ANKARA – Turkey has exceeded all expectations in the last five years recovering from a severe economic crisis, but persistent unemployment and widespread poverty cast a shadow on this stellar performance. A large gap between haves and have-nots and problems of a socially polarized society such as increasing street crime in the big cities hang over the government. The crisis erupted on February 19, 2001, when Turkey’s president furiously tossed a copy of the constitution onto the table in a top-level security meeting. The deputy prime minister threw it back with an angry retort and the 75-year-old prime minister stormed out to tell journalists that the president insulted him, and declared a «serious crisis» in front of television cameras. Panicky investors drained over $7 billion from central bank reserves, key lending rates went over 4,000 percent, causing devaluation of the lira and crushing a three-year, $11 billion anti-inflation program with the International Monetary Fund. Since then Turkey has transformed its economy by sharply lowering its debt load and cutting inflation. The transformation was crowned by the start of the European Union entry talks last October. Quarter of Turks poor However, problems remain. Recently announced official data showed that a quarter of all Turks live below the poverty line, and 1.29 percent suffer from actual hunger. «Unfair income distribution is a problem as important as the current account deficit,» said Demir Hayat Sigorta, portfolio manager Cengiz Kilic. «It is true that the purchasing power has risen, but this has not been divided equally among the people… this is not a short-term problem but a long-term problem,» he said. The latest data on income distribution, for 2003, say that the richest 20 percent of the population take 48.2 percent of the national income, while the poorest 20 percent get 6.0 percent. Toughening competition from China in textiles and rising energy prices put pressure on Turkish wages in addition to IMF-backed tight fiscal discipline. High unemployment Official data show unemployment hovering around 10 percent, but most economists say they do not measure the true extent of joblessness in Turkey due to poor records. High unemployment rates are normal because Turkey is still moving from an agriculture-based country to an economy focused on industry and services, some analysts said. «It is not easy to lower unemployment as you have people migrating from the countryside and also have population growth,» Fortis chief economist Haluk Burumcekci said. In the last year 1.2 million new jobs were created in the non-farm sector, according to Burumcekci. «I believe that we are on the right track. As long as growth is preserved, there will be hope for the jobless,» he said. Turkey has shown an exemplary success improving its macroeconomy but analysts say that was the easy part and making its companies more efficient to compete in an ever-globalizing world economy will be harder. Textiles, a major source of foreign exchange for the Turkish economy, have been a catalyst for the country’s development for decades and provided jobs for low-skilled people pouring into towns from the villages. Now the Turkish textile sector is losing ground to China. «Turkey must design its future growth strategy… we need an export strategy,» said Burumcekci. Despite the abolition of global textile quotas at the start of 2005, the world’s biggest markets, the United States and the European Union, have taken temporary safeguard measures to limit Chinese shipments in certain categories, helping Turkish exporters. But Burumcekci said further liberalization in textiles, white goods and electronics could make things even worse for Turkey. Swing to innovation Separately, Dublin-based Research and Markets company said in a briefing that as the traditional textiles sector in Turkey has matured and is seeing increasing competition from other lower-cost countries, many are turning to innovation in Turkey to keep driving the industry. According to Ahmet Temiroglu, president of the Turkish Textile Dyeing and Finishing Industries’ Association, rather than compete with Chinese processors Turkey must produce more sophisticated products rather than basic products.