already started as we speak. deterioration in risk perceptions has increased the risk premia of developing countries, including turkey. so far, the rise in turkey ’ s risk premium was in line with that of other developing countries, although more recently the current political uncertainty has started to put turkish financial markets under considerable strain. i believe turkey ’ s risk premium would be even higher in the absence of improvements in macroeconomic conditions and institutional reforms implemented in recent years. dear guests, one can label the last two decades as the era of globalization, deregulation, and privatization. it is not a coincidence that this period has overlapped with the rise of attention paid to good governance. one may just look at the number of occurrences of the word “ governance ” in academic search database ( econ - lit ) over time. it occurred just five times from 1970 to 1979, 100 times in the 80s, 4000 times in 1990s, and more than 10000 times since 2000. globalization of economic activity and greater reliance on private sector in economic decisions has created an environment in which the pursuit of efficiency has acquired utmost importance. globalization has increased the likelihood of international financial crisis in countries where the governments do not function properly. economic crisis in south eastern asia in late 1990s showed that even countries with considerable success in economic development may easily collapse into turmoil if they do not follow good governance practices. quite paradoxically, as the control of governments over the economy decreases, the quality of governance becomes more critical and decisive. with greater mobility of capital, countries have become more vulnerable to negative assessment of investors. today, financial markets are facing the most acute crisis they have experienced since the emergence of globalization. it is not surprising that good governance is once again at the center of public debate at this juncture. the seeds of current problems may be traced to past governance practices of governments, monetary authorities, financial institutions, and corporate sector. but before that, let me first introduce some conceptual issues. this may help us understand how we ended up here. it is not easy to give a short and comprehensive definition for economic governance. for the sake of our discussions, let me define it simply as the nature and practice of economic management, regulation and development. economic governance is in fact part of a larger picture that combines political governance, corporate governance and legal governance, which continuously interact with each other. the term “ economic governance ” is explained as “ the study of arrangements, and organizations that arise and evolve to govern economic activity. ” these institutions underpin

fiscal side. the prudent fiscal policy that has been implemented since 2002 has made significant contributions to the disinflation process and the economic growth. the ambitious primary surplus targets are at the center of the improvement in fiscal policy. however, i should also underline the progress in institutional and legal framework, such as the introduction of the public fiscal management and control law, the public procurement law and the multi - year budgeting framework. three year inflation targets that are compatible with the three - year budgeting practice are also one of the good examples of coordination between fiscal and monetary policies. another pillar of better economic governance is financial stability. a stable and healthy financial system is the key to sustainable growth through allocating savings to the real sector in a country. law defines financial stability as the auxiliary objective of the central bank of turkey. establishment of the banking regulation and supervision agency, successful implementation of the banking sector restructuring program and the new banking law that brought the legal framework with best international practices were the milestones of legal and institutional reform in the financial sector. no need to say that the improved macroeconomic framework through successful monetary and fiscal policy implementations also contributed much to financial stability. last but not least, i should say that there is also an effective cooperation among the central bank of turkey, the banking regulation and supervision agency, the undersecretariat of treasury, the capital markets board and other public authorities and also with private sector representatives. the fourth and the final set of actions that has been undertaken towards better economic governance is structural reforms. turkey has achieved significant progress in this front, but today, i would like to put a special emphasis on the role of regulatory and supervisory institutions without getting into details. establishment and effective implementations of institutions such as the banking regulation and supervision agency, the turkish competition authority, the energy market regulatory authority, the telecommunications authority and many others have contributed to the development of a competitive, resilient and efficient economy in turkey. it is not surprising that manufacturing, retail, energy and financial sectors have attracted the interest from foreign investors in recent years, as witnessed by over 40 billion usd foreign direct investment in the last two years. the good corporate governance practices have also contributed to the overall economic governance in the country. as a result of the steps taken in the four categories that i have just mentioned, turkey has shown an impressive economic performance after 2001. the consumer price inflation declined to the single - digit territory. the gdp has continuously grown in the last 24 quarters.