Industrial Clusters in Turkey

During the first ten years of the newly established Republic of Turkey (1923–32), state involvement in economic activities was rather limited. This was mainly because (1) the basic principles adopted in the Izmir Economic Congress (1923) committed the government to the establishment of a private enterprise economy, and (2) some economy-related provisions in the Lausanne Treaty (1924) considerably restricted the area in which the government could operate. For instance the country was bound to apply the Ottoman tariffs for another five years. Over this period little was achieved in terms of industrialization since the private sector lacked the necessary technological competence and capital. These factors, combined with external ones such as the Great Depression, were enough to convince the policy makers that the private sector could not be entrusted with the task of leading the country’s economic development. This marked the beginning of a new period (1933–45) in Turkish economic history called ‘etatism’, during which the government heavily intervened in the production of goods and services. The First Five Year Industrialization Plan (1934–38) placed strong emphasis on the industrialization process, particularly in the case of textiles, iron and steel. As a result of the related policies the pace of industrialization accelerated, with industry’s share of GNP rising from 14 per cent to 18 per cent during the period in question (Kepenek and Yentürk, 1997).