Turkey's Industrial Policy: The Imperative of Macro Stability and Skilled Labor

Turkey faces a 30% broad unemployment rate that demands a new industrial transformation; however, this shift cannot promise sustainable growth without simultaneous improvements in macroeconomic stability, institutional reforms, and skilled labor.

Turkey's Industrial Policy at a Crossroads

Industrial policy must go beyond mere infrastructure investments; high‑tech, green transition, and AI integration should sit at the core of policy design. In this context, the state's role should be redefined to create support mechanisms that understand companies' real challenges without becoming a “crony‑capitalist” conduit.

Roots of Macro Stability

■Inflation: Hovering around 80%, eroding investor confidence.

■Risk premium: Domestic currency risk premium sits at 12%, constraining capital inflows.

■Institutional gaps: Judicial uncertainties and regulatory ambiguities hinder long‑term project execution.

Rodrik & Stiglitz’s Five Pillars: A Strategic Blueprint

1. State‑Company Interaction: An independent body capable of directly addressing firms' challenges. 2. Cross‑Agency Coordination: Integrated cooperation among industry, energy, education, and finance ministries. 3. Performance Monitoring: Transparent data platforms for impact assessment of support programs. 4. Conditional Support: Conditional aid requiring firms to meet productivity and CO₂ reduction targets. 5. New Institutions: Development banks and similar financial intermediaries to fund strategic, long‑term investments.

Key Performance Indicators & Policy Recommendations

■Job creation: Target a 5% increase in employment by 2025.

■Technology adoption: Equip 40% of manufacturing plants with AI and automation.

■Green transition: Reduce the industrial sector’s carbon footprint by 30% by 2026.

■Workforce upskilling: Implement vocational training for 10 million workers.

Turkey’s current macro‑economic environment limits growth if industrial policy focuses solely on infrastructure and incentives. Stability, institutional reform, and the development of a skilled workforce must advance in tandem to unlock a sustainable growth engine. When these three pillars move together, industrial policy can truly become a catalyst for long‑lasting economic expansion.