Public Sector Industrial Relations on the Eve of Mass Privatization in Turkey

Article excerpt

Privatization has been a perennial item on the economic agenda of successive Turkish Governments since the early 1980s.

Preparations for the sale of state assets have already led to far-reaching changes in trade union structure, industrial relations and employment practices in state enterprises. Yet, the scale of actual privatization and, consequently, its direct impact on industrial relations have so far been limited on account of previous Governments' cautious approach to this controversial issue. Whenever shares in state enterprises were put up for sale, there were rumblings of discontent from the trade unions and, in some cases, considerable controversy. As a result, privatization has been confined largely to the sale of minority shares, with relatively long intervals between offerings. But this gentle approach is now believed to have run its course.

The purpose of the following pages is to examine the changes introduced in public sector industrial relations and employment practices in preparation for privatization during the 1980s. The authors argue that the stage is now set for further significant changes, as the new Government of Ms. Tansu Ciller, which took office in June 1993, presses ahead with its plans to speed up privatization.


By the mid-1970s Turkey's state economic enterprises (SEEs) were becoming increasingly unprofitable, in spite--or partly because--of the various subsidies they received. Their inefficiency was attributed to politically motivated employment policies, poor management, arbitrary government meddling, and restrictions on the pricing of their products. It had become customary to give SEE jobs to party supporters after elections. In addition to overstaffing, this practice was responsible for a high turnover among qualified managers who were frustrated by political appointees with little or no knowledge of management. Besides, because of social considerations, SEEs were not free to raise their prices in line with costs in the inflationary environment of the 1970s. Their losses were therefore routinely met through government finance. This, in turn, was a major cause of the increase in budget deficits, accelerating the rate of inflation.

In January 1980, acting on the advice of the International Monetary Fund and the World Bank, the Turkish Government initiated what was described as a stabilization programme. This ushered in an era of regulated labour policies, wage restraints and deregulation in various industries. It was in this context that the privatization of SEEs was first discussed. The plan was to reform them first, in order to improve their performance and make them more attractive to prospective private buyers. The reform began with the removal of restrictions on price increases in 1980. Initially, this boosted SEE profitability, but other problems persisted, including centralized control and interference by ministries, not to mention the inertia of a bureaucracy with vested interests in preserving the status quo. As a result, profits soon began to shrink again. None the less, the Government decided to launch its privatization programme in 1984.


As from the early 1980s, government policy on organized labour was aligned with the stabilization programme and preparations for privatization. During the period of military rule, however, from September 1980 to the 1983 elections, trade union activities and collective bargaining were suspended; the 1 million-strong Confederation of Progressive Labour Unions (DISK) was banned (not to be reinstated until July 1991) and its assets were confiscated; a ban was also imposed on strikes and lockouts; expiring collective agreements were renewed by the government-appointed Supreme Arbitration Board, which granted nominal wage increases systematically below annual inflation rates. The Supreme Arbitration Board was chaired by the Chief Justice of the Labour Division of the High Court and composed of two employers' representatives, two workers' representatives, two government representatives and one neutral expert on labour relations. …