in various provinces, the

privatisation of state companies (e.g. telecoms), recent socio-economic developments and on

the constitutional reform package. The National Security Council also warned against the risk of

“social unrest”.

The Action plan for the Southeast, as devised by the National Security Council, has not been

made public, but is under implementation by the civilian authorities.

The law revising the legal framework for TV and radio (the "RTÜK" law), vetoed by President

Sezer in June 2001, provided for a representative of the National Security Council to be

appointed to the Audio-visual High Board. A revision of the law is now under preparation. It is

important that a revised version of the law meet European standards.

1.2.

Human rights and the protection of minorities

The recent constitutional amendments are a significant step towards strengthening guarantees in

the field of human rights and fundamental freedoms and limiting capital punishment.

The freedom of expression, the freedom of the press, and the freedom of association and

peaceful assembly are among the fundamental freedoms addressed by the constitutional

amendments. In Articles 13 and 14, a number of restrictions have been deleted, thus narrowing

the grounds for limiting fundamental rights and freedoms. The principle of proportionality has

been introduced: any limitation of the rights protected must be proportionate

A number of restrictions on the exercise of fundamental freedoms have remained.

Article 13 now reads:

"Fundamental

rights and freedoms may be restricted only on the basis of specific reasons listed in

the relevant articles of the Constitution without prejudice to the values defined therein and only by law. These

restrictions shall not conflict with the letter and spirit of the Constitution and the requirements of the democratic social

order and the secular republic and the principle of proportionality". Article 14 now reads "None of the rights and

freedoms embodied in the Constitution shall be exercised with the aim of violating the indivisible integrity of the State

with its territory and nation, or for activities undertaken with the aim of destroying the democratic and secular Republic

based on human rights. No provision of this Constitution shall be interpreted in a manner that grants the State or

individuals the right of destroying the fundamental rights and freedoms embodied in the Constitution, and of staging an

activity with the aim of restricting rights and freedoms more extensively than is stated in the Constitution. Sanctions

for persons undertaking activities in conflict with these provisions shall be defined by law."

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The extent to which individuals in Turkey will enjoy a real improvement in the exercise of

fundamental freedoms in practice will depend on the details of implementing legislation, and the

practical application of the law. It is encouraging that a general principle of proportionality has

been introduced and that the stated general aim of the reform is effectively to bring to the

forefront respect for human rights and the rule of law.

Proposals for legislative changes aimed at implementing a number of constitutional amendments,

in particular with respect to freedom of expression and thoughts, are being finalised by the

Government. They include proposals to change Articles 159 and 312 of the Penal Code and of

Articles 7 and 8 of the Anti- Terrorist Law.

As far as Turkey’s position with respect to various

international conventions on human

rights

is concerned, on 18 April 2001, Turkey signed Protocol 12 to the European Convention

on Human Rights (ECHR) on the general prohibition of discrimination by public authorities.

Since the last Regular Report no progress has been made in acceding to a number of other

major human rights instruments such as the UN Convention on the Elimination of All Forms of

Racial Discrimination, the Statute of the International Criminal Court, the UN International

Covenant on Civil and Political Rights, the UN International Covenant on Economic, Social and

Cultural Rights.

As to Protocol 6 to the ECHR on the abolition of the death penalty, it remains to be seen

whether, in the light of the constitutional amendment and the projected reform of the Penal

Code it will be possible for Turkey to sign and ratify it. It can also be noted that Turkey has not

signed the Council of Europe Framework Convention for the Protection of National Minorities.

Since the last Regular Report, the European Court of Human Rights found that Turkey had

violated provisions of the ECHR in 127 cases (although 43 of these are not final, as an appeal

to the Grand Chamber is possible). These cases relate to a wide range of violations to the

Convention such as freedom of expression, ill treatment by the security forces and length of

police custody. Turkey has resolved 53 of these cases through friendly settlements.

In a ruling on 10 May 2001

, the European Court of Human Rights held Turkey responsible for

breaching 14 Articles of the Convention with respect to human rights abuses in the northern part

of Cyprus. The Court also concluded that "for purposes of former Article 26 (current Article 35

§ 1) of the Convention, remedies available in the ”TRNC” may be regarded as domestic

remedies” of the respondent State and that the question of their effectiveness is to be

considered in the specific circumstances where it arises."

In a subsequent ruling of 17 July 2001

, Turkey was found responsible for violating Articles 2, 5

and 13 of the European Convention in a case related to the death of a person while in custody.

In several judgements delivered on 18 September 2001

, Turkey was held responsible of

breaching Article 1 of Protocol No. 1 to the Convention in 34 cases related to expropriation of

property. The compensations paid did not reflect the real increase in inflation between the date

of expropriation and the date of payment.

Cyprus v. Turkey N°25781/94

Bilgin v.Turkey N°25659/94

Yusuf Çelebi v.Turkey N°19667/92 followed by 33 judgements related to the same violation.

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In a third Interim Resolution (2001) 80 adopted on 26 June 2001 by the Committee of

Ministers of the Council of Europe, Turkey has been condemned for the non-execution of the

judgement of the European Court of Human Rights of 28 July 1998 in the Loizidou case.

On 28 June 2001, the Parliamentary Assembly of the Council of Europe adopted a Resolution

in which it was decided to pursue the monitoring procedure in respect of Turkey. A report on

the two visits (26-30 March 2000 and 23-26 May 2001) paid to Turkey by the “Committee on

the Honouring of Obligations and Commitments by Members States” of the Council of

Europe’s Parliamentary Assembly has been published.

With respect to the

enforcement of human rights,

Turkey has established a number of bodies

(law of 5 October 2000): the Human Rights Presidency, the High Human Rights Board, the

Human Rights Consultation Boards and the Investigation Boards. The Human Rights Presidency

is intended to monitor the implementation of legislation in the area of human rights.

The High Human Rights Board is an inter-ministerial committee responsible for making

proposals intended to promote and to strengthen human rights protection in Turkey.

The Human Rights Consultation Board is designed to serve as a permanent forum of exchange

of views between the Government and NGOs. The Investigation Boards will have the task to

conduct on the spot investigations with respect to alleged human rights abuses.

The principles for operation of these Boards have been laid down in an administrative regulation

(Official Gazette of 21 August 2001). The Government has stressed the importance of the full

functioning of these Boards and has requested that "the quarterly reports on the activities of

Boards on Human Rights, together with their opinions and proposals, should continue to be sent

regularly" to the High Board of Human Rights (Circular of the Minister responsible for Human

Rights of 26 September 2001).

Fuller information is needed to assess the impact of these bodies.

Requirements for the training of law enforcement officials on human rights have been set down

in the law on police education of 25 April 2001. Under this law, Police Academies will give

police officers training on human rights issues over a period of 2 years. In addition, several

projects have started in August 2001 in Ankara's police stations aimed at improving the

reception conditions of detainees. Official data provided by the Turkish Government indicate

that 26,780 security officers will have been trained in human rights by the end of the 2000-2001

academic year.

Civil and political rights

Despite a number of constitutional, legislative and administrative changes, the actual human

rights situation as it affects individuals in Turkey needs improvement.

The revised Article 38 of the Constitution limits the

death penalty

to cases of terrorist crimes

and to times of war or imminent threat of war. The exception for terrorist crimes is not in line

with Protocol 6 to the ECHR (which does not permit any reservations), whereas the exception

in the case of war crimes is permitted under Protocol 6. Legislative changes to the Penal Code

will be needed to put this revised Article into effect. This will permit an assessment of whether

Turkey is in a position to sign and ratify Protocol N° 6 to the ECHR.

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During the reporting period, death sentences have continued to be imposed by Courts on the

basis of the Anti-Terrorist Law. In 2000, 17 people were sentenced to capital punishment, and

10 between January and August 2001. However, the

de facto

moratorium on carrying out the

death penalty - which has applied since 1984 - has been maintained. With respect to the case

of Abdullah Öcalan, the Turkish authorities have agreed to postpone the execution of the

sentence pending the completion of the proceedings before the European Court of Human

Rights.

Regarding

torture and mistreatment,

the agreement of the Turkish Government to publish the

report of the Committee on the Prevention of Torture and Inhuman and Degrading Treatment or

Punishment (CPT) of the Council of Europe on torture and mistreatment, in January 2001, is a

welcome development.

On 24 July 2001, the Minister of the Interior issued a circular in which he clarified the duties

and obligations of law enforcement and other security officers with respect to custody, formal

arrest, detention and interrogation of suspects. The circular explicitly forbids the use of torture

and ill treatment. Inspections by public prosecutors in police and gendarmerie stations with a

view to investigating claims related to human rights abuses have recently been established. The

circular of 26 September 2001 (see

above)

also calls upon the regional authorities to intensify

efforts to prevent abuses of human rights.

Pre-trial detention provisions are to be brought further into line with ECHR standards on the

basis of the amendment of Article 19 of the Constitution, which reduces to four days the period

of police custody before bringing the person detained before a judge in cases of collective

offences. This is a positive development from the point of view of the prevention of ill treatment

of detainees and should be applied also for offences falling under the competence of the State

Security courts and in state of emergency provinces.

There are also several other procedures to be brought in line with ECHR standards, notably

automatic judicial review and medical examination as mentioned in the previous report.

In practice, the situation as regards torture and mistreatment has not improved since the last

Regular Report and still gives serious grounds for concern. Incidents of torture and ill treatment

continue to take place during police custody. A recent case was reported on the death of a 16-

year-old boy during police custody in Edremit (Urfa) in August 2001. Torture is especially

prevalent in the Southeast. Particularly in the case of the "incommunicado detention", which is

applied in particular in the 4 provinces under the state of emergency. It is also applied in cases

related to State Security Court as foreseen under the Code of Criminal Procedure and Law

establishing the State Security Courts.

Young people are apparently also affected. The Viransehir (Urfa) children who were arrested

on charges of aiding and abetting an illegal organisation, and who were according to their

lawyers subsequently

ill treated,

were eventually released following international pressure.

The number of prosecutions of officials suspected of acts of torture or ill treatment increased

compared with earlier years. Though there are still concerns that sentences are too light or too

frequently converted into fines or suspended. Moreover, the existing rule that an administrative

authorisation is required in order to prosecute public servants has remained unchanged.

According to the Turkish authorities, during the period 2000-2001, 1,472 proceedings for

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charges of ill treatment and 159 proceedings for charges of torture were opened against security

force members. As a result, 36 persons were given prison sentences while another 50 were

expelled from service.

The Parliamentary Commission on Human Rights has become less effective in its investigation

work on torture following the departure last year of Ms Sema Piskinsüt, the chair of the

Parliamentary Commission. In addition, Ms Piskinsüt has declared herself willing to renounce to

her parliamentary immunity in order to defend the non-disclosure of sources of information,

which were received by the Commission during its investigations into the occurrence of torture.

However, in a recent development, the new Chairman announced that members of the

Commission would pay surprise visits to police stations and prisons to verify whether torture

and / or ill-treatment is taking place in reality.

In autumn 2000, the Turkish Government decided to implement a

reform of the prison

system

replacing large dormitories (up to 80 prisoners in one room) with a system of small cells

shared by 1 to 3 inmates (F-type high security prisons). This led to violent demonstrations and

hunger strikes, which related not merely to improvement of prison conditions but also to other

demands. The vast majority of the prisoners involved in the strikes had been charged or

convicted under the Anti-Terrorist law. A number of extremist groups were involved in the

organisation of the hunger strikes.

The Turkish security forces intervened on 19-22 December 2000 against the hunger strikers

and protestors to carry out a forced transfer to F-type prisons. This resulted in 32 deaths. In

January 2001 the EU called for an independent investigation. The CPT produced a report in

April 2001 indicating that some of the 32 casualties might have been the result of

disproportionate use of force including the use of firearms and tear gas. The report of the

Forensic Medicine Institute on the causes of the deaths confirms the CPT findings

. It was

produced soon after the events but only later made available to the Parliament. Hunger strikes

continue and to date some 40 hunger strikers, inside and outside prisons, have died. An Istanbul

Prosecutor opened a case against 1,615 persons on duty in a prison during the operations of

December 2000. They are charged with "ill-treatment" and "miscarriage of conduct". Free

debate on these issues has been restricted.

A European Parliament ad hoc delegation visited Turkey in early June and urged Turkey to take

appropriate measures in line with the recommendations of the CPT of the Council of Europe.

On other aspects of the

prison reforms,

a number of substantial legislative measures have now

been adopted, notably:

Law amending Article 16 of the Anti-terrorist law

(5 May 2001). This amendment allows

prisoners convicted of terrorism and organised crime to participate in education, sport and other

social and cultural activities in common living areas. Open visits are permitted once a month.

Law on the Institution of the Judge of Enforcement

(16 May 2001). In total, 140

enforcement judge offices are being set up. They will be responsible for making decisions on

actions taken in respect to convicts and detainees and handling complaints regarding such

A penal court case against "Radikal", initiated by the Ministry of Justice, for publishing the report on charges of its

violation of Article 30 of the Press Law led to an acquittal.

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actions. A regulation implementing this law, and the one below, was adopted by the Minister of

Justice on 7 August 2001.

Law on the Establishment of Monitoring Boards for Punishment Enforcement

Institutions and Detention Houses

(21 June 2001). The law establishes around 133

Monitoring Boards. Their task, inter alia, is to carry out inspections and produce quarterly

reports for the Ministry of Justice and other relevant bodies, on the living and health conditions,

transfers and disciplinary measures in penal institutions.

As a step towards reducing the pressures from over-population in prisons, reference can also

be made to a Law on Conditional Release and Suspension (the so-called "Amnesty" law)

adopted on 8 December 2000. As a result of this law, approximately 30,000 people have been

released, some on condition that they would not commit a similar offence within 3 years. By 1

May 2001, there were 59,215 detainees in Turkish prisons, a decrease of 23% from the

previous year. On 18 July 2001, the Constitutional Court ruled that the scope of the “Amnesty”

law should be widened to include various other crimes, and it gave the Parliament six months to

amend this law in line with the ruling.

Changes in legislation are needed to extend the scope of

freedom of expression

so as to give

concrete content to the constitutional amendments, in particular to reflect the changes of the

preamble and of Articles 13 and 14 and also of Articles 22, 26 and 28. These latter two articles

remove the constitutional provision forbidding the use of languages prohibited by law. It is of

particular importance, taking into account the aim of the reforms, that the new formulation of the

restrictions in Articles 14 and 26 are translated into new legislation and practice in such a way

as to provide an effective guarantee for freedom of expression, including the use of languages

other than Turkish.

During the reporting period, there have been several serious problems in relation to the exercise

of freedom of expression. Both the Penal Code (notably Articles 159 concerning insults to

parliament, army, republic and judiciary and Article 312, concerning incitement to racial, ethnic

or religious enmity) and Article 7 and 8 of the anti-terrorist law (disseminating separatist

propaganda) continue to be widely used by public prosecutors and judges to restrict freedom of

expression. Recent examples of such cases include those of the

Radikal

columnist Ms. Nese

Düzel and the

Turkish Daily News

columnist Mr Burak Bekdil. Sixteen intellectuals,

prosecuted for the re-publication of articles in a book on "Freedom of Thought 2000", have

been acquitted by the Ankara Military Court, but continue to face the similar charges in other

courts.

Since 1 January 2001, some 80 journalists have been imprisoned for political activities or for

alleged infringements of various laws. Some are acquitted, such as Mr Mehmet Uzun, who had

been detained on charges of “insulting the judiciary” and “insulting the Republic”, and who was

acquitted following international pressure. However, Dr. Sikret Baskaya, charged with

dissemination of separatist propaganda, had to begin his sentence despite similar pressure. In a

recent development, on 3 October 2001 Mr Uzun's book was confiscated, and there is a new

risk of charges against him.

It has been recognised by some official sources that there are currently around 9,000 prisoners

for crimes connected to freedom of expression. A significant number of journalists, intellectuals,

writers and politicians have been detained for expressing views and opinions. Official data for

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2000 show that 261 persons have been sentenced under Articles 159 and 312 of the Penal

code and 324 under the Anti-Terrorist law. These figures in 1999 were 347 and 1,317

respectively.

As for

freedom of the press,

another amendment has been introduced. The provision that

"publication shall not be made in any language prohibited by law" has been removed (Article

28). This amendment is encouraging but for it to become fully effective legislative changes are

needed. The content of these legislative changes will be crucial for the enjoyment of this right.

As the general restrictions of Article 26 also apply to the expression and dissemination of

thought and opinions in writing and other media, it is important that the implementing legislation

and practice ensure effective protection of the freedom of the press.

As for other aspects of freedom of the press, the Ministry of Interior published a list of terms

prohibited in official documents and government owned media. A number of publishing

companies had to suspend their activities and periodicals and books have been seized. A recent

example is the decision to suspend the

IDEA Politika Journal

on 26 September 2001.

In a judgement on 14 December 2000, the Istanbul State Security Court N° 4 banned all

publishing or broadcasting of information portraying Turkey in "a state of weakness".

Newspapers and journalists have complained about this judgement that is seen as an “act of

censorship” aiming at banning, in practice, the publication of news and pictures especially in

relation to the F-type prison protests.

In the field of

broadcasting,

as mentioned above, the constitutional amendment removing the

provision that “publication shall not be made in any language prohibited by law” is encouraging,

but before it becomes fully effective in broadcasting, legislative changes are needed (see also

under cultural rights). The Turkish Parliament adopted a law in June 2001 amending the status

of the High Audio-Visual Board (RTÜK). This law, though it clarified ownership matters,

legalised retransmission, established some ethical standards, could have further limited freedom

of expression and plurality of ownership. One member of the High Board was to be nominated

by the National Security Council (NSC). At the end of June 2001, President Sezer vetoed the

law on the grounds that it was in breach of several principles of the Turkish Constitution. A

revision of the law according to European standards is now under preparation.

As indicated in the last Regular Report, implementation of the existing law remains a matter of

concern. The High Audio-Visual Board (RTÜK) continued to ban temporarily certain

Radio/TV stations. In August 2001 for instance, 10 stations received penalties for closure from

1 to 365 days mainly for unacceptable comments on current events. Moreover, on 26

September 2001, the Radio and TV High Board took a final decision to prohibit broadcasting,

in Turkish from the BBC and Deutsche Welle on the basis of Article 26 of the RTUK law

(prohibition of retransmission). The President of the Board expressed his opposition to this

decision and launched legal proceedings before an administrative tribunal. This Tribunal has

rejected this appeal and RTUK has summoned the relevant radio stations to stop

retransmission.

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With regard to

freedom of association and peaceful assembly

the amended Article 33 of

the Constitution

modifies general rules and restrictions on the right to form associations. The

impact of this can only be assessed when implementing legislation is established. Certain minor

improvements regarding the creation of NGO international linkages may result from the Civil

Code amendments currently before the Parliament.

Currently, the procedure to establish NGOs in Turkey remains cumbersome and the functioning

of NGOs is still subject to considerable state controls At present, NGOs need approval from

the Government to receive financial resources from outside Turkey. NGOs report that they are

subject to harassment and intimidation, in particular in the Southeast. On 7 September 2001,

the Turkish Human Rights Foundation branch in Diyarbakir was raided by police forces and

confidential medical information concerning the victims of torture and ill treatment were seized

by the authorities. The medical files were returned on 10 October 2001. In the mean time, two

procedures have been initiated against this NGO aimed at hindering its activities or even its

closure.

The constitutional provision on the principles to be observed by political parties has been

amended. Sanctions can be imposed upon a

political party

if "actions" committed by members

violating a number of basic principles are endorsed by the party as a whole. Instead of

permanent dissolution, the Constitutional Court may decide to bar the political party in question

partially or completely depending on the gravity of the "actions". Moreover, the amendment will

may lead to more proportionate sanctions in respect of political parties

but the grounds for

banning political parties remain unchanged (Article 68).

On 22 June 2001, after a procedure lasting 26 months, the Constitutional Court issued a ruling,

with immediate effect (although the official "reasoning" has not yet been published) ordering the

dissolution of the Fazilet Party and the confiscation of its assets for carrying out anti-secular

activities. (Fazilet, the main opposition party with 102 elected members, was the fourth Islamic-

oriented party to be banned in Turkey. Since 1983, a total of 21 political parties have been

banned by the Constitutional Court).

The recent ruling, based on Articles 68 and 69 of the Constitution, expelled two elected

members from the Parliament. These persons, and three other members of their party, were

banned from politics for a period of five years. One of these persons was prosecuted because

she attempted to take the oath while wearing a headscarf. This was viewed by the Court as an

anti-secular activity.

In a judgement delivered on 31 July 2001

the European Court of Human Rights ruled that the

dissolution of the Refah party ordered by the Turkish Constitutional Court in 1998 did not

violate the principle of freedom of association under Article 11 of the ECHR. The Court

considered that the dissolution of the Refah party “could reasonably be considered to meet a

pressing social need for the protection of democratic society”.

Specific grounds for the restrictions to this right, “national security, public order, for the prevention of crime, public

morals, public health, or for the protection of the rights and freedoms of others”, are added to the article.

The sixth paragraph of article 68 now reads :"The Constitutional Court may take the decision to deprive the party of

State funds, either partially or in full, instead of permanently dissolving the party, according to the gravity of the

actions brought before the Court".

Refah Partisi, Erbakan, Kazan and Tekdal vs. Turkey N° 41340/98

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As far as

freedom of religion

is concerned, there have been signs of increased tolerance

towards certain non-Muslim religious communities.

During the year 2000, partly in commemoration of the Christian jubilee, the Turkish authorities

sponsored several ecumenical events among major religious groups including a meeting in

Tarsus. In December, President Sezer issued a message to Turkey's minority religious groups

on the occasion of Christmas and Hanukah.

On 12 June 2001, the Prime Minister issued a circular to local authorities reaffirming the rights

of Syrian Orthodox Turkish citizens, who had emigrated, to return to their villages in regions

covered by the state of emergency and in adjacent provinces. With the support of President

Sezer, the government gave permission for the opening of another Syrian Orthodox church in

Istanbul.

Official permission is no longer required to carry out restoration of churches and other buildings

belonging to minority foundations.

However, Christian churches continue to face difficulties, in particular with respect to ownership

of property. No progress can be reported in the case of the closure since 1971 of the Orthodox

Seminary of Halki. The lack of recognition of the legal status of various churches creates a

number of constraints, including access to Turkey by ecclesiastic personnel.

No improvement in the situation of non-Sunni Muslim communities has taken place. The official

approach towards the Alevis is unchanged. Alevi concerns have not been taken up by the

Presidency of Religious Affairs. Particular Alevi complaints relate to compulsory religious

instruction in schools and school books which fail to acknowledge the Alevi identity, and the

fact that financial support is only available for the building of Sunni Muslim mosques and

religious foundations.

The question of

asylum seekers

and

trafficking in human beings

is taken up under

Chapter

24 - Co-operation in the field of justice and home affairs.

Economic, social and cultural rights

The constitutional reform package has introduced a number of amendments affecting the

constitutional guarantees for economic and social rights. The main amendments deal with:

- broadening the scope of the right to work (Article 19),

- enhanced gender equality (see below) (Articles 41 and 66),

- broadening the scope of trade union rights and freedoms: Article 51 has been amended to

extend the right to form unions to all employees not only to workers. The requirement of holding

the status of a labourer for at least ten years in order to become a union leader has also been

lifted.

- guaranteeing the right to a fair wage in light of the economic conditions (Article 55).

Regarding

children’s rights,

the Turkish Government ratified on 26 January 2001 the ILO

Convention N° 182 on the Elimination of Worst Forms of Child Labour, and on 18 January

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2001 the European Convention on the Exercise of Children’s Rights. A Child Bureau was set

up in the Directorate General for Public Security by a law adopted on 13 April 2001. This new

body is now responsible for tasks stemming from the implementation of the above-mentioned

European Convention on the Exercise of Children’s Rights. However, the situation regarding

children’s rights is not in conformity with Articles 7 and 17 of the European Social Charter

ratified by Turkey in 1989.

Regarding

trade union rights,

a law on “Trade Unions of Public Employees” entered into

force on 12 July 2001. This provides for some basic trade union rights such as the right to

organise. It does not include the right to bargain collectively or the right to strike. Certain

categories of public employees, such as police officers, judges and prosecutors, do not enjoy

trade union rights. This law could be reviewed in light of the amendment to Article 33 of the

Constitution, which broadens the right to form an association but retains restrictions “to the

extent that the duties of civil servants so require”.

An Economic and Social Council has been formally established following a law that entered into

force on 21 April 2001. However, it is only a step towards the kind of social dialogue

mechanism customary in the EU (see

also under Chapter 13 - Social policy and

employment).

As regards

cultural rights,

progress can be reported with the amendment of Articles 26 and

28 of the Constitution, in which the provision forbidding the use of languages prohibited by law

has now been abolished. This could pave the way for the use of languages other than Turkish

and is therefore a positive development. However, changes in existing restrictive legislation and

practices will be needed to provide effective protection against interference with the right to

communicate in languages other than Turkish. The RTÜK law stipulates that radio and television

broadcasts will be in Turkish, “with an exception for languages that will contribute to the

development of a universal culture and science”.

For persons belonging to groups that are outside the scope of the 1923 Lausanne Treaty

(Armenians, Greeks and Jews), the actual situation has not improved, notably in relation to

broadcasting and education. In practice, for instance, Kurdish songs and street interviews in

Kurdish are occasionally broadcast. In the field of education (basic and extended education),

no language other than Turkish is allowed for teaching purposes, except where officially

authorised by the Ministry of National Education. No amendment under the constitutional

reform provides for education in languages other than Turkish.

In the area of

gender equality,

Article 41 of the Constitution has been amended with a view to

establish the principle of equality between spouses as a basis for the family. The amended

Article 66 of the Constitution on Turkish citizenship no longer discriminates on the basis of

gender in the case of a foreign parent. A new Civil Code, which is pending before the

Parliament would remove remaining discrimination and strengthen gender equality

The question of violence against women within the family, including the so-called "honour

killings", remains an issue of concern. The legislation, which allows for the application of

reduced sentences to the perpetrators of such crimes, is still applicable.

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The Minister of Health introduced a change in the disciplinary regime for students in the health

sector. According to this amendment

, students who are found to have had sexual intercourse

or to have engaged in prostitution will be expelled from their school. The Istanbul Bar

Association initiated in September 2001 proceedings against this regulation.

Minority rights and the protection of minorities

Over and above what has been said above on cultural rights and the possible impact of the

constitutional amendments, there has been no improvement in the ability of members of ethnical

groups with a cultural identity and common traditions to express their linguistic and cultural

identity. Turkey has not signed the Council of Europe Framework Convention for the

Protection of National Minorities and does not recognise minorities other than those defined by

the 1923 Lausanne Peace Treaty.

Following repeated initiatives taken by cultural association representing the Roma or other

'gypsy' interests in Turkey, some positive developments can be reported, such as the decision

taken by the Ministry of Culture in July 2001 to confiscate and ban the selling of an official

book, published in 2000, by the same Ministry, containing degrading and offensive language in

relation to the Turkish Roma. Similarly, the Ministry of Education on 5 October 2001 issued a

circular to eliminate pejorative words used about this group in definitions in dictionaries

published by the ministry. However, the Settlement Law of 1934 is still applicable to “nomadic

gypsies”, implying that they are still among the categories of people who are not accepted in

Turkey as immigrants.

The issue of respect for cultural rights is particularly important for improving the situation in the

Southeast. The Newroz “Kurdish New Year” was celebrated there on 21 March 2001 without

major incident, and the festivities are said to have attracted over 500,000 people. However,

organised celebrations were banned in some cities elsewhere including Istanbul.

A Diyarbakir Culture and Arts Festival took place on 25-27 May, co-financed by the EC

Meda programme. Several thousand persons participated in various activities, including a

concert and a panel on multiculturalism. Several other cultural events have taken place in the

past year.

Since the last Regular Report, the state of emergency in the Southeast has been extended three

times: on 27 October 2000, on 27 March 2001 and on 29 June 2001, for 4 months periods for

the four provinces of Diyarbakir, Hakkari, Sirnak and Tunceli. The security situation is reported

to be much improved. However, the disappearance of two HADEP officials in 2001 after

visiting a police station in the area of Silopi/Sirnak have not been clarified.

The pro-Kurdish HADEP political party also frequently faces difficulties from the authorities,

including police investigations. A demonstration of HADEP to celebrate World Peace Day in

Ankara, scheduled on 1 September, was forbidden by the Turkish authorities.

Turkey has invested over the years in an economic aid and development programme, which

includes agricultural and housing projects for areas most affected by the years of violent conflict

and terrorism.

Official Gazette on 13 July 2001.

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An East and Southeast Action Plan initiated by the National Security Council, but still not been

made public has been enacted with the approval of the Prime Minister. The plan reputedly

includes 107 measures related to public administration, economy, health and education. The co-

ordination of the Plan falls under the responsibility of the State Planning Organisation and is

carried out by the relevant public institutions and organisations. As part of this plan, the "return

to village programme" consists of a resettlement scheme for those who have been displaced by

the events in the region. According to the Emergency Rule Governor, up to 26,000 people have

as of July 2001, returned to their villages. 2800 households have been officially resettled.

However, 34,000 applications for return are still pending. In several instances village guards,

armed and paid by the state to defend the evacuated or abandoned villages, have occupied the

houses of departed villagers and refuse to return them to the legitimate owners. There are

between 45,000 and 90,000 village guards in the region.

In the Sirnak area, 12 villages have been built and plans foresee the construction of 4 boarding

schools and 19 elementary schools. The returned refugees, however, question whether the

policy of building new villages, commonly referred to as "central villages", is fully to the benefit

of the people concerned.

The government reports that 10 private bank branches were opened and infrastructure projects

have increased by 14% in the region.

*****

Enhanced political dialogue continued under the French, Swedish and Belgian Presidencies with

political directors’ Troika meetings in Ankara and Stockholm, two meetings of Political

Directors in Brussels, and as part of the EC-Turkey Association Council in Luxembourg on 26

June 2001.

The Helsinki European Council conclusions state that enhanced political dialogue with Turkey

will in particular refer to the issues of human rights, the Cyprus question and efforts to resolve

any outstanding border disputes. The developments on human rights have been described in the

previous part of this report.

1.3.

Cyprus

The prospects for a settlement of the Cyprus problem under the auspices of the United Nations

are analysed in the Regular Report on Cyprus. This section is confined to the discussion of the

Cyprus question in the context of the enhanced political dialogue with Turkey, as referred to

under the heading “Relations between the EU and Turkey” above.

The Accession Partnership states that; “in accordance with the Helsinki conclusions, in the

context of the political dialogue, strongly support the UN Secretary General’s efforts to bring to

a successful conclusion the process of finding a comprehensive settlement of the Cyprus

problem, as referred in the point 9(a) of the Helsinki conclusions.

In the course of the enhanced political dialogue and at the Association Council with Turkey in

June 2001, Turkish representatives expressed their support for the Secretary General’s efforts.

But EU representatives indicated their disappointment that these expressions of support have

not been followed by concrete actions to facilitate a settlement of the Cyprus problem. In

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particular, disappointment was expressed at Ankara’s support for the decision of Mr Denktash,

the leader of the Turkish Cypriot community, to withdraw from proximity talks under UN

auspices and to decline the Secretary-General’s invitation to talks in New York in September

2001.

During the enhanced political dialogue EU representatives urged Turkey to encourage the

Turkish Cypriot leader to take advantage of the window of opportunity for reaching a

settlement before the conclusion of the accession negotiations with Cyprus. This would allow

the Turkish Cypriots to participate in EU accession negotiations, on the basis of a political

settlement, and for the results of the settlement, reflecting the concerns of the respective parties,

to be included in EU accession arrangements.

With this goal in mind, EU representatives invited Turkey to give practical support to the

resumption of the UN process without additional preconditions.

1.4.

Peaceful settlements of border disputes

Bilateral relations between Turkey and Greece have continued to improve. These positive

developments have been led by the foreign ministers of both countries and the framework of

co-operation that they put in place.

A number of confidence building measures have been adopted such as the commitment to keep

each side mutually informed about military exercises in the Aegean as well, to clear land mines,

the setting up of a direct telephone line between the foreign ministries and exchanges of time

schedules for military exercises.

Another set of confidence building measures were decided by June 2001. These positive

developments should create a climate conducive to progress in the peaceful settlement of

disputes between the two countries, in accordance with the Helsinki European Council

conclusions and the Accession Partnership with Turkey.

1.5.

General evaluation

The constitutional amendments adopted by the Turkish Parliament on 3 October 2001 are a

significant step towards strengthening guarantees in the field of human rights and fundamental

freedoms and limiting capital punishment. The amendments narrow the grounds for limiting such

fundamental freedoms as the freedom of expression and dissemination of thought, freedom of

the press and freedom of association. Attention has now turned to the effective implementation

of these important changes. The Turkish Government is finalising a package of new draft

legislation that is aimed at implementing a number of constitutional amendments, in particular

with respect to freedom of expression and thought. It should facilitate progress towards

satisfying the Accession Partnership priorities.

Despite these changes, a number of restrictions on the exercise of fundamental freedoms have

remained. The extent to which individuals in Turkey will enjoy real improvement in the exercise

of fundamental freedoms will depend on the details of implementing legislation, and the practical

See "Making a success of enlargement: Strategy Paper and Report of the European Commission on the progress towards

accession by each of the candidate countries", COM (2001) 700.

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application of the law. It is encouraging that a general principle of proportionality has been

introduced and that the stated general aim of the reform is effectively to bring to the forefront

respect for human rights and the rule of law.

The moratorium on the death penalty has been maintained. The revised Article 38 of the

Constitution limits the death penalty to cases of terrorist crimes and in times of war or imminent

threat of war. The exception for terrorist crimes is not in line with Protocol 6 to the European

Convention on Human Rights (ECHR) (which does not permit any reservations), whereas the

exception in the case of war crimes is permitted under Protocol 6. Legislative changes to the

Penal Code will be needed to put this revised Article into effect. This will permit an assessment

of whether Turkey is in a position to sign and ratify Protocol N° 6 to the ECHR.

The reforms related to economic, social and cultural rights contain a number of positive

elements. The provisions forbidding the use of languages prohibited by law, in Articles 26 and

28, have now been abolished. This could pave the way for the use of languages other than

Turkish and is a positive development. Existing restrictive legislation and practices will need to

be modified in order to implement this constitutional reform, as the Turkish authorities have

recognised. There has been no improvement in the real enjoyment of cultural rights for all Turks,

irrespective of their ethnic origin.

A number of substantial prison reforms have been adopted. Turkey is encouraged to ensure that

these reforms are fully implemented. The disproportionate use of force in breaking up prison

protests is to be regretted. The continuing loss of life as a result of hunger strikes is

unacceptable from a humanitarian point of view. Irrespective of the political motives of those

involved, efforts should be stepped up to prevent further deaths. Free debate on these issues

should be allowed.

Reform of the judicial system has begun. The independence of the judiciary, the powers of State

Security Courts and military courts and compliance with rulings of the European Court of

Human Rights remain matters of concern.

A number of initiatives have been taken to increase the awareness of law enforcement officers

and judicial personnel of human rights issues, but it is too early to assess the practical impact of

these.

Despite several initiatives to foster more transparency in Turkey's public life, corruption remains

a serious problem. The recent signature of important Council of Europe Conventions on

corruption and on money laundering is a positive development.

Further action needs to be taken to improve the economic situation in the South East to reduce

regional disparities and to enhance economic, social and cultural opportunities for all citizens.

The state of emergency still applies to four provinces in this part of the country.

The basic features of a democratic system exist in Turkey, but a number of fundamental issues,

such as civilian control over the military, remain to be effectively addressed.

Despite a number of constitutional, legislative and administrative changes, the actual human

rights situation as it affects individuals in Turkey needs improvement.

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Though it is beginning to make progress in some areas, Turkey does not yet meet the

Copenhagen political criteria and is therefore encouraged to intensify and accelerate the process

of reform to ensure that human rights and fundamental freedoms are fully protected in law and

practice, for all citizens, throughout the country.

Fuller use should be made of the enhanced political dialogue, to further stimulate progress on

key issues which are priorities of the Accession Partnerships, such as human rights, Cyprus and

the peaceful settlement of border disputes.

Given Ankara's support for the decision of Mr Denktash to withdraw from the UN proximity

talks and to decline the UN Secretary General's invitation to talks in New York, the support

Turkey has expressed in the political dialogue for the UNSG's efforts to find a comprehensive

solution of the Cyprus problem should now be followed by concrete steps by Turkey to

facilitate a solution.

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2. Economic criteria

2.1.

Introduction

In its 1989 Opinion on

Turkey’s

application for EC membership, the Commission concluded:

“Turkey’s economic and political situation, … , does not convince it that the adjustment

problems which would confront Turkey if it were to accede to the Community could be

overcome in the medium term”.

In its 1998 and 1999 Regular Reports, the Commission, while acknowledging that progress has

been made, confirmed its Opinion. In its 2000 Regular Report the Commission found that:

“Turkey

has made considerable progress in addressing the most urgent imbalances in the

economy, yet the process of achieving a functioning market economy is not completed.

Considerable parts of the Turkish economy are already able to sustain competitive

pressure and market forces in a customs union with the EC.”

In examining the economic developments in Turkey since the Opinion, the Commission’s

approach was guided by the conclusions of the European Council in Copenhagen in June 1993,

which stated that membership of the Union requires:

the existence of a functioning market economy;

the capacity to cope with competitive pressure and market forces within the Union.

In the analysis below, the Commission has followed the methodology applied in the Opinion and

the previous annual Regular Reports.

2.2.

Economic developments

Macroeconomic stability deteriorated as a result of the financial crises and the situation

remains very volatile.

After a strong recovery during most of 2000, economic activity declined

sharply during the first half of 2001. The main factors for this slowdown have been two financial

crises in November 2000 and February 2001, when political tensions and thin money markets

led to rapidly increasing difficulties in Turkey's financial system. The February crisis forced the

Turkish authorities to abandon the currency peg, which had been at the heart of Turkey's dis-

inflation programme. Since the switch to free floating on 22 February 2001, the Turkish lira has

depreciated by more than 50%. As a result, inflationary pressures resumed rapidly. Domestic

demand declined alongside a significant increase in interest rates, reflecting uncertainty in

financial markets as well as growing domestic indebtedness. Imports fell markedly while exports

benefited from the more favourable exchange rate after the depreciation. The slowdown in

global demand and the sharp rise in domestic interest rates have hindered the export-oriented

sector to fully benefit from the improved price competitiveness. Although the increase in exports

remained moderate, significantly lower imports led to an improvement in the current account.

Foreign direct investment remained very low, while capital outflows were high, leading to a

significant decline in foreign exchange reserves. After the tight monetary constraints associated

with the currency peg, present monetary policy largely accommodates liquidity needs of the

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Turkish economy. Nevertheless, real interest rates remained relatively high, largely due to high

uncertainty in financial markets. In response to the crisis, the government tightened its fiscal

stance in order to compensate for lower growth and the sharp increase in public debt.

Main economic trends

Turkey

Real GDP growth rate

Inflation rate (CPI)

- annual average

- December-on-December

Unemployment rate, end-

year

- ILO definition

per cent

1996

7.0

1997

7.5

1998

3.1

1999

-4.7

2000

7.2

2001 latest

-6.1Jan-June

per cent

80.4

79.8

85.7

99.1

84.6

69.7

64.9

68.8

54.9

39.0

47.8 Sept.

61.8 Sept.

per cent

6.7

6.5

6.8

7.6

6.6

6.9 June

General government budget

balance

Current account balance

per cent of

GDP

per cent of

GDP

million

ECU/euro

-8.4

-13.4

-11.9

-21.8

-11.0

-1.4

1.0

-0.7

-4.9

0.8 Jan-Jun

-1,945

-2,333

1,766

-1,276

-10,574

590

Jan-

June

Foreign debt

- debt export ratio

- gross foreign debt

per cent

million

ECU/euro

171.2

52,797

155.9

64,308

156.1

67,583

199.6

80,196

210.2

108,865

Foreign direct investment in

flow

- balance of payments data

per cent of

GDP

million

ECU/euro

0.4

576

0.4

712

0.5

837

0.4

735

0.5

1,063

2.6 Jan-June

1,874

Jan-

June

Moving 12 month average rate of change.

Source: Website of Central Bank

Source: Website of Central Bank, Balance of inflows and outflows

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As a result of the financial crisis, the speed and scope of structural reforms have

substantially increased.

The Turkish authorities have adopted a wide range of structural

reforms, to reduce the state influence in the economy. The restructuring of the financial sector

has been accelerated by transferring nonviable institutions to the Savings and Deposit Insurance

Fund, by strengthening surveillance and prudential standards and by reducing political influence

in the management of state controlled banks.

Legal measures to liberalise such sectors, as sugar, electricity and gas have been approved, and

steps have been taken to increase the independence of the Central Bank. The privatisation of

former state monopolies and state banks is under preparation. State influence in the agricultural

sector has been reduced and the system of support prices is in the process of being replaced by

a new system of direct income support. The regulation of the telecommunication sector has

been modernised and an independent regulatory agency for the telecommunication sector

established.

Main Indicators of Economic Structure in 2000

Population (average)

GDP per head

Thousand

PPS

Per cent of EU

average

Share of agriculture

in:

- gross value added

- employment

Investment-to-GDP ratio

Gross foreign debt/GDP

Exports of goods & services/GDP

Stock of foreign direct investment

65,293 E

6,400

per cent

Million Euro

Euro per head

14.6

34.9

22.2

50.1

23.8

E: estimate

P: provisional data

Figures have been calculated using the population figures from National Accounts, which may differ from those used in

demographic statistics.

Agriculture, hunting, forestry and fishing.

Data refer to Gross fixed capital formation as % of GDP.

Estimated.

Figures have been calculated using the population figures from National Accounts, which may differ from those used in

demographic statistics.

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Over the period 1995 - 2000, no progress was made in catching-up with the EU.

GDP per

capita in purchasing power parities has remained at around 29% of the EU average. Regional

and social disparities are considerable and widening. The economic activity rate is very low and

declined from 53.4% in 1995 to 49.2% in 2000. As reported by the Turkish authorities,

unemployment stalled at 6.9%. In urban areas, registered unemployment is significantly higher,

at 9 - 10% of the labour force. In 2000, long-term unemployment accounted for about 24% of

all unemployed. Unemployment among educated young people in urban areas has reached

25%. Unemployment rates for men and women do not differ significantly. In the countryside,

registered unemployment is relatively low, partly due to the high share of "unpaid" family

workers in the Turkish agricultural sector. Disparities between urban and rural areas, and upper

and lower income groups, are very high in Turkey. It is likely that these disparities have further

increased in the meantime, mainly due to the erosion of the purchasing power of lower income

groups, through chronically high inflation. The present economic decline has further worsened

the social situation.

2.3.

Assessment in terms of the Copenhagen criteria

The existence of a functioning market economy

The existence of a functioning market economy requires that prices, as well as trade, are

liberalised and that an enforceable legal system, including property rights, is in place.

Macroeconomic stability and consensus about economic policy enhance the performance of a

market economy. A well-developed financial sector and the absence of any significant barriers

to market entry and exit improve the efficiency of the economy.

Despite difficulties, the government is adhering to its economic programme and is

continuing to adopt the envisaged measures.

To address the causes and the consequences

of the crisis, the mandate of the Ministry of the Economy has been strengthened and the

Government presented a new economic programme in the framework of an IMF stand-by

arrangement. The reform package, "Programme towards a strong economy", focuses on the

elimination of political interference in the economy, the consolidation of the financial sector and

the acceleration of structural reforms. Social dialogue is an important feature of the programme.

On the base of this package, the IMF decided to increase the funding of its December 1999

3-year stand-by arrangement. Despite some delays due to tensions within the coalition

government, the implementation of the new programme is on track. Nevertheless, the measures

have not yet succeeded in restoring confidence. In line with the requirements of the Accession

Partnership, Turkey submitted its first Pre-Accession Economic Programme in October. This

programme is based on the "Programme towards a strong economy".

After strong output growth during most of 2000, economic activity has been declining

since the November 2000 financial crisis.

In 2000, real GDP grew by 7.2%. This was the

result of strong private consumption and high investment. Private consumption responded

rapidly to the sharp decline in interest rates after the announcement of the December 1999

disinflation programme. In addition, private and public investment rose due to the reconstruction

needs after the devastation of earthquakes in 1999.

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Financial turbulence in November 2000 and February 2001 brought a sudden end to the

demand driven boom,

as sharply increased interest rates and consumer prices reduced real

disposable income and consumer confidence. During the first half of 2001, real GDP declined

by 6.1% relative to a year ago. This reflects a year-on-year decline by 2.2% in the first quarter

and by 9.3% in the second quarter. Private consumption fell by 7.5% year-on-year during the

first half of 2001. Investment has been particularly sensitive to the financial crisis and has

declined by 23.5%. Due to dampened demand, imports of goods and services declined by

23.7% in the first half of 2001, while exports rose by 8.8%. Net exports thus helped to limit

partially the negative impact of the financial crisis on GDP growth.

Unemployment continued to increase in 2001.

Unemployment rose to 6.9% in the second

quarter of 2001, compared to 6.2% in the second quarter of 2000. Non-agricultural

unemployment was 10.7%. Among educated young people, the unemployment rate was 23.2%

in the second quarter of 2001. Unemployment is significantly higher in urban areas and among

high school graduates. The participation rate is relatively stable at the low level of slightly below

50%.

Inflationary pressures have revived.

In 2000 and early 2001, the disinflation programme

succeeded in bringing down 12-month consumer price inflation (CPI) rates from 69% in

December 1999 to 33% in February 2001. As a result of the sharp depreciation after the

February 2001 crisis, inflationary pressures rose rapidly, reaching month-on-month CPI

increases of 10.3% and 5.1% in March and April. In the summer, month-on-month inflation

was rather low, but rose again to 5.9% in September, partly reflecting seasonal factors. After

the main impulse of the initial depreciation seems to have largely fed through the system, the

recent re-surge in inflationary pressures could have a negative impact on inflationary

expectations. The continued weakness of the Turkish lira could maintain upward pressure on

prices, despite weak domestic demand and low wage increases in the public sector.

After the crisis, monetary policy became largely accommodating, while interest rates rose

sharply.

Before the crisis, monetary policy supported the currency peg, by injecting and

withdrawing liquidity in response to changes in foreign exchange reserves. With the currency

peg abandoned, the Central Bank used its increased flexibility to try moderate swings in the

financial markets, by providing liquidity in both domestic and foreign currency. This helped to

avoid new liquidity bottlenecks in the financial sector, but did not actively address the sources

for the sector's difficulties. At present, the Central Bank uses base money targets and intends to

shift towards inflation targeting as soon as inflationary pressures have come down sufficiently.

As a result of the crisis and insufficient success in restoring confidence of international markets,

interest rates have remained very high. In October 2001, annualised treasury bill yields were still

around 90%. Overnight interest rates came down to slightly below 60% by September. The

stickiness of high interest rates immediately translates into higher than expected financing costs

for the public sector debt and impede fiscal consolidation.

Since its free floating in February, the Turkish lira has lost more than 50% of its value.

From December 1999 to February 2001, the exchange rate regime consisted of a crawling peg

vis-à-vis a currency basket with a depreciation rate equal to the targeted inflation, combined

with a pre-announced exit strategy. This external anchor was designed to reduce inflationary

pressures. Despite some success, inflationary inertia kept domestic price increases higher than

envisaged, leading to a considerable real appreciation of the Turkish lira. Together with sharply

declining interest rates, the real appreciation triggered a boom in imports, resulting in a strong

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increase in the current account deficit. Delays in privatisation eroded market confidence in the

viability of the ambitious consolidation programme. On 22 February 2001, the crawling peg

regime was abandoned, as the Turkish banking sector was no longer able to sustain the tight

liquidity policy necessary for such an exchange rate regime. There are no specific exchange rate

targets at present, although the Central Bank has announced that it will act to avoid excessive

swings in the rate.

Turkey is forced to build up a large primary fiscal surplus in order to try to contain public

sector indebtedness.

Public sector deficits have traditionally been high in Turkey. According to

national accounting standards, the national government deficit was 11¾% in 1999 and 10�½% in

2000. According to harmonised EU national accounting standards (ESA95) the general

government deficit was 11% of GDP in 2000 and 21.8% in 1999. The significantly higher

deficit according to ESA95 reflects an accrual-based allocation of financial costs related to

additional expenditure, caused by the earthquakes of August and November 1999

. When

including extra-budgetary funds and transfers to state owned enterprises, more than 90% of the

general government deficit relates to the central government. Local government net borrowing

contributed only a ¼ percentage point to the general government deficit in 2000 and social

security borrowing about a �½ percentage point. According to ESA95 standards, primary net

borrowing was 5.6% in 2000, compared to 9.2% in 1999. In order to achieve a more

sustainable situation in public finances, the Turkish authorities intend to realise substantial

primary surpluses in the near future, 5�½% of GDP in 2001 and 6�½% of GDP in 2002.

Although the burden of interest payments is expected to decline from the present level of about

15% of GDP, the overall deficits are likely to remain high.

In response to the February crisis, additional fiscal measures had to be taken.

The

modified fiscal package consists of e temporary measures, such as freezing the number of civil

servants, and permanent revenue measures, such as increasing the value added tax (VAT) rate

by one percentage point, the increase in the petroleum consumption tax or the increase in the

minimum contribution base for social security payments. Despite a significant deterioration in

growth expectations for 2001, from -3% GDP growth in the spring to -8% in mid-October,

fiscal targets have been maintained.

Interest payments are crowding out other expenditure categories.

Fiscal revenues rose

from 23¼% of GDP in 1999 to about 25�½% in 2000. This increase was largely due to the rise

in indirect taxes, while direct tax revenues and non-tax revenues remained largely unchanged.

Fiscal expenditures rose from nearly 35% of GDP in 1999 to 36�½% of GDP in 2000. This rise

was mainly due to higher net interest payments, increasing from 13% of GDP in 1999 to nearly

16% of GDP in 2000. The latest budgetary projections forecast a slight increase in total

revenues to 26�½% of GDP and a sharp rise in total expenditures to more than 40% of GDP.

This increase is mainly due to significantly higher interest payments, amounting to about 20% of

GDP or 80% of total revenue.

General government gross debt was 57.8% of GDP in 2000, compared to 69.2% of GDP in

1999. This decline was mainly the result of strong growth and the sharp decline in interest rates

in 2000. The restructuring of the banking sector will sharply increase the public sector debt

Two figures are given for the government balance. One is based on the most commonly used national concept, and the

other is calculated according to the European System of Accounts (ESA 95), which was reported by the candidate

countries for the first time this year.

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stock by at least 20 percentage points of GDP in 2001. As the maturity of the additionally

issued state obligations is rather short and, to some extent, those bonds are denominated in

foreign currencies, the exposure of Turkey's debt service to fluctuations in short-term interest

rates and exchange rates has risen considerably. The importance of restoring market confidence

in order to establish a firm downward trend in interest rates and to stabilise the currency thus

has further increased.

The current account balance improved markedly after the currency depreciation.

2000, strong growth and the real appreciation of the Turkish lira had resulted in a sharp

deterioration of the current account deficit from -0.8% of GDP in 1999 to -4.7% of GDP in

2000. During the first half of 2001, the sharp decline in domestic demand resulted in a minor

current account surplus of 0.8% of GDP. Export revenues increased by nearly 16% (in EUR

terms) year-on-year, while import expenditure declined by about 17%. As a result, the deficit in

the trade account declined to 4.3% of GDP, compared to 10% in the first half of last year. So

far, inflows in the form of tourist revenues, workers remittances and short-term portfolio

investments have been sufficient to finance the trade deficit. However, in the absence of

significant foreign direct investment (FDI) inflows, the cost for attracting external finance is

substantial. The high mobility of short-term portfolio investment can cause substantial short-term

fluctuations in Turkey's financial markets.

The current macroeconomic policy mix seeks to limit the damage of the financial crisis,

but needs to be re-focussed on macroeconomic stabilisation.

The December 1999

programme had failed due to the fragility of the Turkish banking sector and the declining

credibility of the programme, given persistently high inflationary expectations, rapidly increasing

external imbalances, tight financial markets and insufficient political support. The new

programme is trying to remove the fundamental causes of Turkey's macroeconomic instability

before focussing on disinflation. However, the period of prolonged macroeconomic instability

needs to be kept as short as possible to avoid a further deterioration of public finances.

The free interplay of market forces has been increased.

For historic reasons, the influence of

the Turkish state on economic processes has been high. State enterprises provided inputs for

the manufacturing industry and state dominated banks channelled preferential credits to sectors

such as agriculture and small and medium-sized enterprises (SMEs). This interventionist

approach resulted in overstaffed and subsidised state enterprises. Furthermore, state banks

accumulated considerable duty losses, amounting to about 10% of GDP in 2000. Subsidised

energy prices were used as social policy tool, which led to distortions in the sector's price

structure and factor allocation. Transfers to the agricultural sector became a substantial

budgetary burden. Furthermore, the existence of a large informal sector has led to further

disproportions, like in the distribution of the tax burden among households. All these factors

created unsustainable fiscal imbalances and market distortions and rigidities.

Since the financial crisis in February, Turkey has significantly accelerated its efforts to

eliminate distortions and rigidities.

The preparations for the privatisation of state enterprises

have been speeded up, the government is committed no longer to interfere with loan decisions

of state banks, insolvent private banks have been transferred to the Savings and Deposit

Insurance Fund, and troubled state banks have been re-capitalised. In the agricultural sector,

the system of support prices and state purchases will be eliminated gradually and will be

replaced by a direct income scheme. As a result, state influence on producer prices has

declined, but its influence on consumer prices continues to remain rather high at about 25% of

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the items in the basket of the consumer price index. However, legislation on public borrowing

and public procurement remains to be passed through Parliament and the enactment of the

Tobacco Law is still pending.

The role of the state in output generation is still significant and progress in privatisation

has been slow.

In the manufacturing sector, state enterprises account for nearly one quarter of

value added and for about 12% of employment. In the banking sector state controlled banks

account for more than one third of the sector's net assets and for more than 40% of the sector's

employment. Although privatisation started in the mid-1980s, accumulated privatisation

revenues have been very low, accounting for only about 4% of nominal GDP. Last year, when

Turkey registered a record performance in privatisation, total privatisation revenues amounted

to about 1�½% of GDP. The most important recent projects have been the block sale of 51% of

the shares of the petrol distribution company

POAS

and the public offering of 31.5% of the oil

refinery

TÜPRAS.

Attempts to privatise 51% of

Turkish Airlines

and 20% of

Türk Telekom

failed. Legislation on privatisation has been significantly improved, allowing for the privatisation

of enterprises in the sugar, tobacco, energy and telecommunications sectors. However, since

the recent financial crises, no significant privatisation has taken place, in part owing to poor

market conditions, but also partly due to political opposition, also from within the government

coalition. For the remainder of 2001, Turkey is planning secondary and tertiary public offerings

POAS

and

TÜPRAS

and intends to try again to sell 51% of

Turkish Airlines.

Despite fairly liberal regulations concerning market entry and exit, remaining barriers

impede economic activity.

As in previous years, the number of market entries and exits has

been relatively high. During the first nine months of the year, about 35,000 new companies were

registered, which is about 7% of the total number of enterprises. In the same period, about

12,500 enterprises were liquidated. The decline of new market entries by around 20% and the

increase in closures by 25% reflects the effects of the economic recession. Apart from the

economic decline, prohibitively high interest rates and the reluctance of private banks to provide

credits to the private sector, are the main reasons for the decline in the number of newly

established companies. However, there are also some bureaucratic barriers to overcome, which

create difficulties for smaller enterprises, in particular.

The legal system, including the regulation of property rights, is in place. However,

implementation and enforcement of laws and contracts is sometimes difficult.

Despite the

firmly established legal system, implementation of existing legislation is insufficient. The training

of judicial staff does not always meet requirements. Legal procedures are sometimes

complicated and time consuming. However, the election of the former president of the

constitutional court as new president of Turkey has strengthened the respect of the law and has

improved the implementation of existing legislation.

The financial sector is still under restructuring and does not channel sufficient financial

resources to productive investment.

The financial sector mainly consists of the banking

sector. During the 1990s this sector expanded rapidly, benefiting from generous state insurance

for savings and deposits, and strong public sector credit demand. As a result of political

interference in the banking sector, chronically high inflation, weak legislation and insufficient

surveillance, the Turkish banking sector accumulated substantial structural weaknesses. The

banking sector consists of about 70 institutions. The four main state controlled banks account

for about 30% of the sector's assets and for nearly 35% of the deposits. The privatisation of

those state banks is overdue. Another 30% of the sector's assets are controlled by the 4 largest

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private banks. About 10% of the assets are owned by 18 non-operative banks, which have

been transferred into the custody of the Savings and Deposit Insurance Fund (SDIF). The share

of government securities in private bank assets is relatively high at about 25%. Bank lending

accounts for about 23% of GDP and is highly concentrated in the public sector and related

group companies. As a result, only 0.1% of all borrowers account for nearly 40% of the total

loan value. Stock market capitalisation is at about 20% of GDP. After the financial crisis, the

share of non-performing loans in total loans rose to 18%, mainly due to the sharp rise of non-

performing loans of state controlled banks, in particular of the banks under the administration of

the Savings and Deposit Insurance Fund.

Progress in addressing the weakness of the financial sector has been achieved.

The state

controlled banks have been re-capitalised and their short-term exposure has been substantially

reduced. Private banks have been obliged to improve their capital adequacy ratios and to

adhere to international reporting and prudential standards. Non-viable private banks have been

put under the administration of the SDIF, where they are in the process of being restructured

and reorganised The banking regulations have been further strengthened. The establishment of

the Banking Surveillance and Regulatory Agency (BRSA) in 2000 has significantly improved

banking surveillance and the adherence to prudential rules. However, the consolidation process

is far from being completed. So far, only the smallest state-controlled bank,

Emlak bankasi,

has been dissolved. The two largest state banks, the agricultural bank,

Ziraat bankasi,

and a

bank providing credits to SME's,

Halk bankasi,

have been put under joint professional

management and will be prepared for privatisation. Another state controlled bank,

Vakif

bankasi,

is planned to be privatised soon. Some of the non-viable banks have been merged

with the

Sümerbank,

which is supposed to be sold soon to

Oyakbank,

belonging to a support

fund of the military staff. So far, one smaller bank, the

Bank Ekspres, and

the 9

biggest bank

in Turkey, the

Demirbank,

have been sold.

The capacity to cope with competitive pressure and market forces within the

Union

The ability to fulfil this criterion depends on the existence of market economy and a stable

macroeconomic framework, allowing economic agents to make decisions in a climate of

predictability. It also requires a sufficient amount of human and physical capital, including

infrastructure. State enterprises need to be restructured and all enterprises need to invest to

improve their efficiency. Furthermore, the more access enterprises have to outside finance and

the more successful they are at restructuring and innovating, the greater will be their capacity to

adapt. Overall, an economy will be better able to take on the obligations of membership the

higher the degree of economic integration it achieves with the Union before accession. Both the

volume and the range of products traded with EU Member States provide evidence of this.

Despite significant progress in strengthening the base for a functioning market economy,

a sufficient degree of economic stability and predictability has not yet been achieved.

Furthermore, the role of the state is still considerable and financial markets are not channelling

investment to productive uses.

The composition of human and physical capital is very heterogeneous in terms of quality

and regional distribution and needs urgent improvement.

The demographic structure of

Turkey, with a relatively young population, represents a considerable potential but also

generates the need to provide adequate resources for schooling and training. Turkey's human

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capital reflects decades of insufficient funding. The literacy rate is very low when compared to

international standards. In 1999, the literacy rate of the population over 12 years old was 94%

for men, but only 77% for women. In recent years, efforts have been undertaken to improve

this situation. Since the 1997-1998 school year, compulsory schooling has been increased from

5 to 8 years. However, there are serious difficulties in providing facilities and teaching staff.

Nevertheless, the enrolment ratio in primary schools increased to 98%, but is still only 60% for

secondary schools. Educational resources are concentrated in urban areas, while a considerable

share of the population is in rural areas. Furthermore, there is a considerable regional disparity

in the level of basic education. The communication between the private sector and the

educational system is insufficient to adjust the educational content to the needs of the private

sector. High unemployment rates among high school graduates are the consequence. The health

system does not provide sufficient support to the labour force. Besides insufficient resources,

provision of health services differs significantly between regions.

The quality of physical capital is very heterogeneous, leading to considerable productivity

differentials.

Export oriented companies are equipped with state-of-the-art technology, while

many SMEs are working with worn-out capital and outdated management techniques. As a

result, overall productivity of the capital stock is relatively low. The road network is well

developed and in good condition. Pipelines for oil and gas and energy connections have been

extended. However, the railway network has been neglected. Its equipment is outdated and

management capacities are insufficient. As a result, budgetary transfers to the railway company

are a considerable fiscal burden.

Labour market policy remains to be developed.

Due to Turkey's traditional focus on short-

term stabilisation, labour market policies are hardly discussed during policy formulation.

However, recently the institutional set-up and the involvement of the social partners have been

improved. Tri-partite commissions, representing the state, employers and employees, are

preparing reports and proposals on how to improve the efficiency of Turkish labour market

policy.

Gross fixed capital formation is very volatile.

In 2000, the share of gross fixed capital

formation in GDP was around 22%. The share of housing investment is relatively high and the

annual development is volatile, depending on interest rates and the general economic

environment. The share of public investment is fairly constant at around 6% of GDP, with about

90% of this investment going into infrastructure. In view of the volatile economic performance in

recent years, private sector investment declined from 21% of GDP in 1997 to 16% in 2000.

Despite increasing openness for foreign direct investment, inflows have remained

marginal.

During the last year, market liberalisation has improved access of foreign investors to

Turkish enterprises: some sheltered sectors have been opened, although limitations in other

sectors remain; the list of enterprises to be privatised has been extended and bureaucratic

procedures have been improved. Due to the sale of a GSM licence and some privatisation

projects, the inflow of FDI increased in 2000. FDI remains significantly below its potential,

reflecting economic volatility and political uncertainty. Low capital inflows fail to support the

external balance, but also represent missed opportunities in modernising the Turkish capital

stock, in channelling modern know-how to Turkey and facilitating access to export markets.

With respect to competitiveness, this represents a significant disadvantage, in particular in

combination with Turkey's low investment in research and development.

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Enterprise restructuring in the private sector, in particular in the agricultural sector, has

been further accelerated by the structural reforms.

The agricultural sector is experiencing

substantial restructuring, since state support in the form of privileged credit lines, price support

and purchase agreements is in the process of being dismantled. Important agricultural markets,

like the sugar and tobacco market, are to be liberalised. State enterprises are increasingly

subject to hard budget constraints, forcing them to aim for prices which cover costs. Despite the

impressive progress achieved so far, the restructuring process in those formerly sheltered

sectors has just started and the short-term social and political costs of maintaining the

modernisation process might be considerable. However, strict implementation of the new

regulatory framework and continued restructuring will be key for fostering competitiveness of

these sectors and the economy as a whole.

Small and very small family companies are the backbone of the Turkish economy.

Small

and medium-sized enterprises account for about 60% of the employment in the manufacturing

sector and for 30% of the sector's added value. Micro-enterprises are of particular importance

in Turkey. These enterprises, with less than 10 employees, account for 94% of all enterprises in

the manufacturing sector, employ 30% of the sector's labour force, but generate only 7% of the

sector's added value. These mainly family enterprises are dynamic and flexible in finding market

niches and benefit from cheap inputs from the informal economy. In combination with the

informal sector and the family network, it is probably this category of enterprises which

provides some core stability to the otherwise highly volatile Turkish economy. Many of these

small enterprises might face serious difficulties once they have to apply European standards, like

legislation concerning labour regulations, social and health standard and accounting rules.

State interference has been declining further in the agricultural and financial sector.

The

most important measures in this respect have been initiatives to liberalise the tobacco and sugar

markets, the establishment of the autonomy of the agricultural sales co-operatives (ASCUs) and

the elimination of political influence in the state banks. The role of the Telecommunication

Regulatory Authority has been strengthened and the latest amendments to the regulation of the

electricity and gas sector call for the establishment of independent regulatory institutions. These

measures should raise the sectors' attractiveness for foreign or domestic long-term investment.

Furthermore, the independence of the Central Bank has been increased. State subsidies are

being reduced.

Trade integration with the EU has further increased, although progress is quite gradual.

In 2000, the sum of exports and imports of goods and services accounted for about 55% of

GDP. The Union is by far Turkey's most important trading partner, accounting for about 52%

of Turkish exports and 49% of Turkey's imports. The establishment of the Customs Union in

December 1995 has intensified Turkey's trade integration with the EU. In recent years Turkey

has been fairly successful in increasing trade with the successor states of the Soviet Union.

Textiles and clothing account for about 45% of exports. Around 90% of Turkish imports are

inputs into the industrial process. The most important category is machinery, accounting for

some 52% of total imports. Oil products account for about 5% of total imports.

Due to high domestic inflation, the price competitiveness of Turkish commodities declined when

the currency peg was in force last year. The recent depreciation by more than 50% has more

than compensated the previous real appreciation and improved the price competitiveness of

Turkish commodities. However, due to the high import content of Turkish exports, considerably

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increased financing costs and the international economic slowdown, the export sector could not

take full advantage of the depreciation of the Turkish lira.

2.4.

General evaluation

Confronted with two financial crises, Turkey has been unable to make further progress towards

achieving a functioning market economy. Considerable parts of its economy are, however,

already competing in the EU market, under the framework of the customs union with the EC.

The two financial crises brought to a halt economy recovery and put an end to the preceding

economic stabilisation programme. Macroeconomic stability has been shaken, and many

macroeconomic imbalances have reappeared. Turkey has adopted, and has been implementing,

an ambitious economic reform programme that addresses better than its predecessor the risks

and vulnerabilities of the domestic financial sector and seeks to reduce government intervention

in many areas of the economy. These problems were at the heart of the crises.

Priority has to be given to establishing short-term macroeconomic stability, based on

disinflation. However, the authorities must also continue to focus on establishing a solid basis for

sustainable market-based economic development in the medium term. Significant restructuring is

still needed in various sectors, such as banking, agriculture and in state enterprises, in order to

guarantee the medium-term competitiveness of the economy as a whole. They will need to

redefine their budgetary priorities, in a medium-term perspective, in order to provide a sufficient

level of investment in education, health, social services and public infrastructure across the

country.

See "Making a success of enlargement: Strategy Paper and Report of the European Commission on the progress towards

accession by each of the candidate countries", COM (2001) 700.

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3. Ability to assume the obligations of membership

Introduction

This section aims to update the Commission’s 2000 Regular Report on Turkey's ability to

assume the obligations of membership - that is, the legal and institutional framework, known as

the

acquis,

by means of which the Union implements its objectives. Alongside an evaluation of

relevant developments since the 2000 Regular Report, this section seeks to provide an overall

assessment of Turkey's ability to assume the obligations of membership, and of what remains to

be done. This section is structured to follow the list of twenty-nine negotiating chapters, and

incorporates an assessment of Turkey's administrative capacity to implement the

acquis

in its

various aspects.

The European Council in Madrid in December 1995 referred to the need to create the

conditions for the gradual, harmonious integration of the candidates, particularly through the

adjustment of their administrative structures. Taking up this theme, in Agenda 2000 the

Commission underlined the importance of effectively incorporating Community legislation into

national legislation, and the even greater importance of implementing it properly in the field, via

the appropriate administrative and judicial structures. This is an essential pre-condition for

creating the mutual trust indispensable for future membership.

The European Council in Santa Maria da Feira and in Gothenburg in June 2000 and June 2001

respectively recalled the vital importance of the applicant countries’ capacity to implement and

enforce the

acquis,

and added that this required important efforts by the applicants in

strengthening and reforming their administrative and judicial structures.

Building on the

assessment of Turkey administrative capacity provided in the 2000 Regular Report, the present

Report seeks to add further depth and detail, focusing on the main administrative structures

which are required for implementing the

acquis

in its various aspects.

In the 2000 Regular Report, the Commission concluded that:

“Overall, Turkey’s alignment with the community acquis in the areas covered by the Customs

Union is most advanced. However, since the last regular report, progress in transposition of

legislation in these areas has been limited.

As a candidate country, Turkey has to start making substantial progress in alignment with the

acquis in all other fields. Strategies and detailed programmes (including priorities) are necessary

for the transposition, implementation and enforcement of these relevant areas of the acquis. The

results of the preparation of the analytical examination of the acquis and the National

Programme for the Adoption of the Acquis to be established by Turkey will be important tools

for this work.

Substantial administrative reforms are necessary in order to implement and adequately enforce

the different EC policies. The alignment of the Turkish

statistical

base with that of Eurostat is a

very first priority.

Concerning

internal market legislation,

efforts are needed in the areas of free movement of

goods, particularly with respect to the alignment of standards and removal of other technical

barriers to trade. As a result of the obligations under the Customs Union this process has to be

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completed by the end of 2000. Trade in agricultural products remains a problem. For the

internal market,

Turkey needs to adopt framework legislation based on the principles of the

New and Global approach. Substantial reforms have been conducted in the banking sector.

No progress was recorded on the transposition of capital movement legislation. Serious

problems in money laundering persist. Alignment in the areas of non-financial services and free

movement of persons is at a very early stage. Further work on all other aspects of the internal

market remains to be done, as well as with respect to institution building, for example in the

state aid sector. Further adjustments to Turkish monopolies are necessary. Turkish company

law is subject to further Commission assessment of compliance with EU legislation. Substantial

harmonisation is still required in the area of

taxation.

In the customs area, there is almost full

alignment.

In the field of

telecommunications,

substantial progress has been made to introduce

competition. Further alignment with the community acquis is needed. Piracy of audio-visual

materials remains a serious problem.

The first priority in

agriculture

and

fisheries

is to start the introduction of basic mechanisms

and structures, (statistics, land register, improved fishing fleet register, plant and animal

identification systems, upgrading equipment) to be able to manage these policies. The

maritime

safety record of the Turkish fleet remains a matter of concern. Maritime and

road transport

needs to be adapted to EU standards.

In the

social policy

field, Turkish legislation is still very different from that of the Union in

particular in terms of standards, methods and monitoring requirements. In the different areas

much remains to be done. The same applies to key

energy

laws reforming the power and gas

sectors, which are still pending. In the

environmental

sector, strategies for transposing the

acquis as a first step are recommended.

Compared to 1999, no major progress has been made in the field of

justice and home affairs.

As regards migration, efforts need to be seriously stepped up to decrease the number of illegal

entrants trying to reach Western European countries. It is recommended that the various

departments in Turkey are better co-ordinated in order to increase the efficiency of checks,

particularly exit checks.

A comprehensive policy framework is needed to further establish

financial control.

Substantial efforts are still required to modernise financial management, with a view also to

protecting EU financial interests.

The overall conclusion is that substantial efforts are needed in policy fields outside the Customs

Union to further align with EU legislation. including the establishment of adequate

implementation and enforcement mechanisms. This will require important reforms of the

administration at all levels. In some cases this will entail the establishment of new structures, for

example in the fields of state aids and regional development. Various issues mentioned above

are identified as priorities in the Accession Partnership for Turkey."

3.1.

The chapters of the

acquis

As indicated, the review of Turkey's ability to assume the obligations of membership that is

below has been structured in accordance with the list of twenty-nine negotiating chapters.

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Accordingly, this section opens with an assessment of progress related to the so-called “four

freedoms”, the cornerstones of the internal market, and continues with a systematic review of

progress on each of the chapters, to cover the

acquis

in all its various aspects, including

sectoral policies, economic and fiscal affairs, regional policy, environment, justice and home

affairs, external policies, and financial questions.

Chapter 1: Free movement of goods

Since the last Regular Report Turkey has made some further progress in aligning with the

acquis.

However, on the whole, alignment is not yet completed.

Concerning

horizontal and procedural measures,

and in particular the

New and Global

Approach,

progress can be noted. The Law on the Preparation and Implementation of

Technical Legislation on Products was approved by the Turkish Grand National Assembly in

June 2001 and should enter into force in January 2002.

The purpose of this framework law is to lay down the principles and procedures for the placing

on the market of products (including the obligations on producers and distributors), conformity

assessment, market surveillance and inspection and the notifications relating to these

arrangements. The implementation of this law forms the legal basis for further alignment with the

acquis.

As regards sectors covered by the

Old Approach Directives,

good progress can be noted

in the area of motor vehicles and their trailers since the last Regular Report. Since October

2000, legislation transposing 15 EC Directives has been adopted. With regard to agricultural

and forestry tractors, a further 4 EC Directives have also been transposed. The Ministry of

Industry and Trade has started to issue National Type Approval and National Whole Vehicle

Type Approval Certificates for motor vehicles, tractors and motorcycles.

In the field of pressure vessels, all 5 of the Old Approach Directives were transposed between

November 2000 and March 2001.

In the field of textiles, 2 EC Directives (on quantitative analysis of ternary fibre mixtures and

quantitative analysis of binary textile fibre mixtures) were transposed in April 2001. Legislation

transposing the Directive on labelling of footwear has been adopted and entered into force on 3

December 2000.

In the field of legal metrology and pre-packaging, 4 EC Directives (on alcohol meters and

alcohol hydrometers, alcohol tables, electricity meters and tyre pressure gauges for motor

vehicles) were transposed by early 2001.

No progress can be reported in other sectors covered by Old Approach Directives, including

the fields of pharmaceuticals, cosmetics and chemicals. Similarly, there has been no progress in

the fields of crystal glass and wood.

In the field of pharmaceuticals, Turkey has become member of the Collaboration Agreement of

Drug regulatory Authorities in the European Union (CADREAC) in April 2001.

There is no progress to report on the adoption of

food legislation.

(See also chapter 7 –

Agriculture)

Concerning the

non-harmonised sector,

on the basis of the information available, no progress

can be recorded since the last Regular Report.

Concerning

public procurement,

no progress has been made.

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Overall assessment

Although Turkey has taken steps to align with the

acquis

in the area of free movement of

goods, further efforts are required, in particular in all the areas covered by the acquis, both new

approach and old approach. The development of the necessary legal metrology infrastructures

is essential.

In accordance with the product-specific approach, Turkey’s alignment with the

acquis

in some

sectors is completed. But Turkey is lagging behind in meeting its obligations under the Customs

Union, which require it to have adopted and implemented a large body of legislation on

technical requirements for products by the end of 2000. Adequate implementation of the

Community

acquis

in the area of free movement of goods requires the establishment,

reorganisation and upgrading of different bodies in Turkey (e.g. relating to standardisation,

accreditation, conformity assessment and market surveillance). Substantial work remains to be

done in this respect including ensuring greater independence from the state and increased

efficiency of the relevant institutions.

The existence of the Customs Union between Turkey and the European Union influences

Turkey’s situation with regards to aligning legislation in the area of free movement of goods.

According to Decision 1/95 of the EC-Turkey Association Council on implementing the final

phase of the Customs Union, Turkey undertook to adopt Community legislation relating to the

removal of technical barriers to trade by the end of 2000.

Decision 2/97 of the EC-Turkey Association Council established the list of the relevant

Community legal instruments, including a substantial part of the

acquis

on industrial products,

and the conditions and arrangements governing their implementation by Turkey.

However, Turkey has not been able to meet its obligation under Decision 1/95 of the EC-

Turkey Association Council. The transitional arrangements have expired by the end of 2000,

while a substantial part of the

acquis

remains to be transposed and implemented in Turkey.

Although industrial goods largely circulate freely within the Customs Union territory, the number

of non-tariff barriers has in practice increased during 2001. This distorts trade and prevents the

Customs Union from being used to its full potential.

The adoption of the framework law relating to the preparation and implementation of the

technical legislation on products is a significant development. It lays the ground for substantial

progress in alignment with the Community

acquis

in areas covered by the New Approach

Directives. The implementation of the framework law is due to be taken forward through the

adoption of five additional regulations on the following issues: the use of the CE conformity

marking, conformity assessment bodies and notified bodies, exchange of information on national

measures derogating from the principle of free movement of goods between the European

Union and Turkey, exchange of information between Turkey and the European Union on

technical regulations, and market surveillance and inspection of products.

In the area of standardisation, the Turkish Standards Institute (TSE), which is an independent

institution not funded by the state budget, is responsible for the preparation and publication of

standards, industrial metrology and calibration, conformity assessment and certification. It is

already an affiliate member of both CEN and CENELEC and has applied for full membership

of both these organisations.

According to the Turkish authorities, by April 2001, the TSE had adopted a total of 4949 CEN

EN standards and 2282 CENELEC EN standards. Of these, 490 CEN standards and 275

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CENELEC standards were adopted between November 2000 and 1 May 2001. A number of

standards relating to New Approach Directives have already been adopted.

In the area of accreditation, the Turkish Accreditation Council (TURKAK) was created by the

Law on the Organisation and Functions of the Turkish Accreditation Council, to accredit

organisations to conduct laboratory, certification and inspection services. It has been given

administrative and financial autonomy. Since the last Regular report, efforts have been made to

ensure that the accreditation system set up by the law becomes operational, and arrangements

are made to deal with the first accreditation applications. TURKAK’s current staffing level (60

people) is regarded as sufficient to carry out its tasks. It is expected to become operational this

year. A quality management system is being finalised by a special board established by the

Government.

Further development in the area of conformity assessment will depend on the implementation of

framework legislation on technical requirements for products. The same is true for market

surveillance. Currently, market surveillance activities are carried out by a number of Ministries

and public institutions, depending on the sector covered by the relevant legislation. These

include the Ministry of Industry and Trade, the Ministry of Public Works and Settlement, the

Ministry of Health, the Ministry of Agriculture and Rural Affairs and the Undersecretariat of

Foreign Trade. Pre-market control is still a feature of the Turkish system.

Efforts should be made to reduce the number of trade issues which have arisen in recent years.

In particular, greater efficiency of the Turkish Standards Institute (TSE) should decrease the use

of various Turkish standards which diverge from international standards and Customs Union

requirements. Moreover, issues like unnecessary requests for documentation, delays for

approval and excessive testing procedures should be addressed. It is recommended to pay

special attention to these points during the setting up of the implementation arrangements under

the new secondary legislation package. In sectors covered by the Old Approach Directives,

progress in the area of motor vehicles and agricultural and forestry tractors is welcomed.

Turkey should accelerate its alignment in the pharmaceutical and chemical sectors, where it

currently foresees that alignment of its legislation will not be completed until 2003 and 2005,

respectively. On cosmetics, the regulation of this sector in Turkey has evolved in a direction

contradictory to the

acquis.

Indeed, a category of products (“cosmeceuticals”) has been

developed which is not foreseen in the EU

acquis.

Once the

acquis

on these and other industrial products is adopted in Turkey, the authorities

must ensure that it is accompanied by the necessary administrative development to ensure it is

fully enforced.

Concerning food legislation, further work is needed to confirm whether legislation fully in line

with the

acquis

has been successfully adopted and implemented. A food action plan was

drafted in 2000 which aimed to prepare the current Turkish system for compliance with

Community standards. A “Food inspection strengthening project” drawn up in 1997 has still not

been implemented.

Some training programs on inspection, on HACCP and laboratory analysis have been carried

out. Turkey is also working on the establishment of a rapid alert system. Some monitoring plans

for aflatoxine and residues have been drawn up.

The administrative responsibility for foodstuffs, including control, is shared between the Ministry

of Health and the Ministry of Agriculture. Administrative structures will need to be strengthened

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to ensure compliance with Community legislation. In particular, the existing laboratories are not

sufficiently equipped to carry out the necessary analyses.

As regards safety checks on products at external borders, Turkey still needs to establish

appropriate market surveillance infrastructure and improve the administrative co-operation with

competent authorities.

As regards the non-harmonised area, problems remain on the application of the mutual

recognition principle and the acquis stemming from Articles 28-30 EC.

The existing regime of public procurement is not in line with the

acquis.

Chapter 2: Free movement of persons

The reporting period has not seen any significant developments in this area of the

acquis.

No progress can be reported in the area of

mutual recognition of professional

qualifications.

In most areas access to profession is limited to Turkish citizens.

No particular developments can be reported on

citizens’ rights.

No development can be reported concerning the issue of

free movement of workers

Some basic preparatory work has taken place with respect to

co-ordination of social

security.

Overall assessment

Turkey is not yet aligned with the acquis in this field and has completed first preparations in

some areas.

In the area of mutual recognition of professional qualifications as well as citizen’s rights, no

progress has been made. With respect to the co-ordination of social security, preparatory work

needs to continue and the necessary administrative capacity in this area will need to be built up.

The issue of free movement of workers needs to be the subject of mutual consultations.

Chapter 3: Freedom to provide services

Turkey has made moderate progress in aligning with the acquis in the area of financial services.

In the area of

right of establishment and freedom to provide (non-financial) services,

law on the exercise of the legal profession was adopted in May 2001. This gives foreigners the

right to carry out legal consulting services, without needing to be members of a Turkish bar.

However, the regime restricts certain professional activities to Turkish citizens only. In addition,

the law only applies to nationalities, which make similar rights available to Turkish nationals

seeking to practise abroad.

In the field of

financial services,

and in particular the

banking sector,

important changes have

taken place as part of the programme "Strenghtening the Turkish Economy" which was adopted

in March 2001. As part of these reforms, the Banking Regulatory and Supervision Authority

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issued a programme on “Restructuring the banking sector” in May 2001. This accelerated the

privatisation of State-owned banks, which had started in September 2000.

A number of pieces of legislation has been adopted such as the Directive on determining the

qualifications for loans and other receivables for which banks shall set aside provisions and on

general principles and procedures for provisions, and the Decree on savings deposits subject to

insurance and on premiums to be collected by Savings Deposit Insurance Fund. The maximum

coverage saving deposit accounts provided by the Savings Deposit and Insurance Fund has

been reduced to 50 Billion Tl for the deposits made after 1 January 2001. The ceiling had

previously been reduced to 100 Billion for deposits made after 1 January 2000. The coverage

for deposits made before this date remains unlimited.

Additionally, the Regulation on the Internal control and risk Management System of Banks was

adopted requiring banks to set up appropriate internal inspections and risk management tools

by 1 January 2002.

The Regulation on measurement and assessment of capital adequacy on a consolidated basis

was also adopted, as were the principles concerning the accounting and implementation of the

standard ratio relating to the banks' own funds, to net overall positions in foreign currencies , a

ratio which is calculated on a consolidated basis.

In addition, the banking law was amended in May 2001, introducing important changes,

including the definition of thresholds for a bank's own funds, the definition of credit, as well as

rules on provisions against bank losses.

All these provisions aim to stabilise the financial sector and align legislation with the Community

acquis.

Concerning

securities,

two regulations were adopted in June 2001 by the Capital Market

Board. One concerned the functioning of the Investor Protection Fund, intended to cover losses

incurred by customers of insolvent securities firms, and the other the establishment and

functioning of a central registry. The function of the central registry is to manage a fund intended

for the progressive liquidation of insolvent intermediaries. The regulation will enter into force

once the central registry, which is to administer the Fund, is operational.

A Communiqué on the principles regarding licensing and registration of working in the field of

capital markets has been published in June 2001.

In the field of

insurance

services, three laws have been adopted since the previous Regular

Report. These relate to insurance and reinsurance brokers (October 2000), to Individual

retirement and Saving System (April 2001), and an amendment to the Regulation on Insurance

Adjusters (May 2001).

As regards the non-harmonised area, problems remain on the application of mutual recognition

principle and the acquis stemming from Articles 28-30 EC.

No progress has taken place concerning

personal data protection,

neither as regards

legislation or development of administrative capacity.

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Overall assessment

The overall alignment with the acquis and the liberalisation process is advancing in the area of

financial services. The current reforms particularly in the banking sector are significant and are

welcomed. Much work remains to be done in order to bring the Turkish legislation in line with

the acquis in the field of non-financial services.

The outcome of the ongoing negotiations to extend the Customs Union in the area of services

and public procurement should promote further progress. These negotiations have started in

1999, and are progressing, after a reformulation of the draft agreement to take into account

Turkish status as a candidate country.

Important discrepancies with the Acquis remain in the area of

non-financial services.

Foreign

residents still need a permit or an incentive certificate issued by the General Directorate of

Foreign Investments of the Under secretary of Treasury, and the provision of certain services is

reserved to Turkish nationals.

In the field of

investment services and securities market,

the adoption by the Capital Market

Board of the Regulation on the functioning of the Investor protection fund is a welcome

development. It is now essential that the Central Registry becomes operational.

In the field of insurance, specific restrictions on the freedom of services remain. The Insurance

Surveillance Board maintains links with the Ministry of State for Economic Affairs and may

therefore not be qualified as fully independent. This matter needs to be further reviewed.

As regards administrative capacity, the Capital Market Board (CMB) is the authority

monitoring the

investment services and securities market.

It is autonomous, self-financing

(through a 0.25% levy on transactions) and has a staff of 366 persons. It can carry out

autonomous inspections, which can lead to financial penalties and the suspension of licenses.

The Board works on the principles of the International Organisation for Securities Commissions

and EC standards.

Chapter 4: Free Movement of Capital

Since the previous report, Turkey has made limited progress in further aligning with the acquis.

As regards

payment systems

, the new generation real time settlement system, which was

introduced the previous year, was extended to electronic transfer and settlement.

The law of April 2001 amending the Central Bank law enables the Central Bank to regulate the

volume and the circulation of the Turkish Lira, to establish payment, securities transfer and

settlement systems. The law also introduces regulations ensuring uninterrupted operations and

supervision of existing or future systems, to determine methods and instruments including

electronic environment for payments.

With respect to the related acquis on

money laundering,

some progress can be reported with

the signature of the Council of Europe Convention on Laundering, Search, Seizure and

Confiscation of the Proceeds from Crime on 27 September 2001.

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Overall assessment

The Turkish regime on the free movement of capital is to a certain degree aligned with the

acquis, but some further efforts are required for the legislation to be fully in line. Liberalisation

must be extended to all transactions. Restrictions concerning foreign investment in various

sectors, such as mining, energy, banking, TV and radio companies, telecommunications are still

in place. There are also limitations on foreign investment in the transport sector (e.g. maritime

and aviation companies) and in ports, where foreign participation may not exceed certain

ceilings. Foreign investments in real estate are limited, and Turkish insurance companies are not

permitted to invest their reserves in foreign assets.

The authorisation system for investment should be abolished and replaced by a registration

system. The current system is not in conformity with the relevant Community acquis.

As a result of the economic crisis of February 2001, Turkey has embarked upon a substantial

reform of the financial sector. These reforms included the restructuring of the banking system,

and the privatisation or closure of certain ailing banks

(see Section 2 on the economic

situation).

Rapid completion and implementation of banking sector reform is essential, to

complete alignment with the acquis.

In general, the conditions for foreign companies wishing to be listed on the Turkish stock

exchange are similar to those applied to EU companies. However, a foreign company must also

be listed in its home country.

Outward transfers of funds by residents are free, provided they are for sums below US$ 5

million. For larger amounts, official authorisation remains necessary. The conditions under which

non-residents may exports large sums are unclear.

Turkey needs to properly enforce the legislation on money laundering, in force since August

1999. Compliance with the Recommendations of the Financial Action Task Force should be

ensured.

The Central Bank is connected to the TARGET system of the European Central Bank for real

time transaction in EUROs.

In terms of administrative capacity, the special unit dealing with financial crimes investigations

recruited 19 new financial crime experts in 2000-2001. This unit has been operating since 1997

within the Ministry of Finance, and has a staff of 88.

Chapter 5: Company law

Turkey has made some progress in this area, in particular concerning the legislation on

Intellectual Property rights, and has also made efforts to implement this legislation.

No progress concerning

company law

as such.

In the field of

intellectual property rights (IPR),

Turkey has taken a first step by adopting a

legislation which aims to align the Turkish regime with the Directives on rental right and lending

rights and others rights related to copyrights in the field of intellectual property and the Directive

on the co-ordination of certain rules concerning copyright and rights related to copyright

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applicable to satellite broadcasting and cable retransmission, and with the Bern and Rome

Convention, as well as with the TRIPs Agreement, the WIPO Copyright Agreement, and the

WIPO Performances and Phonogram Agreement.

In March 2001, the Parliament adopted a law establishing specialised Courts to deal with

intellectual property issues in the major provinces, while the General Civil Courts and General

Penal Courts have been authorised to handle cases related to IPR issues.

Turkey ratified the European Patent Convention in November 2000 together with the

Memorandum of Understanding in order to harmonise Turkish practices with those of the Office

for Harmonisation in the Internal Market. The law on Customs adopted in February 2001

contains measures aimed at fighting against violations of IPR at the frontiers and contains

measures concerning counterfeited and pirated goods.

Overall Assessment

Turkey has advanced further in the field of industrial and intellectual property rights. No

developments towards further alignment with the

acquis

in other relevant areas can be

recorded.

Important discrepancies remain in the area of company law, in particular in relation to merger

provisions, and accounting and audit legislation. The registration of companies is carried out by

the Provincial Trade Registries which are established within the Chambers of Commerce. There

is a need to further improve the quality of the data and registry.

On intellectual property rights, Turkey needs to fully implement its commitments under the

Customs Union. In addition, Turkey is neither member of the WIPO Copyright Treaty nor of

the WIPO Performance and Phonogram Treaty, and should advance its efforts to align with

these.

Piracy of audio-visual materials continues to be a serious problem in Turkey, and efforts to

address it should be taken further. Strengthening the enforcement of existing legislation, and

gaining approval for the relevant new legislation, remain important priorities for Turkey.

Matters relating to industrial property rights, and in particular the implementation of the Hague

agreement on the Deposit of Industrial Rights, are managed by the Turkish Patent Institute. This

Institute is not a fully independent body, but is connected to the Ministry of Industry. This

situation must be addressed.

The adoption of a law on protection of topographies of integrated circuits is well underway.

Chapter 6: Competition policy

Since the last Regular Report, Turkey has made substantial progress in the field of anti-trust

policy. No progress can be recorded concerning the alignment with State aid regulation and

enforcement.

Turkey has further aligned its legislative framework in the area of

anti-trust

with the

acquis

and

the obligations of the Customs Union. Turkey has adopted a considerable amount of secondary

legislation, in particular in the area of block exemption regulations.

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In the area of

state aid,

in June 2001 the establishment of a functionally independent body

responsible for the enforcement and monitoring of State aid granted in Turkey was agreed, to

be effective as of 1 January 2003. An ad-hoc committee has been set up within the Turkish

Government with a view to preparing the setting up of this independent body. Concerning state

aid for regional development purposes, no progress can be recorded.

Turkey has prepared a list of its remaining State monopolies of commercial character and

companies with exclusive rights. This list was presented to the Commission in April 2001.

Turkish liberalisation efforts have in the period under review continued to be insufficient as

regards dismantling the special rights of TEKEL. The transition period for adjustment foreseen

by the Customs Union agreement expired already in the beginning of 1998. Difficulties in

relation to monopoly adjustment on alcohol and tobacco therefore remain.

The preparation of the procedure for implementing rules in the field of competition under the

Customs Union was finalised and the process of their final adoption by the EC - Turkey

Association Council has been launched.

Overall assessment

The application of anti-trust provisions remains satisfactory. Further alignment to the

acquis,

however, remains necessary in this field. The Competition authority has handled a considerable

number of cases, but the administrative capacity of the authority should be strengthened to

ensure that the handling of all cases is of a high standard.

No effective state aid control, based on EC principles and criteria, exists in Turkey. It needs to

align its legislation with the

acquis

in this area. It should speed up preparation for the

establishment of an independent State aid control body. In addition, Turkey does not have an

inventory of existing state aid, nor is there a regular annual reporting following the methodology

and the presentation of the Community’s survey on state aid. However, Turkey has agreed to

establish an inventory of state aid and regular annual reporting following the methodology and

the presentation of the Community’s survey on state aid after the creation of the State Aid

Monitoring Authority. At present, control of State aids remain under the responsibility of a

number of different public bodies, such as the Undersecretary of State Treasury and the

Undersecretary of Foreign Trade.

Turkey should accelerate its work on the definition of a State aid map for regional development

purposes. Further work is needed to ensure that Community criteria and methodology, as well

as geographical and statistical data collected according to Eurostat standards, are followed

when finalising the map to enable a differentiation of maximum aid intensities in the country.

The independent Turkish Competition Authority became operational in 1997. It has adopted

and published a number of legislative acts and has continued to follow closely the developments

of the EU legislative framework on antitrust and merger policies. However, doubts remain as to

whether this Authority enjoys the appropriate powers to effectively apply competition law to

public undertakings, state monopolies and companies having special rights. The exact

competence of that authority therefore needs to be clarified.

The situation with respect to monopoly adjustment on alcohol and tobacco (TEKEL) remains a

matter of concern. Under the Customs Union decision, the necessary adjustment should have

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taken place by 1998. A new law, adopted in January 2001, is in contradiction with Turkey's

obligations under the Customs Union. As a result, TEKEL effectively retains a monopoly on

trade in alcoholic beverages and tobacco products, although its character has changed from a

public body to a commercial enterprise. Privatisation of TEKEL is under preparation.

Chapter 7: Agriculture

Since the last Regular Report, no progress in aligning legislation has been made.

Agriculture in Turkey accounted for 14,6% of Gross Value Added in 2000

, as opposed to

15% in 1999

. Agriculture employed just over one third (34,9%) of the Turkish labour force in

2000

In 2000, EC imports of agricultural products originating in Turkey decreased by 3,8% to

€1,917.0 million. EC exports to Turkey increased by 24,6% to €1,004.6 million. The trade

balance in favour of Turkey was €912.4 million compared to 1.187 million in 1999

. In 2000,

the most important product groups in terms of EC imports from Turkey were fruit (46%) and

processed fruit and vegetables (20%). As far as EC exports to Turkey are concerned, the most

important sectors were tobacco (9%), drinks and vinegar (7%) and cereals and rice (6%).

Turkey has introduced a number of measures in the area of agricultural policy reform.

According to Turkey's April 2001 programme ”Transition to a strong economy", the main

principle of agricultural policy is to assist farmers by means of direct income support throughout

the whole country. In the short term, state-controlled support prices will take into consideration

Turkey's financial resources and will not exceed targeted inflation rates. Support purchase

volumes will be linked to Turkey's financial constraints.

The government's objective is to phase out various support policies and to introduce a de-

coupled direct income payment system perhectare (nation-wide). Moreover, measures are

taken to limit the role of the State in agriculture. Furthermore, measures to avoid fragmentation,

for example by changing the inheritance rules under the Civil code, and through rural

development projects to improve infrastructure and living standards, are being considered.

In 2001, the State budget for agricultural policies will amount to approximately € 2,600 million.

Out of the total agricultural budget, € 450 million will finance direct support schemes to farmers,

€ 140 million input support and € 2,000 million general and other support measures. State

support to agriculture, including rural development, represents about 3.9 % of the State budget.

Horizontal issues

Preparations for the implementation of measures related to the

European Agricultural

Guidance and Guarantee Fund (EAGGF)

and other horizontal mechanisms have not started.

Data refer to ISIC Rev.2

The source for all agricultural statistics is EUROSTAT unless otherwise specified.

Eurostat Labour Force Survey definitions (LFS). Agricultural employment is defined in LFS terms as economically active

persons who gain a significant part of their income from agriculture.

Uruguay Round definition of agricultural rpoducts, figures taken from EUROSTAT COMEXT

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As regards the implementation of trade mechanisms, Turkey’s state of alignment falls within the

Customs Union Decision of 1995 (see

Chapters 25 - Customs union, and Chapter 26 -

External relations).

Under a pilot programme on direct income payments per hectare, partly financed by the World

Bank, that has been implemented in four provinces, different mechanisms for registering farmers

has been tested. Based on these results, registration will be developed on a nation-wide scale (4

million farmers). The registry will be developed over two years. At present 20% of the relevant

offices have fully computerised cadastre information. Ministry of Agriculture and Rural Areas

(MARA) district offices will keep the farmer registration records.

Within MARA, a Geographical Information System and Remote Sensing Department was

established to classify and map agricultural land, to estimate production and production capacity

for various products and to create a database for land use planning purposes.

A regulation on the identification, registration and monitoring of bovines was published in June

2000. The aim is to start registration still in 2001 and register 10 million bovine animals. A

computerised system is under development.

Common Market Organisations

The Government has started to shift support policies such as intervention, subsidies of input and

credit systems, towards a policy of direct income payments per hectare.

The fertiliser subsidy has been held constant at a nominal rate since 1997. A programme for the

phasing out of agriculture credit subsidies has been approved. Support for some crops such as

wheat has been lowered. The latter issue has led to tensions within the Turkish government due

to the compatibility of the wheat price level with the commitments made under IMF standby

agreement.

As indicated, a pilot programme on direct income payments per hectare has been implemented

in four provinces. The payment per decare was € 5.5 with a maximum eligible area of 199

decare (or 19.9 hectare) per farmer. So far, approximately € 2.7m has been paid to 9,677

farmers.

As a transitional measure, farmers may also receive financial assistance to stimulate the change

to more profitable crops (alternative crop programmes). The main purpose is to reduce land use

for tobacco, sugar beet, tea and hazelnut. Some farmers also may receive supplementary

income support for the development of activities outside agriculture in those regions where the

growing of alternative crops is difficult.

The Government took a further decision in April 2001 on the implementation of the direct

income support system in agriculture (nation-wide).

External border tariffs for certain commodities have been decreased to introduce a more market

conform approach.

Another important element of the reform process in the agricultural field entails the reduction of

the role of the state in agricultural and agro-industrial production. A process of privatisation of

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State Economic Enterprises (SEEs) has started. A law de-monopolising the production of

alcoholic spirits was enacted in January 2001.

Moreover, the law of 2000 on Agricultural Sales co-operative unions and Agricultural Sales

Co-operatives entered into force in 2001. The Restructuring Board was established and former

annual credit payments and subsidies have been replaced as from 2001 by transitional

compensation payments to 12.000 workers.

With respect to privatisation of enterprises, from 2002, the sugar company (TSFAS) will

operate on a commercial basis. Sugar mills and some tea factories are expected to be

transferred to the Privatisation Agency still this year. A Sugar Board was established by the

Council of Ministers' Decree of June 2001. All of TEKEL's assets have been transferred to the

same agency with the aim of completing asset privatisation in 2002 (Law of January 2001).

The changes in the Agricultural Sales Co-operatives will further lead to some changes at

governmental level. The Ministry of Agriculture and Rural Areas will need to take over some

responsibilities previously carried out by the SEEs. Moreover, a further restructuring of the

Ministry is under preparation both at central, provincial and local level. MARA has begun work

on the necessary legislation.

With respect to

arable crops, sugar, specialised crops and animal products,

new legislation

has been adopted.

A new Sugar Law was adopted on 19 April 2001. It opens the market to competition, reduces

state interference, and aims to maintain stable and self-sufficient sugar production. A system of

production quotas will be part of secondary legislation still to be adopted.

In the

tobacco sector,

the Turkish parliament adopted the Law on Restructuring of the General

Directorate of TEKEL and on the production, exports and imports of tobacco and tobacco

products, with the aim of restructuring the State-owned TEKEL and adopting new regulations

on tobacco, tobacco products and alcoholic beverages. The Law did not receive the approval

of the President because of its social consequences for tobacco-growers. A "Tobacco,

Tobacco Products and Alcoholic Beverages Market Regulation Board" is to be set up under

this law. In addition, the monopoly status of TEKEL will be converted into a commercial

enterprise that will operate under free-market conditions, and will subsequently be privatised

subsequently.

Rural development and forestry

Rural development programmes as foreseen by the relevant acquis do not exist in Turkey.

However, a number of ‘classical’ development projects, developed together with the

International Fund of Agriculture Development (IFAD), do exist. They aim to improve

infrastructure in rural areas, to increase income levels and the standard of living. The Grand

Anatolian Project (GAP) has enabled a number of sectoral programmes to improve agricultural

structures. A separate desertification programme has been established. Specific areas of action

in the forestry sector are forest fire protection, afforestation, erosion control, the protection of

biological diversity and the improvement of social and economic conditions of forest villages

through low interest loans. The total staff of the whole Ministry of Forestry is around 30,500

persons.

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A Land Use and Soil Conservation Law is pending before the Turkish Parliament.

Veterinary and phytosanitary issues, including food

safety

In the

veterinary sector,

the animal disease situation remains serious (foot and mouth disease,

rinderpest, blue tongue, sheep/goat pox and brucellosis).

A new animal breeding law entered into force in March 2001. The law aims to improve the

efficiency of animal production (both for agriculture and also the breeding of animals for races

and competitions), and the protection of animal gene resources.

The basic law on Animal Health Services was amended in April 2001. Its aim is to form the

legal basis for the adoption of various items of EC legislation concerning regionalisation of

countries for which import restrictions are imposed due to certain animal diseases and for

strengthening of sanctions. In addition, a circular was issued in February 2001 that set out the

guidelines on animal health conditions and veterinary certification for imports of registered

equidae for breeding and production.

Following a bylaw on the Procedure and Principles for the Establishment, Commencement,

Operation and Inspection of Red Meat and Meat Products Establishments adopted in

September 2000, slaughterhouses are classified into three groups and the number of animals to

be slaughtered and sale points are determined in terms of their technical and hygienic conditions.

The aim of this bylaw is to improve the hygienic and technical conditions of slaughterhouses,

increase the number of licensed establishments, and shut down facilities that do not meet the

requirements. The Turkish authorities have indicated that, as a result of this bylaw, 375 fresh

meat and meat product establishments and 84 poultry-meat and poultry-meat products

establishments have been licensed, and that 550 establishments have been shut down.

As a first action in view of the surveillance of BSE, a screening programme was initiated at the

beginning of 2001, with the aim of inspecting and monitoring samples taken randomly from

cattle with nervous disorder symptoms and from cattle, older than 30 month, slaughtered at

slaughterhouses.

Moreover, at the end of 2000, a “National BSE Monitoring Committee” was established under

the Ministry of Agriculture and Rural Affairs.

A bylaw on the Establishment and Duties of the Provincial Control Laboratory Directorates of

the Ministry of Agriculture and Rural Affairs was amended in January 2001. This amendment

provides for the restructuring of laboratory directorates in order to enable their practices to

come into line with the principles set out in “Good Laboratory Practice”. The capacity of these

directorates was strengthened in 2000 by providing laboratory equipment (€1.3 million).

Disease diagnostic capacity of the laboratories in Veterinary Control and Research Institutes

was enhanced either by establishing new laboratories or by introducing new techniques and

instruments (e.g. establishment of a Molecular Epidemiology Laboratory at the Foot and Mouth

Disease Institute, a BSE laboratory at the Etlik Central Veterinary Control and Research

Institute).

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In the

phytosanitary sector

the disease situation for

Ralstonia solanacearum

and

Globodera

spp.

has improved. The health situation for other diseases has not changed since the last Regular

Report.

A new article for Notification of Interception of a Consignment of Harmful Organisms was

added to the new legislation on plant quarantine. Registration of producers and importers of

plant and plant products and of warehouses and dispatching centres is obligatory.

As regards food safety,

a communiqué on the Determination and Announcement of Entry and

Exit Points for Foodstuffs to be Exported and Imported was adopted on 1 March 2001 in

order to ensure effective controls on foodstuffs with respect to food safety and quality. Certain

customs offices were assigned for imports and exports of foodstuffs. Moreover, training of food

inspectors at border points has been initiated

(see also Chapter 1 Free movement of goods).

Overall assessment

Turkey's preparations to harmonise legislation with the community

acquis

in the field of

agriculture are still at a very early stage. Limited progress has been made in the adoption of

legislation directly related to the acquis in the fields of veterinary, phytosanitary and food safety

in order to align with the acquis. The development of a land register has not been completed. A

plant passport system has not been established in Turkey and preparations have not started.

Low income levels, overproduction in some sectors, fragmented farm structures, and relatively

low education levels of farmers are the main outstanding issues for the Turkish agricultural

sector. The Government is aware of the need to improve productivity and efficiency in the

agricultural sectors. Against this background, Turkey has started a substantial reform process in

the agricultural sector. Various agricultural support mechanisms (input subsidies, agricultural

support prices, credit subsidies) are gradually being replaced by a decoupled per hectare direct

income payment system nation-wide. However, not all of the steps that have been taken

necessarily go in the direction of current Community policies. There is a clear difference in

approach.

The role of the State in agricultural markets and processing of agricultural products is being

reduced.

A functioning land register is necessary for the implementation of a direct payment system (land

parcel identification system; data on land use; data on land ownership). Turkey is encouraged to

continue with projects in this area (including TAKBIS), and with the preparation of statistical

information systems so that valuable information on agricultural developments is gathered. At a

later stage, Turkey is recommended to concentrate on the establishment of other management

systems such as those related to the European Agriculture Guidance and Guarantee Fund

(EAGGF), producers organisations and mechanisms to manage rural development programmes.

A detailed opinion on the new Sugar Law is at present difficult to provide given the fact that its

exact scope greatly depends on the content of various implementing laws, for example with

respect to the establishment of quotas. Further information should be collected on the legislation

in the field of animal nutrition.

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The overall health situation in agriculture needs to improve, and in addition, specific attention

should be given to improve the system of veterinary and phytosanitary controls at external

borders (border inspection posts). Inspection visits of the Food and Veterinary Office of the

EC have established major shortcomings in the performance of Turkey's veterinary office and of

certain departments within the general directorate for inspection and control. Their

recommendations should be implemented.

The administrative systems and control and inspection equipment in agriculture urgently need to

be restructured and upgraded. It is necessary to upgrade food processing establishments.

Chapter 8: Fisheries

No concrete progress can be reported in this sector since the last Regular Report.

In the field of

structural actions,

a pilot study for a more sophisticated registration system is

being conducted on 1,500 vessels. This system records information such as the size of catch,

the species fished and the fishing grounds used.

A law to change the nature of sanctions used within the framework of the Fisheries law (i.e.

from criminal to administrative sanctions) is currently pending before the Parliament.

Overall assessment

Major discrepancies with the main elements of the EC's fisheries policy remain, particularly on

resource management, inspection and control, and market and structural policies.

Concerning resource management, inspection and control, a quota system as such does not

exist in Turkey, but other conservation measures are applied through conditions attached to

licences (e.g. length of vessels, time and place of fishing, use of nets etc). In order to prevent

overfishing, no vessel certificates have been issued since 1997. Foreign-owned vessels are not

allowed to fish in Turkish waters.

Licences for fishermen and fishing vessels are recorded in register books by the provincial

directorates of the Ministry of Agriculture and Rural Areas. The goal is to transfer these records

to a computer system to establish a national database.

As a first step, the fleet registration system needs to be modernised and producers'

organisations established. Moreover, administration, inspection and control systems should be

improved.

Chapter 9: Transport policy

Some progress has been made in this area, although no new legislation transposing the

Community transport acquis has been adopted.

As concerns

land transport,

Turkey signed the Agreement on the International Occasional

Carriage of Passengers by Coach and Bus (INTERBUS) in June 2001. On 16 July 2001,

Turkey joined the AETR (European Agreement concerning the Work of Crews of Vehicles

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engaged in International Road Haulage), thus integrating driving and rest time rules for

international road transport operators into its national legislation.

As regards rail transport, no new developments can be reported.

In the field of

air transport,

services at airports open to international traffic have been opened.

Slot allocations are made according to IATA rules. Turkey has hitherto not shown an interest in

participating in the European Common Aviation Area process with the other candidate

countries.

The Turkish administration responsible for air transport has been restructured through the

creation of a Civil Aviation Authority.

The Turkish aviation sector is undergoing privatisation, although the latest attempted

privatisation of Turkish Airlines was unsuccessful. An amendment to the Turkish Civil Aviation

Code was adopted on 19 April 2001 allowing air carriers to set airfares without the approval of

the Ministry of Transport. This will further promote competition.

In the field of

maritime transport,

Turkey is taking steps to address its problems as regards

maritime safety. According to 2000 statistics under the Paris Memorandum of Understanding,

the detention rate for Turkish-flagged vessels in 2000 was 23.8%, a slight improvement on the

figures for 1999 (24.5%). This compares to an average for EU-flagged vessels of 3.9 % in

2000.

Turkey is a signatory of many related International Maritime Organisation rules and regulations

and has harmonised its legislation accordingly. Further safety legislation has been adopted and

International Maritime Organisation Conventions transposed. Turkish vessels with serious

deficiencies receive additional penalties.

No progress can be noted as regards lifting the restrictions that Turkey still applies on vessels

serving the Cyprus trade and on vessels on the Cyprus register. In addition, market access to

coastal trade is reserved for Turkish-flagged vessels.

Overall assessment

Turkey needs to step up its legislative work considerably to adopt the Community transport

acquis. Whilst a large number of new texts are in preparation, many of these are framework

laws which leave the detail of implementation to secondary legislation. Furthermore,

improvements of Turkey’s administrative capacity to implement and apply effectively the

legislation are required in all sectors of transport policy, in particular as far as the maritime

administration is concerned.

As regards road transport, the structure of the taxes collected from road transport operators is

partly harmonised with the prevailing tripartite EC structure. Turkey does not apply road-user

charges in the way foreseen by the relevant acquis, and vehicle taxes vary according to the year

of manufacture.

It should be noted that although Turkey does not apply the three EC criteria for admission to

the road transport profession, it does apply a set of criteria for financial standing. A set of

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criteria for good repute that is similar to that of the EC also exists. The regulation on the

professional qualifications of road transport operators is insufficiently enforced.

Turkey is well advanced in taking over and implementing the EC road transport acquis in the

technical field. EC norms on vehicle weights and dimensions, including the 11.5 tonnes

maximum authorised weight on driving axles as well the 44 tonnes for-axle combination, are

already part of Turkish national legislation. More efforts need to be made, however, with their

enforcement.

Turkey is having problems in adapting its road transport fleet. Although vehicles engaged in

international traffic comply with international and European norms (environmental norms,

tachographs and speed limitation devices), those that carry out national transport only are far

from complying. For instance, Turkey is only now considering extending the use of the

tachograph to the national fleet. Retrofitting and adapting this fleet will be costly.

As for the rail sector, the regulatory authority is still to be established.

In the field of air transport, a new aviation safety monitoring system is now in place, and the

International Civil Aviation Organisation (ICAO) has expressed satisfaction with Turkey’s

compliance.

On maritime safety, the Turkish maritime safety record is a matter of very serious concern.

Despite Turkey being aware of the problems in this area, and despite some attempts to address

these, the figures for the detention rate of vessels flying the Turkish flag are still very high.

Improving this record should be an urgent priority for Turkey. Turkey should try to fulfil its Flag

State implementation obligations as first priority, followed by its Port State obligations. Turkey

has identified the shortcomings of the maritime administration - particularly that of Flag State

Implementation - as being a major factor in the low safety level of the Turkish register.

Chapter 10: Taxation

Since the last Regular Report Turkey has made progress, especially in the field of excise duties.

In the field of

indirect taxation,

in June 2001 the levels of minimum excise duties on LPG used

as motor fuel was brought above the minimum EC level. Now the level of the duty is higher than

the minimum EC level on all motor fuel oils (liquid petroleum gas - LPG, leaded and unleaded

fuel and diesel).

Concerning

direct taxation,

Turkey adopted in June 2001 a number of amendments to existing

laws. It exempted capital gains arising from mergers, divisions and exchanges of shares from

corporate income tax, in accordance with the relevant

acquis

on mergers, divisions, transfers of

assets and exchanges of shares with regard to domestic transactions. It also reduced the rate of

the indirect taxes on capital-raising by companies, in accordance with the relevant

acquis.

The use of the Personal Identification Number has been extended in 2001 to various financial

transactions.

As regards

administrative capacity,

the implementation of the personal tax identification

number is aimed at improving the effectiveness of tax collection.

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Overall assessment

Overall, further efforts are needed to align national legislation with the

acquis.

As regards VAT, the structure of the tax is in place, following the introduction of the VAT Act

in 1985. However, significant efforts of alignment are necessary in particular with regard to the

exempt transactions and the rates applied.

As regards excise duties, in spite of the positive steps taken on the level of rates on motor fuel

oils, further alignment is required as regards the structure of the duty, the obligatory exemptions,

as well as with regard to the rates applied to tobacco and alcoholic products.

The legislation adopted concerning direct taxation brings the Turkish legislation on direct

taxation more in line with the relevant EC Directives. However, substantial alignment remains

necessary.

As regards administrative capacity, Turkey needs to modernise and strengthen its tax

administration, in order to enable it to implement and enforce the EC acquis and to increase the

tax collection.

Evasion of taxes continues to be widespread in the industrial and business sectors. The

Transition Programme on Strengthening the Turkish Economy aims to address this issue, but

tangible results have not yet been observed.

Chapter 11: Economic and monetary union

A detailed assessment of Turkey’s economic policy in its various aspects has been given above,

in the Chapter discussing the economic criteria

(B-2).

Therefore, the present section is limited to

a discussion of those aspects of the Economic and Monetary Union

acquis

as defined by title

VII of the EC treaty and the other relevant texts which candidate countries should implement

before accession i.e. the prohibition of direct public sector financing by the central bank, the

prohibition of privileged access of the public sector to financial institutions, and independence of

the national central bank. As to the process of liberalisation of capital movements, upon the

completion of which compliance with the EMU

acquis

is conditional, this aspect has been

covered above, in the section on

Chapter 4 – Free movement of capital.

Turkey has made some progress in the adoption of the EMU

acquis.

The

independence of the Central Bank

has been increased with the adoption of the

amendments to the Law on the Central Bank of the Republic of Turkey in April 2001.

As regards

direct public sector financing by the central bank,

the provisions preventing the

Bank from granting, advancing or extending credit to the Treasury, public establishments and

institutions have been reinforced. The Bank may not purchase debt instruments issued by the

Treasury and public establishments and institutions on the primary market.

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Overall assessment

Turkey will participate in EMU upon accession with the status of a country with a derogation

under article 122 of the EC Treaty. It will need to implement the necessary changes to its

institutional and legal framework by the date of accession.

Turkey has taken important steps to increase the independence of the Central Bank, but further

measures are needed to align with the acquis in this area. The Central Bank law is incompatible

with the acquis as far as the determination of the inflation target is concerned, since this is

decided upon in agreement with the Government. Other amendments may be needed to ensure

full compliance with the acquis in the area of personal and institutional independence.

Chapter 12: Statistics

No concrete progress can be reported in this area over the past year, except for the start of co-

operation between the relevant Turkish authorities and Eurostat.

In the context of this co-operation, priority areas were defined as the following fields:

Harmonised Consumer Price Index and Purchasing Power Parities, demographic and social

statistics, regional statistic, macro-economic statistics, business statistics, external trade,

agriculture statistics, business register, Classifications and Dissemination. The State Institute of

Statistics (SIS) has set up a Working group on the business register and prepared a first annual

Work Plan (2001) covering the main statistical domains.

Overall assessment

Turkey’s statistical system is still very different from that of the EU. This is true in most fields,

such as statistical infrastructure, demographic and social statistics, regional statistics, business

statistics, transport statistics, external trade statistics and agricultural statistics. Differences also

exist in macro-economic statistics although some alignment has taken place in recent years due

to the EU-Turkey Customs Union.

In all of the areas mentioned above, much more work is needed on methodology, quality and

completeness of data to achieve compliance with the acquis. As a first step, Turkey will need

to set up the basic infrastructure. In particular this means adopting the required classifications,

building a business register that meets EU standards and amending its Statistical Law, which is

currently not in line with the

acquis.

The State Institute of Statistics is the central authority of the statistical system, responsible for

data collection, production and publication of statistics. The Headquarters of the Institute

consist of 10 “Principal Service Units” which cover the main statistical areas, complemented by

three “Advisory Units” (Legal, Research, Planning and Co-ordination, Statistics) and three

“Supporting Units” (Administrative and Financial Affairs, Personnel, Civil Defence Unit). The

SIS has 23 regional offices at present. The total number of employees is about 2890 people, of

which 2000 are working in the central office and 890 in the regional offices. The “Supreme

Statistical Council” is the advisory body in Turkey on statistical matters.

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The administrative organisation of the statistical system needs to be improved substantially.

Particular efforts are needed in areas including setting of priorities, staff training, and ensuring

appropriate staffing in departments working on areas relevant for EU integration.

Chapter 13: Social policy and employment

Since the last Regular Report, limited progress can be recorded in these areas (see also under

economic social and cultural rights).

In the field of

child labour,

Turkey ratified in January 2001 the ILO Convention N° 182 on the

Elimination of Worst Forms of Child Labour, and also in January 2001 the European

Convention on the Exercise of Children’s Rights. A Child Bureau was set up in the Directorate

General for Public Security by a law adopted in April 2001. However, child labour remains

widespread and a matter of major concern, particularly during the continuing economic crisis.

In the field of

equal treatment for women and men,

preparatory work has been undertaken

with respect to maternity leave and with respect to the elimination of existing discrimination in

the framework of the new Civil Code, currently pending before the Parliament. The Civil Code

also aims at abolishing the concept of the “head of the family”. Further steps in transposing the

relevant

acquis

should follow.

No further transposition can be noted in the area of

health and safety at work.

Despite reforms in progress, the situation of the

public health

care system could not be

improved compared to the previous reporting period. Public expenditure is still insufficient and

the distribution of services in general has not improved, despite reforms in progress.

As regards

social dialogue

, a bill on public servants’ trade unions was adopted in June 2001.

The present bill is not in line with the Community acquis and the relevant ILO conventions that

Turkey has ratified. The law contains a number of provisions, which entail significant constraints

on the right to organise in the public sector. Notably, there are restrictive provisions relating to

the exclusion of the right to strike and to collective bargaining.

Turkey adopted in April 2001 a law setting up the Economic and Social Council, which

establishes a platform for dialogue between the social partners. NGOs can be invited to attend

the meetings at the discretion of the Prime Minister. While the Economic and Social Council

provides a useful forum for consulting a great variety of economic and social actors it does not,

however, form an appropriate basis for an autonomous tripartite social dialogue, given the

predominant place of government. The bill has to be further amended to provide for an effective

consultation of the social partners (employers and trade unions organisations), especially on

labour issues.

Regarding autonomous social dialogue, restrictions continue to exist for the signing of collective

agreements at company level, which seriously limits the extent of collective bargaining and social

dialogue.

Unemployment stood at 6.9 % in June 2001. The main challenges for Turkey remain the high

level of youth unemployment, the structural changes associated with the transition from a labour

market which is still dominated by the agricultural sector and the extent of the informal economy

(for

further details see part B).

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ISKUR, the Turkish Employment Organisation, is the agency in Turkey dealing with matters

relating to employment and unemployment issues, job finding, placement of workers into public

and private organisations and vocational training activities (see also below). Following a

restructuring on the basis of a decree in summer 2000 (the confirmation of which by Parliament

is now overdue), ISKUR has started to design pro-active labour market policies at provincial

level in conjunction with the social partners, but it still lacks the financial resources required.

Concerning

social protection,

a law was adopted in March 2001, which allows for private

pensions, and thus complements the compulsory pension system. The law provides for the

establishment of an Individual Pension Advisory Board. This new unit will be formed by the

Under Secretariat of the Treasury, by one member each from the Ministries of Finance and

Labour, and by the Capital Markets Board. Its task is to determine individual pension policies

and implementation. However, the critical issue of tax exemptions is not included in the law, and

this will reduce the scheme’s attractiveness.

As regards the fight against

discrimination,

no further progress can be reported (see also

above under Civil Code).

As regards

administrative capacity,

since last year a new co-ordination department has been

set up in the Ministry of Labour and Social Security. The status of the Health and Safety

Department was upgraded. No other major progress can be reported in strengthening

administrative capacity.

Overall assessment

Overall, much work remains to be done in order to bring the Turkish legislation in line with the

relevant acquis. This process has suffered from the deepening of the economic crisis which has

severely affected the employment and social situation causing hardship.

In the framework of the constitutional reform, amendments were made with respect to social

rights. These will be implemented by further legislation. Some other steps have been taken in

this field but in different cases the Community acquis has been taken insufficiently into account.

Turkish legislation remains very different from that of the Union, particularly in terms of

standards, methods and monitoring requirements.

In the field of Labour law action is required in areas such as the protection of employees with

regard to the transfer of undertakings and insolvency, the contract or employment relationship,

health and safety of temporary workers, the organisation of working time and part-time work,

the protection of young people at work, the European Works Council and posting of workers.

Despite Turkey's efforts to improve the situation, the issue of child labour still needs to be

addressed as a matter of priority.

In the field of health and safety at work, Turkey should transpose and implement the acquis.

The administrative capacity to implement and enforce legislation needs to be strengthened. The

reform process in the public health care system has to be continued. Turkey needs to ensure

that public expenditure is sufficient to meet needs and that the provision of services is improved.

Turkey should also align with the tobacco

acquis.

Improvements are also needed regarding

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health monitoring and data collection as well as in the field of epidemological control and

surveillance systems.

In the field of equal treatment for women and men, Turkey should speed up efforts to align with

the

acquis.

As regards social dialogue, further progress needs to be made as a matter of priority to create

the conditions for a free and genuine social dialogue at all levels in line with the acquis.

Difficulties with regard to freedom of association and collective bargaining also persist in law

and practice. At the sectoral level, Turkey still requires a 10% threshold for the recognition of a

trade union for collective bargaining purposes at company level. Moreover, trade union rights

are curtailed in export processing zones, where the application of most labour legislation is

suspended and restrictions are imposed on the freedom of workers to organise and on rights to

collective bargaining. The scope of collective bargaining should be improved and Turkey should

take steps to promote workers’ participation and information/consultation at the company level.

At national level, although the creation of the Economic and Social Council is a step towards

more dialogue with a larger number of actors from civil society, the government should also

continue to preserve a tripartite dialogue with social partners to discuss economic and social

policy. Turkey needs to strengthen its administrative capacity for social dialogue in terms of staff

and resources, secretariat facilities for national tripartite and multipartite processes, and

registration and analysis of collective agreements. The government should promote the social

partners’ capacity to assume the role they will be called to play in the future in the social

dialogue at EU level as well as in common European policies.

Furthermore, much remains to be done in the field of social protection. Progress in the on-going

reform of the Turkish social security system is urgently needed. Overall, the social security

system continues to experience serious financial difficulties.

No national programme for disabled people exists as yet in Turkey. Several institutions are in

charge of disabled people, among others the Administration of Social Services and Child

Protection, the Ministries of Health, Education, and Labour, and the Worker Placement

Agency. The Turkish Labour Law foresees that private and public institutions should employ

disabled people, and that they should make up at least 3% of the total number of staff. But

implementation and enforcement are not ensured.

Overall, the administrative capacity needs to be improved in order to ensure effective

implementation and enforcement.

As regards

discrimination,

the pending new Civil Code contains provisions to eliminate this.

Further efforts are needed to ensure alignment with the acquis on anti-discrimination based on

Article 13 of the Treaty.

Fight against social exclusion, as laid down in Article 136 of the Treaty, is part of the objectives

of EU social policy. As decided at the Lisbon and Nice European Councils, policies to combat

social exclusion combine commonly agreed objectives at the EU level, and national action plans.

The Gothenburg European Council in June 2001 invited candidate countries to include the

Union's objectives of promoting social inclusion into their national policies.

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Chapter 14: Energy

Progress has been achieved in this area since the last Regular Report, notably as regards

competitiveness and the internal energy market.

No particular developments are to be reported with respect to

security of supply.

Regarding competitiveness and the internal

energy market,

the Turkish Electricity Market Law

was adopted on 18 February 2001. The Law concentrates mainly on defining the sector’s new

structure and the status of the power sector actors, including restructuring and unbundling the

utilities. Whilst the state will retain control over power transmission, generation and distribution

activities are to be opened up to competition and to private companies - the latter divided into

29 distribution regions. The Law also foresees establishing a regulatory authority, in the form of

an Energy Regulatory Board, which is also expected to prepare secondary legislation. This

Regulatory Board will also cover the gas sector.

The

Natural Gas Market law

was adopted on 3 March 2001. This law also concentrates on

defining the sector’s main structure and the status of the different actors, and the creation of

agencies. The formerly state-owned company, BOTAS, is to be separated into two State

economic Enterprises: one to carry out transmission activities, the other for importing and

commercial activities. In the long term, distribution will be transferred to wholesalers.

It should be noted that the adoption of these two key laws, and the creation of the Energy

Regulatory Board, was a condition for the IMF’s support for Turkey.

Turkey continues to play a pivotal role as a transit country for oil and gas from the Caspian,

Black Sea and Central Asian regions. The development of the ‘Blue Stream’ gas pipeline to

supply gas from Russia across the Black Sea continues. Work on the Baku-Ceyhan oil pipeline

also continues. Such projects can be considered as clearly having an important role to play in

terms of helping ensure the security of supply for the Union (particularly given it is difficult to

envisage significant increases in volumes transiting by sea through the Turkish straits). Other

possibilities are being developed in the framework of co-operation activities between Greece

and Turkey.

In the oil sector, nearly 35% of the refining company was privatised in 2000.

No particular developments can be reported with regard to

energy efficiency.

Last year saw Turkey abandon a call for tender to construct the country’s first nuclear power

plant at Mersin-Akkuyu. There have been no other developments to note in the nuclear sector.

Regarding Nuclear Material Safeguards, Turkey has concluded a Full Scope Safeguards

Agreement with the IAEA. An additional Protocol to this Agreement is in force since July

2001.

Overall assessment

Turkey has advanced in preparing to harmonise with the acquis and to prepare itself for the

internal energy market through the adoption of two major framework laws for the electricity and

gas sectors. It is, however, important to point out that important aspects of the Electricity

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Directive are absent from the Electricity Law - such as access to networks, market opening and

the regime for constructing new capacity. These will need to be the subject of secondary

legislation. Market opening is initially scheduled at a rate of 20%, but there are no further plans

beyond this.

Similarly, provisions required by the Gas Directive, such as third party access, unbundling,

public service obligations or storage are not covered by Turkey’s Natural Gas law, and have

been left to secondary legislation to be adopted by the regulatory body, which itself is still to be

created. Access to the transmission system is planned, but not access to the distribution system.

The Energy Regulatory Board was established on 2 November 2001. It is important that this

body adopt implementing legislation in full compliance with the EC Electricity and Gas

Directives (such as defining eligible customers and licensing), as well as establishing prices and

tariffs. In addition, it is essential that this authority be given the necessary independence and

resources (in terms of personnel, budget, and salaries) to be able to act.

Overall, Turkey’s priority in restructuring its energy sector is attracting investment and reducing

state control. The two new laws pave the way for the opening up of each sector and

encouraging competition, but much remains to be done in terms of compliance with EC

standards. Improving the financial discipline of utilities, particularly those in the power sector,

would assist in making energy investments more attractive.

In terms of security of supply, as a member of the International Energy Association, Turkey has

already taken important steps towards complying with IEA commitments and the emergency

preparedness

acquis

as regards oil stocks. Total oil stocks, as regularly notified to the IEA,

were largely equivalent to the level required by the

acquis.

All emergency preparedness

measures are under the control of the Directorate General for Petroleum Affairs, which serves

as the agency for monitoring and controlling oil stocks.

Energy efficiency promotion is the responsibility of the Ministry of Energy and Natural

Resources, through an Energy Conservation Co-ordination Board and a National Energy

Conservation Centre. It is estimated that there is an energy conservation potential of 40%. New

norms for insulation standards and for new buildings will contribute to this effort.

Turkey should continue to give energy efficiency due attention.

Turkey will need to ensure compliance with Euratom requirements and procedures. In this

respect, due attention should continue to be given to preparing for the implementation of

Euratom nuclear safeguards.

Chapter 15: Industrial policy

Since the 2000 Regular Report, the government has concentrated its efforts on stabilising the

macroeconomic situation. As a result, only limited progress has been made with development of

industrial and enterprise policy.

Developments concerning Industrial policy should be seen in relation to the overall enterprise policy, including the SME

policy (see

Chapter 16 – Small and medium-sized enterprises).

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Turkish

industrial policy

is based around the eighth Five Year Development Plan and was

further developed in the Programme "Transition to a Stronger Economy" adopted in May 2001.

(See

also Part B.2 - Economic criteria).

The business community was involved in the design

of the policy guidelines of the Programme.

The Government adopted a programme for the

promotion of foreign investments,

which

contains measures aimed at attracting FDI. Moreover, in order to overcome the shortage of

credit for enterprises, it has announced that a restructuring fund would be established to aid

enterprises facing liquidity problems. This would be financed by contributions from both the

government and the financial sector.

Privatisation

has proceeded but has met certain obstacles, and not all the privatisations

foreseen could take place within the established timeframe. In the steel sector, following the

previous attempt in 2000 to privatise the Isdemir plants, a take-over by Erdemir was agreed in

2001, which provided for the modernisation of the plants and re-orientation of the production to

a different market segment. The attempt to privatise Türk Telekom was unsuccessful, and

subsequently the conditions of the tender had to be substantially modified, in particular, by

increasing the number of shares offered to the public. The conditions agreed with the IMF were

met. No progress can be recorded on the

restructuring

of state-owned companies.

Overall assessment

Overall, the Turkish policy towards its industry is by and large in conformity with the principles

of EC industrial policy, i.e. market-based, stable and predictable. However its implementation

has suffered from the macroeconomic instability. Turkey should continue its efforts to identify

clear priorities taking into account needs of the business community, included the Small and

Medium Enterprises, and ensure the effective implementation of the policies drawn up. By doing

so,Turkey can further enhance the competitiveness of its industry and in particular that of small

and medium-sized enterprises. A particular priority could be the establishment of closer links

between the financial sector and industry.

The privatisation process will continue, although progress so far has been limited. Turkey needs

foreign direct investment to further modernise and broaden its production base. In spite of an

increase in FDI inflows compared to previous years, the stock remains very low compared to

the potential and the size of the country. The investment climate needs to improve drastically to

attract investments. Reducing the administrative procedures and increasing transparency would

favourably influence this. Administrative capacity should be strengthened, for example with

respect to the Customs Authorities and the metrology and accreditation system.

Turkish industrial policy is managed by the Ministry of Industry. Privatisation is implemented by

the Privatisation Administration, although in some cases privatisation has been carried out by the

relevant public institution.

It should be noted that an important element of any industrial policy is the control of state aid

and that the compatibility of support schemes with EC rules, including the restructuring

provisions of the ECSC Treaty, will have to be examined

(see Chapter 6 - Competition

policy).

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Chapter 16: Small and Medium-sized Enterprises

Turkey has made some progress in revising its

SME policy

and reforming the state support

system for business promotion. In particular, it has launched the “SME Action Plan

Framework” which contains some useful initiatives.

The new Economic reform programme was designed after consulting the Social partners and

the economic operators, including SMEs.

Limited progress can be recorded concerning the improvement of the

business environment.

No specific developments can be noted regarding the alignment of the

SME definition.

Overall assessment

Turkey has made some steps in following the approach of the EU towards SME's. Further

efforts are needed to improve the business climate of SMEs. Turkish SMEs have been

particularly affected by the recent financial crisis. SMEs suffer from the reduced domestic

demand, while their competitive position is is not strong enough to allow them to take advantage

of the devaluation of the Turkish Lira. In this climate, it is particularly important to make

progress in rapidly implementing the SME Action Plan Framework and other related initiatives.

The major problem for Turkish SMEs remains access to finance. This problem has come even

more acute under the current economic situation.

There are a number of useful initiatives underway with a view on supporting enterprises in

Turkey. Support services for small businesses, such as the network of industrial estates for small

companies, are well developed. However, their impact will be limited if the business

environment does not become more stable and predictable. The Turkish government should act

to improve the conditions for business including administrative simplification.

Most of the support to SMEs is provided directly by semi-public bodies, such as TESK, the

Confederation of Crafts and Tradesmen of Turkey, KOSGEB (Small and Medium sized

Industry Development Organisation) and IKV (Foundation for the Economic Development).

KOBI Investment Inc. was established to facilitate the access to finance by SMEs. It works as

a venture capital fund. Moreover, a Credit guarantee fund has been established with the

purpose of providing guarantee for loans delivered by the Turkish Halk Bank.

For high tech start-up companies, the Technology Development Foundation of Turkey (TTGV)

also stimulates the creation of venture capital.

The definition of SMEs is not fully aligned with the recommendations of the European

Commission.

Chapter 17: Science and research

Some further developments can be reported in this area.

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In December 2000, Turkey decided to consider an eventual association to the next Framework

Programme on research and development 2002 - 2006.

Turkey continues to participate in the Fifth Framework Programme on a project-by-project

basis.

Overall assessment

While the principles on the basis of which a European Research Area is presently evolving are

generally shared by Turkey, there is considerable room for development in the RTD sector,

where the level of activity and spending remains relatively low. For the further development of

the sector and for an effective integration of Turkey into the European Research Area, it is

important to increase the gross domestic expenditure on the technological development.

Science and research activities are carried out mainly by universities and public research

institutions, with private sector activity being limited. In some cases, larger firms carry out their

own research and development make use of technology transferred from abroad. Access of

SME's to technological innovation should be improved.

Chapter 18: Education and Training

Only limited progress has been achieved in the area of education and training.

A new impetus has been given to Turkey’s preparations for participating in the

Community

programmes

in these fields (Socrates, Leonardo da Vinci and Youth). A preparatory phase

within Turkey under the management of the Ministry of National Education is due to begin in

2001, with a view to full participation from 2003 onwards. A clear proposal is now needed on

how the National Agency will be set up.

No progress can be reported on the

directive concerning the education and training of

children of migrant workers.

As regards

reform of the education and training system,

Turkey adopted a law in June

2001 which has has expanded the use of the taxation fund to secondary education until 2010.

This, along with a new World Bank secondary education loan and possible credits from the

European Investment Bank, should help the Government to achieve its key 8th Five-year

Development Plan education policy of 12 years compulsory education by 2005.

The law will also substantially affect the structure of Vocational Educational Training in Turkey.

It lays the foundation for a single system of vocational education that will enable easier transition

within the education system. Under the new law it will be possible to enter institutions for further

VET without taking a university entrance examination, considerably lessening the burden on

vocationally-orientated students under the existing system.

Overall assessment

In general terms, most principles underlying the educational system are consistent with those of

Member States. However, the quality of education is uneven, particularly in rural areas.

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The new education law is a positive step, and will in particular benefit the vocational education

and training sector. However, the law does not address the issue of making the VET system

more relevant to the needs of the labour market. Efforts should be made in this direction, in co-

operation with industry and social partners.

In the immediate future, Turkey should as a matter of priority take the steps needed to establish

the National Agency needed to successfully manage the three Community education

programmes. This is a crucial condition for the participation of Turkey in those programmes.

The directive concerning the education of children of migrant workers still has not been

transposed and implementation has to be ensured.

Chapter 19: Telecommunications and information technologies

Turkey has made progress since the last Regular Report.

There have been a number of developments in the

liberalisation of the telecommunications

market,

some of which were made as part of the new economic reform plan. The

Telecommunication Law of May 2001 provides the legal basis for the privatisation of Türk

Telekom (it provides for 100% privatisation of the capital of the incumbent operator, Türk

Telekom, with the exception of a nominal “golden share” retained by the State) and stipulates

that the full liberalisation date of 1 January 2004 will be brought forward to the date when the

state's ownership in the operator's capital falls below 50%. There has also been progress in

introducing further competition in mobile telephony, which has resulted in a considerable

decrease in GSM tariffs.

In addition to the two existing GSM licences, another two licences have been issued to ARIA

(owned by Telecom Italia and Turkish IS-Bank) which has been operational since March 2001

and AYCELL (a subsidiary of Türk Telekom) which has been operational since August 2001.

As regards the

regulatory framework,

following the establishment of the Telecommunications

Authority in August 2000, a regulation on the procedures and tasks of this authority was issued

in February 2001. A concession agreement between the Ministry of Transport and

Telecommunications and Türk Telekom was signed in February 2001. A regulation on the

licensing of telecommunications networks and services was issued in March 2001. In the

meantime, based on the new telecommunications law, the licensing tasks have been transferred

from the Ministry of Transport and Telecommunications to the Telecommunications Authority.

In September 2001, a regulation has been adopted on a price cap mechanism for tariffs reform.

There is no progress to report on the liberalisation of the markets for

postal services.

Overall assessment

While steps have been taken to liberalise the telecommunications market, further efforts are

needed to bring Turkey's telecommunications regulatory framework fully in line with the

acquis.

The same is true for postal services.

The liberalisation of the markets needs to be accompanied by a comprehensive and transparent

regulatory framework. Substantial progress in this area will require amending the

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Telecommunications Law of February 2000 and issuing regulations on key subjects such as

numbering, interconnection, universal service and data protection.

Based on the new tariffs regulation, the principle of cost orientation of tariffs needs to be

implemented. This requires Türk Telekom to introduce cost accounting methods, leading to a

subsequent re-balancing of tariffs.

Strengthening the administrative capacity of the Telecommunications Authority is a key priority.

Staff needs to be recruited and trained to ensure that it is able to carry out its full range of tasks,

including preparing legislation and handling its new responsibility for licensing. At present, the

majority of staff is dealing with technical tasks, e.g. frequencies and equipment type approval.

The Telecommunications Authority has started to monitor actively fair competition in the

markets by preparing a decision on the general technical and financial conditions for national

roaming between the GSM operators. Further progress also needs to be made to ensure that

the Telecommunications Authority is fully independent from the Ministry of Transport and

Telecommunications. A comprehensive enlargement project for regulatory assistance for the

Telecommunications Authority is under preparation.

Chapter 20: Culture and audio-visual policy

Limited progress can be reported in this area since the last Regular Report.

The

audio-visual

sector is dominated by two large industrial groups, which control the majority

of Turkey’s mainstream media. It has particularly suffered from the economic and financial

crisis. During the first half of 2001, it is estimated that up to 4000 workers across the media

sector have been made unemployed.

Over the last year, tenders have been prepared that would allow for the conversion of

temporary broadcasting licences for national channels into permanent licences. The same

procedure is planned for regional and local stations.

The High Audiovisual Board (RTÜK), which is responsible for regulating television and radio

broadcasting, has recently taken on responsibility for satellite broadcasting as well.

Turkey ratified the Protocol Amending the Council of Europe Convention on Transfrontier

Television in October 2000.

An important development was the adoption by the Turkish Parliament in June 2001 of a law

amending the radio and television law, press law, income tax law and law on institutional taxes.

This law was subsequently vetoed by the President and is now being reconsidered.

This law (known as the RTÜK law) included provisions on “broadcasting principles”, sanctions,

internet, composition of the RTÜK board and retransmission, as well as on ownership, mergers

and acquisitions in this area. However, the law made no change to the current regime in relation

to the broadcasting of languages other than Turkish. It also contained no provisions which

advanced alignment with the Community

acquis

in this area (i.e. the “Television without

Frontiers” Directive).

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Under the proposed RTÜK law, individual programmes, and not stations, that violated

“broadcast principles” could be suspended and requirements could be imposed on the

transmitting station, such as broadcasting an apology or paying a fine of up to € 90 000. The

sizes of the fines would vary for central, regional and local stations. The maximum share that

foreign nationals are allowed in private radio or television stations would be increased from 20

% to 25 %. Various organisations such as political parties would not be allowed to own a radio

station. The composition of the High Audiovisual Board would be substantially changed, with

for example one board member to be nominated by the National Security Council.

The President subsequently vetoed this law, citing the arbitrary criteria for imposing sanctions,

the disproportionately high fines, and changes to the composition of the RTÜK Board which

could jeopardise its previously agreed neutrality. He also considered that it did not sufficiently

safeguard basic principles of freedom of speech and that imposing sanctions on broadcasters

was properly a role for the judiciary rather than for the RTÜK.

Overall assessment

Turkey's alignment with the acquis in this area remains limited.

The new law which was proposed on radio and television represented a clear step backwards

for Turkey away from compliance with international media standards, in particular on freedom

of speech, and the independence of the regulatory authority. The law also reaffirmed and

strengthened current principles concerning the use of the Turkish language, which continue to

restrict the use of language other than Turkish.

The RTÜK law should therefore be redrafted in line with international standards and

recommendations on television and radio broadcasting, for example those of the Council of

Europe. Turkey has ratified the Council of Europe Convention on Transfrontier Television and

will be bound by its amending protocol upon the date of entry into force.

Turkey is not advanced in aligning with Community audiovisual legislation. It should incorporate

the Community

acquis

contained in the “Television without Frontiers” Directive. Major

discrepancies need to be tackled, in particular concerning definitions, jurisdiction, freedom of

reception, discrimination on the grounds of nationality, promotion of European and independent

works, advertising and teleshopping, protection of minors, and limits to the share of foreign

capital in radio and television enterprise. There is also a contradiction between Turkey’s

international commitments in the GATS/WTO framework and those that arise from Turkey’s

commitment to full implementation of the Community

acquis

as a candidate country.

Chapter 21: Regional policy and co-ordination of structural instruments

Since the last Regular Report no progress has been achieved in preparing for the

implementation of structural policies.

No developments can be reported concerning the adoption of the

legislative framework

which would allow for the implementation of the acquis under this chapter.

No further progress has been made as regards

institutional structures, programming,

monitoring and evaluation, financial management and control.

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No progress has taken place with respect to the

development of regional statistics.

As regards administrative capacity, the Turkish regional policy is carried out in the framework

of a centralised planning system, for which the State Planning Organisation (SPO) is

responsible. With the exception of the Authority for the development of the South Eastern

Anatolia region (GAP), there are no implementing structures outside Ankara.

Overall assessment

While a regional policy exists in Turkey, preparations for implementing structural policies have

not really started. Turkey still needs to develop the structures necessary for the implementation

of the Structural Funds.

Although combating regional disparities in Turkey should be a major objective for strengthening

internal socio-economic cohesion as well as preparing for accession, there is still no

comprehensive, long-term strategy to address such issues.

High priority should therefore be given to formulating an efficient and modernised regional

policy, which complies with Community standards, and addresses the major issues in the

regions lagging behind. At the very least, specific actions should be directed towards what are

termed the “priority” provinces, which represent more than half of the area of the country and

more than a third of its population, with a per capita GDP of 56% of the national average (19%

of the Community average).

This will require a significantly higher level of public investment, aiming inter alia to reduce

infrastructure disparities, create a favourable environment for private investment, boost human

resource development, and improve living conditions.

In administrative terms, Turkey should strengthen its structures for managing regional

development, both at central level (either through the SPO or a specific department given

responsibility for regional policy) and at regional level (setting up regional development

authorities).

Turkey has not yet begun to develop the necessary structures and operational arrangements to

implement the European Social Fund.

The State Planning Organisation and the State Institute of Statistics have started to prepare a

NUTS II classification in accordance with Community rules, but work remains at an early stage.

Such a map is a pre-condition for the implementation of structural policies. Following the

definition of a NUTS II classification, the regional per capita GDP in Purchasing Power

Standards should be calculated.

Chapter 22: Environment

Since the last Regular Report, Turkey has made no substantial progress in transposing the

acquis in this field, neither as regards horizontal legislation, nor in areas such as air quality, waste

management, water quality, nature protection, industrial pollution and risk management,

genetically modified organisms, noise from vehicles and machinery, and nuclear safety and

radiation protection.

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As regards administrative capacity, Turkey adopted a law on the redefinition of the main

departments in the Ministry of Environment, which establishes local branches of the Ministry.

This is an important first step in ensuring proper enforcement of environmental legislation.

In the field of

chemicals,

the Regulation on the Control of Dangerous Chemical Substances and

Products, which entered into force in 1993, was amended in April 2001. Under this

amendment, definitions, risk phrases and combinations, safety phrases and combinations,

danger symbols and their standard wording have been rearranged. However, full alignment with

EC legislation is not yet achieved.

Overall assessment

Turkish legislation is still very different from that of the

acquis

in particular in terms of standards,

monitoring requirements and methods of measurement. Complete adoption of the environmental

acquis

will require major effort. Implementation and enforcement capacity also needs to be

upgraded substantially. It is also important to carry out detailed compliance checks of existing

laws in order to ensure full transposition of EC environmental directives.

The 1983 Environment Law currently defines the framework for environmental management

and environmental legislation. The last legislative activities based on the Environment Law date

back to 1997 (amendment of the Environment Impact Assessment Regulation, which needs,

however, to be revised to bring it in line with the

acquis).

In the field of horizontal legislation, the Environment Committee of the Parliament approved a

draft Framework law. This draft law amends the Environment Law of 1983 and creates a new

legislative framework in the field of environment.

This represents a significant step forward, as it will introduce the legal framework needed to

transpose the EC

acquis.

Its final adoption is expected this year.

The purpose of this draft law is to integrate the Sustainable Development Principle and to

provide for the implementation of the Strategic Environmental Impact Assessment Procedure

for environmental policies, plans and programmes. The details of this procedure will, however,

be covered by the secondary legislation. The law also revises provisions on nature protection,

and provides for more effective environmental monitoring and supervision by the Ministry of the

Environment, with stricter penalties for non-compliance. It ensures public access to

environmental information. The provisions dealing with the Environmental Pollution Prevention

Fund have been revised and level of funding has been increased.

In the field of air quality, legislation still needs to be aligned with the acquis. Moreover, the

Turkish air quality monitoring system needs further improvement to align it with the EC

acquis.

Waste management is one of the most problematic areas, in particular as regards

implementation of related legislation. A large percentage of household waste (93%) is

uncontrolled waste, being illegally dumped. Substantial efforts need to be undertaken to comply

with the

acquis.

As regards water quality, the 7

and 8

Five Years Development Plans underlines the need for

a new legal framework law on Water Resources and for bringing drinking water standards and

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wastewater discharging in line with the

acquis.

Turkey’s water legislation is not in line with the

acquis.

In order to preserve Turkey's rich assets in bio diversity, nature protection needs particular

attention. Turkey will need to make significant efforts to align its legislation with the Community

nature protection legislation.

In the area of industrial pollution control and risk management, legislation in line with the

acquis

still needs to be introduced. Turkey still lacks a general inventory of chemical substances.

Turkish legislation as regards genetically modified organisms still needs to be aligned with the

acquis.

Concerning nuclear safety, Turkish legislation is not fully in line with the

acquis,

particularly as

regards reporting and monitoring requirements.

Concerning radiation protection, the Turkish Atomic Energy Authority has defined a strategy for

licensing, radiation shielding of all equipment and development of local safety procedures in all

establishments.

Turkey’s environmental investment amounted in 1997 to around USD 1 billion corresponding to

0.5% of national GDP. The Environmental Pollution Prevention Fund (to be closed down as of

end 2001) is the only national fund to finance environmental activities and investments in Turkey,

but the Ministry of Environment has the authority to approve only 10% disbursements from this

fund. For the time being, the fund provides the Ministry with an annual amount of € 125 million

to finance research, clean-up operations, education and training, projects aimed at preventing

environmental pollution and credit for the construction of treatment plants.

Turkey’s environmental investments should to a larger extent focus on the implementation of EC

environmental directives, based on a comprehensive investment strategy.

As regards administrative capacity at central level, the Ministry of Environment, established in

1991, has overall responsibility for environmental activities. These are carried out in close co-

operation and active partnerships with other ministries, government agencies, local authorities

and NGO’s. The Ministry of Environment employs around 800 staff, with a further 500

working in over 30 provincial offices. The State Planning Organisation (SPO) develops Five-

Year Development Plans, the main instruments for co-ordinating government policies.

Implementation of environmental policy is also entrusted to the municipalities, which play an

important role in implementing environmental protection measures, building environmental

infrastructure, and collecting and disposing of municipal waste, as well as land use planning.

Overall, the administrative capacity at national and regional level is a matter of concern.

Enforcement of environmental rules seems not to be ensured due to the involvement of various

bodies and institutions at different levels which leads to conflicting interests and responsibilities,

as well as a lack of trained and specialised staff, financial resources and equipment. It is

necessary to establish monitoring networks and permitting procedures as well as environmental

inspectorates with strong and well-determined powers. Penalties should apply in case of non-

compliance. The municipalities also need to be strengthened, in particular as regards training in

the field of environmental policy implementation.

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Chapter 23 Consumers and health protection

During the reporting period, no further progress was made in terms of legal alignment.

There was no progress in the area of

safety and non-safety related measures

and the same

was true for

market surveillance.

As regards administrative capacity, Consumers Courts have been established and are now

operating in the provinces of Istanbul, Ankara and Izmir, further to a decision of the Supreme

Board for Judges and Prosecutors of 25 January 2001.

Overall assessment

Overall, the alignment of the Turkish Consumer legislation with the acquis is limited.

Turkey still needs to establish a general consumer protection system. The sector is still governed

by a framework law adopted in 1995 which established a Consumer Counci.

A number of initiatives were undertaken in the previous years in areas such as misleading

advertising, door-to-door sales, comparative advertising, indications of labels as well as tariffs

and prices.

Turkey has initiated preparatory work in order to complete the alignment in the fields of time

share contracts, unfair terms in consumer contracts, distance selling and package travels.

Consumer policy falls within the competence of the Directorate General on Protection of

Consumers and Competition, within the Ministry of Industry and Trade.

Administrative responsibility for foodstuffs (including control) is shared between the Ministry of

Health and the Ministry of Agriculture. The existing laboratories are inadequately equipped to

carry out the necessary analyses. Administrative capacity needs to be strengthened.

The Accreditation Council (TÜRKTAK) has not granted any accreditation to date. As a result,

no laboratories have yet been accredited.

Consumers associations are developing, but it is still essential they should be reinforced, as

indicated in the previous Regular Reports.

On the basis of the information available, significant adjustments will most probably have to be

made to administrative structures, technical facilities and legislation before accession can take

place.

Chapter 24: Co- operation in the field of Justice and Home Affairs

Some progress has been achieved over the past year.

data protection,

no developments have taken place with respect to the alignment of

legislation with the acquis.

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In the field of

visa policy

the Government has decided to end the visa free regime for

Kazakhstan and Bosnia-Herzegovina. It has also decided to introduce airport transit visas in the

case of a selected number of countries from which illegal immigration originates. As from July

2001, Bulgarian citizens are exempted from visa requirements.

In the area of alignment with the

Schengen

agreement, no progress has been made.

With a view to the reinforcement of

external border

controls, a process of co-operation and

co-ordination between the various Ministries and bodies involved has begun. A number of

actions have been taken to strengthen border management, in particular to prevent and deter

illegal border crossings. Such measures relate to the setting-up of new checkpoints, the

assignment of additional sea patrols and the enhancement of vigilance and pursuit of suspicious

vessels anchored at harbours. The construction of watchtowers along the Iranian border has

been started.

With regard to

migration,

bilateral negotiations with a number of countries, both of destination

and origin, for readmission agreements have started. On 10 September 2001 Turkey signed, a

readmission agreement with Syria. Iran, Pakistan, Bangladesh, India, Sri Lanka China, Romania

and Bulgaria, all countries of origin, have been approached about draft readmission Protocols.

A Protocol on readmission with Greece is well advanced. In the context of the EU Action Plan

for Iraq, the EU made a proposal to Turkey to improve co-operation in transit matters.

The Directorate General for Public Security of the Ministry of the Interior provided a training

session on the prevention of forgery of documents, as a measure to prevent illegal border

crossing. In total 553 officials were trained between November 2000 and May 2001.

Regarding participation in the Schengen Information System (SIS), legislation is under

preparation. The Gendarmerie is completing its Integrated Communication System Project

(JEMUS) aimed at the speedy transmission of information between all its Units.

There is serious concern about illegal migration flows in Turkey, which have been steadily

increasing. The authorities have acknowledged the existence of 94, 514 illegal immigrants in

2000, as compared to 11, 362 in 1995. In the first 5 months of 2001, the number of illegal

immigrants was 29, 684, which represents a 28% increase compared to last year.

Turkey is a destination and transit country for trafficking of human beings. Women and girls,

mostly from Romania, Russia, Ukraine, Moldova, Armenia, Azerbaijan and Georgia, are

trafficked to or through Turkey. Turkey does not meet the minimum standards for the

elimination of trafficking and has not yet adopted specific legislation concerning trafficking in

human beings. According to Government statistics, the authorities arrested 850 members of

organised gangs of traffickers in 2000.

There has been no progress in the ratification of international instruments pertaining to

combating illegal migration, in particular the 2000 UN Convention against Transnational

Organised Crime and its Protocol to Prevent, Suppress and Punish Trafficking in Persons,

Especially Women and Children as well as its Protocol Against the Smuggling of Migrants by

Land, Sea and Air, signed by Turkey in December 2000.

In the field of

asylum,

in April 2001 Turkey confirmed its willingness to lift the geographical

reservation to the 1951 UN Convention relating to the Status of Refugees, provided that a

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number of conditions are met. These relate to the ability to cope with refugee inflows and

support from the Community.

The government decided to review or adopt new legislation on asylum. The development of

reception facilities for refugees has started in the two existing Refugee Guesthouses, at Yozgat

and Kirklareli. The authorities identified the need to embark on the construction of refugee

centres in 11 provinces to supplement the two existing guesthouses. Since 1998, the Ministry of

Interior has been engaged in training activities in co-operation with the UNHCR. A co-

operation framework was adopted in April 2001 on issues related to asylum and refugee law.

In the

field of police co-operation and the fight against organised crime

, an Agreement

between Turkey and Greece on co-operation on combating crime entered into force in July

2001. The focus is on terrorism, organised crime, drug trafficking and illegal migration. This

Agreement is to be supplemented by the above-mentioned Protocol on readmission currently

being negotiated with Greece.

Developments in the area of police co-operation relate to the gradual introduction of the

Laboratory Work Flow System (LIAS) in all police criminal laboratories as well as to the

process of transfer of data to the Integrated Ballistics Identification System (IBIS) at the Police

Criminal Laboratories in Ankara, Diyarbakir and Istanbul. Since August 2001, every regional

criminal laboratory of the Gendarmerie in Ankara, Bursa and Van has been equipped with 2

automated fingerprint identification systems.

On the

fight against fraud and corruption,

a significant development has been the signature

by Turkey of the Council of Europe 1999 Civil Law and Criminal Law Conventions in

September 2001 (see

Section B.1.1. - Democracy and the rule of law).

The Ministry of

Interior established a Central Anti-Smuggling Department. It also decided to improve the

supervisory capacities of the Directorate General for Title Deeds and Cadastre which has

started running an Information System Project aimed at gradually transferring to electronic

media the land registry records.

No developments can be reported in the field of combating fraud.

In the area of

drugs,

a number of successful seizure operations have been carried out and

trafficking organisations have been dismantled. Procedures allowing for the accession to the

1972 Protocol amending the 1961 Single Convention on Narcotic Drugs were finalised in April

2001. In June 2001 the Family Research Institution of the Prime Minister’s Office was

designated as the National Focal Point for contacts with the EMCDDA. The Turkish

International Academy against Drugs and Organised Crime (TADOC) has been established by

the Ministry of Interior with the aim of developing projects related to the fight against drugs and

of providing training on the suppression of illicit manufacture of drugs, drug abuse and drug

trafficking.

As for

money laundering,

Turkey has signed in September 2001 the 1990 Council of Europe

Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime.

Another development relates to the adoption, in May 2001, of the Act Amending the Act on

Banks which provides for the development of training programmes in the area of fight against

corruption and money laundering.

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In the field of

judicial co-operation in criminal and civil matters,

no progress can be

reported in terms of acceding to the relevant Conventions.

Details with regard to

customs co-operation

are in

Chapter 25 - Customs union.

As for the strengthening of administrative capacity, the Ministry of Interior established two

additional Divisions for Identification and Crime Scene Investigation in the Provincial

Directorates for Public Security of Kahramanmaras and Denizli. The Ministry has engaged in an

education programme aimed at providing training on crime scene investigation and fingerprint

technologies and techniques. In the context of preparations for Europol membership, a national

liaison official has been appointed by the Ministry of Interior.

In May 2001, a meeting took place with representatives of the Turkish General Staff, the

Ministry of Defence, the Ministry of Foreign Affairs and the Ministry of the Interior, which

resulted in the appointment of liaison officers in each institution and the establishment of an early

warning system in the field of border management.

A process of administrative reorganisation has taken place in the field of police co-operation

with a view of strengthening the efficiency of the operational structures. In this context, new

Divisions for Anti-Smuggling and Organised Crime have been established at 81 provincial

Gendarmerie Commands.

The Ministry of Justice underwent a restructuring in May 2001. Matters related to co-ordination

of EU affairs were entrusted to a European Union Directorate General. A Directorate of

International Law and Foreign Relations as well as an Information Technology Department

were also created. The department for prisons has been upgraded to a Directorate General for

prisons and detention houses.

The Ministry has embarked on a major information technology project, the National Judicial

Network Project, aimed at linking all the Courts in the country, as well as the prisons and a

number of ministerial offices, by 2004.

In July 2001, a report of EU experts on the justice and home affairs situation was completed

with the co-operation of the Turkish authorities. It contains a set of conclusions and

recommendations, which should be used in the formulation of future reforms as well as of

financial assistance programmes in the area of justice and home affairs.

Overall assessment

Overall, Turkey has started the process of alignment with the

acquis

in the field of Justice and

Home Affairs.

data protection,

no progress can be reported, including with regard to the ratification of

the 1981 Council of Europe Convention for the Protection of Individuals with regard to

Automatic Processing of Personal Data, signed by Turkey on 28 January 1981.

As far as

visa policy

is concerned, steps have been taken to gradually come into alignment with

the

acquis

and, in particular, the Common Consular Instructions and the relevant EC

Regulation. However, there are no indications on precise targets and timetables. Concrete

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results to date relate to the implementation of the project for issuing passports and installing

optical readers at entry and exit points.

As regards

external borders

and preparations for alignment with the

Schengen

Agreement,

efforts to strengthen border management should continue. The question of the establishment of a

non-military professional body specifically responsible for the control of borders should be

addressed. It is important to adopt a strategy for the effective control and management of all

Turkish borders, as well as for the upgrading of the technical equipment. In order to foster the

administrative capacity of the various actors involved in the protection of the borders, special

attention should be given to training, including language training, in particular for border police at

land, sea and air borders.

As for

migration,

clarifications are needed on the possible scope, contents and timing of

readmission agreements signed by Turkey. Given the recognition of Turkey’s status as a transit

country, a significant step in alleviating the immigration problem would be the adoption of co-

operation measures with the EU in transit matters, in line with the proposals put forward by the

EU to Turkey in July 2001. As a matter of priority, Turkey needs to strengthen the efficiency of

its fight against illegal migration and trafficking in human beings. In that respect the signing of a

readmission agreement between Turkey and the EU would be a step in the right direction.

The willingness expressed by Turkey to lift its geographical reservation to the 1951 UN

Convention relating to the Status of Refugees is a positive development in the area of

asylum.

The conditions attached to it raise a number of questions, which require further discussion.

There are serious concerns regarding current legislation and practices on asylum. This relates

mainly to: the fate of non-European asylum seekers, the time limitations attached to the

registration of asylum claims, the situation of asylum seekers waiting for the determination of

their cases and the deficiencies of the appeal arrangements for rejected asylum applicants. An

important step needed is the setting-up of an independent asylum appeal board.

Turkey is requested to establish a nation-wide screening mechanism to identify asylum seekers

among detained illegal immigrants.

The issue of the creation of reception facilities and their management should be given priority,

including the allocation of adequate resources.

It is worth noting that international experts operating in the field approve the current practice of

providing accommodation to refugees through private local population housing. This practice,

which entails financial support from local governmental authorities for the host families, is

considered more secure than placement in crowded refugee centres, which are exposed to

various forms of criminal activity.

Regarding the

fight against organised crime

and the

fight against fraud and corruption,

procedures should be accelerated to allow for the ratification of the Council of Europe 1990

Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime

which stipulates that income obtained from all kinds of criminal activities is considered as “

illegal money”. The same goes for the 1999 Criminal Law Convention on Corruption and the

1999 Civil Law Convention on Corruption. Turkey should adopt legislation aimed at

implementing the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in

International Business Transactions, ratified in 2000. In order to begin to comply with the acquis

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in the area of the protection of the financial interests of the European Communities, Turkey

should first and foremost align its legislation with the 1995 Convention on the Protection of the

Financial Interests of the European Communities and its Protocols.

In the area of

drugs,

Turkey's strategic location on the transit smuggling route between the

producer countries and the consumer countries and at the crossroads of three smuggling routes,

the Balkan route, the Northern Black Sea route and the Eastern Mediterranean route, makes

drug trafficking a particular concern. International co-operation in the fight against drugs should

be promoted. Accession to the 1972 Protocol Amending the 1961 Single Convention on

Narcotics Drugs, for which a legal basis has been in existence since April 2001, should be

accomplished. Turkey is encouraged to accede to the Council of Europe 1995 Agreement on

Illicit Traffic by Sea, Implementing Article 17 of the 1995 UN Vienna Convention against Illicit

Traffic in Narcotic Drugs and Psycho-tropic Substances.

The establishment of a “mini-Dublin Group” in Ankara on drug-related issues is recommended.

Turkey is requested to develop a national drug strategy, in line with the EU Drug Strategy

2000-2004. The appointment of a National Drug Co-ordinator should be considered. The

launch of an awareness campaign among the competent law enforcement officials should be

envisaged in order to underline the priority character of the struggle against drugs.

As regards

money laundering,

the process of reviewing the 1996 Act on Prevention of

Money Laundering should be actively pursued. It should aim, inter alia, at enlarging the scope of

the definition of money laundering offences, in line with the EU acquis, and at ensuring alignment

with the

acquis

on prevention of the use of the financial system for the purpose of money

laundering.

police co-operation,

all ongoing efforts co-ordinated by the Ministry of Interior should be

accelerated. These are intended to allow for full participation in Europol and in the Schengen

Information System (SIS), and are also aimed at reviewing the Act on the Duties and

Competencies of the Police, in line with the acquis. The establishment of the Directorate

General for Foreign Relations and EU Co-ordination within the Ministry of Interior would be

another positive step in order to strengthen the administrative capacity of the Ministry.

As regards

judicial co-operation in criminal and civil matters,

Turkey should speed-up the

adoption of the Civil Code, the Code of Civil Procedure, the Penal Code, the Code of Penal

Procedure and other relevant Codes and legislation. The momentum gained by the strengthening

of the administrative capacity of the Ministry of Justice should be maintained. The establishment

of the Justice Academy and the creation of a Court of Appeal should be accelerated. In order

to fulfil the overall objective of modernisation of the Judiciary, additional measures should be

envisaged aimed at strengthening the independence and impartiality of judges (including the

removal of obstacles to the creation and joining of associations), increasing the number of

judges and public prosecutors, extending the number of the Juvenile Courts, and revising the

competence of the State Security Courts.

Chapter 25: Customs union

Some progress has been achieved by Turkey in the field of customs since the last Regular

Report.

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Turkey has applied the Common Custom Tariff (CCT) since January 2001 on what are

considered “sensitive products”, as defined by Decision 2/95 of the EC-Turkey Association

Council.

The new

Turkish Customs Code

is almost fully aligned with the

acquis.

However, its practical

application remains slightly divergent, especially in relation to free zones and customs

procedures with economic impact.

Other relevant national legislation outside the Customs Code has not been aligned. Therefore,

no progress has been achieved in respect of counterfeit goods, cultural goods, precursors or

provisions laid down in WCO/ECE Customs Conventions.

Concerning

administrative capacity,

some progress has taken place. The Turkish authorities

have recognised that there is a need for thorough training of officials in customs legislation and

2500 customs officials and 12000 economic operators received training over the last year.

The number of customs offices has been reduced from 250 to 136. The number of transactions

managed electronically has risen, and is now above 90% for both imports and exports. A

programme aimed at improving the infrastructure of Customs Laboratories is under way.

Overall assessment

The Decision establishing the Customs Union (Decision 1/95 of the Association Council)

requires that Turkey align its commercial and customs policies with those of the Community.

With the alignment of Turkish duty rates on “sensitive products” with the CCT, Turkey has

almost completed the alignment with the Common Custom Tariff. Moreover, its customs

legislation is also largely aligned with the Community customs legislation.

Turkey is requested to address the practical application of the provisions with respect to free

zones and customs procedures with economic impact.

Preparatory work to implement the Single Administrative Document (SAD) remains ongoing.

Further efforts are needed to ensure full alignment and implementation of legislation in particular

in areas where competence is shared between the customs, trade and external relations

departments. Efforts are therefore needed in respect of customs legislation outside the Customs

Code, for example counterfeit goods, drug precursors and cultural goods.

The problems concerning the lack of co-operation with the Community have continued, in

particular as regards post-verification of the origin of products. This lack of co-operation

obliged the European Commission to publish a notice to importers concerning the origin of tuna

fish in December 2000. The same problem was highlighted by the Court of First Instance

(Judgement of 10 May 2001 on Turkish television sets).

As regards administrative and operational capacity to implement the

acquis,

Turkey should

continue its efforts, notably for the improvement of border management, and the fight against

irregularities and corruption within the administration. Turkey should also continue its efforts

regarding waiting time at the borders, and continue to act in the field of the fight against customs

fraud and economic crime and improve its co-operation with other enforcement bodies.

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Chapter 26: External relations

Turkey’s

Commercial policy

is largely aligned with the EC Common Commercial Policy, as a

result of the obligations from the Customs Union, aimed at avoiding trade divergence between

the parties. This includes the progressive alignment of Turkey with the preferential customs

regime of the EC consisting of both free trade agreements and autonomous regimes within five

years starting from 1996. Consultation mechanisms between the EC and Turkey on these

matters have been improved.

Concerning bilateral agreements with third countries, Turkey is in the process of negotiating free

trade agreements with Tunisia, Morocco, Egypt, the Palestinian Authority, Croatia and Faeroe.

In particular, three negotiating rounds have been held with Morocco and two with Croatia.

Initiatives have also been taken to conclude agreements with Malta, Jordan, Mexico, South

Africa and Bosnia-Herzegovina.

During the reporting period, discussions took place with Turkey with a view to its gradual

adoption of the EC’s Generalised System of Preferences.

No developments can be reported on the conclusion of a Free trade agreement between

Turkey and Cyprus. There is no development in the area of GATS.

Turkey has continued to co-ordinate positions and policies within the WTO, in particular with

regards to the new Round.

In terms of

development aid and humanitarian aid,

according to Turkey's State Institute of

Statistics (DIE), Turkey paid about €243 million on official aid last year, of which about €28

million in the form of grants was sent to around 65 developing countries and over € 3 million to

around 15 countries in transition to a market economy.

In the field of development aid and humanitarian aid, Turkey has contributed to international

stability through the provision of humanitarian assistance. A total of over € 1.3 million has been

spent in 2000 as external emergency aid mainly via the Turkish Red Crescent.

Overall assessment

Overall, there is large convergence between the EC and Turkey in the area of external

commercial policy.

In the WTO framework, Turkey is a signatory to the Information Technology Agreement (ITA)

and has observer status in the Government Procurement and Civil Aircraft Agreements. Turkey

is supportive of EU policies and positions in the WTO and in particular the preparation of a new

Round.

As regards the conclusion of free trade agreements with third countries, Turkey has so far

entered into Free Trade Agreements with the EFTA countries, Israel, Hungary, Romania,

Lithuania, Estonia, the Czech Republic, Slovakia, Slovenia, Latvia, Bulgaria, Poland, and

FYROM. Turkey should continue to keep the EU informed about negotiations aimed at the

conclusion of any new trade agreements with third countries. The Commission will continue its

initiatives to increase the readiness of third countries to conclude the relevant free trade

agreements with Turkey.

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Turkey still has to align its legislation on export credits with the

acquis.

As regards administrative capacity, Turkish commercial policy is implemented mainly by the

Under secretariat of Foreign Trade. Physical checks are carried out by the Regional

Directorates of Foreign Trade Inspectors. The administrative capacity which needs to be in

place as regards Customs services is addressed under the chapter relating to the Customs

Union (Chapter

25 - Customs Union).

For the purpose of the Turkish future financial contribution to the European Development Fund,

the Turkish management of its national budget organisation and management of flow of funds to

the EC budget is addressed under

Chapter 29 – Financial and budgetary provisions.

Chapter 27: Common Security and Foreign Policy

Since the previous Regular Report, Turkey has continued to align its foreign policy with that of

the European Union.

With respect to the latest developments on enhanced

political dialogue,

see Section A.b.

Relations between the European Union and Turkey.

Turkey has regularly aligned itself with

statements and declarations of the EU,

and has

associated itself with the Union's

joint actions and common positions.

Since October 2000, it

associated itself with 8 EU common positions, including 3 on the Federal Republic of

Yugoslavia.

In the field of European Security and Defence Policy (ESDP), Turkey has actively participated

in exchanges with the EU in EU+15 format (i.e. non-EU European NATO members and EU

candidates) and in EU+6 format (i.e. non-EU European NATO members). However, it has not

yet been possible to reach agreement with Turkey on the European Security and Defence

Policy, in particular as regards access to NATO assets in order to carry out the “Petersberg

tasks” with a Rapid Reaction Force.

Turkey has expressed full support to the conclusions of the Extra-ordinary European Council of

September 2001 on the fight against terrorism. The decision was taken by the Parliament to

make military capabilities available.

Since the last Regular Report, bilateral relations between Turkey and Greece have improved

significantly. This resulted in a number of confidence-building measures, such as a decision by

both sides to keep each other informed on military exercises in the Aegean, and a decision to

clear the common border of land mines. A direct telephone line between the foreign ministries

was set up, as well as a naval and air transportation committee. Co-operation in relation to

natural disasters as earthquakes and fires, and on health issues has been strengthened.

A Greek-Turkish EU Committee has exchanged views in areas such as customs, finance,

jurisdiction and agriculture. A number of other initiatives were also taken at grass-roots level,

such as the Third Turkish-Greek Tourism Forum in Marmaris in May 2001.

Relations with other neighbouring countries have been further deepened. Relations with Syria

have improved with initiatives at the level of regional co-operation. Steps have been taken to

clear landmines in parts of the Turkey-Syria border area. Relations with Iraq have also

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undergone some development with a Turkish Ambassador now permanently based in Baghdad.

Turkey's border with Armenia is still closed. An unofficial "Turkish-Armenian Reconciliation

Commission" has been set up with a view to promoting dialogue and mutual understanding in the

field of economy, tourism, culture, education, research, environment as well as media.

Turkey continues to play a regional role of importance. It actively supports the Black Sea

Economic Co-operation Council, for which it is chairman-in-office in 2001, the Group of

Central Asian Turkic Countries, and the D8 which gathers a group of 8 Muslim countries

including, among others, Egypt, Nigeria, Pakistan and Malaysia. Turkey has made a substantial

contribution to the peace-keeping operations in the Balkans, and has also made a notable

contribution to promoting peace in the Middle East peace process, through frequent bilateral

contacts with all the main actors.

Overall Assessment

Overall, Turkey's alignment with the CFSP acquis is advanced, and co-operation on issues

relating to foreign and security policy is well developed.

However, differences on ESDP i.e. EU access to NATO assets for conflict prevention and

peace keeping operations persist.

Turkey is an important actor in promoting stability and security in its region (Balkans, Caucasus

and Middle East) and has taken a number of initiatives within this role. It continues to play an

effective role in crisis management operations.

Concerning the administrative capacity to implement the provisions relating to CSFP, Turkey

has a well-staffed and functioning Ministry of Foreign Affairs. The ministry is connected to the

Associated Correspondents' Network information system through which the EU communicates

within the CSFP with the candidate countries.

Chapter 28: Financial control

Progress in this domain has been limited.

In the area of Public Internal Financial Control (PIFC), little progress can be reported.

However, the government has identified the inadequacies and weaknesses in the present

financial management and control systems. The 2001 National Programme for the Adoption of

the Acquis acknowledges the need to alter the present Turkish systems to align them with

internationally accepted and EU-compliant concepts and definitions of internal control and

internal audit.

Overall assessment

The Turkish

public internal financial control

(PIFC) systems lack coherence in concept and

implementation, lack an integrated legal framework and do not consistently follow internationally

accepted principles of sound financial management, transparency, public accountability and

performance management. As a result, the current practice of PIFC is not effective in

preventing fraud, corruption and/or serious irregularities.

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The most relevant issues to be addressed are the fact that many (including some of the most

risky) areas of government expenditure remain outside the scope of control and audit; that

responsibilities for specific control and audit roles are not clearly defined among the main actors

in the field; that there is no coherent government approach relating to modern PIFC; that there

is no overall Law on PIFC, and that the public internal audit profession in Turkey does not

exist.

The roles and responsibilities of internal and external financial control are not well defined. The

total number of internal audit units established by various public agencies and organisations is

reported to be 129. A precise definition of the functions of these units is required. Turkey is

also invited to describe the audit methods and experience of the Board of Finance Inspectors in

order to ensure that the Board's function complies with International Institute of Audit

standards.

The current situation leads to multiple auditing of the same activity or, conversely, the exclusion

of some areas from the scope of auditing. There is also a lack of clarity within the administrative

structure between financial management and control functions, functionally internal audit

activities, and external audit functions.

For example, both the Ministry of Finance and the Turkish Court of Accounts (the supreme

audit institution in Turkey) carry out extensive

ex ante

controls. The

ex ante

control function of

the Ministry of Finance is restricted to commitments and disbursements but all financial

decisions, including disbursements are also controlled

ex ante

by the Court of Accounts. In

addition, such audits focus simply on the regularity and legality of expenditure transactions.

Turkey is invited to reconsider its position that internal audit should be strictly centralised within

a unit in the Ministry of Finance.

All government national budget expenditure and extra-budgetary expenditure, since both have

an influence on the government’s financial or budgetary policies, should be subject to

ex ante

control and internal audit. The continuing existence of extra-budgetary funds leads to an

absence of control and audit in many important areas of government expenditure or to a variety

of un-harmonised control and audit systems throughout the public sector. This situation is

illustrated by the large number of control bodies which lack an integrated approach to financial

control and internal audit.

The Turkish Court of Accounts is prevented from properly organising its

external audit

duties

with regard to budget expenditure as a result of its

ex ante

controls, which conflict with its main

ex post

external audit functions and obligations. The Court of Accounts should transfer the

responsibility for the

ex ante

control function to the government and focus on the systems-

based and performance audits of the PIFC systems established in the budgetary spending

centres of the government. The Court should also develop strategies to increase the value of its

audit efforts in appropriate reporting and follow-up procedures with line ministries and the

parliament.

A Central Harmonisation Unit for co-ordinating control and audit methodology should be set up

in the Ministry of Finance. This unit would be responsible for the drafting of financial

management and control manuals, audit manuals and audit trails for all sectors of public

spending. This unit would also have the power to make on-the-spot checks to see whether its

recommendations were being followed up correctly.

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With a view to ensuring suitable

protection of EC financial interests,

Turkey needs to put in

place the legislation necessary to allow the competent EC bodies to carry out on-the-spot

checks and to develop adequate administrative capacity to implement the

acquis,

including the

ability of Turkish law enforcement bodies and judiciary to address cases where EC financial

interests are at stake.

Overall, the Government should now focus on preparing the policy paper which it announced in

its National Plan for the Adoption of the Acquis would form the basis for appropriate

legislation, and on which work is ongoing. This legislative framework could then become the

basis of a financial control structure capable of meeting EC requirements.

Chapter 29: Financial and budgetary provisions

Some progress has been made over the past year, notably as regards the

national budget.

Following the closure of 25 budgetary funds and two extra-budgetary funds in 2000, a law

adopted on 21 February 2001 closed a further 21 budgetary funds and four extra-budgetary

funds. A further law adopted on 19 June 2001 reduced the number of budgetary funds to one -

the Support Price Stability Fund (DFIF) - and the number of extra-budgetary funds to five: the

Social Aid and Solidarity Fund, the Defence Fund, the Promotion and Publicity Fund, the

Savings Deposit and Insurance Fund, and the Privatisation Fund. The DFIF is needed to

channel the proceeds from World Bank loans. There is also a firm commitment not to create

any new budgetary funds. The number of revolving funds – still over 2600 in the first half of

2001 and which are used by local institutions to supplement budget allocations - will be cut by

half by the end of the year.

The Government is also committed to adopting a law on public finance and debt management

which defines clear borrowing rules and limits for the public sector and incorporates into the

budget the on-lending and debt-guarantee operations of the Treasury.

The Treasury has already provided consolidated tables on Guaranteed Debt as well as on

Actual and Foreseen Payments on Issued Guarantees. Annex D of the 2001 budget applies

ceilings to the guarantees that can be extended during the current financial year by category of

beneficiaries (state enterprises, funds, etc). The budget also placed limits on the introduction of

new projects into the public investment programme.

No developments can be reported with regard to

own resources.

Overall assessment

Turkish budgetary practices have in many respects been inconsistent with standards generally

applicable in the EC. The central budget submitted to Parliament excluded revolving funds and

extra-budgetary funds. There are a large number of revolving funds and agencies with special

accounts conducting off-budget operations. Revolving and extra-budgetary funds do not follow

the standard budget classification.

However, the situation has improved. The budget is being consolidated, and the government has

developed a comprehensive public sector reform programme based in part on the

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recommendations of the Public Expenditure and Institutional Review jointly prepared by the

government and the World Bank. These efforts must continue.

More effective expenditure control mechanisms are being developed. The government needs to

complete the implementation of a computerised accounting system to allow better monitoring of

expenditure in government units. A new budget classification which is in line with international

standards has been completed and will be implemented in six pilot budget agencies for the 2002

budget.

Financial management responsibilities continue to be fragmented between several administrative

units each headed by a different minister. As a result there is a lack of clear ownership of the

overall public sector budget. In addition, greater realism is required in assessing budget

magnitudes in the budget’s preparatory stage. In line with expanding the coverage of the budget,

as outlined above, priority areas for on-going reform include improving the transparency of the

budget and accounting standards, and improving the capacity for policy formulation linked to

the budget process.

Progress is needed also with regard to own resources and administrative infrastructure. To date

little has been planned to ensure compliance of the Turkish financial system with EC

requirements concerning own resources. Additional alignment is necessary for the proper

calculation of VAT and GNP resources, as well as further administrative modernisation.

Appropriate administrative structures are required also with regard to EC co-financed

measures.

3.2.

General evaluation

Turkey's alignment with the

acquis

is most advanced in the areas covered by the Customs

Union. Since the last Regular Report, further alignment has taken place in these areas. In

addition, significant legislation was adopted in the field of banking including on the Central Bank,

and in sectors such as telecommunications, energy and agriculture. However, in some cases

newly adopted legislation departed considerably from the

acquis

(cosmetics, audio-visual

policy, social policy). Major discrepancies between the

acquis

and Turkish legislation have

remained. Progress in strengthening administrative capacity to implement the

acquis

has been

limited.

Regarding the

internal market,

various pieces of legislation on free

movement of goods

have

been adopted including standards. The adoption of a framework for technical legislation is

particularly significant. Further steps need to be taken in a number of areas. The existing regime

of public procurement is not in line with the

acquis.

No progress can be reported in the field of

free movement of persons.

In the field of

free movement of capital

important restrictions on

foreign investment in various sectors have remained. Major efforts are required to further align

legislation in the field of non-financial services. The implementation of legislation in the field of

money laundering should be given greater attention. In the area of

company law,

no progress

has been made in establishing a new commercial code. Important steps have been taken to align

legislation on intellectual property rights with the

acquis.

Specialised courts have been set up in

See "Making a success of enlargement: Strategy Paper and Report of the European Commission on the progress towards

accession by each of the candidate countries", COM (2001) 700.

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the field of intellectual property protection, but the enforcement capacity in this field needs to be

strengthened. In the field of

competition policy,

the application of anti-trust provisions remains

satisfactory. Turkey's state aid policy is not compatible with the

acquis.

Despite a new law, the

situation with respect to monopoly adjustment on alcohol and tobacco remains a matter of

concern.

Turkey has started a substantial reform in the

agricultural

sector. However, some of the basic

features of the new Turkish direct income policy differ from the current approach in the EU.

Turkey has not established a number of basic mechanisms, such as a nation wide land register.

It should focus on the transposition, implementation and enforcement of EC legislation in the

veterinary and phytosanitary sectors.

fisheries,

no progress has been made in the alignment with the Common Fisheries Policy. A

modernised fleet registration system needs to be established.

As regards

transport policy,

Turkey should step up the legislative work necessary to adopt the

Community transport

acquis.

The administrative capacity to apply and implement the relevant

legislation in all sectors should be improved.

taxation,

significant progress is required in particular on approximation of the rates applied

in the VAT system.

In most fields, Turkey's

statistical

infrastructure is still very different from that of the EU. No

concrete progress can be reported.

Steps have been taken in the field of

Social Policy and Employment

but not all conform with

the

acquis.

The new law on the Economic and Social Council, for example, fails to create the

conditions for a genuine social dialogue. Turkish legislation remains very different from that of

the EC. As regards

energy,

substantial progress has been achieved in the field of electricity and

gas sectors. The two major laws adopted this year are important steps in preparing Turkey for

the internal energy market.

In the

telecommunications sector,

the new regulatory framework should be brought in to line

with the

acquis

on matters such as universal services and data protection.

As regards

regional policy,

Turkey has made no progress and considerable attention needs to

be paid to prepare the implementation of structural policies.

In the

environmental field,

further new legislation needs to be adopted including an important

framework law, which is pending before parliament.

In the field of

justice and home affairs,

Turkey recently signed three important conventions of

the Council of Europe on money laundering and the fight against corruption. A bilateral

agreement with Greece to combat crime has entered into force. Turkey has taken initiatives to

align with the EU's visa policy and to conclude readmission agreements in the field of migration.

Administrative capacity should strengthened in the field of border controls and the fight against

illegal immigration.

customs,

there is almost full alignment.

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financial control,

budgetary and financial control mechanisms inside the Turkish

Government should be improved.

Administrative capacity in different areas needs to be strengthened to ensure that the

acquis

implemented and enforced effectively. A significant reform at all levels of the administration is

required. In some cases, this will entail the establishment of new structures, for example in the

field of state aid and regional development. In some areas, new regulatory bodies have been set

up. Their autonomy should be assured while at the same time sufficient staff and financial

resources need to be made available.

The Accession Partnership with Turkey was adopted inMarch 2001 and Turkey has made

substantial preparatory efforts for its implementation. . Turkey gained greater understanding of

the

acquis

and the government has started an intensive process of preparation of new

legislation. In the areas of free movement of goods, intellectual property protection, energy,

telecom and customs, the measures taken have partially met the short term Accession

Partnership priorities. Considerable further efforts are needed to meet the short term Accession

Partnership priorities related to the

acquis.

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C. Conclusion