The Role of Corporate Governance in fdi decisions: Evidence from Taiwan
History of Turkish Economic Environment
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History of Turkish Economic EnvironmentAt the beginning of the Republic, the number of population was 14 million which 20 % of current population. Capital formation was low, industrial sector could not be corresponded human needs, economic conditions were relied upon agriculture, there was no developed financial sector and /or intermediaries to support economic activities, The number of companies were insufficient to realize economic activities so forth. All these conditions made difficult to open economic growth and development. İzmir Economic Congress was made in 1923 to build up economic policy. Government anticipated that private oriented development solved the economic instability. This led to government supported to private entrepreneur. Some of them were: Türkiye İş Bankası was founded due to fund private agencies in 1924. Sanayi ve Maadin Bankası also founded to improve industry. Moreover, customs deductions, government aids, marketing facilities, tax deductions, and land facilities to establish new companies were provided with Industry Support Law. Due to private enterprise capital lack, post of Independence War and likely situations caused İzmir Economic Congress Policies were insufficient. Indeed, the world economic crisis in 1929 revealed private entrepreneur inconsistency. Based on the private sector failure, Etaism started to work to satisfy economic growth and development. Etaism tried to improve economy. Government played major role property rights of production. This means government intervened economy, produce goods and services, recruitment employees etc5. Government activities started with the foundation of Sumerbank in 1933. It was very important because it had to make factory and production. Etibank established in 1935 to protect mining likewise Sumerbank. The World War II caused the rigid etaism activities continued between the periods 1939 – 49 which was more solid than before. For instance, most of the sources were nationalizated, highly sensitive market control etc. Due to World War II, 1 million young men were taken military obligation. This caused reduction of production. Why the etaism economic activity did not success to economic stability? Goverment agencies could not be implement economic develeopment plans due to World War II stated. Goverment also spent much sources for defensive expenses. This led to reduction of public investmets. Besides, World War II brought difficulties on foreign trades. New taxes imposed to compensate war expenses6. New prime minister started to work in 1950. New policies and strategies had been made. New flow mechanism was the opposite of the etaism. Government determined its policy with respect to the private enterprises power. It was planned that, less public economic enterprises and more private development carried to economy. Production really increases because of mechanization. The number of employees working in agriculture sector had decreased due to increase in mechanism. Industrialization had been made by private sector. Some families started to be rich, who got rich from agriculture, commers etc. Some of the indicators between the period 1950 and 1960.7
Although, government fulfilled liberal economic policies, the number of Public Economic Enterprises started to increase in 1954. Because, capital formation of private sector was still insufficient to solve economic problems. Secondly the domestic demand increase but the private sector was insufficient afford the domestic demand. Some of the intermediary goods were necessary for private sector production. It was difficult to stress institutionalism and corporate governance until early 1950s. The main problems are capital inadequacy and external political issues. Planned Economic Development Program started early 1960’s. Firstly, Government Planned Agency was founded in 1963 and five years plans made to increase productivity and rapid growth. There has been 7 planned programs applied, these are:
Import Substitution policy defended with 1st Planned Development Program. Government anticipated increasing domestic investment and expanding manufacturing sector. Production of imported goods in internal market led to increase in production. This dynamic reduce to abroad dependency also. Goods and services which were imported from abroad and used manufacturing sector were forbidden. Economy reached the high growth rate with the Planned Economy especially periods between 1962 - 1977. Although, between the years 1962 to 1977 the growth rate of Gross Domestic Product was 6, 7 %, this was reduced after 1977. Foreign exchange bottleneck brought bad air conditions. In addition, after 1977 political issues occurred, economic environment affected by political anarchy. Military power started to decision owner and pursued economic and political agenda. This was continued until 1984 which new democracy movement started. It was still difficult to stress corporate governance and institutionalism. Internal political issues and import substitution policies blocked institutionalization. Although, most of the indicators showed bad score for Turkey economy, liberalization and internalization movements started early 1980s. Regulatory agencies started to work such as Capital Market Board (hereafter CMB) in 19818, İstanbul Stock Exchange (hereafter İSE) in 1986. The main roles of the CMB were to save investors rights and ensure capital market trust and assurance. The role of the 24 January Decisions were very important to improvement of market. Both, Loan interest and time deposit were used in the market freely. Turkish Economy changed its main policy in 1989 with resolution 32. Turkey has opened global economy from the closed economy. Currency exchange was free, import and export activities were free also. This Decision perceived competitiveness thought. Due to government protectionism until late 1980s, Turkish Companies were not sufficient to compete external market. This led to economic crisis in 1994. Turkish Economy negatively affected by the crisis 1994. Foreign currency Dollar appreciated in accordance to Turkish Lira. Inflation rate, interest rate, external and internal market debt increased. Besides unemployment rate, the number of closed firms etc increased while capacity usage rate decreased. Neoliberal macroeconomic policies anticipated to reach stable economic conditions. Open economy, market power provides resources, reduction of government interventions were started with middle of 1990s. Throughout the 1980s and 1990s, the Turkish economic policy was characterised by a symbiotic relationship between discretionary policies and rent-seeking behaviour. As a result, Turkey’s macroeconomic performance has deteriorated over time and the risks faced by corporate actors have increased9. The negative association between volatility and growth tends to be stronger in countries with weak institutional quality and pro-cyclical fiscal policies. This finding is very significant for Turkey – a country that was characterised by poor institutional quality and fiscal indiscipline throughout the 1990s. Banking Regulation and Supervision Agency (hereafter BRSA) founded in 1999 and stated to work in 2000 in accordance to the Banking Law 438910. BRSA has started to work to abolish instability of financial market and monitor and audit financial sector institutions. Turkish Economy cannot take an advantage of global economic conditions. Economy faced a crisis at least each 4-5 years. Turkish Economy deterioration stated with 1997 Asian and 1998 Russian crisis after the year 1994. Moreover November 2000 and the February 2001 crises affected economic actors deeply. IMF has started to play a major role in Turkish Economy between the years 1998 and 2008. After the year 1980s, we can summarize Turkish Economic environment such as:
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