Executive Summary

The World Bank and the Government of Turkey have a long-lasting relationship, which remains critically important as Turkey strives towards European Union (EU) accession. To date, World Bank loans to Turkey total approximately $19 billion. In 2006, Turkey received approximately $1.5 billion in loans from the World Bank, which represents 1.25% of the estimated 2006 Turkish budget expenditure. These loans have funded projects in several sectors, including basic education, emergency relief, and privatization of state-owned enterprises. Beyond funding, the World Bank has offered Turkey extensive advice and recommendations regarding development. As Turkey’s economy
has grown and its development goals have evolved, it is important to reevaluate the role of World Bank financing within the country and, moreover, how to use this funding most efficiently.
In this study, three main research questions were addressed:

(1) How can Turkey better evaluate the cost of borrowing from the World Bank?

(2) What are some of the challenges and obstacles commonly observed in project implementation? (3) Based on
our findings, how can the Turkish government improve project execution? These questions were answered from both financial and managerial perspectives. World Bank loan terms and conditions were compared to other international funding organizations, which revealed that more flexible terms may be available from the European Investment Bank versus the International Fund for Agricultural Development. We also closely evaluated nine recent World Bank funded projects. Based on data from these projects, we developed a method to calculate the true costs of the loans and developed additional criteria to use when evaluating projects. Finally, the nine projects were evaluated based on six categories that we created to identify managerial strengths and weaknesses. Our analysis was supplemented with external research and the expertise of our team to develop substantive recommendations for the Turkish government. The overarching finding was that World Bank funding continues to contribute to Turkey’s development and is an important contributor to Turkey’s economic growth. However, there are tangible ways through which Turkey can improve the use of funds to have a greater impact, benefiting Turkey both socially and economically. Based on the comprehensive
findings, the four main recommendations are:
• More effective planning can improve the implementation of World Bank funded projects in Turkey.
• Evaluation of loan disbursements and repayments in real terms will provide a clearer picture of loan costs and interest rates.
• Increased transparency in the selection, execution, and evaluation of projects can lead to gains in efficiency.
• Greater accountability has the potential to improve multiple phases of projects, and thereby, influence the overall effectiveness of project implementation.
These recommendations are intended to be feasible and practical, enabling Turkey to take full advantage of World Bank funding.

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