The efficiency of revenue collection procedures has been improved. The constitution has been changed to permit international arbitration. This should facilitate privatisation of the electricity sector and investment in infrastructure and reomove an important impediment for foreign direct investments. Priority should be given to reduce inflationary pressures and fiscal deficits in order to reduce real interest rates and high financing needs of the public sector, which are crowding out private sector investment. In view of the financing needs for the repair of earthquake damage, special attention should be paid to the overall fiscal discipline and to the swift implementation of further structural reforms.
Privatisation needs to be continued and the promotion of SMEs has to be enhanced.
The uneven distribution of income and the huge regional disparities impede sound economic development. Attention should be paid to education as an element of an overall socio-economic development strategy. Turkey continues to make most progress in alignment in the areas covered by the Customs Union and, to a lesser extent, in areas covered by the European strategy. In general terms the situation with regard to free movement of goods is satisfactory and Turkey has reached a high level of adoption of European standards even if it has still not adopted a framework law. Despite the high degree of alignment in the customs area there is still a need for a new customs code.