Question

Define Import Substitution Industrialization (ISI) of the 1960s in Turkey and discuss the role of state economic enterprises in comparison to the earlier étatist period of the 1930s.

Answer 1

ISI is a trade and economic policy that includes replacing foreign imports with domestic production. Basically it is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialized products. Despite the incline within the volume of exports, external trade deficit has also increased due to the increase in the imports of the intermediate goods.

ISI adopted by Turkey

The Turkish industry sector has entered into 2000s with such structural problems. Successively, the government shifted to etatism, starting with restrictions on foreign trade. The tariff regulations of 1929 promulgated prohibitions of imports which were complemented by a
restrictive foreign exchange regime a year later. In addition, in November 1931 a quota system was instituted that was to persist 50 years. Shielded by excessive protection, state economic enterprises were founded during the 1930s.

The establishment of infant industries in the state sector could only temporarily offset the stagnation in agriculture. The annual growth rate averaged 7.7% between 1930 and 1939.

The planned efforts of ISI started with the institutional changes brought about by the military rule. The officers who carried through the coup of 1960 had a conception of social change derived from the old authoritarian, etatist ideology.

Role of state in ISI period :

1) The export oriented policy provided Turkey higher and more sustainable productivity. Nevertheless this should not be considered as yet another case for liberal policies and this actually is one of the main claims of this dissertation.

2) Productivity response of state enterprises was also as impressive as export values. Roughly 60% of these gains were due to intra sectoral gains which suggest improving efficiency of   production in the State enterprises.

3) Average annual productivity growth rate in industry during 1980s was at 4%
which is 4 times higher than same rate of the 1970s. Also from 1980 to 1987 industrial exports have
increase eight-fold; from 1 billion to 8 billion dollars.