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Cablegate: Se Turkey Hopes for Economic Turnaround

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 ADANA 0137

SIPDIS


SENSITIVE


DEPARTMENT FOR EUR/SE AND NEA/NGA AND PRM


E.O. 12958: N/A
TAGS: PGOV PREL PHUM TU ADANA
SUBJECT: SE TURKEY HOPES FOR ECONOMIC TURNAROUND
FOLLOWING COALITION VICTORY IN IRAQ


This cable is sensitive but unclassified; please
protect accordingly.


1. (SBU) Summary: Prominent Adana and Mersin
businessmen are optimistic for increased
economic opportunities relating to the
Coalition victory in Operation Iraqi Freedom.
They also are hoping to take advantage of the
SARS outbreak to export more textiles to
Europe. While they believe there may be
openings in Iraq for Turkish companies and that
trade will soon resume with Iraq, they caution
that without significant steps by the GOT and
strong relations with the United States, Turkey
"has no chance" to improve its economic
situation. End summary.


--------------------------------------------- ---
Hopeful for business alliances with Iraq
--------------------------------------------- ---


2. (SBU) Prior to the beginning of Operation
Iraqi Freedom, southeastern Turkish businesses
were proving to be stagnant as the uncertainty
of the war, and its effects, loomed.
Businesses, mainly exporters, were finding
their international clients looking for
alternate suppliers in case Turkish companies
could not fulfill their orders. However,
according to local business owners, while
Turkey remains in a deep economic crisis, the
war did not produce any direct negative
economic ramifications. Rather, the
Coalition's victory in Iraq has the potential
to open many economic opportunities for Turkey;
"Iraq can, in the long term, buy services and
products from Turkey using its oil revenue."


3. (SBU) However, according to our contacts, the
re-establishment of Iraq as a major trading
partner depends upon the United States'
willingness to encourage the new Iraqi
government to work with the Turks. The failure
of Turkey to play a significant role in the war
may have denied Turkey an opportunity to
quickly improve its economic situation with
contracts in post-war Iraq and with the US
economic package. Nonetheless, according to
some sources, the failure of the February 2003
motion to allow US troops in Turkey did provide
two abstract economic benefits: (1) problems
with Turkey's neighbors who did not support the
Coalition did not materialize allowing Turkey
the opportunity to maintain, perhaps even
strengthen, these relationships; and (2) money
that would have been received from the USA
would have gone directly to the politicians and
not to the businesses and people who most need
it requiring the Turkish private sector to
continue to work hard to overcome the current
economic crisis. Whether or not these
intangible "benefits" are true, many of our
contacts fear the strains caused by the
motion's failure in the US-Turkish relationship
will cause the US to `overlook' Turkey in post-
war Iraq.


--------------------------------------------
Blaming the USG and GOT for a Weak Turkish
Economy
--------------------------------------------


4. (SBU) Some of our contacts expressed strong
anger towards the United States for
"sidelining" Turkey economically. According to
these sources, the US's failure to lift all
textile quotas for Turkey, the US's
unwillingness to permit Turkey to play a vital
role in the reconstruction of Iraq, and the
US's failure to "live up to its promises" after
the end of the first Gulf War, produced a
strain on the US-Turkey relationship. "Now, as
the GOT does everything it can to relieve
Turkey of its economic problems, the US, our
supposed ally, does not show her support (i.e.,
in the form of waived quotas, guaranteed
contracts, et al)."


5. (SBU) "While it is easy to blame the
Americans," most businessmen believe Turkey's
current economic situation can only be resolved
if the GOT takes meaningful steps to streamline
its costs and improve the financial climate in
Turkey. "Many Turks are frustrated because
while Turkey has the resources, people, and
knowledge it takes to improve the country, the
government has consistently failed to do so."


6. (SBU) According to our sources, four tasks must
be achieved by GOT to put Turkey on the road to
economic recovery: privatization, population
control, smaller government and streamlined
government spending, and improved foreign
investment policies. Our contacts have
consistently stated that privatization would
allow for redundant governmental positions to
be eliminated and streamlined programs to be
implemented. Population control, especially a
problem in the Southeast where low education
and high birth rates abound, could be achieved
with targeted education campaigns. A more
manageable population would, in turn, produce
less strain on already strained governmental
programs. Frustrated businessmen argue current
government practices to continue hiring people
in an effort to slow unemployment have created
false statistics and excessive government
spending. Finally, prevailing GOT foreign
investment policies must be improved to reflect
willingness and desire to have foreign
investors in Turkey. Currently bureaucratic
procedures involved in investing and
establishing foreign companies in Turkey
strongly deters would-be investors.


-------------------------------
SARS: An Interesting Side Note
-------------------------------


7. (SBU) Our contacts also believe the SARS
outbreak will drive more contracts to Turkey as
people begin to turn away from the Far East in
fear of the disease. According to Free Zone
leaders, while many Turkish businessmen have
sought out these types of contracts, many
textile contracts have sought out Turkey as a
future supplier.
HOLTZ

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