Macroeconomic impacts of privatization: The case of Turkey
State owned enterprises and privatization has long been a major economic concern for Turkey. As being one of the fundamental tools of the free market economy, privatization has been on Turkey's agenda since 1984. Upon formation of a political and social consensus on the needs for privatization, the new privatization law has been enacted on 27 November 1994. The main philosophy of privatization is to confine the role of the state in the economy in the areas like health, basic education, social security, national defence, large scale infrastructure investments; provide legal and structural environment for free enterprise to operate and thus to increase the productivity and the value added to the economy.
The privatization process in Turkey with a view of relieving the burden of state economic enterprises on the national budget has proved to be an important source of funds for the government and brought tangible results and progress within this philosophy. Originally the privatization ideology was based on economic efficiency of the private sector whereas inherently corrupt structure of the public sector. But over the course of time, main objective of privatization had shifted towards mainly revenue generation and financing of the public debt.
The literature on privatization has emphasized the microeconomic aspects of privatization and especially concentrate on the efficiency gains. However there is less empirical work about fiscal and macroeconomic impact of privatization. In this paper we tried to investigate the relationship between the privatization proceeds and the budget deficits. By this way we have analyzed the contemporaneous impact of privatization on the budget. Then in order to find out the structural impact of privatization on macroeconomic performance we utilized public debt, public investment, output growth and the unemployment rate. In our analysis we used annual data between 1986 and 2011 which is obtained from the Privatization Administration and Central Bank of Turkey. In the econometric model we will use privatization proceeds as an explanatory variable and will control for many other variables. We will use cointegration method to check for long run equilibrium relationship between privatization proceeds and the variables used in the model. Turkey, one of the fastest growing economies of the world has positioned itself as an attractive and promising investment environment through the implementation free trade principles. So we expect to find a long run relationship between privatization proceeds and economic growth.