As the Kurdish Studies Center, on the occasion of the first year of the new peace process that began in October 2024 and continues to this day, we are publishing analyses from a group of experts on various dimensions of the process. Through this series, we aim to meet the need of both society and policymakers for rigorous analysis by bringing different expert perspectives, field-based observations, and data into public discussion. We hope you find it a valuable read.

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The Economy in Times of Conflict and Peace: The Situation in Kurdish Provinces and the Impact of the Process on the Economy / Mehmet Kaya

When discussing the region’s economy, we often focus on the outcomes: low income, limited investment, high unemployment, and youth migration. However, these outcomes are not the result of a single period or a single policy; they emerge from the cumulative impact of a long historical background, governance choices, and security-oriented approaches. As we have been in the process of a new era for over a year and these discussions are back on the agenda, we must examine the issue not merely through political lenses but also in light of the costs this accumulation imposes on the economy and social life because the true impact of the steps taken will be most clearly visible here, in the climate of prosperity, employment, and investment.

Looking at the reasons for the region’s economic backwardness, we see that this cannot be explained solely by today’s conditions; rather, the cumulative effects of decisions made over the course of history have shaped the region’s socioeconomic structure in the long term. At the forefront of these decisions is the approach implemented under The Reform Plan for the East (Şark Islahat Planı), which began in 1925 and has continued to be updated and applied to this day. When we examine The Reform Plan for the East and the core principles that have been updated to the present day, the following stand out: the region’s central administration and the insistence on this form of governance; the fact that appointed bureaucrats are tied to the center and are often not local residents; and the constant prioritization of security policies over all other endeavors. This approach makes it difficult to establish a lasting and predictable order in the region; investments that would improve the quality of life are frequently postponed, while security investments become increasingly dominant. Under these conditions, there is a constant brain drain and capital flight from the region; economic and social capacity cannot accumulate locally.

For this reason, the region has been governed within a framework centered on a distinct administrative, military, cultural, and socio-economic approach during the century-long period spanning from 1925 to 2025. In this context, only the period between 2002 and 2015 stands out as an exception. Otherwise, the region has been governed through security-focused administrative practices such as the Office of the General Inspector, martial law, coup processes, and, most recently, government-appointed trustees (kayyum). In 2002, the state of emergency was lifted, but a new era began in 2016 with the implementation of government-appointed trustees, and the region’s governance paradigm was reshaped within a security-centered framework. These long-term administrative practices directly impact the region’s economic decision-making mechanisms, investment climate, local capacity, and social welfare; in the prioritization established between development and security, development and social well-being remain in a secondary position for an extended period.

At this point in time, Kurdish provinces rank among the bottom 20 provinces in Turkey in terms of socioeconomic development. Various development indicators collectively point to this situation. One example of such indicators is the 2022 SEGE Province data from the Ministry of Industry and Technology. According to this data, 49 of Turkey’s 50 least developed provinces are located in the Eastern and Southeastern Anatolia regions. Another indicator highlighting the region’s socioeconomic disadvantage is the table regarding the “not in education nor in employment or training” (NEET) youth population. When examining NEET rates for both women and men, the region appears to have a rate approximately twice the national average. It is also important to emphasize that this group carries a high risk of intergenerational transmission of poverty, and that disengagement from education and employment channels produces persistent inequalities at both the individual and societal levels.

One of the indicators that clearly illustrates regional inequality is per capita consumption expenditure. According to the Turkish Statistical Institute’s (TÜİK) 2024 “Household Consumption Expenditure” data, monthly per capita consumption expenditure in our region remains at one-fourth the level of expenditure in the most developed regions. The Diyarbakır–Şanlıurfa region, defined as TRC2, ranks last nationwide in 8 out of the 13 main categories of per capita consumption expenditures. In these comparisons, when compared to the top-ranked province and region, there are significant spending gaps: 22 times in food, 26 times in education, 8 times in health, approximately 10 times in entertainment, sports, and culture, and 14.5 times in restaurants and accommodation. In other words, we observe a deep divide in the categories that affect basic needs and human capital accumulation in terms of consumption expenditures. The fact that the disparity in education expenditures is particularly high represents a structural risk area regarding the intergenerational transmission of poverty. This is because education stands out as one of the critical levers that prevent regional inequality from being carried into the future.

A similar divide can be seen when looking at income levels. According to the Turkish Statistical Institute (TÜİK), the national average per capita income in 2023 was $13,243; in provinces such as Kocaeli and Istanbul, this figure is around $21,000. Van and the surrounding provinces, however, fall within the $4,000 to $5,000 range. This disparity is also linked to the region’s share of the overall economy. While the region accounts for 15.5% of Turkey’s population, its share of gross domestic product (GDP) remains at 5%, and its contribution to the economy also stands at 5%. This asymmetry between population size and economic share indicates that regional inequality is a structural problem rooted in layers such as the production structure, investment climate, human capital, and institutional capacity.

This structural issue is also evident in financial indicators. When we look at bank deposit and loan ratios, in the TRC2 region, comprising Urfa and Diyarbakır, 1.78 TL in loans is taken out for every 1 TL in deposits. In other words, the region appears to be stuck in an economic mechanism driven by borrowing rather than savings accumulation. The amount of deposits per branch in Istanbul is more than four times that of Diyarbakır; consequently, the TRC2 region has Turkey’s highest loan-to-deposit ratio at 178 percent. While 112 TL in loans are used for every 100 TL in deposits in Istanbul, the use of 178 TL in loans in the Diyarbakır–Şanlıurfa region indicates that consumption is sustained through borrowing despite the region’s limited income-generating capacity. Diyarbakır and Şanlıurfa rank at the bottom in terms of deposit ratios. Therefore, the high loan-to-deposit ratio is more closely related to “low deposit levels” than to excessive borrowing.

When we examine the trajectory of incentive policies implemented to address regional development disparities, we see that 16 incentive programs have been launched under various names since 1963 with the aim of rectifying this situation. In theory, the purpose of these incentives is to reduce interregional development disparities and redirect investment toward less developed regions. However, the results of these programs have failed to meet this objective; rather than narrowing, the gap in inequality has widened. In particular, when examining the results of programs implemented between 2012 and 2024, the regions designated as Regions 1 and 2, which include major cities such as Ankara and Istanbul, received 61 percent of the total investment funds. In contrast, Regions 5 and 6, which cover the East and Southeast, account for a total of just 10 percent, with Region 6 alone receiving only 4.6 percent. One notable point here is that despite Region 6 covering 16 provinces, its share remains extremely limited. In the design and implementation of the incentive system, the conditions and support mechanisms intended to enhance the investment-attracting capacity of underdeveloped regions have not been sufficiently strengthened; the distribution of resources has shown a tendency to flow back toward centers where investment is already concentrated.

Another key factor affecting the region’s socioeconomic performance is the economic cost of the periodic outbreaks of conflict. According to a study by İzzet Akyol, the difference in Turkey’s potential economic size in a scenario without conflict between 1985 and 2020 is estimated at $4.2 trillion. This loss is attributed to a decline in investment, the absence of foreign capital and investment, tourism revenues coming to a standstill, and the effects of the despair caused by the conflicts on migration and the psychological climate. In another study on security expenditures, a comparison between 11 Kurdish provinces and 11 Turkish provinces reveals that per capita security spending in 2023 was $10,400 in the Kurdish provinces, while it remained at approximately $200 in the Turkish provinces. In addition, political leaders and government spokespeople periodically mention the cost of the war in their statements, citing figures ranging from $300 billion to $800 billion. A study by Dünya Gazetesi indicated that direct war expenditures between 1984 and 2024 amounted to approximately $700 billion. In his latest statement, the President indicated that the total cost is around 2 trillion dollars, a figure equivalent to approximately 1.5 times Turkey’s gross domestic product.

When we examine the impact of periods of peace on the economy, the periods of peace that have been achieved from time to time have produced positive results both at the macro level and in regional indicators. During the period of peace between 2013 and 2015, Turkey reached a gross domestic product (GDP) level of $956 billion for the first time in 2013. This level was only matched again a decade later, reaching the 900 billion dollar mark in 2022 and the 1 trillion dollar mark in 2023. Looking at growth rates, Turkey achieved growth of 8.5 per cent in 2013 and close to 5 per cent in 2014; growth was high throughout this period, but rates subsequently fell rapidly. In terms of foreign trade, exports to Iraq, and particularly to the Kurdistan Regional Government, constitute a critical channel for Turkey. This region has consistently ranked among Turkey’s top five trading partners. In this context, we have yet to reach the $13 billion level achieved in exports to Iraq in 2014. By 2025, our exports had only approached the $11 billion mark. In terms of per capita income, the level of 12,582 dollars achieved in 2013 was only reached again in 2023, at 13,110 dollars. A similar trend is evident in terms of foreign direct investment: while Turkey achieved a 19.3 per cent share of international direct investment in 2015, this figure has not been seen again and only reached the 10 per cent range in 2024. These indicators suggest that a climate of peace and stability acts as a key multiplier supporting macroeconomic performance; a breakdown in stability leads to the loss of gains and the cost of a prolonged recovery.

The move of company head offices from the region to western provinces is also among the concrete indicators linked to this climate. According to a study we conducted based on our chamber’s membership profile, the number of companies that relocated their headquarters to western provinces between 2012 and 2015 was around 20. Following the resumption of conflict after 2015, this figure rose to the 70–80 range; in 2018, over 70 firms, and in 2019, more than 100 firms, with a total of approximately 90 companies relocating their head offices to western provinces in the first 10 months of 2025. In other words, the conflict is preventing the accumulation of capital and institutional capacity in the region. It is undermining the investment climate and limiting the local economy’s potential for growth.

The shift in the economic climate is also striking in terms of inflation indicators. Having hovered around 8% between 2008 and 2016, inflation entered a trend that began at 20% in 2018 and has been rising rapidly. In 2022, Turkey saw inflation reach 64%. This macroeconomic fluctuation directly affects household welfare; the pressure on livelihoods is becoming even more severe in regions with low income levels and weak savings capacity.

One of the benefits of the peace process for Turkey is the rapid growth of trade with its southern neighbours. However, security policies have consistently posed a significant obstacle to this trade. In trade with Syria, border crossings such as Nusaybin, Şenyurt and Ceylanpınar, which lead to Kurdish provinces, have been closed for approximately 13 years. In contrast, crossings such as Karkamış, Yayladağı, Cilvegözü, Zeytindalı, Öncüpınar and Çobanbey, which lead to Hatay and Kilis, remain open. On the Iraqi border, in practice, only Habur is open; the Şemdinli–Derecik and Çukurca–Üzümlü routes remain closed. In a sense, security policies have significantly shaped the geography of trade; they have prevented the region’s potential for economic integration with its southern neighbours from being fully realised for a long time.

When we examine the key areas required for regional development, we can say that the incentives and economic policies implemented to date have failed to deliver results. Therefore, it is of vital importance to develop new projects to reduce poverty and to redefine regional development policies. This redefinition must involve not only increasing the allocation of resources but also establishing a governance and investment framework that will strengthen local capacity. In this context, the empowerment of local authorities and the local community; the urgent completion of projects of vital importance to the region, such as the GAP irrigation canals; the acceleration of licensing processes for companies in the region that have been criminalised regarding mining licences; and the prevention of brain drain and capital flight, alongside the strengthening of the region’s youth population and human capital, seen as its most significant asset, through educational support, are among the key priorities. Our region offers opportunities to generate revenue in a short space of time in areas such as history and tourism. To turn our young population into an advantage, we need to address the education, employment and investment environments as a whole. I would also like to highlight the direct economic damage caused by delays in irrigation investments with the following concrete example: although a 148-kilometre irrigation pipeline has been completed in Batman, not a single drop of water has flowed through it for nearly 20 years because the irrigation channels have not been finished; this delay is also leading to significant losses in agriculture, employment and local income.

Consequently, the region’s socio-economic underdevelopment stems from a combination of factors, including historical governance choices, the persistence of security-centred policy frameworks, brain drain and capital flight, the fragility of the investment climate, weak savings capacity as reflected in financial indicators, the failure of incentive mechanisms to achieve their intended objectives, and the multi-dimensional economic costs of the conflict environment. Conversely, both the region’s own internal dynamics and its potential for economic interaction with southern neighbours offer the possibility of faster recovery and development in the short and medium term, provided that the peace environment is strengthened and security-centred policies are replaced by an approach focused on development, empowering local communities and retaining human capital within the region.

/// Note: Analyses published on KSC’s website reflect the views of their respective authors. These views do not necessarily represent or align with KSC’s institutional position.

Mehmet Kaya is the President of the Diyarbakır Chamber of Commerce and Industry (DTSO). As one of the founders of the Dicle Centre for Social Research (DİTAM), Kaya also served as the Chair of the organisation’s Board of Directors for a period. Within the DTSO, he works on issues such as regional development, the investment climate, strengthening the private sector and employment.