Turkey: Special Report - Problems lurk beneath the surface

Turkey briefing: Despite its failed bid for full EU membership, the nation hopes to continue its economic growth

AT FIRST sight, Turkey is a great success story. Until the 1980s, its economy was cut off from the outside world by protectionism. For the last three years, foreign investment receipts have averaged around $900m and the GDP has grown by 7 per cent, according to government statistics. Turkey has entered a customs union with the EU and the state sector's share of the economy has diminished. The country is a multi-party democracy in a region where they are few and far between.

There are still plenty of problems, however. Behind the impressive growth rate lies chronic high inflation. Turkey is bitterly disappointed not to be a candidate for full membership of the EU, but it has done little to improve its poor human rights record, named by the EU as a key factor against the country. A Kurdish insurgency continues in the South-East and Islamism has begun to feature heavily in the country's politics. There have been three military coups since the foundation of modern Turkey and recent events have shown that real power still rests with the generals.

In June 1996, Necmettin Erbakan became Turkey's first Islamist prime minister. A year later he resigned under intense pressure from the military. Mr Erbakan has since been banned from politics and his Welfare Party has been closed.

The principle of secularism is enshrined in Turkey's constitution and rigidly defended by the military, which has pushed the government and courts towards increasingly draconian methods. Islamist mayors have been sentenced to imprisonment for speeches held to be anti-secular. The current government has been forced to implement a package of anti-Islamist laws, which includes a ban on beards and women's headscarves - both traditional symbols of Islam - in universities.

Islamist MPs, in their new Virtue Party, still form the largest group in parliament but their rhetoric has moderated. Spokesmen now talk of Turkey's place as within the Western alliance, not among Islamic countries. The idea of pan-Islamic currency, suggested during Mr Erbakan's government, has been shelved. Introducing an Islamic legal system "would be crazy", says a senior adviser and the party now says it wants to defend freedom of belief in Turkey. Increasingly there is speculation that it may split into two factions because of internal differences.

A minority coalition government of three parties took power after Mr Erbakan's resignation. It was expected to be a caretaker government but committed itself to tackling serious areas of policy, although it has had trouble getting legislation through parliament without a majority. Earlier this month, Mr Yilmaz made an election pact with an opposition party, promising elections next April in return for support in key areas of legislation. But the pact has strained the coalition, with its smallest member threatening to leave in protest.

The government has begun to tackle inflation, aiming to slow growth this year. A six- month price-freeze on state-sector commodities ends this month. Year-on-year consumer inflation came down from 101.6 per cent in January to 91.4 per cent in May, according to government statistics.

Analysts agree long-term inflation has been caused by chronic budget deficits. A tax-reform bill is in parliament - up to 50 per cent of Turkey's economy is believed to be unregistered for tax and under- declaring is routine practice. The government has also benefited from privatisation.

Turkey's economic success began in the 1980s, with the liberalisation programme pioneered by Target Ozal, who emerged as prime minister when the country returned to civilian rule in 1983. Ozal began to put an end to restrictions on foreign investment and protectionist tariffs.

Today the largest sectors are manufacturing and trade. According to provisional government figures, last year Turkey realised $26.24bn of exports. Imports were much higher at $48.58bn. Turkey's foreign trade has been helped by the 1996 customs union with the EU, which abolished trade barriers in most sectors. The economy has proved its resilience by bouncing back from a financial crisis in 1994 which caused GDP to shrink by over 5.5 per cent; in 1995 growth was back to 7.2 per cent. Observers agree that political interference in the economy is still a problem.

Turkey expected the customs union to lead to full membership of the EU. But at last December's Luxembourg summit, the EU effectively rejected Turkey's membership bid for the foreseeable future.

Turkey was offered membership of the European Conference, but declined to attend its meeting in March. Since the Luxembourg summit, Turkey has refused to discuss Cyprus, Aegean disputes with Greece, or human rights with the EU. It rejected an attempt by the British presidency to kick- start relations in May. The Turkish government blames Greece, with which it has a history of acrimony.

One of the reasons the EU gave for rejecting Turkey was its human rights record. Amnesty International says the situation is improving, but that Turkey still has a long way to go. According to Turkey's Human Rights Association (HRA), so far this year there have been 217 allegations of torture, and 44 claims of death through torture or extra-judicial execution.

In May, the HRA's chairman, Akin Birdal, was seriously wounded in a gun attack, the state was widely criticised for taking no action over press leaks believed to have caused the shooting, which alleged that a captured Kurdish terrorist had accused Mr Birdal of terrorist links.

Kurdish terrorism remains a thorn in Turkey's side. The South-East has been ravaged by years of guerrilla warfare between the terrorist Kurdistan Workers' Party (PKK) and the Turkish military. Evacuation forced by the military has sent a wave of refugees to the cities of western Turkey, and another of illegal immigrants to the EU.

The PKK wants Kurdish autonomy. But a separate Kurdish identity is not recognised by Turkey, and there are restrictions on use of the Kurdish language. Turkey says its security forces have all but defeated the PKK. But only last April, a bomb in Istanbul's tourist district caused foreign visitors minor injuries and raised the spectre of attacks on tourists.

turkey

Land area 779,452 sq km*

Population 56.5 million (1990 census)*

65.3 million (1997 estimate)

Religion No official figures, but majority

Sunni Muslim

Language Turkish

Climate Temperate. Varies by region.

Seasonal extremes in interior.

Average annual temperature Ankara: 11.70C

Average annual rainfall Ankara: 377.7mm*

Government Multi-party democracy. But in practice

the military's recommendations are

always followed.

GDP $3,157 per capita (1996)*

Visas Visas required for British passport

holders. Routinely issued on arrival for pounds 10