Changes in spatial and sectoral concentration of economic activities

Economic integration had consequent effects like the relocation of existing company headquarters in Turkey as well as concentration of FDI. As in China, growth was stronger in regions which had historical ties to international trade, like the north- western and western Turkey, and at a minor role, Middlesouthern Turkey (Mersin, Gaziantep), where there was better access to European markets. Both manufacturing industries and services created larger agglomerations in especially north-west and western regions, due to second nature geographical effects1.

Figure 2.2 : Turkey, 81 provinces.

In Turkey not only FDI concentrated in certain areas, but local capital also moved to these centres as it wanted to compete and take part in international trade. Holdings’ and headquarter’s relocations played a key role in spatial development of manufacturing industries and services. As an example, Tekfen Holding moved to Istanbul from Ankara at 1967, Sabancı Holding moved to Istanbul at year 1974 from Adana, Mais Motor Company (Renault) moved first from Ankara to Bursa and then to Istanbul in 1970 and many examples follow. It should be noted that most of these companies were connected to Western economic and political system even before 1970’es and then turned into global players. As an example, Tekfen started construction business through NATO projects. Sabancı Holding had investments in Bridgestone and Hilton, but then started businesses with Toyota, Mitsubishi, Heilderberg and other international trademarks.

It should also be noted that the first wave of movers were rather industrial companies but some companies also had some investments in finance industry, or, they invested

1 _{South-Southwestern Turkey, meanwhile has witnessed the development of tourism industries, which} based on first nature geographical advantages (Muğla and Antalya)

in financial institutions on the way along. Relocation of large financial institutions’ headquarters to Istanbul followed a little later. The movement of İşbankası, one of the largest banks was a very important event. Previously state-owned banks like Şekerbank, and other private banks also moved to Istanbul. Many private banks were opened in Istanbul later, which some of them later were acquired by TNCs.

The privatizations of large public manufacturing companies and the expansion of the private sector have changed the locational logic of firms and their plants, in the favour of market-oriented decision making. Many large companies preferred to have their headquarters separated from production units and locate in Istanbul and other metropolitan cities. This did not only provide them opportunities to benefit high-end producer services that enabled them to trade with the Western World, but also helped in the expanding international operations of Turkey based companies in the North- African, Balkan, Black Sea and Middle East Region. As an example Bucharest in Romania and Odessa in Ukraine attracted many investments from companies located in Istanbul (Erkut and Baypınar, 2007).

Turkey has entered the 1980’es with a fundamental change in its development policy, leaving an industrialization policy that depended on an import substitution model in favour of an export oriented industrial growth model. A rapid expansion of manufacturing industries and private sector has followed immediately (Table 2.3). One particular aspect of expansion was that Turkey specialized in labor intensive industries like textile, wearing apparel and leather industries (table 2.4 and 2.5). By 1990, Istanbul’s share in total GDP in Turkey was 20.7%, Ankara’s share was 8.5% and Izmir’s share was 7.4% approximately. By 2000, Istanbul’s share rose to 22.7% while Ankara and Izmir’s shares remained as they were. Shares of two neighbor reigons distant from the West; Adana and İçel (Mersin), dropped slowly. Therefore, Istanbul’s position as a global gateway continuously strengthened. Government policy has as well supported and still is supporting Istanbul’s growth as a global city.

Initially there has been a spectacular rise of Textile, wearing apparel and leather industry in the early periods of export oriented industrial growth period after 1980. Textile, wearing apparel and leather industry was dominated by large public enterprises in the pre-1980 period (Baypınar, 2003), with low levels of export. It has

become the largest manufacturing sector in Turkey in the post 1980 period, and still is. During 1980-1998 period, its exports have folded 13 times, making Turkey Europe’s first trading partner in textiles. SMEs and many large private companies opened, which preferred to concentrate in only a few locations in the country.

Table 2.3: Public and private enterprises share in all manufacturing

industry workplaces in Turkey.

1980 1998 Public Private Total Public Private Total

Workplaces* Number 408 8,299 8,707 302 12,030 12,332 Share 4.69% 95.31% 100.00% 2.45% 97.55% 100.00% Employees Number 287,189 499,806 786.995 143.516 1.062.648 1.206.164

Share 36.49% 63.51% 100.00% 11.90% 88.10% 100.00% *Workplaces with 10 or more workers

Source: own table using TURKSTAT Annual General Census of Industries 1980 to 1998

Table 2.4: Number of employees in manufacturing industries. Number of Employees in Manufacturing Industry* 1980 1998 Change (%) Contribution to Overall Increase (%)

31 Food, beverages and tobacco 185,794 186,166 0.20 0.09 32

Textile, wearing apparel and

leather industries 184,224 416,836 126.27 55.49 33

Wood and wood products,

furniture 16,745 27,657 65.17 2.60

34 Paper products, printing and publishing 28,285 36,168 27.87 1.88 35

Chemicals and chemical, petroleum, coal, rubber and

plastic products 74,747 109,329 46.27 8.25

36 Non-metallic minerals 58,707 79,414 35.27 4.94

37 Basic metal 74,181 66,462 -10.41 -1.84

38

Fabricated metal products,

machinery and equipment 161,235 275,832 71.07 27.34

39 Other 3,077 8,300 169.74 1.25

Grand Total 786,995 1,206,164 100.00

*in firms with 10 or more employees Source: Baypınar, 2003

Though manufacturing industries expanded rapidly, compared to population of country, a very large part of the population still worked in agriculture. Industries hence remained largely concentrated within and around metropolitan areas, with differences according to sub-sectors.

Table 2.5: Manufacturing industry exports in Turkey.

Industry export (000USD) 1970 1980 1998 Contribution to Overall Increase (%) 31 Food, beverages and tobacco 250,267.175 1,033,992.022 3,660,071.400 11.32 32 Textile, wearing apparel and

leather industries

203,712.014 810,861.183 10,877,964.064 43.41 33 Wood and wood products,

furniture 3,772.887 8,394.031 151,948.822 0.62

34 Paper products, printing and

publishing 210.975 3,013.838 178,127.079 0.76

35 Chemicals and chemical, petroleum, coal, rubber and

plastic products 13,382.877 129,991.927 2,205,012.141 8.95 36 Non-metallic minerals 3,847.904 75,611.132 937,782.898 3.72 37 Basic metal 11,455.109 58,800.870 2,215,546.531 9.30 38 Fabricated metal products,

machinery and equipment 2,911.962 96,851.249 4,900,470.858 20.71

39 Other 712.444 3,861.879 286,628.198 1.22

Source: Baypınar, 2003

The automobile assembly industry and chemical industries have also developed in the same period, and have also substantially increased their exports in the post 1980 period. Today fabricated metal products, machinery and equipment industries compete with the exports of the textile, wearing apparel and leather industries.

Turkey has not been able to attract electrical-electronical equipments industries as succesfull as Asian emerging countries, indeed. Thus, though it has attracted some FDI, it lacked the opportunity to benefit from this high demand sector (Lemoine and Ünal-Kesenci, 2003).

Empirical outcomes of a study by Baypınar, (2006) provides some information about the changing structure of the spatial economy during 1992-2002.

Core metropolitan regions of Istanbul, Ankara and Izmir have stregthened their position in financial services throughout the period. The subsequent concentration of financial activities after financial regulations in 1989, has led to a decrease in the number of regions with strong financial services. Bank mergers and acquisitions have also played a role in this concentration.

Baypınar’s study shows that two new industrial regions, Denizli and Tekirdağ have emerged which have strong shares in private R&D services relative to their population share at year 2002. Denizli and Tekirdağ have both attractaed industries and emerged as competitive regions. Kocaeli has still a distinguishing feature, while

Bursa has lost its stregth in R&D services’ share. Core regions (Ankara Istanbul Izmir) have still high shares in both R&D services and manufacturing industries. In the share of administrative, legal and other services, while the three core regions still were the most important regions by 2000. Kocaeli, Bursa, Denizli and Tekirdağ possess higher shares in manufacturing industry and important shares of such services. These services included headquarters of companies, which shows that the region is more connected to global networks. Bilecik, Kırklareli and Rize formed a subgroup, which were in usual highly specialised in few industries.

GDP Per Capita Groups in Turkey at 1997

Regions whose GDP Per Capita increased between 1990 and 1997 and was above the national average at 1997

Regions whose GDP Per Capita increased between 1990 and 1997 but was below the national average at 1997

Regions whose GDP Per Capita decreased between 1990 and 1997 and was below the national average at 1997 Source: Baypınar, 2003

Figure 2.3 : GDP per capita groups in Turkey at 1997.

An initial look at the geography of production reveals that growth of urban sectors is strong in and around existing metropolitan areas, and stronger in the West. This should likely make spatial inequalities rather persistent. The evolution of regional inequalities in Turkey will be discussed and studied in detail in the fifth section, therefore, here only a brief schema on distribution of regional growth of income is be presented in figure (2.3) above.