COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 05.11.2008

SEC(2008) 2699

{COM(2008)674}

1. Introduction.................................................................................................................. 4

1.1. Preface......................................................................................................................... 4

1.2. Context ......................................................................................................................... 4

1.3. Relations between the EU and Turkey......................................................................... 4

2. Political criteria ............................................................................................................ 6

2.1. Democracy and the rule of law .................................................................................... 6

2.2. Human rights and the protection of minorities .......................................................... 11

2.3. Regional issues and international obligations ............................................................ 28

3. Economic criteria ....................................................................................................... 29

3.1. The existence of a functioning market economy ....................................................... 29

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

................................................................................................................................... 34

4. Ability to assume the obligations of membership...................................................... 37

4.1. Chapter 1: Free movement of goods .......................................................................... 37

4.2. Chapter 2: Freedom of movement for workers .......................................................... 40

4.3. Chapter 3: Right of establishment and freedom to provide services ......................... 40

4.4. Chapter 4: Free movement of capital ......................................................................... 41

4.5. Chapter 5: Public procurement................................................................................... 43

4.6. Chapter 6: Company law............................................................................................ 44

4.7. Chapter 7: Intellectual property law........................................................................... 45

4.8. Chapter 8: Competition policy................................................................................... 47

4.9. Chapter 9: Financial services ..................................................................................... 48

4.10. Chapter 10: Information society and media ............................................................... 50

4.11. Chapter 11: Agriculture.............................................................................................. 51

4.12. Chapter 12: Food safety, veterinary and phytosanitary policy .................................. 52

4.13. Chapter 13: Fisheries.................................................................................................. 54

4.14. Chapter 14: Transport policy ..................................................................................... 55

4.15. Chapter 15: Energy .................................................................................................... 56

4.16. Chapter 16: Taxation.................................................................................................. 58

4.17. Chapter 17: Economic and monetary policy.............................................................. 59

4.18. Chapter 18: Statistics.................................................................................................. 60

4.19. Chapter 19: Social policy and employment ............................................................... 61

4.20. Chapter 20: Enterprise and industrial policy.............................................................. 63

4.21. Chapter 21: Trans-European networks....................................................................... 64

4.22. Chapter 22: Regional policy and coordination of structural instruments .................. 65

4.23. Chapter 23: Judiciary and fundamental rights ........................................................... 66

4.24. Chapter 24: Justice, freedom and security ................................................................. 71

4.25. Chapter 25: Science and research .............................................................................. 75

4.26. Chapter 26: Education and culture............................................................................. 76

4.27. Chapter 27: Environment ........................................................................................... 77

4.28. Chapter 28: Consumer and health protection............................................................. 78

4.29. Chapter 29: Customs union........................................................................................ 80

4.30. Chapter 30: External relations.................................................................................... 81

4.31. Chapter 31: Foreign, security and defence policy...................................................... 82

4.32. Chapter 32: Financial control..................................................................................... 84

4.33. Chapter 33: Financial and budgetary provisions........................................................ 86

Following the conclusions of the Luxembourg European Council in December 1997, the

Commission has reported regularly to the Council and the Parliament.

This report on progress made by Turkey in preparing for EU membership largely follows the

same structure as in previous years. The report:

- briefly describes the relations between Turkey and the Union;

- analyses the situation in Turkey in terms of the political criteria for membership;

- analyses the situation in Turkey on the basis of the economic criteria for membership;

expressed in the Treaties, the secondary legislation, and the policies of the Union.

The period covered by this report is from 1 October 2007 to early October 2008. Progress is

measured on the basis of decisions taken, legislation adopted and measures implemented. As a

rule, legislation or measures which are under preparation or awaiting Parliamentary approval

have not been taken into account. This approach ensures equal treatment across all reports and

permits an objective assessment.

The report is based on information gathered and analysed by the Commission. In addition,

many sources have been used, including contributions from the government of Turkey, the

non-governmental organisations.

The Commission draws detailed conclusions regarding Turkey in its separate communication

The Helsinki European Council of December 1999 granted the status of candidate country to

Turkey. Accession negotiations with Turkey were opened in October 2005.

The Association Agreement between Turkey and the then EEC was signed in 1963 and

entered in force in December 1964. Turkey and the EU formed a customs union in 1995.

level of preparedness to start negotiations on individual chapters has been assessed on the

basis of screening reports. Of a total of 33 screening reports, one has still to be delivered by

the Commission to the Council whilst nine are being discussed in the Council.

addition, the EU informed Turkey about the progress needed to reach a satisfactory level of

remains in force.

dialogue meetings were held in May and September 2008 at ministerial level and in February

and July 2008 at political director level. These meetings focused on the main challenges faced

by Turkey in terms of the Copenhagen political criteria and reviewed progress being made

towards fulfilment of Accession Partnership priorities. Foreign policy issues related to

regional areas of common interest to the EU and Turkey, such as Iraq, Iran, the Middle East

and the Caucasus, were also regularly discussed.

which was nearly € 100 billion in 2006, thereby making Turkey the EU's seventh trading

partner. The EU asked Turkey to remove all remaining restrictions on the free movement of

goods, including restrictions on means of transport regarding Cyprus. A number of Turkey's

commitments on technical barriers to trade, import licences, State aid and enforcement of

intellectual property rights remain unfulfilled. No progress can be reported concerning

Turkey's longstanding ban on imports of live bovine animals, beef and other animal products.

2008. Progress on these reform priorities is encouraged and monitored through the bodies set

up under the Association Agreement. The Association Committee met in March 2008, the

Association Council in May 2008. Eight sectoral sub-committees have been held since

November 2006.

Turkey has not pursued the negotiations on a readmission agreement with the European

Community since December 2006.

the Instrument for Pre-accession Assistance (IPA) in 2008. The Multi-Annual Indicative

Planning Document 2008-2010, which provides the strategic multi-annual framework for all

programmes at national level, was adopted by the Commission on 25 July 2008. In addition,

Turkey is benefiting from a series of regional and horizontal programmes under IPA.

In relation to IPA preparations, Turkey's focus in the last year has been on finalisation of the

first set of programmes under all components, the negotiation of a Framework Agreement

with the Commission and preparations for the setting up of implementation systems. Delays

have occurred in these preparations, which put some of the IPA 2007 programme allocations

restrictions regarding the Republic of Cyprus and no chapter will be provisionally closed until the

Commission confirms that Turkey has fully implemented the Additional Protocol to the Association

Agreement.

at risk. Turkey needs to vigorously address remaining system weakness findings and to

further improve the quality and efficiency of the project and programme cycles.

This section examines progress made by Turkey towards meeting the Copenhagen political

criteria, which require stability of institutions guaranteeing democracy, the rule of law, human

rights and respect for and protection of minorities. It also monitors the respect for

international obligations, regional cooperation, and good neighbourly relations with

enlargement countries and Member States.

On 14 March 2008 the Chief Public Prosecutor applied to the Constitutional Court for the

governing AK party to be dissolved and for 71 former and present party officials, including

the President of the Republic and the Prime Minister, to be banned from being member of a

political party for five years. The charges brought against the party alleged that it was a focal

point for anti-secular activities. On 30 July, the Constitutional Court fell short of the required

majority to close down the party, but considered that the latter had carried out activities

against the secular principles of the Republic. It thus ordered that 50% of the government

Pursuant to Articles 68 and 69 of the Constitution and to the relevant provisions of the Law on

political parties, on 16 November 2007 the Chief Public Prosecutor at the Court of Cassation

applied to the Constitutional Court for closure of the Democratic Society Party (DTP). He

also requested that 221 former and present members of the party be banned from being

member of a political party for five years. The party is accused of engaging in activities

against the unity and integrity of the country. This case is pending before the Constitutional

Court.

An investigation started in 2007 into an allegedly criminal network, known as Ergenekon, led

to the arrest of a number of people, including retired Army generals. The indictment against

Ergenekon, presented on 14 July 2008 by the Istanbul Public Prosecutor Office, is based on

charges such as forming a terrorist organisation and attempting to overthrow the government

and to undermine its operation by use of violent means. During the course of the

investigation, there were reports regarding the insufficient safeguarding of the rights of

defence and the excessive duration of detention period without indictment. The first hearing

of the trial, first of this kind on such a scale, was held as planned on 20 October.

The governing party gave a group of academics a mandate to revise the 1982 Constitution

with a view, among other things, to aligning Turkey with international standards on

fundamental rights.

However, no draft has been presented either to the public or to parliament, and no clear

timetable has been set for discussing it.

Instead, in February 2008, the Parliament amended Article 10 ("Equality before the law") and

Article 42 ("Right and duty of training and education") of the Constitution, with the aim of

lifting the headscarf ban for university students. The amendments were adopted with the

support of the governing Justice and Development Party (AKP) and of the opposition

Nationalist Movement Party (MHP) and Democratic Society Party (DTP).

Following an appeal by the opposition Republican People's Party (CHP) and Democratic Left

Party (DSP), on 5 June 2008 the Constitutional Court annulled the amendments on the

grounds that they were against the secular nature of the State. A minority of two judges

argued that the Court can only examine constitutional amendments with regard to their form

and not their content.

The Parliament - the Turkish Grand National Assembly - adopted 116 bills. Since October

2007 the government submitted 397 draft bills, while 313 were submitted by individual

members of Parliament.

In March 2008 an amendment to the Law on elections and electoral rolls was adopted,

extending the right of Turkish citizens living abroad to participate in parliamentary elections,

in line with the recommendations of the OSCE Election Monitoring Report.

However, in response to an appeal filed by the CHP, the Constitutional Court ruled in May

that the possibility of postal voting is unconstitutional. The CHP referred to the Constitutional

Court a total of 16 laws adopted in 2008, some of which were intended to introduce EUrelated

democratisation reforms (including, for example, the law on Foundations and the

amendments to the Law on the public service broadcaster).

The new President has exerted efforts to play a conciliatory role with regard to political actors

and civil society. He established a good working relationship with the government, while

repeatedly calling for an acceleration of the pace of EU-related reforms.

He played an active role in foreign policy and travelled extensively abroad. In September

2008, at the invitation of the Armenian President, he paid the first-ever visit by a Turkish

President to Armenia, with a view to establishing a bilateral dialogue leading to the

normalisation of bilateral relations.

The government expressed its commitment to the EU accession process and to political

reforms.

However, despite its strong political mandate, the government did not put forward a consistent

and comprehensive programme of political reforms. On 1 September 2008 the Government

consultation process with civil society and the opposition. The Programme remains to be

adopted. The staff and resources of the Secretariat General for EU Affairs (EUSG), the main

coordinating body in charge of EU affairs, remain weak.

This Law established 43 new districts, merged 239 municipalities and closed down 863 of

them. In July 2008, Parliament adopted a Law to increase the revenue of local Governments,

aimed at enabling them to fulfil their mandate more effectively. The implementation of local

administration laws and capacity-building has continued.

However, the Law on municipalities adopted in March 2008 is still under review in the

Constitutional Court, following the appeal by the CHP. There has been no progress regarding

the adoption of the Framework Law on public administration, which aimed at devolving more

powers to local Government.

City councils, which are designed to be a platform to enhance citizens' participation in local

government, have been functioning effectively in only a limited number of cities. Efforts are

needed to strengthen all city councils. Accountability systems and transparency also need to

be strengthened.

Overall, as concerns the legislative and executive functions, while the new President played a

positive role by calling for further political reforms, the government did not put forward a

consistent and comprehensive programme of political and constitutional reforms.

Furthermore, the lack of dialogue and spirit of compromise between the main political parties

had a negative impact on the smooth functioning of the political institutions. The work of the

newly elected parliament was affected to a considerable extent by legal cases aimed at

dissolution of two parties. As regards local government, the recently adopted local

administration laws need to be implemented and decentralisation of powers in favour of local

governments to be strengthened.

As part of the efforts to reduce red tape, the government issued a circular in May 2008

instructing all public agencies to use the ID shared data base (KPS) for residence and birth

records of citizens, instead of requesting them from citizens. The current recruitment and

promotion procedure (up to mid-career level) is based on a merit-based competitive

examination, managed by an autonomous body.

However, the politicisation of senior level appointments has been criticised. As regards the

reform of public administration, a number of issues remain to be addressed, such as reducing

administrative burden, ensuring simplification, establishing regulatory impact assessments

(RIA), developing administrative procedures, enhancing transparency and improving policymaking

and coordination systems.

Strategy development units, which are pillars of financial management and policy-making,

need to be strengthened. Efforts are needed to secure full implementation of the Public

Financial Management and Control Law.

Parliament has not received a comprehensive draft law on the Civil Service.

Overall, there has been limited progress on public administration reform. The civil service

system needs to be modernised.

Political control over the military was applied in practice in the context of military operations

aimed at terrorist targets in Northern Iraq. Such operations were authorised by the parliament

and decided upon by the government.

However, the armed forces have continued to exercise significant political influence via

formal and informal mechanisms. Senior members of the armed forces have expressed their

opinion on domestic and foreign policy issues going beyond their remit, including on Cyprus,

the South East, secularism, political parties and other non-military developments.

No change has been made to the Turkish Armed Forces Internal Service Law and the Law on

the National Security Council. These define the role and duties of the Turkish military and

grant the military wide room for manoeuvre by providing a broad definition of national

security. No progress has been made on enhancing civilian control over the Gendarmerie

when engaged in law enforcement activities.

An internal military memorandum leaked to the press identified NGOs that had received

financial aid from foreign organisations, including the EU. The memorandum was not denied

by the General Staff.

force unchanged. The protocol allows military operations to be carried out for internal

security matters under certain conditions without a request from the civilian authorities.

No progress has been made on strengthening parliamentary oversight of the military budget

and expenditure. The Parliamentary Planning and Budget Committee reviews the budget of

the Ministry of National Defence. However, extra-budgetary funds are excluded from

parliamentary scrutiny. The Defence Industry Support Fund (SSDF), from which most

procurement projects are funded, is still an extra-budgetary fund.

audits of military expenditure. In 2007, some 25% of all military accountancy offices

were audited. In July 2008, the Court of Auditors decided that it has a mandate to audit the

SSDF. However, the Court remains unable to audit assets belonging to the military, pending

adoption of the revised legislation on the Court of Auditors, which is overdue. Furthermore,

the 2003 Law on public financial management and control, which provides for internal audits

of security institutions, has yet to be properly implemented

Overall, no progress has been made in ensuring full civilian supervisory functions over the

military and parliamentary oversight of defence expenditure. Senior members of the armed

forces have made statements on issues going beyond their remit.

presented in spring 2008. The document is comprehensive and covers issues related to the

independence, impartiality, efficiency and effectiveness of the judiciary, enhancement of its

professionalism, the management system and measures to enhance confidence in the

judiciary, to facilitate access to justice and to improve the penitentiary system. Judges and

prosecutors discussed the draft strategy at a meeting in Antalya.

In 2007, a total of 846 judges and prosecutors were appointed. The total number of judges and

prosecutors on 1 May 2008 was 6,914 (6,785 on 1 May 2007) and 3,917 (3,744 on 1 May

2007) respectively. On the same date, the total number of vacant posts for judges and

prosecutors was 4,166. The funds available to the judiciary in 2007 totalled € 865 million.

However, the Government failed to prepare a comprehensive anti-corruption strategy. Policy

making in this field has not received adequate political support.

Furthermore, several of GRECO's most important recommendations have not been addressed,

such as the recommendation to entrust an oversight body, involving civil society, with the

responsibility of overseeing implementation of national anti-corruption strategies and of

proposing new strategies.

Corruption incidents, involving in particular real estate agencies, local government and

universities, were frequently reported by the media. As a result, law enforcement agencies

have conducted a series of high-profile corruption investigations in various agencies. In the

context of a fraud case against the charity association Deniz Feneri in Germany, the Regional

Court of Frankfurt am Main convicted three charity's managers for having misused funds

collected as donations. The Court also stated that part of the funds have been channelled to

entities based in Turkey. In this context, an Ankara prosecutor initiated an investigation, and

asked the Ministry of Justice to request the necessary documents from the German Court.

There has been no progress on limiting the immunity of Members of Parliament and there is

no legislation in place on election campaign financing. The European Court of Human Rights

noted in a ruling that that no objective criteria had been set to define the conditions under

No progress has been made regarding new legislation on the Court of Auditors. There has

been no progress on strengthening Parliamentary oversight over public expenditure.

widespread issue. There has been limited progress towards strengthening the legal framework

and institutional set-up to fight corruption. The continuing absence of an overall strategy,

action plan and coordination mechanism is a cause for continuing concern in this area. Turkey

needs to develop a track record of investigations, prosecutions and indictments of allegations

of corruption.

Optional Protocol to the UN Convention against Torture (OPCAT), signed in September

2005, has not been ratified. The ratification of the UN Convention on the Rights of Persons

with Disabilities is pending. Turkey has not ratified three additional Protocols to the European

total of 266 judgments finding that Turkey had violated the ECHR. Similarly to last year, the

total number of new applications to the ECtHR continued to increase, with 3,705 applications

during the reporting period. The majority of these new applications concerned the right to a

fair trial and protection of property rights. Few of them concerned violations of the right to

life or torture and ill-treatment.

Turkey abided by the final judgment of the ECtHR in the majority of cases. However, a

considerable number of ECtHR judgments are awaiting enforcement by Turkey. This is

sometimes because general legislative measures are required. For instance, the legal provision

preventing the re-opening of domestic proceedings in certain circumstances following a

judgment by the ECtHR remains in force. The Committee of Ministers of the Council of

Europe indicated that continuation of this situation amounts to a manifest breach of Turkey's

obligation under the ECHR. Furthermore, Turkey has not adopted legal measures to prevent

repetitive prosecution and conviction of conscientious objectors. Other cases pending before

the Committee of Ministers awaiting adoption of the necessary implementing measures relate

to control of the activities of security forces, effective remedies against abuses and restrictions

on freedom of expression.

In the Cyprus v. Turkey case, the issue of missing persons and the restrictions on the property

rights of Greek Cypriots living permanently in the northern part of Cyprus remain pending.

The compensation mechanism put in place to address the property rights of displaced persons

fulfils in principle the requirements indicated by the ECtHR and has continued to receive

requests for compensation. On 22 April 2008 the Court welcomed settlement in the case of

Turkish Cypriot Immovable Property Commission, which provides for the payment of USD 1

million and a property exchange. However, the ECtHR has not assessed whether the available

remedy is effective for all relevant issues. Turkey has not yet fully implemented the ECtHR

judgements on the Loizidou and Xenides-Arestis cases.

Overall, Turkey has continued to make progress on the execution of ECtHR judgments.

However, further efforts are needed in this context. Furthermore, there has been no progress

on ratification of international human rights instruments, including in particular OPCAT.

and the Human Rights Boards (931 in all). The latter have the task of visiting places of

detention and State-sponsored social services.

At parliament level, the Human Rights Investigation Committee has established two subcommittees

to investigate torture and ill-treatment in prisons and detention centres and the

murder of journalist Hrant Dink. The latter Commission finalised its report in July 2008. The

report came to the conclusion that there was negligence, error and lack of co-ordination in the

activities of the security organisations and of the gendarmerie in failing to prevent the murder.

These findings need to be properly followed-up.

The institutional framework for human rights promotion and enforcement does not meet the

independence requirement and lacks financial autonomy and transparency. There is a need for

greater public awareness of the work of these institutions. The Human Rights Advisory Board

- a body representing NGOs, experts and ministries - has not been operating since the

publication of a report on minority rights in October 2004.

Furthermore, the establishment of the Ombudsman has been outstanding since 2006,

following the application of former President Sezer to the Constitutional Court for the

annulment of some provisions of the Law. The Constitutional Court suspended the entry into

force of the Law pending its final ruling. In the absence of an Ombudsman system, there is no

alternative remedy, other than the judiciary, for investigating complaints against

administrative decisions at central and local level, as regards the respect of human rights,

would help defuse tensions between different sections of society by strengthening the rule of

law and the protection of individual rights.

Human rights defenders have faced criminal proceedings because of their work. Some faced

threats from extremist groups, and were subsequently placed under police protection.

Overall, the institutions for the promotion and enforcement of human rights lack

independence and resources. The introduction of an Ombudsman is overdue and is of key

importance to prevent tensions in society. Furthermore, threats to personal safety and

occasional criminal proceedings have an adverse effect on the work of human rights

defenders.

The rights of detainees are protected by a comprehensive set of safeguards which serve to

detainees in police custody. Efforts are ongoing to ensure compliance with these provisions.

They include training for judges, prosecutors and forensic experts with a view to better

implementation of the Istanbul Protocol, which provides guidance on effective investigation

and documentation of torture and ill-treatment cases.

The Ministry of Interior continued its work for the establishment of an independent national

mechanism to investigate citizens' complaints against law enforcement officers. As a next step

the establishment of this mechanism requires public consultations on its structure and

function.

The Council of Forensic Medicine is preparing for ISO quality accreditation, which will

enhance the credibility of its reports. The Council has seven branch offices, and efforts are

ongoing to increase the resources for forensic medicine in the country through the creation of

units in each of Turkey's 81 provinces.

However, the number of applications to NGOs in relation to cases of torture and ill-treatment

has increased, in particular outside official places of detention, notably during apprehension,

transfer, or in the open with no detention registered. Furthermore, there are cases where the

legal safeguards in place failed to prevent or stop the occurrence of torture and ill-treatment

while in custody or in prison. These developments are a matter of concern.

Amendments to the law on the duties and legal powers of the police, adopted in 2007, provide

that the police are not entitled to use force unless confronted with resistance. These

amendments, together with the instructions given to members of the security forces, appear to

align the Turkish legislation with the ECHR standards. However, there are concerns that the

implementation of this law has resulted in cases of ill-treatment during routine identity

checks. Strict implementation of the amended provisions needs to be monitored by the

Turkish authorities in order to prevent human right violations.

mechanism for monitoring places of detention, there is no such mechanism in place. Visits by

the Human Rights Boards are often not followed up and the boards do not have sufficient

expertise.

The use of statements obtained in the absence of legal counsel or not confirmed before a

judge is prohibited by the Criminal Procedure Code. However, the Court of Cassation ruled

that the ban on use of such statements does not apply retroactively. There have been cases

where lower courts have not removed such evidence from the case file, although allegations

of ill-treatment were made by the defendant.

Medical reports established upon admission to and exit from police custody are sometimes

inaccurate due to lack of resources or expertise. Furthermore, for their own security, the legal

framework allows doctors to request the presence of a law enforcement officer during medical

examinations of detainees. However, in some reported cases, law enforcement officers were

present during examinations without the request of the doctor in charge.

Victims of torture and ill-treatment rely essentially on rehabilitation services provided by

NGOs. This is partly due to the lack or inaccessibility of State-sponsored services for victims

of torture and ill-treatment.

death following torture in detention. However, impunity for human rights violations is a cause

for concern. There is a lack of prompt, impartial and independent investigation into

allegations of human rights violations by members of security forces. None of the 70

complaints submitted to the prosecutor in relation to the Diyarbakir incidents in March 2006

have been closed so far. Furthermore, judicial proceedings into allegations of torture and illtreatment

are often delayed by the lack of efficient trial procedures or abuse of such

procedures.

A comprehensive set of safeguards is in place. However, allegations of torture and illtreatment

during detention or outside official places of detention are a cause for concern. The

efforts to prevent torture and ill-treatment need to be enhanced. The ratification of the

OPCAT and the fight against impunity are key in this context.

a lawyer immediately after detention. In rural areas, however, in particular in the South-East

of the country, there have been cases where defendants have not had access to a lawyer on

terms equivalent to those in urban areas.

Twelve new prisons have been completed and a further 22 new prisons are under

construction.

Staff training continued to improve. There are four prison staff training centres, which deliver

pre-service, in-service and promotion training. The trainers have been trained under the EU's

judicial modernisation and penal reform (JMPR) programme.

Greater transparency was introduced to the operations of the Penal Institutions and Detention

Houses Monitoring Boards. These boards carry out regular visits to prisons and the findings

of their reports are now publicly accessible. Furthermore, the Law provides for the publication

of an annual report on the activities of the Penal Institutions and Detention Houses

Monitoring Boards.

However, the national framework for prison monitoring falls short of the requirements of the

Restrictions on prisoners' correspondence and inadequate health/psychiatric resources remain

a problem. The total number of prisoners is 95,551 for a total prison capacity of 90,558.

Prisons in big cities are especially faced with the problem of overcrowding. Implementation

of the circular on high-security F-type prisons has failed to remedy the shortcomings as

regards communal activities for inmates. Proper implementation of the circular depends on

increasing the numbers and training of staff, and making more rooms available for the

activities of different groups of prisoners.

Provisions allowing solitary confinement of persons sentenced to aggravated life

imprisonment remain in force. In its 2006 report on Turkey, the Council of Europe Committee

for the Prevention of Torture indicated that such rules need to be applied for as short a time as

possible and must be based on an individual risk assessment of the prisoner concerned.

Cases of ill-treatment by prison staff have been reported, but few lawsuits have been launched

to probe these allegations.

Overall, good progress was made on improving infrastructures and on training of staff.

However, shortcomings as regards restrictions on prisoners' conditions, on solitary

confinement and on occasional ill-treatment remain to be addressed.

Open debate continues in the Turkish media on a wide range of issues, including those

perceived as sensitive by Turkish society. In April, the Turkish parliament adopted

amendments to Article 301 of the Turkish Criminal Code with the intention of strengthening

insults in a foreign country. Furthermore, the amendments introduce a requirement for

permission to be obtained from the Justice Minister in order to launch a criminal

investigation. A circular on implementation of the amended article was issued on 9 May

Following the adoption of the amendments to Article 301, Turkish courts had forwarded, by

September, 257 cases to the Minister of Justice for prior authorisation. This requirement

1. A person who publicly degrades the Turkish nation, the State of the Republic of Turkey, the Turkish Grand

National Assembly, the Government of the Republic of Turkey and the judicial bodies of the State,

shall be sentenced to a penalty of imprisonment for a term of six months to two years

2. A person who publicly degrades the military or security organisations of the State shall be sentenced to a

penalty in accordance with the first section

3. The expression of an opinion for the purpose of criticism does not constitute an offence.

4. The conduct of investigation for such offence shall be subject to the permission of the Minister of Justice.

that international conventions on human rights automatically become part of the Turkish legal order -

without any additional legislative steps for transposition - once they have been adopted by the

Parliament. Furthermore, the circular establishes, that for offences against Article 301, statements

cannot be taken from the suspect without permission from the Minister of Justice in order not to

discredit the suspect in the eyes of the public.

concerns cases at the investigation stage or for which judicial proceedings have started. By

September, the Minister had reviewed 163 cases and refused to grant permission to proceed in

126 cases.

However, the wording of Article 301 remains largely the same and the prior authorisation

requirement opens up the possibility that the article will become subject to political

consideration. So far, the Minister of Justice authorised the criminal investigations to continue

in 37 cases. This includes one case which was initiated following a statement made by a

Turkish writer on the Armenian issue shortly after the assassination of the Turkish journalist

of Armenian origin, Hrant Dink. Furthermore, there is legal uncertainty as regards cases

which had been granted authorisation by the Minister of Justice under the former Article 159

of the Turkish Criminal Code.

Other legal provisions that restrict freedom of expression remain a cause of concern. For

example, Articles 215, 216 and 217 of the Turkish Criminal Code, that criminalise offences

against public order, and the Anti-Terror Law have been applied to prosecute and convict

those expressing non-violent opinions on Kurdish issues. Turkish judges and prosecutors

apply a wide interpretation of the provision on "incitement to violence" or "public interest", in

particular as concerns Kurdish-related issues. This is not in line with the ECtHR case law on

freedom of expression and implies in particular a lack of differentiation between violent and

non-violent opinions. Moreover, press articles on ongoing judicial proceedings have led to

prosecutions and convictions under Article 288 (attempt to influence a fair trial) of the

Turkish Criminal Code or under the Press Law. Similarly, public statements on the right to

conscientious objection are prosecuted under Article 318 (discouraging the people from

military service) of the Turkish Criminal Code.

Furthermore, there have been statements by senior figures strongly criticising the press, in

particular following press reports on alleged corruption cases and the fight against terrorism.

Another problematic area is the frequent website bans, which are disproportionate in scope

and duration. Along with other websites, the popular You Tube site has been closed down

several times.

The Turkish Armed Forces still deny access to military receptions and briefings to some

journalists and media organisations.

The case against 53 DTP mayors for sending a letter to the Danish Prime Minister requesting

that Roj TV not be closed was finalised in April 2008. The Court sentenced the defendants to

2 months and 15 days imprisonment, which was commuted to a fine. The Court's ruling

cannot be appealed.

Overall, with the amendment of Article 301 there has been some progress in the efforts to

strengthen the safeguards for freedom of expression, which is a priority of the Accession

Partnership. However, only a consistent track record of implementation will show whether or

not the revised article is adequate. Moreover, further legislative reforms are needed to ensure

full respect of freedom of expression, in law and in practice, in line with the ECHR and the

ECtHR case law. Against the background of pressures on the press and electronic media,

there is a need to guarantee an atmosphere conducive to full respect of the freedom of the

press.

However, as regards implementation, arbitrary limitations have been applied in practice to the

right to peaceful assembly. The Turkish police used disproportionate force against protestors

and trade union representatives who ignored the ban on 1 May demonstrations in Taksim

violence against demonstrators in several provinces, in particular Hakkari, Yuksekova and

Investigation files are pending on the circumstances of these deaths in the Van Chief Public

Prosecution Office.

Investigations have been initiated into the allegations of disproportionate use of force by the

police during demonstrations. However, in such cases, the opening of a criminal case depends

on the authorisation of the Governor. In certain cases, the authorisation has been refused for

lack of conclusive evidence, against the findings of prior investigations. Furthermore, some

protestors who allege police ill-treatment during demonstrations have faced criminal charges.

The criminal investigation into the cases of disproportionate force by the police during the 1

May 2007 demonstrations in Istanbul resulted in charges being pressed against two police

officers. However, the parallel disciplinary investigation was closed without any

administrative sanction against the police officers on duty during the demonstrations.

Overall, further efforts are needed to ensure freedom of assembly in practice in line with

European standards, as arbitrary limitations and disproportionate use of force against

demonstrators still occur.

of the amendments to the Law on foundations in February 2008. The scope of the new Law

extends to all existing foundations. The new provisions relax the conditions for establishing a

foundation and ease the regulatory framework for their activities, in particular on selecting

board members, acquiring or selling assets, receiving funds from abroad and co-operating

with foreign foundations. The previous ban on foreigners establishing foundations in Turkey

has been replaced by the principle of reciprocity. The new Law provides tax incentives for

donations to all foundations and allows tax exemptions for the repair, restoration and

landscaping of cultural properties that belong to foundations. Furthermore, the Law provides

for the establishment of the Foundations Council as the highest decision-making body for

foundations. As a positive step, the foundations themselves are represented in this new body.

However, the obligations imposed by the Law on associations to notify the authorities before

receiving financial support from abroad and to provide detailed documents on such support

continue to place a burden on associations' operations. Furthermore, frequent inspections of

NGOs receiving funds from abroad, including EC funds, remain a cause of concern. Certain

NGO activities were videotaped by the security forces, especially in East and Southeast

Turkey.

The registration of the Turkish Armenian Business Development Council was rejected by the

Governorate of Istanbul, without clear legal grounds. Following a case brought by the Istanbul

Governorate, an Istanbul court decided in May to close down a lesbian, gay, bisexual,

transgender/transsexual (LGBTT) association. The Istanbul Governorate is accusing Amnesty

International (AI) of illegal money collection. The competent Istanbul Administrative Court

heard the case and decided in favour of AI. The Governor has appealed the case before the

Council of State.

provide political actors with an adequate level of protection from the state's interference in

their freedom of association and freedom of expression.

Overall, there were improvements to the legal framework on freedom of association.

However, some associations faced disproportionate administrative difficulties or judicial

proceedings. Furthermore, in the light of the recurrent closure cases against political parties,

the legal provisions on political parties need to be amended in line with the case law of the

ECtHR and best practices in EU Member States, as outlined by the Council of Europe's

Venice Commission. This is a priority of the Accession Partnership.

However, there is no coherent legal framework organising this cooperation. As a result,

tangible policy outputs. Political pluralism would be enhanced if participation of civil society

and other stakeholders in policy-making were increased. Furthermore, the breadth and scope

of civil society organisations needs to be strengthened.

The Law on foundations adopted in February 2008 addresses, among other things, a number

The court case on the killing of three Protestants in Malatya in April 2007 continued. A

leading defence lawyer was provided with protection after receiving threats. A limited number

of court decisions have ruled against use of threats or insults against representatives of non-

Muslim minorities.

As regards the Alevis, the government announced an initiative aimed at improving dialogue

with this community and addressing its concerns. In what was noted as a first decision of its

kind in the country, a municipal council recognised a Cem house as a place of worship and

applied mosque tariffs to its water charges.

However, the government's initiative has not been followed through. Overall, Alevis continue

to face the same problems as before, in particular as regards education and places of worship.

This has led an AKP Alevi MP to resign from the position of Advisor to the Prime Minister

on Alevi issues.

As regards education, under Article 24 of the Turkish Constitution religious culture and ethics

classes are compulsory in the curricula of primary and secondary education. This was not the

case previously, i.e. before the entry into force of the current Constitution in 1982. In October

2007, further to an application lodged by a family who are followers of Alevism, the ECtHR

specific instruction in the major principles of the Muslim faith, including its cultural rites. The

Court requested Turkey to bring its educational system and domestic legislation into

conformity with Article 2 of Protocol No1 to the ECHR. This ECtHR judgment needs to be

implemented. In August 2008 an Alevi Federation applied to the Committee of Ministers of

the Council of Europe complaining that this judgment is not being implemented and claiming

that the new textbooks include superficial information on Alevis part of which could also be

considered misleading. In March 2008, in two separate cases, the Council of State (CoS)

decided that children of Alevi families were entitled to be exempted from these religious

education classes.

As regards places of worship, two cases regarding Alevi places of worship (Cem houses or

Cemevi) are pending before the courts, one of them before the Council of State. In both cases,

Alevis were refused plots to construct Cem houses. These are not recognised as places of

worship and, as a result, receive no funding from the authorities. Two Protestant churches and

a Jehovah's Witnesses assembly have been unable to register their places of worship.

Attacks against non-Muslim clergy and places of worship have been reported in a number of

provinces. Missionaries continue to be portrayed and/or perceived as a threat to the integrity

of the country and to the Muslim religion. The Turkish Alliance of Protestant Churches

submitted a report to Parliament's Human Rights Committee on the state of religious

minorities in Turkey. This report pointed out that non-Muslim groups in the country had been

the targets of attacks, provided a list of such incidents and noted that no suspects had been

arrested. Implementation of the Ministry of Interior circular of 19 June 2007 on freedom of

religion of non-Muslim Turkish citizens has not yet had the desired effects.

Non-Muslim communities - as organised structures of religious groups - still face problems

due to lack of legal personality. Restrictions on the training of clergy remain. Turkish

legislation does not provide for private higher religious education for these communities and

there are no such opportunities in the public education system. The Halki (Heybeliada) Greek

Orthodox seminary remains closed. There have been reports of foreign clergy who wish to

work in Turkey facing difficulties in obtaining work permits. The Ecumenical Patriarch is not

free to use the ecclesiastical title Ecumenical on all occasions. In January 2008, Prime

Minister Erdogan declared that use of the title "ecumenical" should not be a matter on which

the State should rule.

Judicial proceedings against conscientious objectors have continued and there have been

frequent allegations of ill-treatment of conscientious objectors in prison. Furthermore, public

Overall, there has been some progress, in particular as regards adoption of the Law on

foundations. However, the implementation of the Law, together with the resolution of the

outstanding property-related issues regarding non-Muslim minorities remains a challenge.

Furthermore, Alevis continue to face the same problems, including on education and places of

worship. A legal framework in line with the ECHR has yet to be established, so that all non-

Muslim religious communities and Alevis can function without undue constraints. Turkey

needs to make further efforts to create an environment conducive to full respect for freedom

of religion in practice and to carry out consistent initiatives aimed at improving dialogue with

the various religious communities.

domestic violence against women has helped to improve cooperation between public

institutions. Awareness-raising activities have been organised for members of the judiciary

and law enforcement bodies. To date, 30 000 law enforcement officers have reportedly

participated in training with a further 10 000 planned by the end of 2008. Gender sensitivity

training programmes have also been conducted for health workers. The number of shelters for

women victims of domestic violence has marginally increased. Courts have applied the

There are some notable examples of high-level presence of women in Turkish society in

business, academia, the civil service and politics. Parliament adopted the "Employment

Package" amending the Labour Law and certain other laws in order to promote women's

However, gender equality remains a major challenge in Turkey. According to official

statistics, participation by women in the labour force is low (24.8 % in 2007), and on a

decreasing trend. The rate of women's employment is the lowest among the EU Member

States and the OECD countries.

Political representation of women, at both national and regional levels, is very low. Civil

society organisations have submitted proposals to address this issue, in particular with a view

to the forthcoming municipal elections scheduled for 2009.

Documents posted on the Diyanet's (Presidency for Religious Affairs) site contain language

perceived by NGOs as discriminatory against women.

Women's access to education is the lowest among the EU Member States and the OECD

countries. The good results on reducing the gender gap in primary education need to be

sustained and strengthened, in particular by ensuring the continuing attendance of girls at

Domestic violence, honour killings, and early and forced marriages are still a serious problem.

The Court of Cassation ruled that sentences for honour killings are given only if there is

evidence showing that the murder was committed following a decision of the family

assembly. This decision was criticised by a member of the Court, who claimed that it would

complicate efforts to eradicate these killings. According to the Prime Ministry Human Rights

Directorate, 220 honour killings were reported in the country in 2007, most of which

happened in big cities. This is an increase compared with 2006 and illustrates the need to

target efforts to raise awareness on women's rights among urban migrants. Finally, there is a

need to improve reliability of data on all these issues.

Women are reportedly reluctant to have recourse to the police or the courts due to lack of

confidence in provision of effective protection. Women's economic fragility further reinforces

fully implemented and the number of shelters remains lower than provided for under that law.

Women's NGOs are conducting surveys to define the number and capacity of properly

separately. They have also abolished all fees for applications and administrative transactions related to

court proceedings.

municipalities and in municipalities with a population of 50 000 or more.

functioning shelters. NGOs have reported that it is not possible to obtain information about

the scope or an assessment of the impact of awareness-raising campaigns.

A Gender Equality Body and a Parliamentary Committee on Gender Equality have still to be

established. Women's civil society organisations have requested the establishment of a fullyfledged

committee that could play an essential role in mainstreaming women's issues in all

policy areas.

There have been complaints from civil society organisations about the consultations organised

by the government on the direction and implementation of gender policy. These relate to both

the limited number of civil society organisations consulted, but also the extent to which

positions expressed are eventually taken into account.

Overall, the legal framework guaranteeing women's rights and gender equality is broadly in

place. However, further significant efforts are needed. To reduce the gap between men and

women in economic participation and opportunity, educational attainment, access to

healthcare, and political empowerment. Efforts to prevent honour killings and domestic

violence have continued. However, these issues remain a serious problem, and efforts need to

be stepped up.

gap in primary education was halved from 4.6% to 2.3%. The number of pupils in pre-school

education has increased by 28% over the last three years, from 550,000 in 2005 to 700,000 in

2007. The government target is to attain a 50% pre-school enrolment rate from the current

25%. The Ministry of National Education has established an e-school database containing

information on school attendance. The Ministry can thus identify children that are out of

school and try to ensure their enrolment or provide catch-up education. In May 2008, the

Education Board approved the catch-up education programme: this is meant to give a second

chance to children of 10-14 years of age who either never enrolled or who dropped out. This

measure is targeted mainly at working and Roma children. In addition, mobile schools are

trying to reach out to children working in agriculture.

The proportion of children under 15 years of age in households experiencing poverty

decreased from 27.7% in 2005 to 25.2% in 2006. The Social Services and Child Protection

Agency (SHCEK) has collected data on domestic violence and child abuse and on children

living and working on the streets. However, these data have not yet been made public.

Minimum standards on care and protection for children living outside parental care have been

developed, and efforts to strengthen and monitor the parenting system have intensified. The

new Social Insurance and General Health Insurance Law provides for coverage for every

citizen under 18 years of age. Parliament has ratified the Hague Convention on the Civil

Aspects of International Child Abduction, which provides for a simplified procedure for

returning children to their legal custodian.

Institute (TURKSTAT) revised its population figures based on its new address-based population

registration system. Thus, the Ministry of National Education's formal education statistics for 2007-08

apparently paint the clearest picture yet of enrolment rates at various levels of the school system and of

the gender gap in access to education.

SHCEK has recruited new members of staff. The number of specialised staff such as

psychologists, child development experts and sociologists increased during the same period.

Staff of institutions involved in child care, including members of the judiciary, have been

trained on juvenile justice. SHCEK has also made efforts to improve the quality of the

services it provides and has assumed more responsibilities in implementation of the Law on

child protection. Reception centres have been opened in a number of provinces for children

who are perpetrators or witnesses of crimes or victims of violence. Six (6) such centres were

established for the first time in 2007 in accordance with provisions of the Child Protection

Law. Four (4) of these centres are "Protection, care and rehabilitation centres" and assist

children involved in criminal activities; two (2) are "Care and social rehabilitation centres"

and assist child victims of violence and abuse.

However, respect for and implementation of children's rights continue to be a matter of

concern. Children out of school remain a problem: the e-school database has revealed that

approximately 450 000 children between 6 and 14 years of age do not attend school.

Implementation of minimum standards of care and protection of children living outside

parental care needs to be improved. SHCEK needs to make the data on domestic violence

against children and child abuse and on children living and working on the streets publicly

available in order to improve policy-making and public debate. Efforts to combat child labour

Despite some progress in the juvenile justice system, the number of child courts is still

longer periods of time. There has been an increase in the number of children in detention. The

conditions in detention centres need to be improved, both in terms of physical conditions and

as regards the quality of the services provided. The probation system should also be improved

to prevent recurrence of the offence and to support children and their families.

Overall, there has been progress on access to education, social services and the juvenile

justice system. However, efforts need to continue in all areas related to children's rights,

including administrative capacity, education, the juvenile justice system and child labour.

the social security premiums for people with disabilities to promote their employment. There

was an increase in the resources allocated to care services for people with disabilities. A

circular was issued with a view to immediate placement of people with disabilities who are in

need of urgent care. As regards mental health, progress has been made in the field of electroconvulsive

therapy which is implemented in hospitals in line with medical standards and

respecting patients' rights.

not provide protection for children working in agricultural enterprises employing less than fifty (50)

employees; and it does not regulate the work of children in artistic and cultural activities and in the

media. Lastly, the current legislative framework does not tackle the issue of children working on the

streets.

However, currently there are such courts in only 40 of the 81 provinces in the country.

days in ordinary courts.

However, people with disabilities are not receiving adequate public services. This is mainly

due to lack of awareness of the available services and problems in accessing the services,

especially physical barriers. The lack of data and research on persons with a disability and on

conditions of care for mentally ill persons is preventing informed policy-making. Communitybased

services are not sufficiently developed as an alternative to institutionalisation, and

resources continue to be limited in relation to needs. There is an ongoing problem of

insufficient general medical care and treatment in mental health hospitals and rehabilitation

centres.

Collective Bargaining, Strike and Lockout Laws has not moved forward substantially. Turkey

relevant International Labour Organisation (ILO) conventions, in particular the rights to

organise, to strike and to bargain collectively. This is a priority of the Accession Partnership.

There are reports about restrictions on the exercise of existing trade union rights and

dismissals due to trade union membership. Social dialogue mechanisms, including at tripartite

laws. Homosexual relationships between consenting adults in private are permitted in Turkey.

In recent years, associations of the lesbian, gay, bisexual and transgender (LGBT) community

registered for legal status in Turkey and prosecutors refused to press charges following a

request by the Ministry of Interior to close them. This has enabled them to start advocating

and defending the rights of lesbian, gay, bisexual and transgender people.

However, the law does not duly mention all the grounds of discrimination, such as sexual

orientation, and provisions of the Turkish Criminal Code on "public exhibitionism" and

"offences against public morality" are sometimes used to discriminate against LGBT. In May

2008, upon an appeal by the Istanbul Governorate, an Istanbul court decided to close down

Lambda Istanbul, as its statute was considered against general morality. An appeal has been

lodged before the Council of State in this case.

Homosexuals have the right to exemption from military service. If they request such

exemption, their sexual orientation is verified by means of degrading medical and

psychological tests or by demanding proof of homosexuality.

Transsexuals are occasionally subjected to physical assaults, including by the police.

Homophobia has also resulted in cases of physical and sexual violence. These allegations

require prompt and effective investigation.

This Law was first voted by Parliament in November 2006, but was subsequently vetoed by

the then President Sezer. The Law addresses a large number of issues faced by religious

communities, mainly over management and acquisition of property. In particular, under the

collectively) of the revised European Social Charter.

Constitutional Court requesting annulment of Articles 5(3), 6(3), 11, 12(1), (2) and (3), 14, 25, 26, 41

and 68 of the Law. The Law entered into force on 28 February 2008.

Foundations can establish companies and commercial bodies and can participate in existing

companies with a view to achieving their objectives and generating income. Non-Muslim

community foundations can register in the Land Registry, under their names, immovable

property which is either entered in their 1936 declarations, under figurative or fictitious names

or was purchased by or bequeathed or donated to community foundations after their 1936

declarations but registered under the name of the testator or of the donator or of the Treasury

or of the Directorate-General for Foundations because of restrictions on owning property.

Donations of immovable property to foundations cannot be seized or mortgaged. Properties

which are no longer used, wholly or in part, for their original purpose, can be transferred to

another foundation of the same community, leased or have their use changed. The

Directorate-General for Foundations issued a Circular in May 2008 that deals with the process

of restitution of properties of non-Muslim foundations registered under figurative or fictitious

names, or in the name of the Treasury or the Directorate General for Foundations. An

implementing regulation was published in the Official Gazette in September 2008.

However, the Law addresses neither the issue of properties seized and sold to third parties nor

that of properties of foundations that were fused before the adoption of the new legislation. In

addition, implementation will be crucial to attaining its objectives.

been deprived of its property acquired in 1902 and dedicated to a specific use in 1903 via the

Foundation of the Büyükada Greek Orphanage for Boys. The applicant alleged, in particular,

that by ordering registration of its real estate in the name of the orphanage, under the

breached its right to peaceful enjoyment of its property. The Court held that the Turkish

authorities were not entitled to deprive the owner of its property without providing for

appropriate compensation, and that there had been a violation of the ECHR.

Problems encountered by Greek nationals in inheriting and registering property continue to be

reported, in particular as regards, inter alia, the application by the Turkish authorities of the

a violation of Article 1 of Protocol 1 (peaceful enjoyment of possessions) to the ECHR and

ordered either the return of the property or the financial compensation of the applicants.

Syriacs continue to face difficulties in relation to property. Complaints about the seizure of

their properties have increased, in particular in the context of the establishment of the

cadastre. This concerns both private individuals and religious institutions.

Overall, adoption of the Law on foundations has been a welcome step forward. However,

implementation of the Law will be crucial. The outstanding issues also need to be addressed.

Finally, the quality of the dialogue between the authorities and the communities concerned

will be instrumental in creating an environment conducive to achieving progress.

establishment, whereas only a decision by the competent body of the foundation is needed to sell

immovable property or rights acquired at a later stage.

took over its management.

unchanged. Without prejudice to the Treaty, the Turkish authorities consider Turkish citizens

as individuals with equal rights before the law, rather than as individuals belonging to the

majority or to a minority. This should not prevent Turkey, in accordance with European

standards, from granting specific rights to certain Turkish citizens on the grounds of their

ethnic origin, religion or language, so that they can preserve their identity. Full respect for and

protection of language, culture and freedom of association, assembly, expression and religion

and effective participation in public life for all citizens irrespective of their background or

origin, in accordance with the principles laid down in the Framework Convention for the

Protection of National Minorities and in line with best practice in Member States, have yet to

be fully achieved.

Turkey is a party to the UN International Covenant on Civil and Political Rights (ICCPR).

However, its reservation regarding the rights of minorities and its reservation concerning the

UN Covenant on Economic, Social and Cultural Rights (ICESCR) regarding the right to

Convention for the Protection of National Minorities or the European Charter for Regional or

Minority Languages.

The repeated requests of the OSCE High Commissioner on National Minorities (HCNM) to

follow up on his last visit to Turkey of December 2006 were not accommodated. There is a

need to start a dialogue between Turkey and the HCNM on issues such as the participation of

minorities in public life and broadcasting in minority languages. This would facilitate

Turkey's further alignment with international standards and best practice in EU Member

States.

Management of minority schools, including the dual presidency, remains an issue, pending an

implementing regulation. Work is under way to remove discriminatory language from

textbooks.

The Greek minority continues to encounter problems with education and property rights. In

on the Greek minority on the islands of Gökçeada (Imvros) and Bozcaada (Tenedos). The

resolution calls for preserving the bicultural character of the two Turkish islands as a model

for cooperation between Turkey and Greece. Furthermore, it takes account of positive

gestures made by the Turkish authorities, mainly in connection with the Greek community's

architectural heritage, and calls on Turkey to maintain up the momentum by taking additional

measures, in particular on property and education issues.

exclusively of non-Muslim religious communities. In practice, the minorities which the authorities

associate with the Treaty are Jews, Armenians and Greeks.

apply the provisions of Article 27 of the International Covenant on Civil and Political Rights in

accordance with the related provisions and rules of the Constitution of the Republic of Turkey and the

Treaty of Lausanne of 24 July 1923 and its Appendixes."

Residence of Aliens, which authorises "the Ministry of Internal Affairs to expel stateless and

non-Turkish citizen gypsies and aliens that are not bound to the Turkish culture", thus

promoting discrimination against Roma. This provision needs to be repealed. Turkey has yet

to establish a strategy to address the problems of Roma. Turkey is not participating in the

2005-2015 Decade of Roma Inclusion.

Roma, who comprise other similar but distinct ethnic groups such as Dom, Lom and

Travellers, face social exclusion and marginalisation in access to education, discrimination in

health services, exclusion from employment opportunities, difficulties in accessing personal

documentation and exclusion from participation in public affairs and public life.

As regards housing, the Roma population has faced several instances of demolition of

communities, forced evictions and exposure to poor living and sanitary conditions without

recourse to any publicly accountable process. In many cases, Roma who have been

dispossessed as a result of demolition join the ranks of IDPs, with all the social problems that

this entails. As regards demolition of the Roma neighbourhood in Istanbul's Sulukule district

and the relocation of its members, which started in spring 2008, the Prime Ministry's Human

Rights Commission has called for an inquiry into any possible infringement of human rights.

In addition, civil society organisations have filed a suit for cancellation of the urban

regeneration project in Sulukule.

particularly on the use of languages other than Turkish in broadcasting, in political life and

when accessing public services. There are no opportunities to learn these languages in the

who frequently face discriminatory treatment in access to adequate housing, education, social

protection, health and employment. Demolitions of Roma neighbourhoods, in some cases

involving forced evictions, continue.

In May 2008 the Government announced the guidelines and general content of a plan for

development of the South-East. The Government pledged to allocate total funding equivalent

to €14 billion to complete the ongoing South-East Anatolia Project (GAP) between 2008 and

2012, thus increasing the originally planned spending on the project by €10.2 billion. The four

pillars of the action plan are: economic development, social development, infrastructure

development and institutional strengthening. Most investments will concentrate on the energy

and agriculture sectors.

Terrorist attacks by the PKK, which is on the EU list of terrorist organisations, continued in

the South-East, but also throughout the country and claimed many lives. Following

parliament's authorisation the government ordered air strikes against terrorist hideouts in

Northern Iraq. The "temporary security zones" established in June 2007 in the provinces of

Sirnak, Siirt and Hakkari close to the Iraqi border remain operational.

Diyarbakir and Istanbul, where demonstrations were allowed.

Landmines remain a security concern for both military personnel and civilians. The

government reported ongoing use of anti-personnel mines by the PKK/KONGRAGEL.

During the reporting period there have been 66 casualties among civilians and security forces

due to anti-personnel landmine explosions. Under the Convention on the Prohibition of the

Use, Stockpiling, Production and Transfer of Anti-Personnel Mines and on Their Destruction

(the 'Ottawa Convention'), of which it is a signatory party, Turkey has undertaken to destroy

all antipersonnel mines in mined areas as soon as possible, but no later than 1 March 2014.

The process of compensation of losses due to terrorism and the fight against terrorism

continued to make progress. By May 2008, 313 829 cases had been filed under the relevant

Law. Some 40% of these, i.e.126 945 cases have been finalised, out of which 82 893 obtained

a favourable response. The deadline for applications for compensation expired on 31 May

2008.

However, despite the efforts made by the Government to improve the situation, reports on

shortcomings in implementation of the Law, in particular as regards uneven and inequitable

calculation of compensation between provinces, have continued. Furthermore, due to lack of

resources and the heavy workload of the Damage Assessment Commissions, progress in the

assessment and payment of compensation has been slow.

The situation of IDPs in urban areas remains a cause for concern. IDPs suffer from economic

and social marginalisation and have little or no access to social, educational and health

services. Return of IDPs is prevented by a number of factors. These include mainly the

security situation, but also the lack of basic infrastructure, lack of capital, limited employment

opportunities and the threat posed by the village guard system.

There is no overall national strategy to address the situation of IDPs. The insufficient

institutional capacity of departments responsible for IDPs remains a challenge. There is a

need to involve civil society further in the development of IDP policies.

No steps have been taken to abolish the system of village guards.

Overall, as regards the East and South-East, the government's decision to complete the South-

East Anatolia Project is a step in the direction of addressing the economic and social

difficulties of the region. Further efforts are needed in order to create the conditions for the

predominantly Kurdish population to enjoy full rights and freedoms. Compensation of

internally displaced persons (IDPs) has continued. However, the government lacks an overall

national strategy to address the IDP issue. The village guard system still has to be phased out.

The Turkish government has continued to express its commitment to a comprehensive

settlement of the Cyprus problem under the auspices of the United Nations. It welcomed the

start full-fledged negotiations in September between the leaders of the two Cypriot

communities under the Good Offices Mission of the UN Secretary General. Turkey needs to

take concrete steps to contribute to a favourable climate for a comprehensive settlement.

Since the Council's decision of December 2006, Turkey has made no progress towards fully

implementing the Additional Protocol.

Turkey has made no progress on normalising bilateral relations with the Republic of Cyprus.

Turkey continues to veto Cyprus's membership of several international organisations and of

the Wassenaar Agreement on the Code of Conduct on Arms Exports and on Dual-Use Goods.

of exploratory talks was held in July 2008 in Athens. Exploratory talks have been continuing

since 2002.

In November 2007, the Turkish and Greek Prime Ministers met at the border to inaugurate a

natural gas pipeline. In January 2008, the Greek Prime Minister paid an official visit to

Turkey - the first of this kind in 49 years. Both Prime Ministers expressed their commitment

to improving bilateral relations.

So far 31 agreements have been signed and 24 confidence-building measures have been

agreed since 2000. The third joint exercise between military disaster response units was

conducted in May in Athens. Contacts at military level continue. The Greek Chief of General

Staff paid an official visit to Turkey in May 2008.

The threat of "casus belli" in relation to the possible extension of Greek territorial waters in

the resolution adopted by the Turkish Grand National Assembly in 1995 still remains. The

Council highlighted in December 2007 that "Turkey needs to unequivocally commit to good

neighbourly relations and to the peaceful settlement of disputes in accordance with the UN

Charter, including, if necessary, jurisdiction of the International Court of Justice. In this

context, any threat or action which could negatively affect good neighbourly relations and the

peaceful settlement of disputes should be avoided".

During the reporting period, Greece formally complained to Turkey about continued airspace

violations.

As a full member of the Barcelona process, Turkey participated in the launch of the Barcelona

Process: Union for the Mediterranean in July 2008.

In examining the economic developments in Turkey, 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 and the

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

the Commission took into consideration run up to end of September.

Turkey broadly implemented the economic policy agreed with the Commission and with

international financial institutions and successfully completed the stand-by arrangement with

the International Monetary Fund (IMF) in May 2008. The pre-accession economic

programme submitted to the Commission in December 2007 adequately reflected the needs

for, and commitments to, further reform. At times, the domestic political crisis hampered the

decision-making process with regard to reforms. The fragmentation of responsibilities

between government bodies has been partly addressed in the new government's programme

by assigning the role of coordinating economic policy to a Deputy Prime Minister. However,

coordination of budgeting and medium-term economic policy-making has so far only partially

are either lacking or based on partial information. In conclusion, consensus on economic

policy essentials has been maintained and coordination has improved.

In 2007, GDP growth slowed down to 4.6% from 6.9% one year earlier, mainly due to

contraction in agriculture and weaker aggregate demand. There was a slowdown or stagnation

in many sectors of the economy from construction to textiles, while agriculture was severely

hit by a drought. Private consumption growth remained weak in 2007 growing by 3.8%, in

spite of a strong surge (up 6.3%) in the third quarter. The public sector purchased significantly

lower volumes of goods and services and markedly reduced construction after sizeable

spending increases in these areas in the run-up to the July 2007 elections. The contribution of

the external sector to growth fell substantially, as imports grew by 14.4% and 15.7% year-onyear

in the third and fourth quarters respectively, while export growth was 2.5% in the fourth

quarter, down from 12.5% in the first quarter of 2007. The slowdown in domestic demand

was triggered mainly by a tighter monetary stance, higher interest rates and lower lending.

In the first half of 2008, the economy slowed down, due to the global financial turbulence and

the domestic political uncertainty, and GDP grew by 4.2%. GDP growth slowed down to

1.9% in the second quarter of 2008 from 6.7% in the first. Agriculture contracted by 3.5% in

the second quarter after output had increased by 2.6% in the first quarter. Final consumption

of households lost steam in the second quarter, as expenditure rose by 2.8% after a 7.6%

increase in the first. In March 2008, the GDP methodology was aligned with the European

System of Accounting (ESA95). Consequently, one third was added to the size of the

economy, which resulted in a 2006 GDP of more than TRY 750bn (about EUR 380bn).

Although economic growth has slowed down, due to a combination of weaker aggregate

demand and higher uncertainty linked to the global financial crisis and domestic political

developments, overall economic performance demonstrated that the foundations and

resilience of the Turkish economy are substantially stronger today than some years ago.

The thorough revision of Turkey's national accounts in March 2008 reduced the current

account deficit relative to GDP by one third to more benign levels. The sharp rise in oil prices

has been putting pressure on Turkey's current account. This has become more pronounced in

recent months as oil prices have soared to record levels. The current account deficit in the first

half of 2008 totalled about 6.3% of GDP, compared with 5.7% in 2007 and 6.2% in 2006. The

same indicator, excluding energy, was below 2.8% throughout the period. This pointed to a

trade deficit of about 7% in the first half of 2008. As in previous years, over one third of the

gap is covered by services, mainly tourism, which performed better in 2007 and 2008 than in

2006. On the capital account, capital inflows have more than funded the current account

deficit, leading to an increase in official reserves. Recently almost 40% of the current account

deficit has been financed by foreign direct investment (FDI) and the remainder by long-term

inflows, comprising long-term external borrowing by the private corporate sector and banks.

The share of portfolio investments declined significantly and became negative from March

2008 on. FDI inflows totalled 3% of GDP in 2007 and 2% in the first half of 2008. The

services sector (mainly banks and telecommunications) accounted for almost two thirds of

total FDI. Turkey's external debt rose by almost 20% in nominal terms to roughly 45% of

GDP by mid-2008. Private external debt makes up two thirds of the total and is rising fast,

which is a source of potential risk. International reserves increased by over 15% to EUR 47

billion, or about six months of imports. Although higher oil and commodities prices put

pressure on Turkey's current account, long-term capital inflows remained high, leading to an

increase in official reserves. Turkey's external position remained solid throughout 2007 and

the first half of 2008.

So far (by mid-October 2008), the global financial crisis has caused a correction in Turkish

asset prices and in the currency, which could also lead to further output losses and inflationary

pressures. The impact on the Turkish banking system has remained limited so far, largely due

to previous restructuring measures and comfortable prudential indicators. However,

considerable external financing needs stemming from large external deficits in combination

with the private sector's significant reliance on external financing and a sizeable - albeit

falling - debt stock make Turkey potentially vulnerable to changes in investor sentiment. The

quality of financing of the current account deficit has deteriorated, gradually moving away

from equity investment towards debt accumulation. The close cooperation amongst Turkish

financial authorities as well as with the international and European financial institutions, the

existence of strong prudent regulations, the implementation of restrictive monetary and fiscal

policies as well as the continuation of structural reforms are providing a stabilising effect to

financial markets and the economy.

Labour market conditions remained challenging. The working-age population increased by

over 700,000 in 2007. Fewer than 300,000 of them joined the workforce; the rest remained

outside the labour market. Consequently, the employment rate hovered around 43% in 2007-

2008. In particular, the female employment rate remained low at less than 24% of the total

working-age population. The unemployment rate remains between 10% and 11%.

Unemployment was much higher among the young (about 20%). Long-term unemployed

accounted for more than half of job-seekers. Agriculture typically employs many unpaid

family workers. This leads to a statistically lower rate of unemployment, but suggests large

pockets of underemployment in this sector and the economy at large. Job creation continued

to be hampered, in part, by labour market rigidities (for example, high severance payments

and the sizeable social security wedge), by the skills mismatch between labour demand and

supply and by the cost of hiring and firing. Overall, labour continues to act as a brake on

employment.

Annual inflation rose to 8.4% by the end of 2007 and to 10.6% by mid-2008, well above the

inflation target, partly due to soaring food and energy prices. Excluding unprocessed food and

energy, underlying inflation rose to 10.4% in mid-2008, a four-year high, depreciated

substantially vis-à-vis the euro in September and October 2008. The Central Bank maintained

the formal inflation targeting policy adopted in January 2006, but chose to raise its inflation

targets in June 2008 in an effort to anchor inflationary expectations more firmly. At the same

time, the Central Bank decided to raise rates by a cumulative 150 base points, after having cut

them by 225 base points in the course of 2007 and early 2008. It has also announced a

tightening bias with the aim of fighting second-round effects on prices. This action was seen

as a reaffirmation of the independence of the Central Bank and a strong signal of its continued

commitment to fighting inflation. Credit to the private sector remained broadly constant on

around 30% of GDP and is therefore not seen as a significant threat to price stability. In

conclusion, price stability has weakened significantly over the last year, partly due to external

factors.

Fiscal performance has been satisfactory, although the government missed its 2007 fiscal

targets. Public debt (ESA95 definition) fell from 46.1% of GDP in 2006 to 38.8% in 2007 and

is expected to continue to fall over the medium term, improving fiscal sustainability. The

2007 primary surplus - which excludes interest payments - equalled 3.5% of GDP (ESA95

methodology), down from 5.5% in 2006. In June 2008, the authorities announced the

introduction of a five-year (2008-2012) medium-term fiscal framework (MTFF), which offers

good visibility over the government's medium-term fiscal strategy. The MTFF seeks to reduce

public debt from around 39% in 2007 to 30% in 2012. This is to be achieved by means of a

primary surplus of 3.5% in 2008 (unchanged compared with 2007), declining to 2.4% in

2012. The overall deficit is projected to remain below 1.7% over the five-year period. The

fiscal space gained from reducing debt service is to be used to finance three major policy

initiatives: an employment package and social security reform, the South Anatolian project

(mainly infrastructure investment) and decentralisation to municipalities. Fiscal targets for the

first half of 2008 have been met, in large part due to the higher - mainly tax - revenue which

kept pace with inflation.

The recent depreciation of the Turkish currency caused a limited decrease in government debt

in the first few months of 2008. Recent interest-rate increases had much less impact on the

debt stock, which increasingly comprises fixed-rate government securities. However,

domestic financial markets remain relatively shallow and the debt service dynamics are still

closely related to movements on global financial markets. The average maturity of

government debt securities therefore fell in the first quarter of 2008 to 23.5 months, from 25.7

months in 2007. By mid- 2008, almost 60% of total government securities were in the hands

of banks, up by almost 2% from 2007, and thus mitigating the decline in non-residents' share.

Completion of the IMF stand-by agreement, combined with the perceived uncertainty

regarding the future direction of economic policy and the protracted global financial crisis,

call for stronger anchoring of the fiscal position. In addition to the MTFF, introduction of a

robust and binding fiscal rule would substantially reduce uncertainty and the vulnerability of

Turkey's public finances to further turbulence on the financial markets. Overall, fiscal

sustainability has been further strengthened thanks to a prudent fiscal policy, but the fiscal

position remains vulnerable to shocks and requires stronger anchors in the face of heightened

uncertainty and the ongoing financial crisis.

In 2007, several coordination and control bodies were set up within the Ministry of Finance.

Accountability, efficiency and transparency of the budgeting process have benefited

substantially. This is illustrated, for example, by the development of the MTFF. As last year,

some key elements are still lacking, in particular unifying all tax administration functions

under the Revenue Administration, strengthening audit capacity and making increased use of

standard risk-based audit techniques, which would all enhance transparency and provide

significant support for anti-corruption efforts. Overall, measures to increase fiscal

transparency have continued.

Over the last few years, Turkey has successfully implemented a strong stabilisation

programme. Now it is entering a new stage in its development strategy aimed at raising the

growth potential by means of higher public investment, job creation, structural reforms and

better education. This entails a difficult balancing act between the desire for higher growth

and the need to maintain price stability and reduce the current account deficit. While the

public debt level is no longer a major concern for fiscal sustainability and the current policy

mix is broadly adequate, macroeconomic stability remains vulnerable to shocks, given the

The independence of regulatory and surveillance agencies has been largely preserved,

although some imperfections persist. However, for the first time in several years significant

progress was made, in particular in the area of price liberalisation. Electricity and gas prices

were raised in January and June 2008 respectively to reflect the actual costs better. Since July

2008, electricity prices are subject to automatic indexation. Price subsidies are being phased

out with a view to privatising some public electricity companies by the end of 2008.

Administrated prices make up less than 10% of the total weight of the consumer price index

(CPI) basket.

Despite its stated intention to allow State-owned firms to set their own prices, the government

continued to set prices of goods produced by them. The prices of some key commodities

produced by the State are periodically raised. In general, the government sets annual prices

for a range of crops. The municipalities continue to place ceilings on the retail price of bread

and the Ministry of Health controls medicine prices. Permission for price increases has

traditionally depended more on political than on economic criteria. Public institutions and

local authorities have large arrears with the State-owned energy company. Price liberalisation

is fairly advanced and further progress has been made recently. However, the government

continues to control the prices of some key commodities.

Although privatisation continued, with a number of major operations, the private sector's

share of GDP remained virtually constant at almost 89% in mid-2008. The pace of

privatisation slowed down only slightly from the peak years of 2005-2006. Between July

2007 and mid-2008, privatisation proceeds totalled about EUR 5 billion. Major privatisations

included the sales of the petrochemicals company Petkim (EUR 1.4 billion), the State

railways port facility in Izmir (EUR 0.8 billion) and of the State tobacco company TEKEL

(EUR 1.2 billion) and the initial public offering of 15% of the shares in Türk Telekom (EUR

1.3 billion). In conclusion, privatisation has advanced significantly.

Turkey has made efforts to improve the business climate and reduce impediments to market

entry and exit. Appreciation for this has been voiced by international experts. The business

registration process was further streamlined in 2007. Legal changes were enacted to make it

easier to obtain business and operating licences, including in the mining sector. About 55,000

new companies were established in 2007, an increase of 5% compared with 2006. During the

same period, roughly 10,000 firms were liquidated. Sectoral restrictions on foreign ownership

continued in the areas of maritime transport, civil aviation, groundhandling, road transport,

radio and TV broadcasting, energy, accountancy and education. Entry to the banking and

capital markets remained restricted to mergers and acquisitions as no new licences have been

issued. Overall, some progress can be reported in business entry and exit.

A reasonably well functioning legal system, including in the area of property rights, has been

in place for several years. However, no major progress has been made over the last year.

Registering a property takes six procedures and six days in Turkey. Enforcing commercial

contracts remains a lengthy process, which needs 36 procedures and takes 420 days on

average. The specialisation of commercial court judges appears insufficient, leading to

lengthy court proceedings. The expert witness system continues to function as a parallel

settlement mechanisms remains low. The legal environment continues to pose practical

challenges and creates an obstacle to a better business environment.

The financial sector grew steadily in 2007 and 2008 and attracted sizeable foreign

investments. The total assets of the financial sector grew by 18% in 2007 and at a similar pace

in early 2008. Almost 90% of these assets belong to banks. The ratio between the banking

sector's balance sheet and GDP increased to almost 68% at the end of 2007 compared with

66% a year earlier. The ratio of deposits and loans to GDP increased by 3% and 15%

respectively in 2007, which demonstrates the continuing financial deepening and increasing

intermediation, channelling more savings into productive investment. The efficiency of

financial intermediation improved slightly, as the interest rate spread narrowed by about 0.2%

in the previous year. The banking sector attracted strong interest from foreign investors.

Consequently, foreign shareholders' share of the sector's assets grew to 26% by the first

quarter of 2008 from 22% in early 2007. Including shares listed at the stock exchange, almost

45% of the Turkish banking sector is owned by foreigners.

The Central Bank made significant efforts to monitor developments in the financial sector

more closely. Liquidity requirements were tightened and a new survey was launched to

monitor better both private-sector debt and the exposure of the corporate sector to exchange

rate volatility. The delay in adoption of the new Turkish Commercial Code is hampering the

Central Bank's risk assessment capacity, since financial statements have not been aligned with

international financial reporting standards. More broadly, adoption of the new Commercial

Code is a priority, as it would significantly improve the business environment. Banking

profitability ratios improved markedly, by about one third in the year to December 2007.

Capital adequacy ratios decreased significantly, albeit from very high levels, from 21.8% in

2006 to 17.3% by March 2008. Concentration in the banking sector is at the same level as last

year, as the five largest credit institutions' share of the banking system remained at 60% at the

end of 2007. In April 2008, the Banking Regulation and Supervision Agency (BRSA)

increased the liquidity requirements for banks in order to mitigate the increased risk stemming

from the corporate sector's growing foreign exchange borrowing. The net liabilities of the

non-bank corporate sector in foreign denominations increased by 60% in the year to

December 2007 to about EUR 45 billion (12% of GDP). The share of foreign exchangedenominated

corporate loans as a percentage of the banking sector's total loans fell from

almost two thirds at the end of 2006 to just 56% in early 2008. In spite of several bouts of

instability during 2007-2008 the financial sector has shown remarkable resilience.

Macroeconomic stability has been broadly preserved during the reporting period. Financial

market turbulence and domestic political developments added some uncertainty to the

business environment, but at the same time underlined the economy's improved shock

resilience so far. The authorities have improved the investment climate by reducing

administrative barriers to firms' entry and operation, by reducing and simplifying the tax

system while improving the effectiveness of the tax administration and corporate governance

and by privatising State-owned enterprises.

In 2007-2008, the authorities continued to implement the educational reform programme,

which is part of the National Development Plan (2007-2013). This programme has two key

pillars for education: modernisation and reform. On the one hand, it aims to increase the

responsiveness of education to demand and, on the other, to enhance the educational system.

The challenges are significant. The top students in Turkey perform well. However, the gap

with the vast majority of Turkish students remains significant. Participation in higher

education remains low by international standards. Around 40% of 20- to 24-year-olds had

completed secondary education, but about ten percent of school-age children are still not

enrolled in primary schools. Reforms and increased spending on education are having some

positive impact on educational attainment. In 2007, enrolment rates improved at all levels of

education, in particular for female students, but significant problems persist.

Little progress has been made on correcting the mismatch between supply and demand forces

on labour markets, which largely stem from the sectoral shift away from agriculture combined

with often inadequate education. Coverage of the population eligible for unemployment

benefit is limited by rigid eligibility conditions. In May 2008 the government adopted a new

employment package, which provides incentives to employ young workers, women and

people with disabilities. The package aims to reduce non-financial burdens and social security

contributions, which had acted as a disincentive to formal employment. In particular, the

package reduces employment costs for five years for newly employed people in the abovementioned

categories. However, it does not affect other barriers which complicate job

creation, for example the very high severance payments. The Turkish Employment Agency

continued its efforts to improve its institutional capacity and the services provided to jobseekers.

Turkey declared 2008 the year for combating undeclared work. Overall, the situation

on the labour market remains challenging, but a set of broadly adequate reforms have been

tabled.

Both domestic and foreign investments remain robust. Private gross fixed capital formation

grew by around 5% in 2007 and in the first half of 2008. Private capital formation totalled

around 17% of nominal GDP. FDI inflows decreased to 3% of GDP in 2007 and 2% of GDP

in the first half of 2008. Around 80% of these FDI inflows were equity investment and around

20% real estate purchases. As a result, the FDI stock stood at EUR 53.7 billion (about 15% of

GDP), of which about one quarter was due to 2007 inflows. Most of the equity investments in

2007 were in financial services (60%) and manufacturing (20%). Investment growth

weakened, albeit from very high levels.

For many years infrastructure investment has been hampered by the need to consolidate

public finances and the failure to cut lower-priority spending. Inadequate infrastructure is

increasingly affecting economic activity. Therefore, the government adopted a spending

programme, which aims at releasing about TRY 17 billion (EUR 8.7 billion) for investment in

infrastructure in the South-eastern Anatolia region between 2008 and 2012. In addition, extra

power-generating capacity is planned in order to keep pace with the rapidly growing

electricity consumption (7% on average in each of the past five years). The new government's

initiatives aim at boosting investment in infrastructure. Also, the EBRD shareholders have

recently decided that the Bank should start operating in Turkey, a decision that was supported

by the Commission and the EU shareholders. The EBRD's support will contribute to Turkey's

further development and reform programme. The EBRD can support the development of a

more open and entrepreneurial economy by promoting growth of small businesses, supporting

the Turkish government's privatisation programme, bringing private sector financing and

know-how to the provision of public services.

The share of agriculture in employment fell by about 1 percentage point to 26.5% in 2007.

Most jobs were created in the services sector. The share of services in the total labour force

rose to 48%. Employment in industry and construction accounted for roughly 20% and 6%

respectively. The relative size of agriculture in GDP fell from 8.3% in 2006 to 7.7% in 2007.

Industry's (including construction) contribution to GDP remained stable at roughly 31%,

while services generate about 60% of national income. The sectoral shift away from

agriculture towards services has continued.

SMEs account for 99% of all enterprises in Turkey and 77% of total employment. However,

SME ratios for capital investment (38% of the total), value added (26.5%), exports (10%) and

bank credit (5%) point to low labour productivity, insufficient access to finance and barriers

to entering foreign markets. Informality is widespread throughout all corporate sectors, but

particularly amongst SMEs. Small enterprises continue to suffer from insufficient managerial

capacity and a too small knowledge base to cope with the increasing competition on the

markets. To sum up, SMEs continue to have insufficient access to finance and know-how and

too often operate in the grey economy.

Restructuring was supported by privatisation in some areas, such as telecommunications.

Progress has been made on restructuring and preparing for privatisation in the energy sector,

where the main outstanding problems are related to cross-subsidies and large distribution

losses. In the private sector, strong productivity gains indicate that the restructuring process

has been largely successful. Overall, the process of structural transformation of the economy

has advanced relatively well, mainly in the form of privatisation.

Transparency in the corporate sector has improved and accounting standards have been

upgraded, although the new Commercial Code has not yet been adopted. The absence of

transparent monitoring of State aid and of supporting policies to reduce distortion has an

adverse effect on competition and competitiveness in the economy. Public procurement

policies continue to be undermined by exceptions to the regulatory framework. In addition, a

number of derogations have been introduced by sectoral laws, which has further limited the

scope of the law. Overall, State intervention continues to influence competition and

competitiveness considerably, although the State's role as an active player on the markets is

being further reduced.

Turkey's trade openness has increased marginally. Exports and imports of goods and services

totalled 60% of GDP in 2007. The share of exports to the EU increased slightly from 56.0% in

2006 to 56.4% in 2007. Imports from the EU as a share of total imports declined, from 42.6%

to 40.4%, mainly due to the rising import bill for energy, which Turkey imported almost

exclusively from non-EU countries. Investors from EU Member States continued to invest

heavily in Turkey, though at a slower pace. About two thirds of all FDI inflows recorded in

2007 originated from EU Member States, down from 82% in 2006. In the first quarter of

2008, the share of FDI flows from the EU fell further to 53%. In 2007, GDP per capita in

Turkey stood at 43.3% of the EU-27 average. The EU remains Turkey's largest trading and

investment partner.

This section examines Turkey's ability to assume the obligations of membership - that is, the

assessment covers progress achieved during the reporting period, and summarises the

country's overall level of preparations.

movement of goods. The communiqué on standardisation in foreign trade, applicable in 2008,

further reduced the list of items subject to conformity assessment upon import to 100 from

about 150 in 2007. For the first time, all 20 communiqués regarding standardisation in foreign

trade were published together at the beginning of 2008. This provided a consolidated

overview of the standardisation and licensing requirements for imports into Turkey, which

was helpful to traders as import checks and licensing are carried out by five different public

authorities. Mandatory standards on gas appliances, pressure equipment, batteries and

chemicals used in batteries were abolished. In principle, products in free circulation in the EU

and bearing the "e", "E" or "CE" marking are exempted from conformity assessment

procedures.

However, technical barriers to trade still exist, in particular in the area of old approach

directives such as on legal metrology, pharmaceuticals, chemicals and foodstuffs. There are

limitations to the free circulation of goods in the non-harmonised areas, as Turkey has not

introduced the mutual recognition principle. Licences are still necessary for goods considered

old, renovated or faulty and second-hand motor vehicles.

Adoption of European standards by the Turkish Standards Institute (TSE) gained pace. So far

the TSE has adopted a total of 11 048 standards of the European Committee for

Standardisation (CEN), 3 725 standards of the European Committee for Electro-technical

Standardisation (CENELEC) and 336 standards of the European Telecommunication

Standards Institute (ETSI). The overall rate of harmonisation with EN standards rose to 97.4%

from more than 90% last year. The restructuring of the TSE continued and it has been

reinforced with a separate standards preparation centre, 89 operational committees and a clear

separation of its various tasks. However, a revised law reflecting the new structure of the

TSE, in accordance with the requirements for full membership of the CEN and CENELEC,

has yet to be adopted.

There are six Turkish notified bodies, operating in the areas of lifts, appliances burning

gaseous fuels, construction products (cement), pressure vessels and recreational craft.

European Accreditation Cooperation (EA) multilateral agreements (MLA) last year, the

outcome of EA assessment of the Turkish Accreditation Agency (TURKAK) in the fields of

certification of products and persons has been positive. TURKAK is already a member of the

International Accreditation Forum (IAF) and has a mutual recognition agreement with

International Laboratory Accreditation Cooperation (ILAC). The number of TURKAK

accreditations rose to 246, an increase of 13% since last year. TURKAK has become the

monitoring authority for good laboratory practice, following signature of a protocol between

the designating ministries and TURKAK. The revised law aiming at further harmonising

TURKAK's structure with the European accreditation system has not yet been adopted.

approval of measures and measuring instruments was adopted and published in the Turkish

Official Gazette on 6 November 2007. Measuring instruments remain a problematic area, with

excessive requirements on service stations that need to be established prior to import. Turkey

is now able to affix its own TR sign for initial verification of measuring instruments in

accordance with the relevant EU directive.

the telecommunications authority, the Ministry of Health and the Ministry of Industry and

Trade, published revised regulations on the method and principles of their market surveillance

systems. In the cases of the telecommunications authority and the Ministry of Health, the

amendments are of minor importance and further clarify earlier texts. The new regulation

from the Ministry of Industry and Trade replaced the 2003 text and contains specifications on

the qualifications and training of inspectors. It also provides for a single inspection report

template and includes sections on the principles of market surveillance, measures to be

imposed, powers and obligations and coordination. The Under-secretariat of Foreign Trade

increased the administrative fines for violation of the Framework Law regarding technical

legislation on products, which lays the foundation for market surveillance, by 7% in 2008.

The fines have almost tripled since the law was published in 2002. However, there are no

reliable data on the sanctions and fines imposed by the ministries concerned. The skills of

relevant personnel in the Ministry of Industry and Trade, the Ministry of Health and the

Ministry of Public Works and Settlement have been considerably enhanced. The Ministry of

Industry and Trade and the Ministry of Health increased considerably their market

surveillance activities in 2007 as compared with 2006. However, the operational budgets

allocated for market surveillance remain too small. Generally, considering the size of the

country, more extensive surveillance activities are required, taking into account visibility

considerations and risk assessment principles. Continuous training remains to be

institutionalised in order to maintain the benefits of the recently acquired knowledge. A

common method for data gathering has still not been achieved. Coordination between

surveillance agencies remains problematic, including automated exchanges of information.

The consumer movement needs support if market surveillance is to become really effective.

Alignment of horizontal measures is advanced. However, the effective implementation of

market surveillance, the adoption of final legislative changes on standardisation and

accreditation, and the alignment in the area of legal metrology have all been delayed.

progress was made on motor vehicles by amending existing and introducing new legislation.

The Ministry of Trade and Industry has published a transposing regulation regarding the type

approval of agricultural or forestry tractors, their trailers and other interchangeable towed

machinery. The Ministry of Health published amending legislation on the pricing of

pharmaceuticals and on the pre-packaging and labelling of pharmaceuticals for human use.

The latter launched a pharmaceuticals tracking system to fight against counterfeit products.

The problem regarding regulatory data protection and the authorisation system for generics

for which a marketing authorisation was applied for before 1 January 2005 has still not been

solved. The double import licensing obligation for alcoholic beverages has ended, after the

import permission procedure of the Tobacco and Alcoholic Beverages Regulatory Authority

was converted into a notification requirement. The control certificate and obligatory sampling

requirement by the Ministry of Agriculture is still a cause for concern.

alignment in this area was already advanced. Full alignment on four more directives was

verified during the reporting period, following the 20 directives verified last year. The

Ministry of Industry and Trade transposed the revised electromagnetic compatibility directive.

The new regulations will enter into force in December 2009. The Ministry of Industry and

Trade also transposed the directive on efficiency requirements for new hot-water boilers fired

with liquid or gaseous fuels. Harmonised standards on recreational craft were published in

October 2007. Amendments were made to the legislation on toys and childcare articles

containing certain phthalates and intended to be placed in the mouth by children. The new

provisions transpose Directive 2005/84/EC.

Regulation 339/93 have been adopted. However, the Under-secretariat of Foreign Trade is

implementing the directives on radio and telecommunication terminal equipment, toys,

personal protective equipment, construction products, batteries and medical devices, based on

standardisation in foreign trade communiqués. Products that have to bear the CE marking and

entering Turkey from third countries are subject to checks by the TSE upon import. There has

been no progress on cultural goods and firearms.

key element for this chapter, has not yet been introduced into the Turkish trade regulations.

"Free movement of goods" is one of the eight chapters covered by the conclusions on Turkey

adopted by the Council (General Affairs and External Relations) on 11 December 2006 and

endorsed by the European Council on 14/15 December 2006. As long as restrictions remain in

place on the free movement of goods carried by vessels and aircraft registered in Cyprus or

where the last port of call was Cyprus, Turkey will not be in a position fully to implement the

Some progress can be reported in this chapter. Alignment of product legislation and

horizontal measures, except on market surveillance and legal metrology, is advanced.

Effective market surveillance activities are needed, taking into account visibility

considerations and risk assessment principles, including coordination between surveillance

agencies. Some key issues for this chapter, such as identifying and abolishing remaining

import licences, restrictions on the import of used motor vehicles, introduction of the mutual

recognition principle into Turkish legislation and transitional issues connected with

application of regulatory data protection for pharmaceutical products are yet to be solved.

eased procedures and exempted certain professionals from obtaining work permits, including

people working on national and international projects, was vetoed and is still before

Parliament.

Efforts to strengthen the capacity of the Turkish Employment Agency (ISKUR) continued.

These concerned, in particular, IT infrastructure and training to allow job-matching services

in an electronic environment. Further efforts are needed to prepare for participation in the

capacity of the Social Security Institution continued. Appointment of medium- and high-level

managers at central and provincial level also contributed to consolidation of the (Social

Security) Institution. The efforts to build "one-stop-shop" social security centres in districts

are continuing.

There have been no developments as regards preparations for the introduction of the

Overall, limited progress has been made. Alignment is at an early stage. The administrative

capacity needs to be strengthened further.

Limited progress can be reported on right of establishment and freedom to provide services.

strategy on this chapter, as required under the Accession Partnership. Gender, nationality and

residence requirements, but also disproportionate language and other requirements, such as

Registration, licence or authorisation requirements continue to be incompatible with the

specific registration and authorisation requirements. The same applies to service providers,

who have to fulfil particular requirements in order to obtain the necessary work and residence

permits.

Work to identify obstacles to exercising the right of establishment and freedom to provide

services has not yet started. No steps have been taken to establish the structure needed for that

purpose. Alignment in the fields of establishment and services is at an early stage.

area) regardless of weight limits is still intact. No independent regulatory authority exists in

appropriate accounting method for reserved and non-reserved services and of separation of

accounts.

regulated professions (medicine, nursery, midwifery, dentistry, veterinary medicine,

pharmacy and architecture) has been adopted and published in the Official Gazette, with the

aim of aligning with Directive 2005/36. The Vocational Qualifications Authority (VQA) has

taken further steps towards becoming operational, including recruitment of staff and adoption

of several regulations on staff and working methods. This should allow the authority shortly

to develop standards on the professions which will fall under its remit. However, the principle

of reciprocal recognition is still applied to a number of regulated professions whereas

automatic recognition is the general rule under the acquis. Various requirements based on

nationality and language criteria persist. Discrimination based on gender also persists in the

area of midwifery. Despite a cross-reference to the midwife profession in the recently adopted

Law on nurses, male students are still not entitled to attend midwife schools. No procedure

has been set up to allow distinctive recognition of professional and academic qualifications,

whereas the current administrative structures allow recognition of foreign qualifications at

academic level only. Turkey still needs to designate a contact point as part of implementation

of Directive 2005/36 on the recognition of professional qualifications.

"Right of establishment and freedom to provide services" is one of the eight chapters covered

by the conclusions on Turkey adopted by the Council (General Affairs and External

Relations) on 11 December 2006 and endorsed by the European Council on 14/15 December

2006. As long as restrictions remain in place on the free movement of goods carried by

vessels and aircraft registered in Cyprus or where the last port of call was Cyprus, Turkey will

Alignment in the area of services and establishment is still at an early stage. The legal

groundwork in the field of postal services still needs to be launched. Alignment with

Community law on the mutual recognition of professional qualifications is progressing slowly

but at a steady pace.

dispute settlement mechanism for customer complaints (the "Arbitration Panel for Customer

Complaints") has been established under the sectoral association. This collegiate body now

needs to demonstrate independent decision-making. Some progress can be reported on

transactions in the area of securities, instruments other than securities and foreign currencies.

The Capital Markets Board abolished the maximum limit on investments by pension funds in

foreign securities. The Board also removed the minimum requirement for private pension

funds to invest in Turkish government debt instruments by amending the Regulation on the

principles regarding the establishment and activities of pension funds. The Council of

Ministers amended the Decree on protection of the value of Turkish lira and abolished several

restrictions. Following this amendment, residents in Turkey are now entitled to buy and sell

foreign currency from and to institutions which are authorised to do so in other countries. The

amendment also entitles Turkish residents to purchase capital market instruments other than

securities (e.g. derivatives) from abroad. Export revenue no longer has to be converted into

Turkish lira. The corresponding decree entitles the Ministry in charge of the Treasury to

entrust other institutions with execution of foreign currency transactions in Turkey and with

extension of foreign currency denominated loans abroad. However, residual exchange

controls remain on certain significant outward capital movements (i.e. foreign consumer and

real estate credits to Turkish residents) which are considered by Turkey to have possible

macroeconomic implications.

The Turkish legislation in the field of real estate acquisition by foreigners is not fully

consistent with Article 56 of the Treaty establishing the European Community. Acquisition of

real estate by foreign physical and legal persons (established in other countries) has been

regulated by the Land Registry Law. Foreign capital companies (established in Turkey) were

subject to different arrangements for real estate acquisition which was regulated by the

Foreign Direct Investment Law. In January 2008 the Constitutional Court overruled some

provisions of the Land Registry Law on real estate acquisition by foreign physical and legal

persons. In April 2006 the same court cancelled some provisions of the Foreign Direct

Investment Law on real estate acquisition by foreign capital companies. To fill the legal gap,

in July 2008 the Turkish Grand National Assembly enacted a Law amending the Land

Registry Law. The new law takes into account the views expressed by the court in both the

above-mentioned decisions and regulates the arrangements on real estate acquisition by

foreign physical and legal persons and foreign capital companies. Under the new law, foreign

physical persons can acquire real estate for residence or business up to certain area limits,

may acquire real estate in Turkey to conduct business in accordance with the activities listed

in their articles of association. Foreign capital companies are legally considered as Turkish

companies, regardless of the citizenship of their shareholders. Authorities also issued an

implementing regulation requiring foreign capital companies to get the approval of the

military chief of staff and the provincial governor when purchasing immovable property.

Restrictions on foreign direct investment originating from the EU persist in a large number of

sectors, such as maritime transport, civil aviation, ground handling, road transport, radio and

TV broadcasting, energy, accountancy and education. A number of the restrictions depend on

participation by Turkey in the relevant EU sectoral policies (in particular, in the area of

transport). Little tangible progress has been made with free movement of capital in these

various sectors to date.

under the Accession Partnership.

implementing regulations have come into force, which supplement the Law on the prevention

of laundering proceeds of crime. Those implementing regulations relate to reporting

suspicious transactions with regard to financing of terrorism, customer due diligence,

extension of obliged parties to lawyers and accountants, simplified customer identification

measures in the necessary cases and the working principles and procedures of the

Coordination Board for Combating Financial Crime. Turkey made a number of legislative

amendments in order to prohibit those criminalised as a result of laundering of proceeds of

crime and financing of terrorism from becoming founders, partners or managers in exchange

offices, investment funds, capital markets brokerage houses, precious metals brokerage

houses and real estate investment partnerships.

Turkey signed Memoranda of Understanding with five countries on information exchange

(Indonesia, Sweden, Portugal, Mongolia and Afghanistan). A special unit has been established

in the Financial Crimes Investigation Board (MASAK) to fight financing of terrorism. A

general communiqué regarding the reporting of suspicious transactions and terrorist financing

has been adopted. A regulation on measures to prevent laundering of proceeds of crime and

terrorist financing has also been adopted, including measures on customer due diligence. The

number of reports of suspicious transactions to MASAK increased from 1 140 in 2006 to

2 946 in 2007, mostly originating from the banking sector. Similarly, the number of reports of

suspicious transactions with regard to financing terrorism increased from 8 in 2006 to 144 in

2007. In 2007, 43 dossiers were referred by MASAK to the public prosecutors office for

prosecution as compared with 39 in 2006. 22 of those resulted in the opening of cases before

courts in 2007 as compared with 27 in 2006. However, convictions, confiscations, seizures

and freezing of assets have remained quite rare up until now.

The lack of effective enforcement capability and implementation mechanisms remains a cause

of concern. MASAK provided training for bank staff, judges and prosecutors, finance and tax

inspectors, obliged parties and other relevant enforcement bodies. However, MASAK's

resources are still insufficient and the skill levels of the judiciary and law enforcement bodies

are not considered adequate. Turkey has not yet ratified the 2005 Council of Europe

Convention on laundering, search, seizure and confiscation of the proceeds from crime and on

the financing of terrorism. Deficiencies identified in the report on the third review by the

Financial Action Task Force (FATF) will be discussed in the FATF plenary meeting in

February 2009. They still need to be properly addressed.

against money laundering and financing of terrorism.

There has been some, albeit uneven, progress on this chapter. The maximum limit on

investments by private pension funds in foreign securities has been removed. Restrictions on

the use of export proceeds and on foreign currency transactions have been abolished.

Restrictions on free movement of capital persist in various sectors of the economy. The

Parliament enacted an amending law regulating the acquisition of real estate by foreign

physical and legal persons and by foreign capital companies. Turkey made further progress

regulations and communiqués have been adopted and the number of suspicious transactions

reported has increased considerably. Turkey needs to continue alignment in this area.

bidders is still enshrined in the legislation. However, less use was made of it than during the

previous year (1.5% of the overall contract value in 2007 compared with 8% in 2006). A

number of additional derogations from the Public Procurement Law have been adopted,

notably in the laws with regard to associations, on Istanbul as the 2010 capital of culture and

on witness protection. The amendment of the electricity market law brought in another

derogation to the public procurement law. Such derogations reduce competitiveness and

efficiency in public tender.

rate in tendering procedures indicates that information on public tenders is widely available,

including on the internet. However, the Turkish Public Procurement legislation remains

the concept of framework agreements to be applied only in the health sector. Utilities continue

to be subject to the classical public procurement procedures. There is no coherent legal

framework for the award of concessions and public private partnerships. The 2008 thresholds

and financial limits for procurement remain above EC levels.

Both the Public Procurement Agency and the State Planning Organisation have significant

administrative capacity. However, staff awareness of the State Planning Organisation as

competencies in the Public Procurement Agency needs to be enhanced.

As regards the institutional set up, Turkey has designated the Ministry of Finance as

coordinator of public procurement policy, including concessions and PPPs, which is one

priority of the Accession Partnership. This decision has had a positive impact, as it has

allowed better coordination of legislative preparations in 2008.

complaints lodged by dissatisfied tenderers has grown over the years, from about 900 in 2003

to over 4 000 in 2007, though representing only 3% of all contract awards. The review

procedure is lengthy and results in creation of backlog of cases.

Some limited progress can be reported in this chapter. Turkey has started to address its

priorities in the area of public procurement and has the capacities to address them. The

designation of the Ministry of Finance as overall policy coordinator on public procurement is

a positive development. The Ministry will have to ensure consistent policy development in the

area of public procurement and steer its implementation. This needs to be backed up by a

comprehensive strategy on the reforms necessary in terms of legislative alignment and

from the general provisions that have the effect of reducing competition and efficiency in

public tenders need to be avoided.

(TCC) and the law on the entry into force and implementation of the TCC were not adopted

yet. Adoption of these two laws would mark an important step forward in this chapter,

cannot register online in the registries operated by Chambers of Commerce. Establishment of

an electronic database and on-line access to basic company information depend on adoption

of the TCC. Adoption of the TCC will trigger amendment of various other laws, including the

Capital Markets Law (CML) concerning domestic mergers and divisions of public limited

liability companies, the exercise of certain rights of shareholders in publicly held companies

and takeover bids.

Standards Board (TASB) adopted and published several interpretations and revisions of a

number of international accounting standards (IAS). The adopted standards apply solely to

listed companies. The Capital Markets Board of Turkey (CMB) imposes an obligation on

listed companies to publish their yearly and quarterly financial statements in compliance with

the IAS and the international financial reporting standards (IFRS) in the format applicable in

the EU. However, only a few companies in Turkey are listed. The majority are non-listed.

Further recruitment took place in order to enhance the administrative capacity of the TASB.

Specific training was organised for newcomers. The process to enhance the professional skills

of the TASB continued.

Standards Board is still under preparation.

No substantial progress can be reported in the period under consideration. Overall, alignment

the process of alignment of other laws in this area, has not been adopted.

The overall legislative framework for intellectual and industrial property rights is largely

enforcement, as required by the Customs Union Decision. Turkey remains one of the

countries where IPR protection and enforcement are most problematic. Effective enforcement

is a priority under the Accession Partnership Agreement and for the negotiations on this

chapter.

considerably improved coordination and cooperation between various stakeholders in the area

of copyright and related rights issues. A coordination committee was set up in 2007 within an

EU-funded twinning project. It was convened in January 2008 to draft an action plan to

strengthen copyright protection in Turkey. Another twinning project to strengthen

enforcement capacity started in 2008 and will be conducted throughout the year with the

Turkish national police as the main target group. Many training sessions and seminars have

been organised to raise awareness of IPR enforcement issues. The number of collecting

societies increased from 22 to 24. Four collecting societies in the music sector agreed on a

common approach to setting tariffs, licensing and other issues. They also signed an agreement

on the licensing of musical works used in hotels. However, conflicting views persist regarding

collective rights management between users and rights-holders. Piracy of books and other

media, such as CDs and DVDs, remains widespread. Turkey's enforcement capacity is still

lagging behind. The laws for ratification of the WIPO Copyright and Phonograms Treaties

were published in the Official Gazette.

has entered into force. The Turkish Patent Institute (TPI) has further improved its internal and

external IT structure. Improvements can also be reported in online services (including an eapplication

system), search portals and public relations. Fifteen new staff members have been

recruited. Several members of staff have attended training courses to improve their legal

knowledge and various awareness-raising activities have been organised. However,

inconsistencies persist between the trademarks department and the appeals board. Most of the

appealed decisions are reversed by the appeals board and the courts. Measures should be

taken to harmonise implementation on the basis of absolute and relative grounds, especially

Infringements of well-known designs, trademarks and trade dresses are still a cause for

concern. TPI practices and courts' understanding of the same issues diverge. Proper reasons

should be given for the decisions of the TPI. The regulatory framework, including a code of

ethics for patent and trademark agents to prevent misconduct and take implementation

forward, is not yet in place. So far no constructive dialogue has been established between the

TPI and its customers and the various professional groups dealing with IPR.

Particular attention should also be paid to bad faith and similar trademarks and industrial

design issues.

Board, co-chaired by the Ministry of Industry and Trade and the Ministry of Culture, has been

established. The purpose of the Board is to foster cooperation between relevant institutions in

order to improve the level of IPR protection. The Board will meet every six months. The

Board will be able to invite other public institutions and private-sector representatives to its

meetings. An action plan has been drawn up. The criminal provisions of the Turkish

Copyright Law have been amended to harmonise them with the new Turkish Criminal Code

and Turkish Criminal Procedure Code. The new provisions have reduced legal predictability

to seize pirate goods. Consequently, enforcement against piracy has almost come to a halt in

most Turkish cities, with the exception of Istanbul, Ankara and Izmir. During the drafting of

these special provisions, the opinions of the IPR enforcers (i.e. judges and prosecutors

specialising in IPR and collecting societies) were not sufficiently taken on board. Therefore,

stakeholders (including the judiciary) need to acquire a better understanding of the

amendments to the criminal provisions in order to ensure effective enforcement.

Following a recent Constitutional Court decision, Turkey's trademark protection is at a crucial

point. The court pointed out that trademarks infringements could not be punished under the

current legislation because crimes and punishments are not defined appropriately in the

relevant Turkish legislation. The court invited the government to remedy this situation and to

address the current legal vacuum within six months, ending in January 2009. The relevant law

prepared by the government has not been adopted. As long as the legal vacuum persists, all

similar pending trademarks infringements will be affected. However, since other industrial

property rights, like designs, patents, utility models and geographical indications, are also

regulated in the same way as trademarks, the court's decision will affect all infringements of

industrial property rights. The Turkish authorities need to tackle this situation as a matter of

urgency and to eliminate the risk that industrial property infringements cannot be punished.

Nine new specialised IPR courts (three civil and four criminal in Istanbul, one civil in Ankara

and one civil in Izmir) were recently established and brought into operation. The locations of

the courts were selected on the basis of the level of commercial activities. The appeal stage of

the IPR court procedure is very lengthy. Most of the files on criminal acts have been pending

before the Supreme Court for a long time. Rights-owners are experiencing difficulties in

obtaining preliminary injunctions or search and seizure warrants which would offer a proper

enforcement solution to most cases. Training seminars and workshops have been held for

stakeholders such as customs officers, national and municipal police forces, lawyers and the

related staff of the enforcement bodies. Three public-awareness seminars were organised.

Customs officers seized goods in 160 cases on their own initiative in 2007 compared with 45

in 2006. Turkey remains one of the main sources of counterfeited and pirated products seized

at EU borders.

between the IPR-related public bodies and their awareness have improved significantly.

However, serious deficiencies remain in the area of industrial property rights, in particular

with implementation and enforcement. Turkey is still considering its response to the European

Commission's suggestion to establish a dialogue on Intellectual property Issues.

alignment.

The Competition Law was amended to provide further clarity and legal certainty in the

provisions regulating fines imposed for competition infringements. The competition authority

adopted a block exemption communiqué covering the insurance sector, in line with the

agreements. There are a few divergences between this communiqué and the relevant

Commission rules, in the form of hardcore restrictions due to the Turkish legislation on

intellectual property rights. The authority published two guidelines on market definition and

subcontracting agreements between non-competing undertakings. The rules on horizontal

telecommunications and postal services still need to be transposed. The Banking Law exempts

mergers and acquisitions leading to a market share below 20% in the banking sector from the

competition authority's control. This exemption limits enforcement of the merger control

rules in the banking sector. The authority's efforts to promote competition might be limited in

the upcoming privatisation of public banks due to this exemption.

The competition authority enjoys a sufficient level of administrative and operational

independence. The authority's emphasis on training for its staff is a determining factor for

effective enforcement of the competition rules. All public authorities, including the Ministry

of Industry and Trade to which the competition authority is linked administratively, need to

respect the administrative and operational independence of the authority.

As regards the enforcement record, in 2007, 238 merger and acquisition cases were handled

and 232 cases were concluded (up from 199 and 186 in 2006). The authority opened 131

cases on anti-competitive behaviour and finalised 148 cases (up from 108 in 2006). The Board

opened 34 negative clearance and individual exemption cases and concluded 39 in 2007 (36

and 33 in 2006). The fines imposed by the authority decreased by 50%, from TRY 27,002,139

in 2006 to TRY 13,641,633 in 2007. The authority has also been active during the first half of

2008. It took decisions on 65 cases of anti-competitive behaviour and on 109 merger

notifications. The administrative capacity of the Council of State (high administrative court)

for handling appealed competition cases still needs to be improved. However, the

establishment of a special chamber in the Council of State in 2007 is expected to speed up the

review of competition decisions.

There has been no progress on alignment of the rules concerning public undertakings and

undertakings having exclusive and special rights.

legislation nor set up an operationally independent state aid monitoring authority.

Furthermore, Turkey has not prepared the state aid inventory and has not reported on state

schemes, as required by the transparency commitments. There are no rules ensuring

transparency of financial relations between public authorities and public undertakings.

Some progress has been achieved as regards state aid in the steel sector. Following the

transmission of new information in 2008, the Commission has an improved understanding of

the state aid granted from 2001 until now. Furthermore, Turkey has reviewed the national

restructuring programme concerning both the state aid aspects and the market analysis and

forecast for the Turkish steel industry. However, information is still needed on several

capacity developments and some state aids of the last years as well as on a clear position of

the Turkish authorities concerning future state aid to the steel sector.

In the field of anti-trust, including mergers, a high level of alignment has been achieved. The

administrative capacity and operational independence of the competition authority are

satisfactory. The authority enforces the competition rules effectively. There has been no

alignment in the field of state aid. Turkey needs to implement the EU state aid discipline in

the steel sector, in line with the long-standing commitment given in the ECSC Free Trade

Agreement. Alignment in this chapter is not complete.

view to strengthening the liquidity position in the banking system, the Banking Regulatory

and Supervisory Agency (BRSA) introduced additional liquidity requirements. However,

Turkey has postponed implementation of the BASEL II Accord. The Agency also advised

private banks to build up a solid capital stock in response to the recent financial turmoil.

Moreover, the prudential and supervisory standards have been tightened up. The BRSA

imposed marked-to-market valuation for the derivative instruments recorded on bank balance

sheets. The BRSA clarified the coordination rules for consolidated supervision of financial

institutions which are being supervised by separate regulatory authorities. The Savings

Deposits and Insurance Fund (SDIF) introduced five deposit premium categories for banks,

based on their detailed risk profiles. In turn, the BRSA introduced additional reporting

requirements for the representative offices of foreign banks. The Agency also placed an

obligation on foreign banks' branch and representative offices to apply for authorisation in the

event of any change in the ownership of the parent undertaking in the home State. The BRSA

organised several training sessions for its staff and gave a dozen staff members an opportunity

to study abroad. The BRSA has also established further memoranda of understanding with

third countries, taking the number of MoUs up to 16. Supervisory capacity has been enhanced

by introducing new reporting requirements and an early warning system. In the area of

efforts are needed to continue alignment with the new capital requirements for credit

institutions and investment firms and with the other related directives (on deposit guarantee

schemes, winding up and reorganisation, financial conglomerates and bank accounts), as

outlined in the Accession Partnership.

The Treasury introduced the concept of "sponsoring undertaking" in a newly published

regulation on occupational pension schemes. The same regulation also introduced limits on

the fees and expenses that insurance companies are allowed to be charged, whereas the

vesting period for group insurance policies was reduced to five years. The Treasury published

a regulation on supplementary pension companies covering fit and proper criteria for

disclosure. As far as solvency is concerned, the paid-in capital of an insurance company's

subsidiaries and affiliates has been included in the definition of the owners' equity. As regards

passenger transport, Turkey has increased the minimum level of coverage under the

compulsory insurance scheme. However, coverage levels for personal injuries are still well

below EU standards. The Treasury adopted a new communiqué requiring insurance and

supplementary pension companies to publish their financial statements both in newspapers

and on their own websites. Turkey has introduced a new type of insurance for loan

repayments by bank customers. A new regulation on insurance mediation has entered into

force. It has improved consumer protection and set new standards on registration and

minimum capital, while introducing professional indemnity insurance for intermediaries.

However, indemnity coverage levels are markedly below the EU standards. Several other

insurance regulations have been published, covering training, internal control and risk

management systems, and rules on establishment for brokers. However, provision of crossborder

services is impeded, as the regulations place an obligation on foreign brokers to

operate via branch offices established in Turkey. A regulation on the activities of committees

of insurance experts has also been adopted. Finally, a regulation implementing the rules on

the professional qualifications, accounting and bookkeeping responsibilities and activities of

insurance experts has been published. Alignment in the area of insurance and supplementary

pensions is partial. Establishing an independent regulatory and supervisory authority is a

priority. Further alignment is needed, in particular on calculation of solvency margins,

supervision of insurance groups and the minimum amounts of cover in motor insurance.

Markets Board of Turkey (CMB) imposes an obligation on listed companies to publish their

yearly and quarterly financial statements in compliance with the international accounting

standards (IAS) and the international financial reporting standards (IFRS) in the format

applicable in the EU. The CMB successfully completed a twinning project which contributed

to further improving the capital market legislation and the administrative capacity of the

regulatory authority. Alignment in the area of securities markets and investment services is

moderately advanced. Further progress is needed, in particular on markets in financial

instruments, investor compensation schemes, prospectuses and market abuse.

"Financial services" is one of the eight chapters covered by the conclusions on Turkey

adopted by the Council (General Affairs and External Relations) on 11 December 2006 and

endorsed by the European Council on 14/15 December 2006. As long as restrictions remain in

place on the free movement of goods carried by vessels and aircraft registered in Cyprus or

where the last port of call was Cyprus, Turkey will not be in a position fully to implement the

There has been good progress in the area of financial services. Progress has been made on

tightening up prudential and supervisory standards, both in banking and in the non-bank

financial sector. Authorities have taken measures to strengthen the liquidity position and the

capital adequacy of the banking system. A risk-based deposit insurance premium system has

been introduced. As regards insurance and supplementary pensions, Turkey has made

significant progress by adopting regulations on occupational pension schemes, publication of

financial statements and insurance mediation. The CMB has introduced IAS and IFRS

standards for listed companies. There was further alignment as regards banks and financial

conglomerates, while alignment in securities markets and investment services is moderately

infrastructure. Alignment in the area of insurance and supplementary pensions is incomplete;

in particular, an independent supervisory authority in the insurance and supplementary

pensions sector needs to be set up.

a penetration rate of roughly 25%. The total number of mobile subscribers reached to 63.6

million with a penetration rate of 90%. The number of Internet subscribers reached to

approximately 5.4 million, 5.3 million of which are broadband (ADSL) subscribers.

Turkey continued its alignment by introducing new regulations on access and interconnection

based on the 2002 EU framework, on operators with significant market power (SMP) on the

reference interconnection offer (RIO) and the reference Unbundling Offer and wholesale

broadband access conditions from the incumbent internet operator. Furthermore, mobile

termination rates have continued to gradually decrease.

There has been some progress on number portability, which may become possible from 10

November 2008 in the mobile market after a central database became operational in the

Telecommunications Authority. Some initial progress can also be reported for local loop

unbundling following the revision on Turk Telekom's reference unbundling offer last year. .

However, the Electronic Communications Law which would provide the basis for alignment

with the EU framework did not enter into force after its adoption by the Parliament. The

Turkish President vetoed four articles on the administrative and financial conditions for the

regulatory authority and the draft is back in Parliament for discussion. Competition in the

fixed and broadband markets remains marginal. More than 95% of the broadband internet

access services are provided by the incumbent's internet operator. Limited progress can be

reported towards equitable and transparent conditions for fixed wholesale broadband access.

No progress can be reported with regard to accounting separation and cost accounting

imposed on the fixed incumbent. High taxation on communication services unrelated to

administrative costs for regulating the sector remains a problem. The scope and

implementation of universal service obligations are still incompatible with the relevant

fixed and broadband markets. The regulatory body is well staffed and is self-financed.

However, it lacks independence - notably in the authorisation process - and the decision

making process of the Telecommunications Authority is not transparent.

Implementing regulations on provision of internet services at public places and on principles

and procedures concerning the regulation of the broadcasts on internet have been adopted

during the reporting period. Implementation of these regulations have the potential to violate

freedom of expression.

Assembly amended the Turkish Radio and Television Corporation (TRT) Law allowing

by broadcasters and enhanced its administrative capacity to fulfil its monitoring

duties. Since August 2008, RTÜK decisions are accessible to the public.

limited to provisions concerning advertising and the protection of minors. The Law on the

establishment of radio and television broadcasts still poses problems in terms of nondiscrimination

on the grounds of nationality, definitions, jurisdiction, freedom of reception

and retransmission, major events, promotion of European and independent works and

restrictions on the share of foreign capital and television enterprises. As regards

administration of the broadcasting sector, RTÜK has not reallocated frequencies or reviewed

temporary licences. RTÜK established a regular dialogue with the broadcasters and enhanced

the transparency of its decisions. However, further measures are needed in order to strengthen

the functionality of the regulator.

Some progress can be reported in the field of electronic communications, in particular as

regards competitive safeguard measures imposed on dominant operators, notably in the

mobile and broadband markets. However, alignment with the EU framework remains limited.

The adoption of a new primary electronic communications law well aligned with EU rules is

limited.

Progress on legislative alignment with the common agricultural policy (CAP) has been

limited. No progress can be reported concerning the announced restructuring of the Ministry

of Agriculture and Rural Affairs (MARA).

announcement of the intention to scrap decoupled area payments and replace them by coupled

payments remains a cause for concern. This would lead to Turkey's agricultural policy

drifting away from the reformed CAP and from the principles of competitiveness and market

orientation.

Turkey has advanced in preparing a strategy to develop the system of land identification and a

farmer's register, as well as a strategy to develop agricultural statistics in line with EU

requirements. Efforts to set up a pilot Farm Accountancy Data Network (FADN) have

continued.

Turkey continues to ban imports of beef and of live bovine animals originating in the EU.

These barriers are not in line with bilateral obligations and their removal is a key component

of the accession negotiations on this chapter.

noted with the adoption of two regulations on purchases and sales of cereals and rice and

paddy rice. Progress has also been made on alignment of Turkey's legislation with EU

marketing standards for fruit and vegetables. The conformity checking operations, performed

by the Turkish authorities prior to import into the Community for all fresh fruit and vegetables

are recognised by the EU/Community.

development programme for 2007-2013, prepared under component V of the Instrument for

Pre-Accession Assistance (IPARD) and designed to support policy development in the field

of agriculture and rural development, as well as the preparation for the implementation and

management of the Common Agricultural Policy, was approved by the Commission in

February 2008. This marks a major step towards implementation of IPARD in Turkey.

Concerning administrative structures, the head of the IPARD Agency has been appointed and

a concise action plan for the accreditation process has been submitted to the Commission.

According to the plan conferral of management powers by the Commission is scheduled for

June 2009. The legislative framework for operation of the managing authority is in place and

personnel, both at headquarters and at provincial level, are being appointed and trained.

counties for imports of organic products according to Article 11 of Council Regulation (EEC)

2092/91. Following the transmission of additional information regarding Turkish organic

farming production rules and control system in the end of the year 2007, the Commission

could close several points. The main areas of concern remain approval of inputs allowed in

organic farming and supervision system

"Agriculture" is one of the eight chapters covered by the conclusions on Turkey adopted by

the Council (General Affairs and External Relations) on 11 December 2006 and endorsed by

the European Council on 14/15 December 2006. As long as restrictions remain in place on the

free movement of goods carried by vessels and aircraft registered in Cyprus or where the last

to this chapter.

the capacity necessary to implement IPARD. However, further efforts must be made to

complete establishment of the necessary administrative and control structures so that they will

be able to operate in a fully decentralised management system. Progress as regards

administrative structures related to the CAP was limited to the FADN system and fruit and

vegetables. Current support and strategic policy planning in Turkey seem to be developing

away from the principles of the reformed CAP by strengthening support instruments linked to

production. Technical barriers to trade in bovine products in breach of bilateral commitments

remain. Overall, preparations are still at an early stage in this chapter.

Law on food, veterinary, feed, hygiene and official controls, which needs to provide for clear

assignment of responsibilities, in particular for control bodies, has not yet been adopted.

With regard to general food safety policy, the national rapid alert system for food and feed has

been improved. Local units have been directly linked to the Ministry of Agriculture and Rural

Affairs to ensure effective follow-up of notifications. Monthly reports on the follow-up to

RAFFS alerts are being sent to the Commission. However, the number of notifications

received is still very high. Further efforts to follow up alerts and implement the necessary

corrective measures are still needed.

The first veterinary border inspection post (BIP) at Sabiha Gorken airport in Istanbul is not

yet fully operational. The BIP receives a low number of consignments because most still

arrive at Ataturk airport in Istanbul. Construction of three land and two seaport BIPs is under

way. The system for identification and registration of bovines and their movements has been

improved as regards registration of holdings (including animal markets), control of

movements of animals and training of users of the database. Turkey has made further efforts

regards registration of movements in the bovine database. Initial work on identification and

registration of ovine and caprine animals is ongoing, with the aim of setting up an

identification system covering sheep and goats in line with EU requirements. For the time

being, only some voluntary identification and registration activities have been introduced for

small ruminants in some provinces. No progress can be reported as regards non-commercial

movements of pets.

Turkey has continued its efforts to combat animal diseases. Efforts have focused on avian

influenza (AI) and foot-and-mouth disease (FMD), as in previous years. AI outbreaks were

low in number in the reporting period and successfully contained with the cooperation of

public health authorities. Intensive awareness-raising campaigns were implemented. The

regulation concerning protection against AI has entered into force. Stricter measures on

animal movements between Thrace and Anatolia have had a positive impact on the

occurrence of FMD outbreaks in Thrace, where the number of outbreaks has considerably

decreased. The last FMD outbreak in Thrace was in September 2007. Turkey has also started

focusing on attaining brucellosis- and tuberculosis-free status in Thrace, although no

significant progress has been observed on the ground. No progress can be reported with

transmissible spongiform encephalopathy (TSE). Turkey has continued its voluntary

participation in the EU animal disease notification system (ADNS). Relevant information on

animal diseases was provided to the EU and to other international organisations.

Turkey has improved its procedures for implementing and following up the national residue

monitoring plan and controls on veterinary medicinal products. However, additional progress

is essential, mainly on the laboratory side and on inclusion of all substances on which controls

are required by the EU legislation.

Turkey's current system for financing veterinary inspections and controls is not in line with

EU practice. No progress has been observed regarding import requirements for live animals

and animal products. The regime of individual licences for import of each consignment of live

(See Chapter 11). Turkey has made no progress on animal welfare and zootechnical issues.

Transposition of the hygiene package, which is a key component of the accession negotiations

on this chapter, has not yet been completed. Unclear division of tasks between different

departments and institutions is still leading to problems with official controls. Some

improvements were observed in the administrative structures as a result of intensive training

programmes. Work has started on accreditation of inspection services, but no substantial

progress has been observed in this field. The legislative basis has been put in place for

establishment of the national food reference laboratory in Ankara. Risk-based annual control

programmes have been established for several products. The data network system, which will

allow more efficient implementation of inspection and control programmes, has been

improved. Preliminary preparations for classification of agri-food establishments as regards

their compliance with EU structural requirements, which is a key component of the accession

negotiations on this chapter, have started. However, no action has been taken to bring agrifood

establishments into compliance with the EU hygiene requirements. No progress has been

Alignment and implementation of the legislation on labelling, presentation and advertising,

food additives and purity criteria, extraction solvents, quick frozen foodstuffs, food for

particular nutritional uses and irradiated food has advanced.

Transposition in the areas of flavourings, food supplements, novel food and genetically

modified organisms (GMOs) has yet to be completed. Alignment and implementation of the

legislation on food contact materials has advanced; however, further adaptations are required

to bring the system fully into line with the EU system.

Aflatoxin contamination remains a major problem. A communiqué on the methods of

sampling, sample preparation and analysis for the official control of lead, cadmium, mercury,

inorganic tin, 3-monochloropropane-1,2-diol and benzopyrene in foodstuffs and the

communiqué on the maximum limits on contaminants have entered into force. Alignment is

advanced in the case of mineral waters. No progress has been observed as regards specific

rules for feed.

protection products is advanced. Implementing regulations on seeds and propagating material

have entered into force. The law on plant health and quarantine has not yet been adopted. No

developments were reported on international phytosanitary agreements.

Progress in the area of food safety, veterinary and phytosanitary policy has been limited and

requires considerable efforts. Strengthening administrative capacity at central and local levels

is vital for proper implementation.

law on fisheries has not yet been adopted. The central administration structures remain

unsatisfactory. The spread of powers across different ministries and even different

departments within the Ministry of Agriculture and Rural Affairs (MARA) persisted.

improvement in the fisheries information system however it is not yet fully operational.

Turkey's satellite-based system for monitoring (VMS) the 86 blue-fin tuna fishing vessels is

in place. This monitoring system is currently used by 196 vessels, . Two additional fishery

port offices have been established and been brought into operation. No progress can be

reported as regards stock assessment.

fishing records in logbooks for fishing vessels longer than 12 metres, which will allow

registration and reporting of catches. Turkey has started work on introducing sales notes in 10

wholesale markets on a pilot basis.

"Fisheries" is one of the eight chapters covered by the conclusions on Turkey adopted by the

Council (General Affairs and External Relations) on 11 December 2006 and endorsed by the

European Council on 14/15 December 2006. As long as restrictions remain in place on the

free movement of goods carried by vessels and aircraft registered in Cyprus or where the last

to this chapter.

Limited progress has been made on resource and fleet management and on inspection and

control. However, Turkey has made no progress on legislative alignment in this chapter. The

administrative structures necessary to implement the Common Fisheries Policy have not been

established.

made. Licensing of road transport operators and certification of professional competence are

close to completion. Turkey has issued a decree setting out the principles of a fleet renewal

scheme and for phasing out old vehicles.

Institutional capacity has been further strengthened. The Directorate-General for Highways

has been transferred from the Ministry of Public Works and Settlement to the Ministry of

Transport. This has improved coordination between transport authorities. Moreover the

Directorate-General for Land Transport (DGLT) has established a new unit for

implementation of the Regulation on dangerous goods. However, DGLT has not reached the

necessary monitoring and control standards and a precondition for the Regulation

implementation has not been fulfilled as Turkey has not yet become a party to the European

agreement on the international carriage of dangerous goods by road (ADR). Financial and

professional competence requirements are less stringent for domestic operators. Continued

efforts are required in order to meet EU technical requirements, also in the field of road

transport, in particular for the introduction of digital tachographs - where necessary

preparatory work to meet international obligations and its implementation has not yet started -

and for speed limitation devices' requirements for light buses and utility vehicles which are

There has been some progress in preparations for a new railways law, which are at an

advanced stage, but there is no progress with its adoption process. Attention must be paid so

licences were aligned with the European Aviation Safety Agency (EASA) Regulations, Part

66 and Part 147. Preparation of regulations on slot allocation, groundhandling services,

passenger rights and maintenance systems is advancing. The EASA accredited the

Directorate-General for Civil Aviation (DGCA) in the field of aircraft maintenance. However,

its implementation capacity in these technical areas is lagging behind. Preparations for a

single European sky are at an early stage.

Air traffic management is suffering from a lack of regional cooperation. The lack of

communications between air traffic control centres in Turkey and the Republic of Cyprus is

seriously compromising air safety in the Nicosia flight information region.

legislation on roll-on/roll-off passenger ships and high-speed craft has been published. The

provisions of the I/8 and Code A-I/8 section of the STCW-95 Convention. Preparations for

improvement of the institutional capacity to prevent pollution from ships, along with

emergency response capacity, have not yet been launched.

become a signatory to SOLAS-78, SOLAS-88 and Mar-Pol Annexes III and IV. Turkey is on

the grey list of the Paris memorandum of understanding. The detention rate of Turkish vessels

in 20078 improved to 6,12 %, compared with an EU average of 3,08 %.

reported.

"Transport policy" is one of the eight chapters covered by the conclusions on Turkey adopted

by the Council (General Affairs and External Relations) on 11 December 2006 and endorsed

by the European Council on 14/15 December 2006. As long as restrictions remain in place on

the free movement of goods carried by vessels and aircraft registered in Cyprus or where the

relating to this chapter.

framework in Turkey to regulate State aid.

Turkey has made limited progress on transport. In the area of road transport, alignment is

advanced. However, the implementation capacity is lagging behind and continued efforts are

required to ensure due enforcement of road safety. Little progress can be reported in the rail

sector. Progress in the maritime sector is uneven. The institutional capacity for prevention of

pollution and emergency response is insufficient. There has been limited progress on air

transport. The lack of communications between air traffic control centres in Turkey and the

Republic of Cyprus is seriously compromising air safety. In both the air and maritime sectors,

no progress has been made on becoming a party to international conventions.

aim of strengthening security of supply and speeding up investment in energy infrastructure

was adopted. Under the new law, the State may, when necessary, engage in electricity

generation in addition to the private sector. No developments were reported regarding

approximation of the methods of calculating oil stocks with the EU method. The natural gas

pipeline between Turkey and Greece is now in operation.

was lowered to 1.2 GWh which is equivalent to market opening of approximately 41%. A

cost-based pricing mechanism came into force by July 2008. This mechanism enables State

economic enterprises (SEEs) operating in the field of energy to reflect changes in their

production/input costs in their sales prices. The mechanism is expected to contribute to better

and sustainable pricing on energy markets and to help to improve the financial position of the

SEEs concerned. However, cross-subsidies persist in the electricity sector and non-cost items

like TRT share remain part of electricity bills. The privatisation process of four electricity

distribution regions has been completed. The privatisation high council and Energy Market

Regulatory Authority have not yet approved the processes. The percentage of their annual

electricity generation that auto-producers are allowed to sell on the electricity market has been

increased to 50% from 30%. By the end of 2007, 48.3% of electricity was generated by

SEEs. Electricity theft and loss was reduced to 15%, but remains almost twice the EU

average.

There has been very limited progress as regards the natural gas market. By the end of May

2008, the distribution tender process was completed for 55 regions. A total of 40 cities have

started to use natural gas. The Ankara natural gas distribution company has been privatised.

An amendment to the natural gas market law allows the state pipeline operator BOTAS to

import LNG from spot markets. Also, the natural gas licensing regulation was amended in a

way to facilitate LNG imports. No developments have been observed in transfer of BOTAS's

contracts to the private sector. BOTAS still imports 86.6% of the consumption in Turkey. The

Natural Gas Market Law requires BOTAS to transfer purchase or sale contracts to the private

sector until its aggregate annual imports fall to 20% of annual national consumption by 2009.

Competition remains limited on both the electricity and the natural gas markets. To improve

operation of the markets and establish competition, the regulatory authority needs to exercise

its powers in a more assertive manner.

Framework Law last year, an implementing regulation covering the transport sector has now

been adopted. A prime ministerial circular has declared 2008 the year of energy efficiency

and the government has drawn up an action plan on "energy efficiency movement". The

administrative capacity of the Directorate-General for Electrical Power Resources Survey and

Development needs to be enhanced in order to make it more effective in this field. No

to the Renewable Energy Law introduced additional incentives. The Energy Market

Regulatory Authority issued the criteria to be applicable to renewable energy generation

facilities for their connection to the grid. Following adoption of the Framework Law on

geothermal energy, the implementing regulation on principles and procedures for exploration,

operation and licensing of geothermal resources, natural mineral waters and geothermal-based

gases was adopted.

and operation of nuclear power plants and energy sales has been adopted. This marks a major

change in Turkey's energy policy. The Turkish Electricity Trade Company (TETAS)

launched the tender for construction and operation of a nuclear power plant in Mersin Akkuyu

and announced the call for proposals. For the tender of Turkey's first power plant only one bid

was submitted and the evaluation process has started by end of September. The implementing

regulation on competition and contracting principles and procedures within the scope of the

Framework Law was also adopted. Turkey needs to fully implement the requirements of the

Convention on nuclear safety, in particular those related to siting and to regulator's

independence, and that the existing legislative framework in the field of nuclear safety and

radiation protection is completed, implemented and monitored. Management of institutional

radioactive waste needs to be brought into line with international recommendations, basic

safety standards and best EU practice. Turkey has not acceded to the Joint Convention on the

safety of spent fuel management and radioactive waste management.

There has been some, but uneven, progress in the area of energy. Several years after adoption

of the Framework Laws on the electricity and natural gas markets, competition remains

limited and transparent and cost-based pricing has yet to be achieved. National targets for

energy efficiency and renewable energy have yet to be set.

schemes and application of reduced rates is needed.

rates and has no element of specific excise duties. The Tobacco Fund remains discriminatory.

It sets a special duty on imported tobacco and cigarettes only, which is not applied to

domestic products. Turkey has not introduced any duty-suspension arrangement for domestic

movements and fiscal warehouses.

duty if the former is lower than the minimum amount. The specific duty levels are

differentiated on the basis of the type of product, instead of alcohol content. The levels set are

higher for imported products than for comparable domestic products. This discriminatory

discriminatory taxation practices is the key to further progress in the accession negotiations on

this chapter.

Law to comply with the revised Corporate Tax Law. This amendment and adoption of the

implementing legislation for domains such as transfer pricing are positive developments for

addressing harmful tax practices and for respecting the principles of the code of conduct for

business taxation. Turkey will need to avoid introducing any measures contradicting the

principles of the Code of Conduct for business taxation.

Directorate-General for Revenue Policy continued improving their administrative capacity.

The revenue administration published its second tri-annual strategic plan with performance

indicators.

provincial tax offices have been computerised. The large taxpayer unit is fully operational.

Taxpayers file 99% of their tax returns electronically. Improvements in taxpayer services to

encourage voluntary compliance are continuing, with the establishment of the taxpayer

services unit, taxpayer call centre and taxpayer services centre. The revenue administration

has developed an electronic tax database and risk-analysis system. The banderol tracking

system on tobacco and alcoholic products is fully operational. Turkey's tax revenue has

increased, but measures for reducing the informal economy still need to be reinforced.

There has been little progress towards improving Turkey's legislative alignment in this

chapter. However, discriminatory taxation of alcoholic and tobacco products persists.

Modernisation of the Tax Administration has continued, leading to improved service to the

taxpayer and increase in revenue.

abolished the requirement whereby private pension funds must invest a minimum percentage

of the premiums they collect in Turkish government debt instruments. In the area of monetary

Bank of Turkey set the inflation target jointly. The Central Bank sets limits for credit card

interest rates. The Central Bank started the process for the re-introduction of the Turkish Lira

Bank's statute has to be revised in order to ensure full independence of the Bank. The

Banking Law allows for the disbursement of advance payments to the Savings Deposits

Insurance Fund from the Central Bank. This provision is not in line with the prohibition of

monetary financing of the public sector. As for the prohibition of privileged access by the

public sector to financial markets, there are several provisions requiring the purchase of

public securities.

action plan for 2008 - 2012. The authorities completed some key legislative steps, in

particular by adopting the social security law, the law on incentives for research and

development, and an employment package to improve labour market conditions. Turkey

submitted a Pre-Accession Economic Programme (PEP) to the Commission. The authorities

published a Medium-Term Fiscal Framework (MTFF) for 2008 - 2012, which sets mediumterm

public debt and budget deficit targets after the expiry of IMF stand-by arrangement in

May.

Formulation and implementation of economic policy remained fragmented, despite efforts to

improve co-ordination activities.

Some progress can be reported in the area of economic and monetary policy. Economic policy

formulation and implementation remained fragmented. Little progress has been made in the

field of monetary policy. Several shortcomings still exist, in particular regarding full

independence of the central bank, the prohibition of monetary financing of the public sector

and the prohibition of privileged access of the public sector to financial markets.

Programme for 2007-2011 was updated. The programme defines standards, data compilation

methodologies and publication schedules for all official statistics providers. The Turkish

statistical institute (Turkstat) made some progress in strengthening its coordinating role.

Cooperation with main data providers should be further improved. Main data providers should

improve their administrative capacity, including language skills.

EU statistical classifications are available for use by all official statistics providers. Progress

in setting up the business register and farm register systems remained very limited. There is

an urgent need to further improve the administrative registers held by the Ministry of

Agriculture. Further efforts are needed to finalise the establishment of a business register

system.

accession negotiations in this chapter, Turkey completed a major revision of its national

accounts, which largely aligned them with the European System of Accounts, ESA 95. In

made. Pilot surveys on vineyards, pesticide use and fruit were conducted. Preparations are

underway to improve statistics on crop, livestock and meat production, as well as milk

studies for the household domestic tourism survey have been completed. As regards

and environmental expenditure.

There has been good progress in the area of statistics. The administrative capacity improved.

Turkey revised its national accounts and finalised the 2007 population census through the new

address-based population registration system. Further progress is in particular needed in the

key areas of agricultural and macroeconomic statistics as well as in the field of business

registers. Cooperation with other data providers and the coordinating role of Turkstat have to

be further strengthened.

employment rates, in particular for women (22.2% in 2007), and high levels of youth

unemployment (19.6% in 2007). The large size of the informal economy (a little under half of

those in employment are not registered with any social security institution) and the marked

rural/urban divide in the labour market remain the main challenges. No further progress was

made in finalising the Joint Assessment Paper on Employment Policy Priorities (JAP): no

agreement has yet been reached on how to address the employment issues affecting

vulnerable groups. In the area of employment, Turkey is not yet sufficiently prepared.

through the implementation of the component on Human Resources Development of the

Instrument for Pre-Accession Assistance (IPA). In December 2007, the Commission adopted

the Human Resources Development Operational Programme. Its aim is to support activities in

the areas of employment, education and training, and social inclusion. The Ministry of Labour

and Social Security has established the internal structures necessary for the management of

the Operational Programme, staff have been assigned and staff training has been provided.

The Turkish authorities have accredited the management and control system for implementing

IPA on a decentralised basis and have requested the conferral of management powers. To

mobilise stakeholders, awareness raising events were organised. However, administrative

structures and legislation are not yet sufficiently adapted in order to build up adequate

institutional capacity for the future management, implementation, monitoring, audit and

control of ESF-type measures. Preparations in this area are starting.

General Health Insurance Law entered into force in October 2008. It provides general health

insurance coverage for everyone under 18 years of age. This includes foreign nationals who

have resided in Turkey for more than a year and who do not have social insurance in their

home countries. The health premiums of those who cannot afford to pay are to be covered by

the State. As part of the Employment Package, social security premiums for the disabled will

be covered by the State to promote the employment of people with disabilities. However, a

high incidence of poverty persists in rural areas as well as among employed people (working

poor) and children. No further progress was made in finalising the JIM (Joint Inclusion

Memorandum): no agreement has yet been reached on how to address issues of social

inclusion of vulnerable groups. Sound mechanisms are still outstanding for monitoring

poverty and social inclusion, as well as the implementation of social inclusion policies, so as

to measure progress. Preparations in this area are at an early stage.

of the social security reform, the Social Insurance and General Health Insurance Law, entered

into force in October 2008. Its aim is to regulate, among others, the pension parameters and

the general health insurance system with a view to ensuring adequate and sustainable

pensions. The Social Security Institution has been strengthening its capacity to deliver

decentralised one-stop services for disadvantaged people. However, there has been no

development as regards new legislation on social assistance and services. Preparations in this

area have started.

Women's employment rates and access to education are the lowest among the EU Member

States and the OECD countries. Important general principles and definitions, such as the

concerning discrimination on grounds of racial or ethnic origin, religion or belief, disability,

age and sexual orientation has not yet been transposed. An effective and independent