This Working Paper presents a cross-directorate report on the economic, budgetary, regulatory and urban policy implications of the earthquakes which struck the Marmara and Bolu areas of Turkey on 17 August and 12 November 1999. The earthquakes caused high casualties and significant material damage to property, with severe effects on economic activity. The Report traces the factors underlying Turkey’s vulnerability to earthquake damage, along a known active fault line, to deficiencies in risk identification procedures and risk-reduction methods, as well as to the absence of risk transfer and financing techniques. It suggests that these deficiencies may stem from the nature of recent Turkish economic development, which has been driven by the need to assimilate a mass migration from the countryside to the cities and has been associated with extremely high and variable inflation.
Ensuring a more orderly future development requires both an overhaul of governance structures in Turkey, including better central-local co-ordination and urban planning procedures and more balanced macroeconomic policies, so as to introduce more effective public oversight and more appropriate private incentive structures. The earthquakes have given an extra impetus to the reform process needed to achieve both. While the defects in the housing stock cannot be quickly or easily corrected, the structural reforms set in train by the disaster, allied to the disinflation process under way in Turkey, should make for an economic environment that allows both for better future preparedness and a more orderly, earthquake-resistant pattern of urban development than has been apparent in the past two decades.