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Brussels, 8.11.2006

SEC(2006) 1390

COMMISSION STAFF WORKING DOCUMENT

Turkey 2006 Progress Report

{COM(2006) 649 final}

TABLE OF CONTENTS

1. Introduction 4

1.1. Preface 4

1.2. Relations between the EU and Turkey 4

2. Enhanced political dialogue and political criteria 5

2.1. Democracy and the rule of law 5

2.2. Human rights and the protection of minorities 10

2.3. Regional issues and international obligations 24

3. Economic criteria 25

3.1. Introduction 25

3.2. Assessment in terms of the Copenhagen criteria 26

3.2.1. The existence of a functioning market economy 26

3.2.2. The capacity to cope with competitive pressure and market forces within the Union 29

4. Ability to assume the obligations of membership 31

4.1. Chapter 1: Free movement of goods 31

4.2. Chapter 2: Freedom of movement for workers 33

4.3. Chapter 3: Right of establishment and freedom to provide services 34

4.4. Chapter 4: Free movement of capital 35

4.5. Chapter 5: Public procurement 36

4.6. Chapter 6: Company law 37

4.7. Chapter 7: Intellectual property law 38

4.8. Chapter 8: Competition Policy 39

4.9. Chapter 9: Financial Services 40

4.10. Chapter 10: Information society and media 41

4.11. Chapter 11: Agriculture 43

4.12. Chapter 12: Food safety, veterinary and phytosanitary policy 44

4.13. Chapter 13: Fisheries 47

4.14. Chapter 14: Transport policy 47

4.15. Chapter 15: Energy 49

4.16. Chapter 16: Taxation 50

4.17. Chapter 17: Economic and Monetary Union 51

4.18. Chapter 18: Statistics 51

4.19. Chapter 19: Employment and Social Policy 52

4.20. Chapter 20: Enterprise and Industrial Policy 54

4.21. Chapter 21: Trans European Networks 55

4.22. Chapter 22: Regional Policy and Coordination of Structural Instruments 56

4.23. Chapter 23: Judiciary and fundamental rights 57

4.24. Chapter 24: Justice, Freedom and Security 62

4.25. Chapter 25: Science & Research 65

4.26. Chapter 26: Education & Culture 66

4.27. Chapter 27: Environment 66

4.28. Chapter 28: Consumer and Health Protection 68

4.29. Chapter 29: Customs Union 69

4.30. Chapter 30: External Relations 70

4.31. Chapter 31: Foreign, Security and Defence Policy 71

4.32. Chapter 33: Financial and Budgetary Provisions 76

STATISTICAL ANNEX 77

COMMISSION STAFF WORKING DOCUMENT

Turkey 2006 Progress Report

INTRODUCTION

Preface

Following the conclusions of the Luxembourg European Council in December 1997, the Commission has reported regularly to the Council and the Parliament.

This report on progress made by Turkey in preparing for EU membership largely follows the same structure as in the previous years. The report:

- briefly describes the relations between Turkey and the Union;

- analyses the situation in Turkey in terms of the political criteria for membership;

- analyses the situation in Turkey on the basis of the economic criteria for membership;

- reviews Turkey's capacity to assume the obligations of membership, that is, the acquis expressed in the Treaties, the secondary legislation, and the policies of the Union.

The period covered by this report is 1 October 2005 to 30 September 2006. Progress is measured on the basis of decisions taken, legislation adopted and measures implemented. As a rule, legislation or measures which are under preparation or await Parliamentary approval have not been taken into account. This approach ensures equal treatment across all reports and permits an objective assessment.

The report is based on information gathered and analysed by the Commission. In addition, many sources have been used, including contributions from the government of Turkey, the Member States, European Parliament reports[1] and information from various international non-governmental organisations.

The Commission draws conclusions regarding Turkey in its separate communication on enlargement[2], based on the technical analysis contained in this report.

Relations between the EU and Turkey

Accession negotiations were opened with Turkey in October 2005. The first phase of the accession process, the analytical examination of the acquis (screening) was completed in October 2006. Negotiations on one chapter, science and research, were opened and provisionally closed in June.

The enhanced political dialogue has continued under the United Kingdom, Austrian and Finnish presidencies.

The Association Agreement has continued to work in a satisfactory manner.

EC-Turkey trade has continued to expand in the context of the customs union , reaching € 75 billion in 2005. In all occasions, the EU urged Turkey to remove all restrictions on the free movement of goods, including restrictions on means of transport regarding to Cyprus. Other unfulfilled commitments by the Turkish side persist, relating to technical barriers to trade, import licences, state aids, enforcement of intellectual property rights, and other discriminatory provisions. The partial reduction of mandatory standards is however a positive step. The EU hopes that negotiations to extend the customs union to the area of public procurement and services can resume soon. Trade negotiations were completed in September on processed agricultural products. These aimed to improve market access and to adjust customs union provisions to the EU's 2004 enlargement. No progress can be reported concerning Turkey's long-standing ban on imports of live bovine animals, beef and other animal products.

The revised Accession Partnership was adopted in January 2006, setting out priorities that Turkey should address in the short- and medium-term in its preparations for accession.

The 2006 EC pre-accession financial assistance amounts to € 500 million. EIB lending in Turkey stands at some € 4.2 billion.

ENHANCED POLITICAL DIALOGUE AND POLITICAL CRITERIA

This section examines progress made by Turkey towards meeting the Copenhagen political criteria which require stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities. It also monitors the respect for international obligations, regional cooperation, and good neighbourly relations.

Democracy and the rule of law

Parliament

The Turkish Grand National Assembly, in which six parties are represented, has adopted 148 laws of a total 429 draft bills submitted since October 2005. The next elections are scheduled for November 2007.

Throughout the year, the EU Harmonisation Committee and the Human Rights Committee played an important role in addressing issues arising under the Copenhagen political criteria ( on the Human Rights Committee see section on human rights ).

A public debate has developed over the need to change the electoral system, which currently requires political parties to reach a 10% threshold at national level to achieve representation.

The government submitted a new reform package in June, covering a number of areas related to the Copenhagen political criteria. Parliament passed several laws in the area of the political criteria.

However, some legislative proposals included in the government's reform package were not adopted before the end of the reporting period.

Amendments to the anti-terror law were adopted in June 2006 as a response to the escalation of terrorism. Under the new law, the list of what constitutes a terrorist offence was extended and a wide definition of terrorism maintained. The law introduces legal restrictions on freedom of expression, the press and the media[3]. In August, President Sezer applied to the Constitutional Court for the cancellation of Articles 5 and 6, providing for such restrictions. The new anti-terror law reduces procedural safeguards for suspects of terrorist offences. Access to a lawyer may be denied for a period of 24 hours, and under certain circumstances security officers may attend meetings between suspects and their lawyer. As regards the defence rights, officials and former officials are granted differentiated treatment. Furthermore they dispose of wider discretion with regard to the use of firearms.

Government

The government, in power since November 2002, has repeatedly confirmed its commitment to the EU accession process. As a result, it presented a new reform package in June ( see Parliament ).

In October 2005 the EU Chief Negotiator presented the structure of the negotiating team. The Head of the team is the Minister of Foreign Affairs. The EU Chief Negotiator is in charge of steering and implementing the accession work. A Monitoring and Steering Committee was established. The Committee comprises the Secretary General for EU Affairs, the Deputy Undersecretary of the Foreign Ministry, the Deputy Undersecretary of the State Planning Organisation, the Deputy Undersecretary of the Office of the Prime Minister and Turkey’s Permanent representative to the EU.

The Secretariat General for EU Affairs (EUSG) has played a co-ordinating role, in particular regarding alignment under the political criteria, financial co-operation and, since 3 October 2005, the process of screening and negotiating acquis chapters.

However, given the significant increase of EUSG responsibilities, there is a need for a proportional strengthening of its staff and resources. Limited action has been taken in this respect.

Public administration

Parliament adopted a Law Establishing an Ombudsman. The Ombudsman will handle petitions from natural and legal persons in relation to administrative acts. This is a priority of the Accession Partnership and an important step forward, as it creates an institutional framework for the monitoring of public administration by the Turkish citizens.

The Constitution was amended in November 2005 in line with the Public Financial Management and Control (PFMC)’s broader definition of state budget. This includes general budget agencies, special budgets agencies, budgets of regulatory agencies as well as budgets of social security agencies.

Turkey has made some progress regarding better regulation. The government adopted a Regulation in February 2006 which introduces regulatory impact assessments (RIA) into the Turkish legal system. The use of RIA should, amongst other things, support Turkey in the conduct of EU accession negotiations.

However, a number of issues require attention. PFMC needs to be fully implemented and the institutional capacity for conducting regulatory impact assessment needs to be reinforced.

No progress has been made in adopting the Framework Law on Public Administration, which was vetoed by the President in 2004. As a result, the devolution of central government powers to local administrations was hampered. Moreover, fiscal decentralisation has not been achieved. No progress has been made to establish City Councils.

The Law on the Associations of Local Governments was amended in January 2006. This allows villages, municipalities and special provincial administration to undertake joint projects. The expenditure and budgets of the joint projects became exempt from the Court of Accounts audit. This is not in line with the principles of external audit.

No progress can be reported on the draft Civil Servant law. This aims to partially repeal the existing legal provisions and to adopt a more managerial legal instrument.

Overall, there has been some legislative progress in public administration reform. The implementation of reforms adopted in previous years has continued. Further efforts are needed in the area of decentralisations.

Civil-Military relations

There has been progress concerning the competence of military courts to try civilians. Under the law amending the relevant provisions of the Military Criminal Code as adopted in June 2006, no civilian will be tried in military courts in peacetime unless military personnel and civilians commit an offence together. The new law also introduces the right of retrial in military courts. Accordingly, if there is an ECtHR decision in favour of military or civilian persons who have been tried before military courts, they can ask for a retrial.

The National Security Council (NSC) has continued to meet on a bi-monthly basis in line with its revised role. It has discussed domestic and foreign policy issues such as counter-terrorism, internal security, energy security, migration, water policy and foreign aid policy. The NSC has submitted reports to the government, including recommendations.

One such document, the revised National Security Policy Document (NSPD), adopted by the government in November 2005, is a classified document and was not discussed by Parliament.

The Armed Forces have continued to exercise significant political influence. Senior members of the armed forces have expressed their opinion on domestic and foreign policy issues including Cyprus, secularism, the Kurdish issue, and on the indictment concerning the Semdinli bombing ( see sections on the judiciary and South East ).

The Turkish Armed Forces Internal Service Law remains unchanged. This defines the role and duties of the Turkish military and contains articles granting the military a wide margin of manoeuvre. Similarly, as reported last year, Article 2a of the NSC Law provides a broad definition of national security. No measures have been taken to enhance civilian control over the Gendarmerie. This is part of the army and operates under the General Staff as well as under the Ministry of Interior in terms of law-enforcement duties.

In March, a draft report of the Şemdinli Investigation Commission of Parliament revealed the existence of a secret protocol on Security, Public order and Assistance Units (commonly called EMASYA). Signed by the General Staff and the Ministry of Interior in 1997, this protocol allows for military operations to be carried out for internal security matters under certain conditions without request from the civilian authorities. Under the protocol, the military can gather intelligence against internal threats.

Reforms in defence expenditures, adopted in previous years have started to be implemented. The budgetary appropriations of the National Intelligence Service, the National Security Council as well as the administrative budget of the under-secretariat in charge of the Defence Industry were all included in the 2006 state budget. However, most procurement projects are funded separately from extra-budgetary funds.

No further progress has been achieved in terms of strengthening parliamentary overseeing of the military budget and expenditures. The Parliamentary Planning and Budget Committee reviews the military budget only in a general manner but does not examine programmes and projects. Furthermore, extra-budgetary funds are excluded from parliamentary scrutiny.

No internal audit of military property has yet taken place pending the adoption of secondary legislation to the Law on Public Financial and Management Control (PFMC). According to Article 160 of the Constitution, the Court of Auditors can carry out ex-post audit of defence expenditures. However, the Court remains unable to carry out its tasks due to the lack of the relevant implementing legislation.

Overall, limited progress has been made in aligning civil-military relations with EU practices. Statements by the military should only concern military, defence and security matters and should only be made under the authority of the government, while the civilian authorities should fully exercise their supervisory functions in particular as regards the formulation of the national security strategy and its implementation, including with regard to relations with neighbouring countries.

Judicial system

The authorities have been focusing on the implementation of the new Penal Code, the Code of Criminal Procedure and the Law on Enforcement of Sentences following the entry into force of these laws in 2005.

In this respect, the Ministry of Justice updated all existing circulars by issuing some 100 new circulars mainly addressed to public prosecutors in January 2006. This action aimed to create a clearer and more concise framework for the implementation of the new Code of Criminal Procedure and the Law on Enforcement of Sentences. One circular of particular importance concerns the implementation of legislation on arrest, detention and statement taking and the prevention of human rights violations during these practices. This circular underlines the duty of prosecutors to monitor the situation of detainees through regular visits to places of detention. It also requires prosecutors to report periodically to the Ministry of Justice on implementation by law enforcement authorities.

Two circulars were issued by the Ministries of Interior and Justice in November 2005 and January 2006, respectively, to clarify the interaction between prosecutors and the judicial police.

Courts have continued to apply the European Convention on Human Rights (ECHR).

During the year 620 new judges were recruited. Training activities continued to ensure implementation of the reforms carried out in the last three years. The budget of the Ministry of Justice was increased and the programme of building Courts of First Instance continued. The establishment of Regional Courts of Appeal is proceeding.

However, a number of issues remain to be addressed. Certain provisions of the Penal Code, in particular Article 301, have been used to restrict the expression of non-violent opinions ( see section on freedom of expression ).

A number of cases have shown inconsistency in the judiciary approach to the interpretation of legislation.

As regards the implementation of the new Code of Criminal Procedure, the establishment of the judicial police has led to some tensions between the law enforcement bodies and prosecutors. Despite the Ministries of Interior and Justice issuing two circulars, prosecutors report difficulties in effective supervision of the judicial police.

With regard to the independence of the judiciary, various provisions of the Turkish Constitution and of domestic law guarantee this principle. However, a number of factors are perceived as undermining it. Judges and public prosecutors are attached to the Ministry of Justice as far as their administrative functions are concerned. The High Council of Judges and Prosecutors, the supreme governing body of the judiciary, does not have its own secretariat, separate premises and budget. The judicial inspectors, who are responsible for evaluating the performance of judges and prosecutors, are attached to the Ministry rather than to the High Council. The Minister and the Undersecretary of the Ministry of Justice are two of the seven members of the Council with voting rights. The remaining five are appointed among judges of the Court of Cassation and the Council of State. This composition does not seem to be representative of the judiciary as a whole and, together with the other issues listed above, may create the potential for the executive to influence decisions relating to the careers of judges in Turkey, provided that the executive is present[4].

Questions were raised on the independence of the High Council of Judges and Prosecutors in the aftermath of the publication in March 2006 of the indictment on the Şemdlinli bombing ( see Southeast section ), which included accusations against the Land Forces Commander and other high-ranking military commanders. The General Staff criticised the indictment in a press statement and urged those bearing constitutional responsibility to take action. In April the High Council of Judges and Prosecutors reviewed charges against the prosecutor and applied the highest disciplinary sanction, i.e. dismissal from office. The final review by the High Council on this matter is scheduled for November.

Overall, there was continued progress in the area of judicial reform. However, implementation of the new legislation by the judiciary presents a mixed picture so far and the independence of the judiciary still needs to be further established.

More details on the judicial system can be found under Chapter 23 – Judiciary and fundamental rights .

Anti-corruption measures

Concerning transparency in the public administration, the Law on Access to Information was amended in 2006 to enable citizens to dispute all decisions of state agencies regarding denials of requests for information.

The Parliamentary investigation commissions on the gasoline smuggling and on the illegal public offering completed their reports. Both reports show a wide range of corruption activities. The first case involved a former Minister of Finance and Minister of State, and has serious economic and financial implications. The reports include recommendations for measures to be taken by the public institutions.

However, a number of issues remain to be addressed. Corruption remains widespread in the Turkish public sector and judiciary, despite the efforts of recent years. Turkey needs to improve its legislation on financing and auditing of political parties.

The wide scope of parliamentary immunity remains a significant problem in the context of corruption in Turkey.

With regard to corruption investigations carried out by the Inspection Boards, the need for a prior authorisation from the hierarchy when investigating some categories of public officials hampers the investigation.

There is a need for better co-ordination of the system currently in place for combating corruption. The designation of a body with sufficient independence responsible for the conception and monitoring the implementation of anti-corruption measures could be helpful in this respect.

Overall, there has been some limited progress in the fight against corruption, notably on increasing transparency in the public administration. However, corruption remains widespread and anti-corruption authorities and policies are still weak.

Human rights and the protection of minorities

Observance of international human rights law

Concerning the ratification of human rights instruments , the Second Optional Protocol to the International Covenant on Civil and Political Rights (ICCPR) on the abolishment of the death penalty was ratified in March 2006. Protocol No 13 of the ECHR, on the abolishment of the death penalty at all times was ratified in February 2006. Protocol No 14 of the ECHR, amending the control system of the Convention entered into force in May 2006. The UN Convention against corruption entered into force in June 2006.

Turkey ratified the revised European Social Charter on 27 September 2006. The European Social Charter was accepted with reservations on Article 5 (right to organise) and Article 6 (right to bargain collectively) as well as on paragraph 3 of Article 2 (minimum annual holidays) and paragraph 1 of Article 4 (remuneration and decent standard of living). Turkey has lifted previous reservations on the European Social Charter's provisions, namely the right of children and young persons to protection and the right of disabled persons.

Four Additional Protocols to the ECHR remain to be ratified, including Protocol No 12 on the general prohibition of discrimination by public authorities, signed in 2001. The First Optional Protocol to the ICCPR, signed in 2004, and the Optional Protocol to the UN Convention against Torture (OPCAT), signed in September 2005, also awaits ratification. Ratification of these protocols is a priority in the Accession Partnership.

During the first 8 months of the year 2006, the European Court of Human Rights (ECtHR) delivered 196 final judgements finding that Turkey had violated at least one article of the ECHR. In 5 cases the ECtHR ruled that there was no violation of the ECHR. Most of these judgements refer to cases lodged prior to 1999.

From 1st September 2005 until 31 August 2006 2 100 new applications regarding Turkey were made to the ECtHR. More than 2/3 of the applications introduced to the ECtHR refer to the right to a fair trial (Article 6) and protection of property rights (Article 1 of Protocol No 1). The right to life (Article 2) and the prohibition of torture (Article 3) are referred to in 78 and 142 cases respectively.

In relation to the situation in the Southeast, the ECtHR found in the İçyer v. Turkey[5] case that the Law on Compensation and Losses Resulting from Terrorist Acts provides adequate redress to the extent that it is undisputed that the applicant could today return freely to his village ( see section on Southeast). Approximately 1 500 cases relating to the possibility to return to villages have been declared inadmissible by the Court following this decision.

The reforms undertaken by Turkey in 2004 and 2005 have had positive consequences on the execution of judgments of the ECtHR. However, Turkish cases still represent 14.4% of the cases pending before the Committee of Ministers for execution control.

Restrictions in Turkish legislation prevent the re-opening of domestic proceedings following a violation found by the ECtHR under certain circumstances[6]. This prevents the execution of the ECtHR judgement in the Hulki Güneş case[7], as well as in 113 cases related to fairness of proceedings before the former state security courts.

As regards the Öcalan case, the Court left the question of the reopening largely to the evaluation of domestic authorities under the Committee of Ministers' supervision. In July an Istanbul Court rejected the request for a retrial of Abdullah Öcalan. The Committee of Ministers will evaluate the reasons given by the Istanbul Court for rejecting the appeal at one of its upcoming meetings.

Other pending cases before the Committee of Ministers awaiting the adoption of necessary execution measures relate to the control of actions of security forces and effective remedies against abuses (93 pending cases). These cases refer mainly to violations that took place against the background of the fight against terrorism in the first half of the 1990s, but some concern events in the course of normal police activity. A number of positive legal reforms have been adopted since the judgements were issued. The Committee is now closely monitoring their implementation.

Furthermore, 115 cases related to freedom of expression are pending before the Committee of Ministers for execution control. These cases mainly relate to articles of the old Turkish Penal Code which were amended in 2004. Some relate to the provisions of the Anti-terror law. Execution of these judgments will however be assessed by the Committee of Ministers in the light of case law of Turkish courts, as well as the practice of prosecutions ( see section on freedom of expression ).

Concerning the case of Cyprus, the Committee of Ministers has decided to examine measures taken with regard to education and freedom of religion with a view to closing these questions at its meeting of December 2006. The Committee on Missing Persons was reactivated in 2004. However, the Committee of Ministers considers that additional measures should be taken for the fate of missing persons to be determined[8].

Finally, with regards to property rights[9], the ECtHR ruled in the case of Xenides-Arestis v. Turkey that a remedy which secures effective redress for violations must be introduced, in relation to the applicant, as well as in respect of all similar applications pending before the Court. The ECtHR has not yet ruled on the question whether adequate redress was introduced in the meantime.

With regard to the promotion and enforcement of human rights , the Human Rights Presidency and the 931 District Human Right Boards continued to provide training on human rights and process applications on alleged human right violations. Between January and June 2006, 778 applications were received. The vast majority of applications related to health and patients' rights, non-discrimination, right to property, and social security rights.

However, the Human Rights Presidency lacks independence from the government, is understaffed and has a limited budget. Furthermore, a new president has not been appointed since the resignation of the previous one in September 2005. The Human Rights Advisory Board under the Office of the Prime Minister has not been operating since the publication of a report on minority rights in Turkey in October 2004. This is a body composed of NGOs, experts and representatives from ministries.

The Parliamentary Human Rights Committee continued to play an active role in collecting complaints on human rights violations and conducting fact-finding visits to the regions. The Committee received 864 applications between October 2005 and June 2006. It has conducted several investigations and finalised three reports since January 2006. The Committee has no legislative role, and is thus not consulted on legislation affecting human rights.

Overall, Turkey has made progress on the ratification of international human rights instruments and in the execution of ECtHR judgements. However, there is a need to further upgrade the human rights institutional framework.

Civil and Political Rights

With regard to torture and ill-treatment , a comprehensive legislative framework is in place. The downward trend has continued in the number of cases of torture and ill-treatment.

The reforms in detention procedures and detention periods have shown positive results on the ground. The regulation concerning the system for the medical examination of persons in police or gendarmerie custody complies with previous recommendations from the Committee on the Prevention of Torture.

However, implementing the legislative reforms undertaken in previous years remains a challenge. Cases of torture and ill-treatment are still being reported, in particular outside detention centres.

With respect to some provisions of the Code of Criminal Procedures and of the Law on execution of sentences, the notification of a relative of the detained person and the right to access a lawyer are not uniformly applied. Furthermore, while the Code introduced provisions against the use of statements obtained under torture, concerns remain on statements obtained prior to the enactment of the Code ( see also access to justice ).

Concerns remain with regard to the confidentiality and quality of medical examinations. There is a need to further strengthen the independence of the Institute of Forensic Medicine Institute and to make further efforts to implement the Istanbul Protocol[10] throughout the country. The Human Rights Boards have yet to assume a more prominent role in the on-site monitoring of law enforcement establishments. Since October 2005, the Boards carried out 992 visits to police stations and detention centres.

The human rights situation in the Southeast raises particular concerns following the violent disturbances that took place in several cities in March and April ( see section on the Southeast ). Over 550 people were detained as a result of these events, including over 200 children. The Diyarbakir Bar Association submitted more than 70 complaints of ill-treatment to the authorities. Subsequently, investigations were launched into 39 of these claims.

During the events in Diyarbakir, forensic examinations of detainees were carried out in places of detention. This contravenes the rules and the circulars issued by the Ministries of Justice and Health as well as the independence of the medical profession.

The new provisions introduced in June 2006 to amend the anti-terror law could undermine the fight against torture and ill-treatment ( see section on parliament ).

Despite an increase in the number of convictions since 2003, the fight against impunity remains an area of concern.

Overall, the Turkish legal framework includes a comprehensive set of safeguards against torture and ill-treatment. Cases of torture and ill-treatment declined over the reporting period. However, concerns remain regarding cases outside detention centres, human rights violations in the Southeast and the problem of impunity.

With regard to access to justice and right of defence, detainees enjoy the right to legal counsel, and statements made in the absence of lawyers are not admissible as evidence in court under the new Code of Criminal Procedure. However, concerns remain with regard to the lack of review of past statements ( see section on torture and ill-treatment ).

A considerable increase in the appointment of legal aid lawyers has been registered since the new Code of Criminal Procedure entered into force. With regard to the prison system , Turkey has adopted regulations to implement the 2004 legislative reforms in this area. Physical infrastructure has also continued to be improved and training is being strengthened.

Outstanding problems in prison facilities include a lack of communal activities, limited interaction between custodial staff and prisoners, inadequate health-care and psychiatric resources as well as cases of overcrowded prison cells.

Cases of ill-treatment by prison staff have been reported. Civil and military prisons are not open to independent monitoring, pending the ratification of the Optional Protocol to the UN Convention against Torture (OPCAT).

The application of a solitary confinement regime to prisoners sentenced to aggravated life imprisonment is too extensive. Such a regime needs to be applied for as short a time as possible and be based on an individual risk assessment of the prisoner concerned.

With regard to freedom of expression (including the media) , the Ministry of Justice issued a circular in January 2006, regarding cases of freedom of expression in written and visual media. It instructed prosecutors to take into consideration both Turkish legislation and the ECHR. The circular also established a monthly monitoring mechanism of criminal investigations and court cases against the press and media.

Some progress can be reported in the area of broadcasts in languages other than Turkish at local and regional level ( see section on cultural rights and Chapter 10 ).

However, the prosecutions and convictions for the expression of non-violent opinion under certain provisions of the new Penal Code are a cause for serious concern and may contribute to create a climate of self-censorship in the country. This is particularly the case for Article 301 which penalises insulting Turkishness, the Republic as well as the organs and institutions of the state. Although this article includes a provision that expression of thought intended to criticise should not constitute a crime, it has repeatedly been used to prosecute non violent opinions expressed by journalists, writers, publishers, academics and human rights activists.

In July, the General Assemblies of the Civil and Penal Chambers of the Court of Cassation established restrictive jurisprudence on Article 301. The Court confirmed a six-month suspended prison sentence for journalist Hrant Dink. This was on the basis of Article 301 of the new Penal Code for insulting "Turkishness" in a series of articles he wrote on Armenian identity.

Against this background, Article 301 needs to be brought into line with the relevant European standards. The same applies to other provisions of the Penal code which have been used to prosecute the non-violent expression of opinions and may limit freedom of expression. The potential impact of the anti-terror law on freedom of expression raises concerns ( see section on parliament ).

Recent decisions taken by the government in relation to the appointment procedure of the members of the High Audiovisual Board (RTÜK) are a cause for concern to the extent that they weaken the independence of the media regulatory body.

Overall, open debate has increased in recent years in Turkish society on a wide range of issues. Notwithstanding this trend, freedom of expression in line with European standards is not yet guaranteed by the present legal framework.

As regards freedom of assembly , public demonstrations are subject to fewer restrictions than in the past. However, in some cases security forces used excessive force, especially when the demonstrations were carried out without permission.

The administrative investigations have been finalised into the incidents during a demonstration promoting women's rights in March 2005. Three members of the Istanbul Directorate of Security have been punished with a reprimand due to “Failure in undertaking the duty of training and supervising members under their command.” A further six staff members have been punished with a salary deduction due to “disproportionate use of force when dispersing the demonstrators and speaking to or treating the public in a degrading manner”. The investigation launched by the Chief Public Prosecutor’s Office of Istanbul against seven police officers is currently ongoing.

Concerning freedom of association , the legal framework is generally in line with international standards. The impact on the ground of the legislative reforms concerning associations has been positive, in particular the adoption of a Law on Associations in November 2004.

However, the requirement to notify the authorities in case of receipt of finances from abroad results in difficulties and cumbersome procedures for NGOs. Furthermore, unlike associations, foundations still need permission before applying for projects outside Turkey and funded by international organisations.

Some difficulties related to the registration of associations remain. The requests of the Diyarbakir Protestant church and of the Jehovah's Witnesses to establish associations were challenged in court. In both cases the court ruled in favour of the associations. In April 2006, a Kurdish association was ordered to close by a Court in Diyarbakır on the grounds that its statute included the objectives of setting up a Kurdish archive, museum and library and that its activities would be carried out also in the Kurdish language. Gay and lesbian associations have encountered fewer difficulties than in the past. However, they are also occasionally subject to court proceedings.

As regards political parties, court cases against several parties, including DEHAP and HAKPAR, are still ongoing. There has been no progress regarding aligning the Turkish Law on Political Parties with EU practice. Parties are not allowed to use languages other than Turkish. The Law on Political Parties needs to be amended to ensure that political parties are permitted to operate in line with the standards established by the ECHR and the case law of the ECtHR.

As concerns civil society organisations , the recent reform environment has led to positive developments. Civil society organisations have become relatively more vocal and better organised, especially since the adoption of the new Law on Associations. There is an increasing variety of organisations in Turkey including approximately 80 000 registered associations, and several hundred unions and chambers (including vocational and professional associations).

As concerns freedom of religion , freedom of worship continues to be generally respected.

In April a delegation consisting of the Ministries of Interior, Education, Foreign Affairs, the EUSG and Istanbul governorate visited leaders of non-Muslim communities in Istanbul to discuss their problems and possible solutions.

Although the mandatory indication of religious affiliation in some personal documents, such as ID-cards, was abolished in April 2006, such documents still include information on religion, leaving open the potential for discriminatory practices. This is an area of concern.

Furthermore, a number of other problems remain. Non-Muslim religious communities have no access to legal personality and continued to face restricted property rights. They encountered problems in the management of their foundations and in recovering property by judicial means. The June 2005 ruling by the Council of State narrowing the scope for the Directorate General for Foundations to take over the management of foundations was not applied during the reporting period. In this respect, no progress can be reported on the Büyükada Greek Girls’ and Boys’ Orphanage, whose management remains under the control of the DG foundations.

The impact of the new law on foundations on the issues above will have to be assessed once it has been adopted.

Furthermore, restrictions on the training of clergy and on foreign clergy to work in Turkey remain. Turkish legislation does not provide for private higher religious education for these communities. The Greek Orthodox Halki (Heybeliada) seminary remains closed. The public use of the ecclesiastical title of Ecumenical Patriarch is still banned.

Sermons and publications of the Religious Affairs Directorate (Diyanet) and of local religious authorities occasionally appear hostile towards proselytising activities. Attacks against clergy and places of worship of non-Muslim religious Communities have been reported. The court case concerning the murder of the Catholic Priest Andrea Santoro in a church in the Black Sea region province of Trabzon in February 2006 resulted in a heavy penalty for the perpetrator. Several incidents against Syriacs also occurred.

There have been no developments in relation to the situation of the Alevi community. Alevis face difficulties for opening their places of worship (Cem houses). Cem houses are not recognised as places of worship and receive no funding from the authorities.

Alevi children are subject to compulsory religious instruction in schools, which fails to acknowledge their specificity. A case on compulsory religious education is pending before the ECtHR. References to Alevis are planned to be introduced in the secondary school curricula as from next year.

Overall, freedom of worship continues to be generally respected. However, no progress can be reported with regard to difficulties encountered by non-Muslim religious communities on the ground. Furthermore, the Alevis continue to face discriminatory practices.

Economic and Social Rights

As concerns women's rights , the report of the ad hoc Parliamentary Committee on "crimes in the name of honour, violence against women and children" has been finalised. The report puts forward practical recommendations, which received wide media coverage. A circular by the Prime Minister's Office in July follows up on these, by giving priority to the fight against violence, listing the activities to be undertaken and naming the state bodies responsible. The Directorate General for the Status of Women is given the task of overall co-ordination of activities.

The campaign “Stop domestic violence” entered its second phase, after being launched in October 2004 by the daily Hürriyet, in cooperation with the Foundation of Contemporary Education and the Istanbul Governor’s Office. Most daily newspapers and TV channels extended their support to a campaign targeting the education of girls.

The legal framework is overall satisfactory, but implementation remains a challenge. The Law on the Protection of the Family is only partially applied. Despite the provisions in the new Penal Code that lists moral killings as an aggravated circumstance for murder crimes, the sentences issued by courts reflect a mixed picture. While in some cases courts imposed maximum sentences (life imprisonment), in others they opted for lighter sentences, especially if a minor had committed the murder.

Crimes in the name of honour and suicides committed by women due to the influence of the family continue to occur, especially in the regions of the East and Southeast. Nonetheless, there is still a lack of reliable data on such events as well as on domestic violence more generally. According to the preliminary results of the UN Special Rapporteur on Violence against Women, causes of suicides are early and forced marriages, domestic violence and denial of reproductive rights. Poverty, urbanisation, displacement and internal migration, and thus changing socioeconomic situation of women are the contexts within which suicides occur. Women’s suicides are not always properly investigated, especially in the Southeast,

In parts of the South East it still occurs that girls are not registered at birth. This hampers the fight against forced marriage and crimes in the name of honour since these girls and women cannot be properly traced.

There is still a need to further increase the provision of shelters for women subjected to domestic violence[11]. The provision in the Law on Municipalities, adopted by Parliament in July 2004 is not yet fully implemented. All municipalities with a population greater than 50 000 should provide a shelter.

Women remain vulnerable to discriminatory practices, due largely to a lack of education and a high illiteracy rate. The girls’ education campaign conducted by the Ministry of National Education and UNICEF ensured the enrolment in primary schools of 62 000 girls in 2005, which would otherwise have been out of school. In 2006 the campaign was extended to all 81 provinces. Private sector campaigns to increase school enrolment and to improve the physical condition of schools have continued.

The level of participation of women in the parliament and in local representative bodies remains very low and prevailing discrimination exists in the labour market. Participation by women in the workforce is among the lowest in OECD countries ( see Chapter 19 employment and social policy ).

As regards institutional capacity, the Directorate General for the Status of Women still suffers from a lack of staff. The Advisory Board on the Status of Women has not been convened during the reporting period.

Overall, there has been growing public attention on the issue of women's rights in Turkey. However, full respect of women's rights remains a critical problem, particularly in the poorest areas of the country. While the legal framework is overall satisfactory, its implementation remains inadequate.

With respect to children’s rights , the right to education for children, particularly girls, remains a problem in some areas. The newly initiated 'conditional cash transfer' programme implemented by the Social Support and Solidarity Fund provides incentives and compensation to targeted families by offering cash transfers on the condition that they send their children to school if they are of school age. Enrolment campaigns need to be sustained and consolidated to address the low level of school attendance, in particular in rural areas of the South East.

The incidence of street children, child poverty and child labour remains significant. The Turkish Labour Law prohibits the employment of children under the age of 15. However, there are shortcomings regarding the application of the law.

The Law on the Protection of Children, adopted in July 2005 establishes a legal framework aimed at safeguarding the rights and well-being of both children with particular problems and children under legal investigation or who have been convicted of crimes. Further implementation of the Law is needed, in line with the relevant ILO conventions.

In late 2005, ill-treatment of children in an orphanage of the Social Services and Child Protection Institution (SHÇEK) in Malatya revealed the shortcomings of the child protection system in Turkey.

As regards the rights of disabled people , several implementing legislation were issued following the entry into force of the Law on People with Disabilities in 2005. These cover areas such as workplaces and educational services for disabled people. More needs to be done to establish decentralised structures and services for disabled people and also to facilitate access to education of children with disabilities.

As regards mental health, there are significant discrepancies in the quality of services, which is particularly poor in some rural areas. The largest psychiatric hospital in Turkey abolished the use of unmodified electroconvulsive therapy (ECT). However, Turkey has yet to ban this practice throughout the country and establish written guidelines regarding the administration of modified ECT as part of an individualised treatment plan. Ongoing work, in co-operation with the World Bank, to establish a strategy in this area needs to be intensified, with a view in particular to establish a mental health law. Rehabilitation centres generally lack adequate infrastructure, resources and qualified personnel. Mentally disabled living with family members receive little assistance from the state.

There is no progress to be reported on trade union's rights .

The government submitted to social partners two legislative proposals aimed at amending the two currently applicable laws in this area. However, no further progress was made and no formal legislative initiative has been taken by the government.

As a result, the current significant shortcomings on the right to organise and the right to collective bargaining, including the right to strike remain in place. The thresholds at company and sector levels required for signing a collective agreement, and the cumbersome procedures to enrol in trade unions are still in force. Journalists continue to encounter specific problems in organising and collective bargaining.

Turkey still falls short of ILO standards, particularly in relation to conventions No 87 (freedom of associations and protection of the right to organise) and No 98 (right to organise and collective bargaining). Turkey ratified the revised European Social Charter in September 2006 but maintains reservations on Article 5 (right to organise) and Article 6 (right to bargain collectively) ( see Chapter 19 – Social policy and employment ).

In April 2006, the Ministry of Labour and Social Security sued the Gıda-İş Trade Union on the grounds that some of the elected representatives of the union do not have 10 years seniority, as required by the Law on Trade Unions. The labour court decided to close down the union but the Court of Cassation overturned this ruling on procedural grounds.

Minority Rights, Cultural Rights and Protection of Minorities

Turkey’s approach to minority rights remains unchanged. According to the Turkish authorities, under the 1923 Treaty of Lausanne, minorities in Turkey consist exclusively of non-Muslim religious communities. The minorities associated in practice by the authorities with the Treaty of Lausanne are Jews, Armenians and Greeks. However, there are other communities in Turkey which, in the light of the relevant international and European standards, could qualify as minorities.

The February 2005 visit of the OSCE High Commissioner on National Minorities (HCNM) to Ankara has not been followed up and no progress has been made in starting a dialogue on the situation of national minorities in Turkey. The deepening of such a dialogue between Turkey and the HCNM is necessary. It needs to include relevant areas such as minority education, minority languages, the participation of minorities in public life and broadcasting in minority languages. This would facilitate Turkey's further alignment with international standards and best practice in EU Member States to ensure cultural diversity and to promote respect for and protection of minorities.

Turkey’s reservation towards the UN Covenant on Civil and Political Rights (ICCPR), regarding the rights of minorities – to which a number of EU Member States objected as being incompatible with the object and purpose of this Covenant – and its reservation to the UN Covenant on Economic, Social and Cultural Rights (ICESCR), regarding the right to education[12], are of concern.

Turkey has not signed the Council of Europe Framework Convention for the Protection of National Minorities or the European Charter for Regional or Minority Languages.

There has been limited progress as concerns education. The 2005 recommendations of the European Commission against Racism and Intolerance (ECRI) on school curricula and textbooks as well as on the functioning of minority schools remain valid. Further efforts are needed to remove discriminatory language from textbooks. The management of the minority schools including the dual presidency remains an issue.

There has been no progress in relation to Syriacs who continue to face difficulties in relation to property. Those who have lost their Turkish nationality are not able to register their property in the land registry. In this context, complaints about seizures of property have increased.

The Greek minority continues to encounter problems. These are particularly related to education and property rights. The Greek minority properties on the island of Gökçeada (Imvros) and Bozcaada (Tenedos) are under threat of confiscation and tender by the Turkish authorities.

As regards cultural rights , permission was granted to two local TV channels in Diyarbakır and to one radio in Şanlıurfa to broadcast in Kurdish. However, time restrictions apply, with the exception of films and music programmes. All broadcasts, except songs, must be subtitled or translated in Turkish, which makes live broadcasts technically cumbersome. Educational programmes teaching the Kurdish language are not allowed. ( see Chapter 10 ).

The Turkish Public Television (TRT) has continued broadcasting in five languages including Kurdish. However, the duration and scope of TRT's national broadcasts in five languages is very limited. No private broadcaster at national level has applied for broadcasting in languages other than Turkish since the enactment of the 2004 legislation.

Children whose mother tongue is not Turkish cannot learn their mother tongue in the Turkish public schooling system. Such education can only be made by private education institutions. As concerns Kurdish all such courses were closed down in 2004. Therefore, there are no possibilities to learn Kurdish today in the public or private schooling system. Furthermore, there are no measures taken to facilitate access to public services for those who do not speak Turkish.

As reported above, according to the Law on Political Parties, the use of languages other than Turkish is illegal in political life. The court case against the Rights and Freedoms Party (HAK-PAR) regarding a speech in Kurdish continues.

As regards the situation in the East and Southeast , progress has been made with regard to the compensation of losses resulting from terrorist acts. The ECtHR ruled that the compensation law allowed for the provision of adequate redress for persons who were denied access to their possessions in their place of residence.

The process of compensation is ongoing. The Damage Assessment Commissions established to process the compensation claims have so far received around 215 981 applications. Approximately 33 299 have been processed as of September 2006.

The situation in the South-East has deteriorated since the resumption of violence by the PKK, which is on the EU list of terrorist organisations. During the period between November 2005 and June 2006, there were 774 terrorist attacks reported, which led to 44 military, 5 police and 13 civilian casualties.

In the aftermath of the funerals of some PKK terrorists at the end of March, riots took place in Diyarbakir and spread to other cities in the region. Demonstrators attacked the police, civilian residents and shops. Ten civilians were killed during clashes with the police and security forces, including three children. Many civilians suffered bullet wounds. There are widespread reports of excessive and arbitrary use of force by the security forces, even against ambulances. Investigations are ongoing to determine the causes of these deaths.

The violence triggered by the March riots had a negative impact on the human rights situation. Over 700 people were detained and cases of ill treatment were reported.

A number of security measures have been reinstated as a response to the escalation of terrorism, such as road blocks and checkpoints in some provinces of the Southeast. On the legislative side, amendments to the anti-terror law were adopted in June 2006 ( see section on parliament ).

The November 2005 Şemdinli bombing, which killed one person and injured others, also had a negative impact on the situation in the region. A court in Van imposed heavy prison sanctions on two gendarmerie officers and a former PKK member reported to work as a gendarmerie informer who were found responsible for the bombing. A Parliamentary Committee was established in November 2005 to investigate the Şemdinli events. The Committee has not published its report.

The overall socio-economic situation in the Southeast remains difficult and there is no comprehensive plan to address this issue. The positive statement of Prime Minister Erdogan in 2005 stressing the need to resolve through democratic means what he called "the Kurdish issue" was not followed up. There is almost no dialogue between the authorities and locally elected politicians. Furthermore, many locally elected politicians face court cases. Moreover, the 10% threshold under the electoral law makes it difficult for all but the nationwide largest parties to be represented in Parliament.

In spite of the ECtHR ruling in the Icyer vs.Turkey case of January 2006, the implementation of the Law on Compensation of Losses Resulting from Terrorist Acts raises several concerns. Overall, there seems to be divergences in the methods used by the compensation commissions. They have large discretionary powers and procedures are often cumbersome. As a result, the payment of the amounts due is slow. There are concerns about the level of compensation.

Furthermore, the conditions attached to the eligibility for compensation could leave a large number of potential beneficiaries outside the scope of the Law. There is also a heavy burden of proof on applicants to provide documentation, including property titles, which in many cases have never existed.

The issue of “reconciliation” is not addressed in the compensation approach in relation to past human rights violations committed against internally displaced persons – such as the burning and destruction of property, killings, disappearances and torture.

The situation of internally displaced persons (IDPs) remains an issue of concern. There has been no further progress on the establishment of a new governmental body responsible for implementing the “Return to Village and Rehabilitation Programme and to developing policy on IDP return. A study on IDPs carried out by the Haceteppe University should provide a thorough analysis and policy guidance, however its publication has been delayed.

Several factors affect negatively the return of IDPs: the absence of basic infrastructure, the lack of capital, limited employment opportunities and the security situation. In particular, large numbers of landmines[13] constitute a strong disincentive to return. Moreover, the discretion of the governor plays a crucial role in the implementation of the legal and administrative provisions regulating return.

No progress has been made in addressing the problem of village guards[14]. No action was taken to phase them out.

A return to normality in the Southeast can only be achieved by opening a dialogue with local counterparts. A comprehensive strategy should be pursued, to achieve the socio-economic development of the region and the establishment of conditions for the Kurdish population to enjoy full rights and freedoms. Issues that need to be addressed include the return of internally displaced persons, compensation for losses incurred by victims of terrorism, landmines as well as the issue of village guards.

As concerns the Roma , amendments to the Law on Settlement adopted in September 2006 repealed discriminatory provisions against the Roma.

However, discriminatory provisions remain in the Law on Movements and residence of aliens.

Recent research by the Bilgi University suggests the Roma population in Turkey is around two million. Roma experience discriminatory treatment in access to adequate housing, education, health and employment. There are frequent forced evictions. Urban regeneration projects of historical districts have led to displacing Roma population residing in those districts (i.e. Ankara-Çinçin, Zonguldak-Ere, Istanbul-Sulukule).

During the reporting period more Roma-led advocacy organisations and two Roma Federations were established. Several NGO projects were carried out aimed at capacity building of Roma organisations and establishing a clearer picture of the problems they encounter.

Overall, Turkey made little progress on ensuring cultural diversity and promoting respect for and protection of minorities in accordance with international standards.

Regional issues and international obligations

Cyprus

Under the negotiating framework and the Accession Partnership, Turkey is expected to ensure continued support for efforts to find a comprehensive settlement of the Cyprus problem within the UN framework and in line with the principles on which the Union is founded, whilst contributing to a better climate for a comprehensive settlement; implement fully the Protocol adapting the Ankara Agreement to the accession of the 10 new EU Member States including Cyprus; and take concrete steps for the normalisation of bilateral relations with all Member States, including the Republic of Cyprus, as soon as possible.

Moreover, under its declaration of 21 September 2005, the EU expects full, non-discriminatory implementation of the Additional Protocol, and the removal of all obstacles to the free movement of goods, including restrictions on means of transport. The EU will monitor this closely and evaluate full implementation in 2006. The declaration also stressed that recognition of all Member States is a necessary component of the accession process and underlined the importance it attaches to the normalisation of relations between Turkey and all EU Member States, as soon as possible.

Turkey has stated on several occasions that it remains committed to support UN efforts to find a comprehensive settlement of the Cyprus problem. Turkey expressed support for the setting up of technical committees between the two Cypriot communities, as agreed during talks hosted by the UN in July, initiated after the February meeting in Paris between UN Secretary General Mr Annan and President Papadopoulos.

Turkey has not fully implemented the Additional Protocol extending the EC-Turkey Association Agreement to the ten Member States that acceded on 1 May 2004, which it had signed in July 2005 and which enabled the accession negotiations to start. Turkey has continued to deny access to its ports to vessels flying the Republic of Cyprus flag or where the last port of call is in Cyprus. Such restrictions on shipping often preclude the most economical way of transport and therefore result in a barrier to free movement of goods and to trade. They infringe the Customs Union agreement. Similar restrictions continued to apply in the field of air transport.

Turkey's Prime Minister, as well as the Foreign Minister, stated on several occasions that the Additional Protocol would not be implemented as long as the isolation of the Turkish Cypriot community continued. An "Action Plan on Cyprus" presented in January by Turkey's Foreign Minister followed the same approach. EU representatives have frequently reminded the Turkish government that implementing the Protocol is a legal obligation as such, which must not be linked to the situation of the Turkish Cypriot community.

No progress has been made on any aspects of normalising bilateral relations with the Republic of Cyprus. Turkey has continued to impose a veto on Cyprus’ membership of certain international organizations such as the OECD as well as its participation in the Wassenaar Agreement on the Code of Conduct on Arms Exports and on Dual Use Goods.

In December, the European Court of Human Rights ruled in the case of Myra Xenides-Arestis vs Turkey that Turkey had violated the "protection of property" (Article 8) and the "right to respect for the applicant's home" (Article 1 of Protocol No 1). The Court demanded that Turkey introduces a remedy which secures effective redress for violations, in relation to the application, as well as in respect of all similar applications pending before the Court in accordance with the Convention and within the established deadlines. The ECtHR has not yet ruled on the question whether adequate redress was introduced in the meantime.

Peaceful settlement of border disputes

Turkey and Greece have continued to pursue the positive development of their bilateral relations. High-level contacts have continued, with the respective Prime Ministers meeting informally twice during the last year.

The 34th round of exploratory talks between foreign ministries initiated in 2002 was held in Athens in May. A new package of confidence building measures was agreed during the visit of the Greek Foreign Minister to Istanbul in June. The package includes the building of a new bridge over the border river Evros/Meriç and the establishment of a joint civilian task force on natural disaster prevention. A direct hotline between the Combined Air Operation Centers in the Turkish city of Eskişehir and the corresponding authorities in the Greek city of Larissa will soon become operational. In addition, it was agreed to establish a second hotline between the respective Chiefs of General Staff. The summer moratorium for suspending military exercises in the Aegean was extended for one month. In July, the Greek Chief of Staff visited his counterpart in Turkey.

Following the collision of Turkish and Greek military aircraft over the Aegean in May, which caused the death of a Greek pilot, the two Foreign ministers agreed that the incident would be investigated.

The Negotiating Framework includes the following requirement against which progress will be measured: "Turkey's unequivocal commitment to good neighbourly relations and its undertaking to resolve any outstanding border disputes in conformity with the principle of peaceful settlement of disputes in accordance with the United Nations Charter, including if necessary jurisdiction of the International Court of Justice". Furthermore, the Accession Partnership for Turkey has included as a short term priority to "unequivocally commit to good neighbourly relations; address any sources of friction with its neighbours; and refrain from any action which could negatively affect the process of peaceful settlement of border disputes". It should be noted in this context that the “casus belli” reference in relation to the possible extension of Greek territorial waters in the resolution adopted by the Turkish Grand National Assembly in 1995 remains unchanged.

See Chapter 31 – Foreign, Security and Defence policies for relations with other neighbouring countries.

ECONOMIC CRITERIA

Introduction

In examining the economic developments in Turkey, the Commission's approach was guided by the conclusions of the European Council in Copenhagen in June 1993, which stated that membership of the Union requires the existence of a functioning market economy, and the capacity to cope with competitive pressure and market forces within the Union.

Assessment in terms of the Copenhagen criteria

The existence of a functioning market economy

Economic policy essentials

The authorities managed to bolster economic policy efforts though recent agreements with international financial institutions, in particular by the Stand-By Arrangement with the International Monetary Fund (IMF) and the Programmatic Public Sector Development Policy Loan with the World Bank. The Pre-Accession Economic Programme (PEP) submitted to the Commission in December 2005 reflects good progress in institutional capacity building and important commitments to further reform. The government steered a steady reform course, although political considerations occasionally slowed down this course. The methodology and co-ordination for budgeting and medium-term economic policy making is hampered by the fragmentation of responsibilities between government bodies. Decisions are sometimes taken on an ad hoc basis. Impact assessments are either lacking or based on partial information. In sum, the government largely maintained consensus on macroeconomic stabilisation and structural reforms.

Macroeconomic stability

Real annual GDP growth slowed down slightly from a high 7.4% in 2005 to 7.0% in the first half year of 2006. Private consumption and investment bolstered GDP from the expenditure side. In the first half of 2006, gross fixed capital formation growth slowed down to 19% from 24% in 2005. The external sector contributed negatively to GDP, as export growth slowed to 3.9% from 7.4% in the previous year. The rapidly growing Turkish economy ran into fast growing external imbalances. This was predominantly caused by too slow structural reforms and a sizeable increase in investment spending. The authorities reacted promptly by fiscal and monetary tightening. Recent high-frequency indicators suggest that the change in fiscal and monetary policy proved out effective. Besides, the restrictive effect on growth may be alleviated by strengthening external demand. Average per capita income amounted to just over 25% of the EU-25 average in 2005. In conclusion, economic growth has remained quite strong and has become more balanced.

The current account deficit increased sharply to 6.3% of GDP in 2005. The deficit has risen further in the first half of 2006 to 7% of GDP, driven by strong domestic demand growth, higher oil prices and lower tourism earnings. Turkey can still easily finance its current account deficit. It has recently considerably increased its foreign currency reserves as a result of very high privatisation revenues, including from foreign investors. The current account deficit was also driven by higher investment, which should enhance the export capacity of the economy over the medium term, and help reducing the external vulnerability.

In spite of the high growth , few new jobs have been created. The unemployment rate ranges between 8% and 10% . The skill mismatch between labour demand and supply and some labour market rigidities continue to hamper job creation. Unemployment was much higher among the young (around 18%) and was of a long-term nature for more than half of job-seekers. The lower unemployment rate in the agricultural sector, which include unpaid family workers, suggests large pockets of underemployment in the economy. In addition, the employment rate fell slightly to 43% by mid-2006. In particular, female employment remains low at 23%. Overall, unemployment remains fairly high and constant, while participation in the labour market is low and falling.

Disinflationary policies succeeded in decreasing the inflation rate in December 2005 to 7.7%, even though tax on alcohol and tobacco increased and oil prices soared. This process was driven by a tight fiscal policy, major improvements in productivity, and the strength of the lira. However, a weaker lira and higher energy prices have recently reversed this process. Consumer price inflation rose to around 10% by August 2006. Additional pressures, particularly from the exchange rate make it very difficult to reach the official end-of-year target for consumer price inflation of 5%. After strong disinflation, inflation has recently increased.

In previous years, the Central Bank of Turkey (CBT) had been very successful in reducing inflationary pressures. The CBT implemented a new policy framework of inflation targeting as from 1 January 2006. This was to make its policy more transparent. It uses short-term interest rates as a main instrument. Most members of the monetary committee and the CBT board, including the governor, have been recently appointed. The new policy framework, together with the new board, shifted market perception of monetary risk. This change, in combination with the globally worsening perception of emerging markets, led to a sharp depreciation of the lira. The exchange rate against the euro fell by about 25% in May-June 2006, but significantly recovered in the following months. The CBT has increased overnight borrowing and lending rates by 425 and 625 basis points respectively. Financial markets have recently been very volatile.

Consolidation of public finances has been on track. The 2005 primary surplus target of 6.5% of GNP (IMF methodology) was roughly reached, and the general government budget deficit declined from 5.7% of GDP in 2004 to 1.2% of GDP in 2005 (according to EU standards). The increase in the fiscal consolidation in 2005 stems mainly from a faster decrease in real domestic interest rates. The budget for 2006 is designed to achieve a similar public sector primary surplus. Targets for the first half of 2006 have almost been reached, in spite of the significant rise in interest rates. The laws on the social security framework were approved in spring 2006. These are an important step forward in the consolidation process, provided they are implemented in full. Overall, fiscal consolidation has been strong.

General government gross debt fell markedly from 76.9% of GDP at the end of 2004 to 69.6% at the end of 2005 (ESA 95 methodology). The main factors have been a significant primary surplus, strong GDP growth and falling interest rates. Various rating agencies have upgraded the rating for Turkey. Turkey has subsequently launched various sovereign bonds on the international market. The average maturity of debt is therefore lengthening rapidly, including on domestic borrowing, to over 30 months by mid-2006. Almost 40% of public debt is denominated in foreign currency in mid-2006, compared to over 45% in 2003. This illustrates a further shift to domestic currency and decreasing vulnerabilities. The risk to macroeconomic and financial stability has been further reduced due to improvements in the public debt structure and maturities.

Measures to increase fiscal transparency have continued. Emphasis has been put on the implementation of legislation adopted, in particular the Public Financial Management and Financial Control Law. Several coordinating and controlling bodies have been created within the Ministry of Finance to enhance efficiencies and transparency. This has resulted in an improvement in budget preparation. Overall, fiscal transparency has improved.

Free interplay of market forces

The government has confirmed the independence of regulatory and surveillance agencies. Special privileges of state-owned banks are being phased out. State-owned enterprises account now for about 5% of GDP and about 15% of the value added in the manufacturing sector. State banks make up nearly one third of the value added in the banking sector. Staff in state enterprises and banks comprises only 2.5% of total employment. In sum, progress has been made with the free interplay of market forces.

The share of administrated prices in the Consumer Price Index (CPI) basket amounts presently to 10.2% of the total weight of the CPI basket. Price reform is not complete. For example, electricity prices are far f below production costs and include cross-sector subsidies Price liberalisation is fairly advanced, but has not made much further progress.

Free market entry and exit

Privatisation receipts amounted to about 2.8% of GDP in 2005. Largest privatisations included the Tüpraş oil refinery and the steel and iron producer Erdemir. The privatisation of Turk Telekom has been finalised. Delays in the privatisation of electricity distribution were incurred. Public ownership in the business sector downscaled to 5%, excluding agriculture. Overall, significant privatisation continued. In 2005, almost 100 000 enterprises were established. More than 26 000 firms went bankrupt. These numbers were about 5% higher than in 2004. Restrictions on foreign ownership still exist in the areas of civil aviation, maritime transport, road transport, ground-handling services, yachting, broadcasting, electricity, financial corporations, private employment offices, tourism, education and defence sectors. Barriers to market exit have not been significantly reduced.

Adequate legal system

The legal system, including the regulation of property rights, is in place . However , the time lag is sometimes long between the adoption of framework legislation and its implementation. Courts, in particular the commercial courts, work relatively slowly. The enforceability of the decisions of the authorities and of courts continues to prove difficult. This is the same for foreign investors. The expert witness system has evolved into a parallel semi-judicial structure. Training of judicial personnel is not always adequate. This hampers a swift settlement of commercial cases. The implementation of the legislation on property rights, including intellectual property rights, is not appropriate. Overall, the implementation of laws and contracts should be further improved.

Sufficiently developed financial sector

Banking credits rose to 110% of GDP in the first quarter of 2006 compared with 82% in the same period of last year. Efficiency of the financial intermediation has been increasing, as shown by the gradual decline in spreads between average lending and deposit rates from 6% in 2004 to 4.6% by end 2005. Increased foreign participation in the banking sector has enhanced competition. Majority-owned foreign banks accounted for about 15% of Turkish banking assets in mid-2006, compared with 5% in 2004. However, the return on assets and on equity declined. This indicates declining profit margins for the banks. The banking sector has strengthened considerably and financial intermediation substantially improved.

The stock market has grown in recent years, but it remains small with just 289 companies listed on the main board at the end of September 2006. The companies listed include leading conglomerates and banks and a few large state-controlled companies. Market capitalisation is relatively low with about 50% of GDP in 2006. This is in spite of the massive increases in the main share price index in 2003-05. Banks and multinationals lead the small insurance sector. The insurance sector is currently regulated by the Treasury. The non-banking financial sector has further grown.

Supervision of the financial sector has benefited from a new Banking Law. This law was adopted by the Parliament in October 2005. Consequently, the requirements and supervision will be significantly enhanced as soon as the law is fully implemented. Most of the secondary regulations have been put in place in 2006.The regulations which establish that the regulatory and supervisory power on financial holding, leasing, factoring and consumer finance companies are to be transferred to the Banking Regulation and Supervisory Agency (BRSA) are in place. Overall, supervision of the financial sector has been further strengthened.

The capacity to cope with competitive pressure and market forces within the Union

Existence of a functioning market economy

As a result of structural reforms and the process of macroeconomic stabilisation, the corporate and investment climate has been gradually improving. However, certain features which distort the functioning of markets, remained, such as low transparency regarding state aids. They constrain the competitiveness of the economy. Recent financial market fluctuations also added some uncertainty to the environment in which the private and public sector operates, but also in fact underlined the improved shock resilience of the economy. Overall, the functioning of market forces continued to improve.

Sufficient human and physical capital

Spending on education increased and some reforms were made . The government plans increased expenditure on education from 8.8% of total expenditure in 2004 to 12.4% in 2006. This increase not only reflects rising costs of a growing young population, but also started to enhance coverage and quality of education. Reforms include an increase of secondary education from three to four years. However, considerable income- gender- and regional differences in educational attainment and in the quality of education persist. The average knowledge level for pupils in secondary education is still low. Weaknesses in quality, transparency and accessibility of higher education remain significant. To summarize, reforms and increased spending on education are generating some positive impact on educational attainment, but significant problems remained.

Labour force participation rates are low, particularly for women and older people, and declined further in 2005 and 2006. In addition, the fast-growing working-age population and the move out of agriculture sector create a strong need for job creation. There has been little systematic effort to reduce the substantial employment in the informal economy. No significant changes has been made to the labour framework. The legal focus remains on protecting jobs and less than 4% of unemployed workers get unemployment benefits. The non-wage costs of hiring labour remain large. Active labour market policies are small in scope and have had limited success in reducing unemployment. To conclude, the situation in the labour market remains challenging and policy responses have been limited.

Investment continued to be strong in 2005. Gross fixed capital formation amounted to around 20% of nominal GDP. This reflected strong private capital formation which equalled 15.3% of nominal GDP. FDI inflows increased significantly in 2005, to 2.8% of GDP from a low 0.8% in 2004. The privatisation process proceeded in the first half of 2006 and supported continued strong inflows. The cumulative stock of FDI was around € 1 300 per capita in 2005. Foreign ownership was most prominent in the wholesale and retail sectors where 36% of the companies with foreign ownership operated. Overall, investment - both domestic and foreign financed - grew strongly.

Infrastructure investments have been suppressed to support the primary surplus target. No significant changes occurred concerning road and rail network. The Baku-Tbilisi-Ceyhan pipeline was finalised which was an important addition to the energy infrastructure. Mobile phone penetration continued to grow to 64% in March 2006. Internet subscribers increased from 1% to 2% of the population. Spending on R&D remained low. A strategy has been defined on how to strengthen efforts and outcomes in this area. Public spending on R&D is budgeted to increase by 20% in 2006. So far, improvements in infrastructure have been modest.

Adequate sectoral and enterprise structure

Progress was made with the structural transformation of the economy. The share of agriculture in employment decreased markedly during 2005, from 33% to 26% of total employment. This trend continued in 2006. Jobs were created in the industrial sector (including construction) and its share in the total labour force rose from 18% to 26% in 2005. However, job creation in industry and services was not strong enough to fully compensate for the reduction in agricultural employment. The share of agriculture in GDP decreased from 11.7% to 10.7%. Industry gained in importance, increasing from 29.7% of GDP to 31.2%. Services remained stable at around 58% of GDP. In summary, the process of structural transformation of the economy accelerated.

Small and medium-size enterprises (SMEs) accounted for over 75% of employment but only 27% of value added[15] Many SMEs operate in the informal economy, which restrains their ability to improve productivity. Access to finance for SMEs improved as the banking sector expanded its lending activities. However, bank loans still only cover about 10% of SME's financing needs. Owner's capital remains the major source of financing. Collateral requirements and high interest rates are the most important factors which hamper borrowing. Overall, small and medium-size enterprises (SME) remained an important cornerstone of the economy, but their efficiency was often low and informality widespread.

Enterprise restructuring advanced and was supported by privatisation in some areas, such as the telecom sector. Some progress was achieved in restructuring and preparing privatisation of the state owned banks, but the process was delayed compared to the planned schedule. Efforts to restructure and liberalise the energy sector also fell behind schedule. Some of the main outstanding problems in the sector concerns cross-subsidies and large distribution losses. In the private sector, strong productivity gains indicated that restructuring of companies made progress. Overall, the restructuring process continued.

State influence on competitiveness

The work of the Competition Authority continued to be satisfactory and its role in the market was further supported by the privatisation process. Transparency in the corporate sector improved and accounting standards were upgraded although not yet fully implemented. No improvements were made concerning monitoring of state aids. The absence of transparent monitoring and policies to decrease distortions negatively affects the competitive climate. Public procurement policies continued to be undermined by further exceptions made to the regulatory framework. To conclude, some improvements in competition policy took place, but in certain areas deficiencies remained or worsened.

Trade integration with the EU

Exports and imports of goods equalled around 54% of GDP in 2005, up by about 3%. The share of exports destined for the EU declined from 54.5% in 2004 to 52.4% in 2005 as exports to some other markets rose more rapidly. Imports from the EU as a share of total imports also declined, from 46.6% to 42.2%. The EU remained Turkey's largest trading partner, but other markets are gaining in importance. Overall, trade openness continued to increase and the trade partners were diversified.

Labour productivity improved and rose by 8% in the manufacturing sector during the year. Productivity in the public sector also continued to improve, where the number of employees decreased by 7% while productivity increased by 10%. The real effective exchange rate (REER) based on Unit Labour Cost rose considerably until February 2006. Due to sharp exchange rate depreciation, which started in May, this trend was then strongly reversed. Some strength was regained in July and August, but the REER was still at levels similar to end 2004. In summary, labour productivity continued to rise and the trend of increasing real effective exchange rate was strongly reversed.

ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP

This section examines Turkey's ability to assume the obligations of membership – that is, the acquis as expressed in the Treaties, the secondary legislation, and the policies of the Union. It also analyses Turkey's administrative capacity to implement the acquis . The analysis is structured in accordance with the list of the 33 acquis chapters.

Chapter 1: Free movement of goods

Limited progress can be reported in area of general principles applying to free movement of goods.

The new regime of technical regulations and standardisation aims at alignment with EU safety rules for products imported from third countries (Regulation (EEC) No 339/93), as well as with general principles. As a consequence, the number of products subject to mandatory standards or technical specifications upon import, and all sectors included, has been reduced by more than a half.

In principle, products which are in free circulation in the EU, bearing “e”, “E” or “CE” marking are exempted from conformity assessment procedures. However, implementing provisions and administrative requirements introduce limitations to the free circulation of these products.

Good progress was made on horizontal measures. In the area of standardisation, the number of mandatory standards declined significantly, in particular in the area of New Approach, where they decreased from 300 in 2005 to 29 in 2006. The remaining mandatory standards are mainly in the area of construction products. Turkish Standards Institute (TSE) further adopted EN standards of the European Committee for Standardisation (CEN), the European Committee for Electro technical Standardisation (CENELEC) and the European Telecommunications Standards Institute (ETSI). About 90 % of CEN and 88% of CENELEC standards are now adopted.

In terms of conformity assessment, substantial progress was achieved, albeit for a limited number of activities and sectors. Turkey can now notify conformity assessment bodies to the European Commission.

Regarding accreditation , some progress can be noted. TURKAK, the national accreditation agency, signed the multilateral agreements (MLA) of the European Accreditation Cooperation (EA) on calibration laboratories, testing laboratories, quality systems certification bodies and inspection bodies.

Limited progress took place in the area of metrology, and related administrative capacity. Some progress can be reported regarding market surveillance . The Ministry of Industry and Trade, through its network of provincial offices, carried out market surveillance activities. The Ministry of Health started implementing its market surveillance strategy in the area of toys and medical devices, and the Telecommunication Authority continued its comprehensive market surveillance activities. Very limited progress took place concerning market surveillance for construction and for personal protective equipment. Numerous organisations are involved in market surveillance. Administrative capacity of the Ministries concerned is sufficient. However, their organisation and coordination is lagging behind to perform effective market surveillance duties.

Some progress took place in the area of new approach product legislation . Provisions entered into force for marine equipment, toys and childcare articles made of soft PVC. Harmonised standards on toys, pressure vessels, pressure equipment and gas appliances gas meters, as well as weights further clarifying the legislation, were published in the Official Gazette for information to the industry. However, practices constituting technical barriers to trade continued. These include verification fees on measuring instruments. The regulations on pre-packaged products are implemented.

Limited progress can be reported in the area of pharmaceuticals. The legislation for medicinal products for human use is well advanced. However, the uncertainty linked to the authorisation regime applied to a number of generics, for which a market authorisation was requested before 1 January 2005, continues to constitute a source of concern and disagreement. No development can be reported in other areas, especially on medicinal products for veterinary use, chemicals, cosmetics and veterinary pharmaceuticals.

There was additional progress concerning sectoral regulations in new approach area. Alignment is generally advanced, and completed in some sectors.

The alignment of old approach product legislation is advanced. Limited further progress took place. Some progress was achieved regarding motor vehicles. However, the requirements of control certificates in various sectors are partially not in line with the acquis and constitutes a technical barrier to trade which is not in line with Turkey's Customs Union obligations.

As regards procedural measures , and in particular the notification procedure , the alignment with provisions on information in the field of technical standards and regulations progressed. An increase in notifications was registered.

In the non harmonised area , no progress has taken place and provisions on mutual recognition and notification remain to be adopted.

There was no progress regarding cultural goods and firearms .

Turkey continued to deny vessels and aircraft flying the Cyprus flag, or whose last port of call was in Cyprus, access to its ports. Such restrictions on shipping often preclude the most economical way of transport and therefore result in a barrier to the free movement of goods and to trade. They infringe the Customs Union Decision.

Conclusion

Progress has been uneven. There were improvements in areas such as accreditation, standardisation and conformity assessment, as well as areas under the new approach directives where the number of compulsory standards reduced drastically. However, the identification and the removal of provisions contrary to the general principles of free circulation of products and mutual recognition has not been completed. Remaining import licensing requirements are contrary to Articles 28 to 30 of the EC Treaty. Technical barriers to trade continue.

The conformity assessment structures have been developed, and allow the designation of the Turkish notified bodies in some areas, for a limited number of activities.

The relevant ministries, especially the Ministry of Industry and Trade, intensified their efforts towards the implementation of market surveillance. Nevertheless, an effective market surveillance system in conformity with the new approach principles is not yet in place throughout the country.

Chapter 2: Freedom of movement for workers

There are no developments on access to labour market . Several laws, as well as the role of professional organisations, contain restrictions on the free movement of foreign workers.

Modernisation of the Public Employment Services continued. Staff training for future participation in the EURES (European Employment Services) network requires attention.

As regards co-ordination of social security systems , the new social security reform laws contain elements regulating the conditions of work and social security rights of foreign nationals. Foreign nationals residing in Turkey for more than a year will be covered under the Universal Health Insurance Law.

Conclusion

Limited progress has been achieved on this chapter. Progress was mainly realised in the area of co-ordination of social security systems. Alignment is at an early stage. The administrative capacity needs to be strengthened.

Chapter 3: Right of establishment and freedom to provide services

No new developments can be reported in the area of right of establishment . The Law on Work Permits of Foreigners in principle exempts self-employed EU nationals from the requirement to obtain a work permit. However, such exemptions are, according to the interpretation of the Turkish administration, subject to reciprocity requirements. The Ministry of Labour and Social Security is the responsible body for foreigners’ work permits.

As regards company registration requirements, restrictions continued limiting the right of establishment for foreigners. Sectoral legislation requires economic operators to obtain a licence or an authorisation, including mandatory membership in a chamber of commerce, trade association or in another professional organisation. In some sectors, foreign nationals cannot provide services even if their company is established in Turkey. Certain professions are closed to foreign nationals. In this area, overall alignment with the acquis is limited.

No particular developments took place concerning the freedom to provide cross-border services . Service providers are generally required to obtain a licence or authorisation, also for temporary provision of services. This is mostly linked to mandatory membership in a professional organisation. Foreign companies providing services on a temporary basis are also required to register with the relevant association, i.e. the Union of Chamber and Commodity Exchanges of Turkey (TOBB). The Law on Craftsmen and Artisans was amended. Craftsmen and tradesmen registered with a given Chamber are now free to exercise their activities in the whole country. However, authorisation procedures are cumbersome. Overall, alignment with the acquis is limited in this area.

In the area of postal services , there was no particular development. Turkey has not started aligning its legislation. A legal monopoly (without weight limit) continued in the postal sector. The Directorate General of PTT is the only universal service provider. However, in practice there is de facto private sector activity in express mail and private parcel delivery. Turkey has no independent regulatory authority to ensure compliance with the Postal Directive and guarantee fair competition. A lack of transparency in the accounting system prevents tracing potential distortions resulting from abuses of a dominant market position, or from cross-subsidisation. Overall, the acquis is not aligned in this area.

Turkey has not developed a roadmap for the implementation of the postal services acquis as indicated in the accession partnership.

Limited progress was made in the area of regulated professions . Turkey’s legal framework does not incorporate an overall framework concerning the recognition of foreign professional, as opposed to educational, qualifications. A law, entrusting the administration of occupational standards to a new independent authority, was adopted in September 2006. However, the sectoral directives for regulated professions were not transposed, and the minimal training requirements for health sector professions are not aligned with the acquis . Administrative structures for recognition of foreign qualifications are limited to academic recognition, the structure to certify the professional qualifications and to handle recognition requests submitted by non-nationals are not in place. Nationality requirements for professions such as lawyers, medical doctors, dentists and midwives, as well as for air traffic controllers and private security services are not in line with the acquis . Overall alignment in this area is limited.

Conclusion

Overall alignment with the acquis is limited. Alignment with the EC principles on the right of establishment and the freedom to provide services remains incomplete. There has been no progress in liberalising the postal services and the establishment of an independent regulatory authority. In the area of regulated professions limited progress was made, however, Turkish legislation takes a different approach to the acquis .

Chapter 4: Free movement of capital

In the field of capital movements and payments , no progress can be reported. Turkey has important restrictions in areas such as outward capital movements, credit and cash transactions, foreign direct investment in a number of sectors, special government rights in privatised companies and real estate acquisition by foreigners.

In the area of real estate, recently adopted legislation was a step backwards. The amended Land Registry Law introduces the principle of reciprocity for acquisition of real estate in Turkey by foreigners and it brings stricter limitations to this right, concerning, inter alia, the maximum size of land that can be owned by foreigners, and the location of the property. For foreign commercial companies, in addition to the restrictions stated in the Land Registry Law, acquisition of real estate should also comply with the provisions stated in sectoral legislation. These include the Petroleum Law, the Law for the Support of Tourism, and the Law on Industrial Zones. The Council of Ministers, with an aim to protect public interest and national security, can restrict the sale of a specific piece of land.

Preparations for alignment in the area of capital movements and payments are underway. In the area of payment systems and cross-border transfers, limited progress can be reported. The new Banking Law authorises the Turkish Banking Association to establish an out-of-court dispute settlement body for customer complaints on cross-border credit transfer