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Cablegate: Kayseri: Eye of the Anatolian Tiger

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Dianne Wampler 02/23/2007 08:43:44 AM From DB/Inbox: Dianne Wampler

Cable
Text:


UNCLAS SENSITIVE ANKARA 00385

SIPDIS
CX:
ACTION: PA
INFO: ECON AMB DCM POL PMA

DISSEMINATION: PAO /1
CHARGE: PAS

APPROVED: PAO: DSREEBNY
DRAFTED: ACAO: BBALL
CLEARED: CAO: EMCKAY; ECON: TGOLDBERGER; POL: JWEINER

VZCZCAYI870
RR RUEHC RUEHIT RUEHDA
DE RUEHAK #0385/01 0531509
ZNR UUUUU ZZH
R 221509Z FEB 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 1059
INFO RUEHIT/AMCONSUL ISTANBUL 2182
RUEHDA/AMCONSUL ADANA 1681

UNCLAS SECTION 01 OF 02 ANKARA 000385

SIPDIS

SENSITIVE
NOT FOR INTERNET DISTRIBUTION

E.O. 12958: N/A
TAGS: PREL PGOV ECON SOCI TU
SUBJECT: Kayseri: Eye of the Anatolian Tiger

REFTEL: Ankara 0038

1. (SBU) Summary: Kayseri, a city of one million people in the
center of Turkey, is one of the centers of Turkey economic
revival. The business elite tends to recycle investment capital
back into the city, and credit is usually obtained overseas. The
limits on Kayseri's development are its fickle labor market, which
copes with migration to Istanbul and from rural areas, as well as
increasing competition from Chinese goods. Politically, Kayseri is
conservative, but not especially religious. The ruling Justice and
Development Party (AKP) controls the province's parliamentary
delegation and city government, a situation that is unlikely to
change any time soon. End Summary.

-----------------
A Booming Economy
-----------------

2. (U) Kayseri's growing economic weight is evident. On the edge
of town, a massive industrial park produces an increasingly wide
array of goods, including furniture, textiles, appliances,
machinery, and tools. Most of Kayseri's goods are produced for
Turkey's domestic market, but exports are growing, with an estimated
forty percent eventually exported.

3. (U) Many Kayseri business leaders credit their success in part
to a tradition of re-investing profits in family conglomerates in
the region. For example, Irfan Basyazicioglu, who started with an
animal feed factory in the 1960s, and used the steady profits to
fund real estate investments and other small factories in Kayseri.
"Business people in Istanbul are looking to earn a quick dollar,"
he says. "Here in Kayseri, we pay attention to things like debt
ratios. We don't like to rely on outside credit. We prefer
controlled, natural, steady growth."

4. (U) Those who do seek credit to start their businesses have
traditionally looked outside of Turkey. Mehmet Filiz, leader of a
local young business owner's association, says that until recently,
Kayseri factory owners found that credit was more cheaply financed
from overseas, in spite of caution about the instability of Turkey's

economy. Turkish banks were seen as unreliable, unimaginative, and
bogged down with red tape. In the past few years, however,
relaxation of rules on foreign partnerships and acquisitions
provided Turkish banks with an infusion of know-how and capital that
they are using to invest in domestic business. Domestic credit
services are still second-rate, Filiz says, but he predicts that
some of the market leaders such as Garanti Bank and Ak Bank will
soon become the lenders of choice.

5. (U) The relatively strong position of Turkey's currency at the
moment is a concern for Kayseri's exporters. Facing competition
from Asia and developing countries that take advantage of EU
favorable-treatment rules, factory owners are hoping that the lira
will slide in the coming year to a rate of 1.6 lira to the dollar,
from the current 1.4 lira to the dollar rate.

6. (SBU) China is of particular concern to Kayseri's business elite.
The mere mention of competition from Chinese goods produces a
torrent of invective about the "illegal" subsidies provided to
state-run businesses and the "poor quality" that is undercutting
superior Turkish goods. Kayseri's Deputy Governor, Mehmet Ali
Ceviker, worries that in spite of the stereotype of cheap Chinese
products, their quality is actually increasing. He is not alone -
business owners from every sector are looking for a strategy to deal
with increasing competition from Chinese goods, but have found
little strategic thinking from either the government or business
groups.

----------------------------
Good Help Is So Hard To Find
----------------------------

7. (U) The primary complaint of Kayseri's business elite is that it
is increasingly difficult to find qualified labor. Basyazicioglu
actively recruited a university-trained engineer, offering him a
competitive salary and benefits package, but lost him to the lure of
Istanbul. Basyazicioglu had to fill the position with an elementary
school graduate.

8. (SBU) Bulent Kalpaklioglu, a real estate entrepreneur, echoes the
sentiment, saying that educated and skilled workers prefer Istanbul's
cosmopolitan attractions to the conservative, provincial countryside,
no matter how many pseudo-cosmopolitan trappings are created to retain
the elite. "When it's a social faux pas to drink wine in a public
setting, you're never going to keep the people you need," he comments.

9. (SBU) The "brain drain" would be acceptable to Kayseri's business
leaders if they felt that there were alternatives among the waves of
migrants coming from nearby rural areas. Instead, they mainly see
migrant workers with no skills or special training. Even graduates
of Kayseri's well-respected magnet industrial high schools often
pursue their careers in Istanbul or Ankara. Kayseri expects little
from the central government, but the business community asserts that
a training program for internal migrants would help with
unemployment while increasing their profit margins. Officials at
the Kayseri governor's office insist that such a program is in the
works, but admit that it has a long way to go.

10. (U) Despite the obvious boom in Kayseri's business sector, there
is a disconnect between the rhetoric of employers and employees.
Officials in the city government state that "whoever wants a job in
Kayseri can find one," but this is contradicted by the noticeable
presence of beggars on the streets, a rare sight in other parts of
Turkey.

----------------------------------------
All AKP, All The Time (National Edition)
----------------------------------------

11. (U) In the center of Turkey's conservative heartland, Kayseri is
AKP country, the home of Foreign Minister Gul and a bastion of
electoral strength for the ruling Justice and Development Party.
All of Kayseri's eight MPs are from AKP. Gul is a beloved figure,
and is well known among the business elite who speak of him as
"Abdullah" rather than "Mr. Gul."

12. (SBU) Despite their glowing descriptions of the current
government and appreciation for its religious roots, the people of
Kayseri are more concerned with stability than they are with
ideology. "This is not Konya," says one business owner, referring
to the politically religious sentiments further west. "We want
political stability the most, whatever the color of the government,"
says another.

-------------------------------------
All AKP, All The Time (Local Edition)
-------------------------------------

13. (SBU) The AKP mayor of Kayseri, Mehmet Ozhaseki, is arguably one
of Turkey's most popular mayors. In the 2004 local elections, he
was re-elected for the third time with a whopping seventy percent of
the vote. His popularity is attributed to massive infrastructure
investments and close ties to the business community. When asked
about a possible parliamentary run, Ozhaseki's staff coyly stated
that he was waiting for the results of the presidential election in
May, and would then test the waters in the expectation of a
"high-level" (read: minister level) position were he to enter
parliament.

14. (SBU) The Kayseri city government both relies on and is hemmed
in by budgetary links to the central government. Of the 310
trillion YTL city budget, around thirty percent comes from
government funds allocated from Ankara. However, the local taxes,
rents, and fees that comprise the remainder are kept in the same
centralized accounts. "We have to ask for everything from Ankara,
every last penny," says Mustafa Yalcin, the mayor's Chief of Staff.
"It's not as much of a problem at the moment as we are all from the
same political party. We are afraid that if the parties change, all
of our work will come to a grinding halt."

15. (SBU) Like the "brain drain" of Kayseri's workforce, the Kayseri
municipality is plagued by the flight of tax revenue to Istanbul.
Since most of Kayseri's major businesses have their headquarters in
Istanbul, corporate taxes often end up in Istanbul's coffers rather
than in Kayseri, where goods are produced. According to Yalcin,
Istanbul is more attractive for some headquarters because they are
subject to fewer solicitations for charitable donations. In
Kayseri, where a business may be a top taxpayer, owners are under
pressure to support local NGOs and charities.

-------
Comment
-------

16. (SBU) Kayseri's business and political leaders are
bullish. The region's economy is starting to attract foreign
investment, and the city is benefiting from ever-expanding
infrastructure projects. Economic and political stability is a
priority and Kayseri's decision-makers see no cause for concern.
The main checks on Kayseri's growth will be increasing competition
for skilled labor and the willingness of local businesses to adapt
to global market changes. In both of areas, Kayseri will be at the
mercy of Turkish politics and economics. End Comment.

WILSON

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