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Cablegate: Factory Explosion Underscores Danger of Unregistered

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RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHIT #0059 0321310
ZNR UUUUU ZZH
P 011310Z FEB 08
FM AMCONSUL ISTANBUL
TO RUEHC/SECSTATE WASHDC PRIORITY 7840
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHDA/AMCONSUL ADANA PRIORITY 2335
RUCPDOC/DEPT OF COMMERCE WASH DC PRIORITY
RUEATRS/DEPT OF TREASURY WASH DC PRIORITY

UNCLAS ISTANBUL 000059

SIPDIS

SIPDIS

TREASURY FOR J.ROSE
USDOC FOR 4200/ITA/MAC/EUR/PDYCK/CRUSNAK


E.O. 12958: N/A
TAGS: ELAB EIND ASEC TU
SUBJECT: FACTORY EXPLOSION UNDERSCORES DANGER OF UNREGISTERED
ECONOMY

1. (U) All newspapers gave front-page billing to a January 31
explosion at an unlicensed factory in Istanbul's Zeytinburnu
district that killed 23 people and injured more than 100. Around
half of those killed were onlookers or passersby. According to
Zeytinburnu Mayor Murat Aydin, a fire in an unlicensed fireworks
depot spread to the unregistered Irnak Textiles jean processing
plant on a lower floor. The Irnak Textiles boiler exploded,
collapsing the top two floors of the five-story building and
damaging surrounding buildings.

2. (U) Of the five companies in the building, Aydin claimed only
Irnak Textiles was unlicensed. However, the company housing the
fireworks was licensed only to produce plastic goods. Defending his
office against widespread accusations of negligence, Aydin claimed
the municipality had closed Irnak Textiles several times and finally
resorted to filing charges after it was repeatedly reopened without
proper permits.

3. (U) The tragic incident brought Turkey's informal economic
sector into the limelight. Of Turkey's 22 million workers, the
Turkish Statistics Institute estimates 47% are unregistered, with
1.1 million unregistered workers in Istanbul alone. Unregistered
workers have no collective bargaining rights, are typically
uninsured and are not eligible to participate in
government-sponsored retirement and disability programs. Yaman
Toruner, former governor of the Central Bank of Turkey and current
member of AKBank's board of directors, estimates the informal sector
accounts for 34% of Turkey's $500 billion GNP.

4. Comment. Business leaders have long argued the informal economy
tilts the playing field by giving an unfair advantage to unlicensed
companies who do not pay corporate/employment taxes or fairly
compensate workers. In a December conversation with Istanbul AmCham
affiliate, State Minister Mehmet Simsek acknowledged that the
informal economy was a drag on both government revenues and the real
economy. However tax evasion (a primary incentive for operating an
unregistered business) is popularly viewed as a "victimless crime"
and labor market reforms are both technically difficult and
unpopular with voters. Now this deadly accident has prompted many
media commentators to argue that unlicensed businesses are dangerous
as well as bad for business. It remains to be seen whether the
Irnak Textiles explosion will be the impetus the government needs to
take difficult steps to tackle the unregistered economy. End
Comment.


WIENER

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