gradually removing barriers to trade with the EU. Broader
privatization, further liberalization of the investment code to
increase foreign investment, improvements in government efficiency,
and reduction of the trade deficit are among the challenges ahead.

Turkey
Turkey's dynamic economy is a complex mix of modern industry
and commerce along with a traditional agriculture sector that still
accounts for more than 35% of employment. It has a strong and
rapidly growing private sector, yet the state still plays a major
role in basic industry, banking, transport, and communication. The
largest industrial sector is textiles and clothing, which accounts
for one-third of industrial employment; it faces stiff competition
in international markets with the end of the global quota system.
However, other sectors, notably the automotive and electronics
industries, are rising in importance within Turkey's export mix.
Real GNP growth has exceeded 6% in many years, but this strong
expansion has been interrupted by sharp declines in output in 1994,
1999, and 2001. The economy is turning around with the
implementation of economic reforms, and 2004 GDP growth reached 9%,
followed by roughly 5% annual growth in 2005-06. Inflation fell to
7.7% in 2005 - a 30-year low, but climbed back to 9.8% in 2006.
Despite the strong economic gains in 2002-06, which were largely due
to renewed investor interest in emerging markets, IMF backing, and
tighter fiscal policy, the economy is still burdened by a high
current account deficit and high debt. The public sector fiscal
deficit exceeds 6% of GDP - due in large part to high interest
payments, which accounted for about 37% of central government
spending in 2004. Prior to 2005, foreign direct investment (FDI) in
Turkey averaged less than $1 billion annually, but further economic
and judicial reforms and prospective EU membership are expected to
boost FDI. Privatization sales are currently approaching $21
billion. Oil began to flow through the Baku-Tblisi-Ceyhan pipeline
in May 2006, marking a major milestone that will bring up to 1
billion barrels per day from the Caspian to market.

Turkmenistan
Turkmenistan is a largely desert country with intensive
agriculture in irrigated oases and large gas and oil resources.
One-half of its irrigated land is planted in cotton; formerly it was
the world's tenth-largest producer. Poor harve