Enlargement Strategy and Main Challenges 2006 - 2007

and supervision has been further strengthened. The economy has become more open to
foreign trade and investment. The Central Bank and the government continued to implement
disinflation policy.
The relatively high external and government financing needs remain highly vulnerable to
investor sentiment, which implies a potential threat to macroeconomic stability. Therefore,
fiscal consolidation needs to be further strengthened and effectively backed by structural
measures. Combating unregistered employment requires attention. Labour market imbalances
persist. Employment rates are very low and falling, in particular for the female population.
Policy responses to these imbalances were limited and non-wage costs of hiring remained
large. Average educational standards are relatively low and large disparities persisted. The
business environment was negatively affected by barriers to exit and low transparency as
regards state aids. The process of restructuring of the energy sector advanced fairly slowly.
Turkey has improved its ability to take on the obligations of membership. In most areas
some progress was made. However, fulfilment of short-term priorities under the Accession
Partnership is lagging behind in many areas. A number of obligations by Turkey under the
Customs Union remain unfulfilled. Much remains to be done to improve the level of
alignment and the institutional and administrative capacity.
Progress in free movement of goods has been uneven. There were improvements in areas such
as accreditation, standardisation and conformity assessment. However, a number of provisions
remain contrary to the general principles of free circulation of goods, and technical barriers to
trade continue to exist. On free movement of workers, there were no developments. Alignment
with the acquis on the right of establishment and the freedom to provide services remains
limited. Turkey made very little progress on the free movement of capital. Alignment is
incomplete in particular concerning the fight against money laundering. Acquisition of real
estate by foreigners is restricted.
Progress in the area of public procurement is very limited. The scope of application of the
legislation narrowed through the introduction of exemptions. Turkey does not have an
organisation that guarantees a coherent policy in all areas related to public procurement. As
regards company law, some limited progress was made. Turkey has adopted most
international accounting standards. However, these are not legally binding for the majority of
Turkish companies, which are only subject to tax-based reporting requirements. The level of
alignment is low. On intellectual property law, alignment is well advanced and administrative
capacity improved. However, further progress remains necessary, in particular on
enforcement addressing organised piracy and counterfeiting. Furthermore, cooperation and
coordination between relevant authorities needs strengthening. Non-specialised lower courts
have difficulty in properly implementing legislation.
Progress in the field of competition policy is mixed. Alignment of anti-trust acquis is well
advanced and enforcement by the Competition Authority is satisfactory. However, on state
aid there is no progress: Turkey does not have the necessary legislative framework, nor
administrative structures to implement EU rules. The relevant obligations under the
Association Agreement remain to be fulfilled.
Turkey has made some progress on financial services. A new banking law, and insolvency
legislation in the insurance and supplementary pension sectors, are improvements. Alignment
of legislation in insurances is limited. In the area of investment services and securities markets
the investor compensation scheme, cross border provision of services, disclosure
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