Long abstract

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Istanbul, the demographic and economic heart of Turkey, has gone through enormous changes over the past century. This mega-city of about 15 million inhabitants has seen its population increased more than tenfold since 1950. It has benefitted from a favourable national economic environment, triggered by a broad and continuous reform process, strengthening its position on the international marketplace. Over time, Istanbul has established itself as the industrial, financial and logistics centre of the country, producing almost one-third of the national output and absorbing the bulk of foreign direct investment. Though it ranks low among OECD metro-regions in terms of gross domestic product (GDP) per capita, Istanbul has registered one of the highest output growth rates since the mid-1990s.
Istanbul however faces challenges that could hamper its ambition to become a hub for finance, logistics, culture and tourism in the Euro-Asia region, as well as its development in general. It is changing from an economy driven by labour-intensive activities to one based on knowledge industries, while traditional and labour-intensive sectors (e.g., textiles and its supply chain) are shifting only gradually and slowly to other complementary industry segments. Constraints on human capital development and the informal sector have hindered productivity levels and increased income disparities. Over-migration is putting a burden on Istanbul’s transport, public infrastructure and housing, and earthquake risk management. The scale and variety of these challenges necessitates improving the overall planning system, local public management and implementing a national strategy to reduce regional disparities and limit migration flows.
This Policy Brief looks at some of the challenges facing Istanbul and at the possible solutions.