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Welfare: Health and education outcomes have improved significantly addressing eq-uity as well as access, benefitting also the less well-off.Rising spending as well as sector specific reforms have boosted social outcomes. Extension of the mandatory school age and changes in the curriculum in the late 1990s and early 2000s has helped Tur-key catch up on education. In the health sector, a large scale reform effort has created performance linked incentives, supported a shift towards prevention and primary care, and vastly improved access for the poorer parts of the population. Turkey will not enjoy the fiscal divi-dend of debt consolidation forever and needs to prioritize spending. In looking for spending efficiencies, Turkey should revisit its social security model, which is generous particularly thanks to a low age of retirement. Sustaining progress in education will require more spend-ing, and also reforms to boost quality in the classroom and at the school level. In health care, dealing with rising entitle-ments and technology driven cost in-creases present challenges for efficiency.Public finance:Comprehensive structural reforms in the public sector have support-ed a sharp and continuing decline in Tur-key’s public debt to GDP ratio and created fiscal space for improved public services. Conservative budget policies and com-mitments to primary surpluses were combined with a wholesale reform of public financial management to escape from the fiscal politics of patronage and create a rule-based system for spending allocations, as well as expanding the rev-enue base.Continued fiscal prudence would sup-port Turkey’s transition to high-income. Reforms on both the revenue and expen-diture side of the budget remain incom-plete, with a highly cyclical revenue base, growing social entitlements, and pockets of spending (particularly in infrastruc-ture) outside the scope of rule based fiscal governance representing the main challenges.INSTITUTIONSTurkey has recorded significant improve-ments in institutional performance and public sector governance, particularly af-ter the 2001 crisis and anchored by the EU Accession negotiations process.The pace of institutional reforms has slowed since 2007, with only marginal improvements in overall governance, and some concerns over reversals in selected areas such as voice and accountability or independent regulators in finance and in-frastructure. Turkey has yet to establish the institu-tional foundations for the transition to high income. Improvements across the board are needed, including in the busi-ness climate, the rule of law, regulatory policies, the guarantee of civil and po-litical rights, public sector accountability, and decentralized decision making.
Turkey’s Transitions262Annex 1: Turkey’s Tenth NationalDevelopment Plan (NDP)The Tenth NDP stretches from 2014 to 2018 and diagnoses the key challenges that Turkey needs to address to overcome the “Middle Income Trap”.