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Cablegate: More On Privatization,Uzans, and Brsa

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

111425Z Aug 03

UNCLAS SECTION 01 OF 02 ANKARA 005075

SIPDIS


SENSITIVE


STATE FOR E, EB/IFD AND EUR/SE
TREASURY FOR OASIA - MILLS AND LEICHTER
NSC FOR BRYZA


E.O. 12958: N/A
TAGS: EFIN TU
SUBJECT: MORE ON PRIVATIZATION,UZANS, AND BRSA


REF: A. A) ANKARA 4956
B. B) ANKARA 4832
C. C) ANKARA 4528


1. (SBU) SUMMARY: RECENT MEETINGS WITH BANKING REGULATORS
AND THE PRIVATIZATION AUTHORITY HAVE REINFORCED THE MESSAGE
THAT: A) GOT OFFICIALS BELIEVE THE UZANS' FAILED PURCHASE OF
PETKIM WILL NOT HVE A SIGNIFICANT EFFECT ON TURKEY'S
PRIVATIZATION PROGRAM, BUT B) THE IMAR BANK CASE IS
RATCHETING UP PRESSURE ON THE BRSA. END SUMMARY.


--------------------------------------------- -------
GOT OFFICIALS ASSERT PRIVATIZATION PROGRAM ON TRACK DESPITE
PETKIM FAILURE:
--------------------------------------------- -------


2. (SBU) THE UZAN GROUP'S STANDARD KIMYA FAILED TO COME UP
WITH THE REQUIRED $240 MILLION INITIAL PAYMENT AND CREDIBLE
BANK GUARANTEES FOR THE REMAINING $365 MILLION DUE AUGUST 6
FOR THE PURCHASE OF STATE-OWNED PETKIM. THE FAILURE TO PAY
DISQUALIFIES THE UZANS FROM THE PETKIM PRIVATIZATION AND,
ACCORDING TO PRIVATIZATION AUTHORITY (PA) PRESIDENT KILCI'S
COMMENTS IN THE PRESS, FROM ALL FUTURE PRIVATIZATION TENDERS.


3. (SBU) IN AN AUGUST 7 MEETING WITH EMBOFFS, PA VICE
PRESIDENT HIDAYET KAYA POINTED OUT THAT THE UZAN GROUP HAD
PREVIOUSLY PARTICIPATED IN SEVERAL PRIVATIZATIONS AND HAD
ALWAYS MADE REQUIRED PAYMENTS. NOW, OBVIOUSLY, THE SITUATION
HAD CHANGED AND THE PRIVATIZATION BOARD WOULD HAVE TO BE MORE
CAREFUL ABOUT THE FINANCIAL CREDIBILITY OF BIDDERS.


4. (SBU) THOUGH IT IS A BLOW TO THE UZANS, KAYA ARGUED THAT
THE TEMPORARY FAILURE OF THE PETKIM PRIVATIZATION IS NOT A
SIGNIFICANT BLOW TO THE OVERALL PRIVATIZATION PROGRAM. KAYA
WAS AT PAINS TO EMPHASIZE THAT THE PA IS MOVING QUICKLY TO
RE-BID PETKIM, RE-ENGAGING WITH COMPANIES THAT HAD EXPRESSED
INTEREST THE FIRST TIME AROUND, AS WELL AS WITH OTHER
COMPANIES. THOUGH THE PRECISE TIMING IS NOT YET CLEAR, THE
PA HOPES TO PUT OUT THE NEW TENDER QUICKLY, PROBABLY BY
SEPTEMBER, WITH BID COLLECTION BY DECEMBER AND A FINAL DEAL
BY JANUARY.


5. (SBU) KAYA CLAIMED THAT THE PETKIM DELAY WOULD NOT BE
SIGNIFICANT FROM A BUDGETARY STANDPOINT. BEFORE THE TENDER,
THE GOVERNMENT HAD PROJECTED $500 MILLION IN RECEIPTS FOR
PETKIM, THOUGH THE UZANS ACTUAL BID WAS HIGHER. FOR 2003,
THE REVENUE WHICH THE TURKISH STATE WILL NO LONGER RECEIVE IN
THE FORM OF THE UZANS' DOWN PAYMENT IS $240 MILLION, WHICH,
DEPENDING ON EXCHANGE RATES, IS ABOUT 1.4 PERCENT OF
PROJECTED 2003 TOTAL PUBLIC SECTOR REVENUE. IF, AS SEEMS
LIKELY, THE RE-BID PETKIM TENDER GARNERS A BID ROUGHLY IN
LINE WITH THE $500 MILLION PROJECTION, THE FISCAL IMPACT OF
THE CURRENT TENDER'S FAILURE WILL BE TO SHIFT THE REVENUE
INTO 2004 RATHER THAN LOSE IT OUTRIGHT. ON THE MUCH MORE
SIGNIFICANT TUPRAS AND TEKEL PRIVATIZATIONS, KAYA CONFIRMED
THE TIMETABLE DESCRIBED BY PRESIDENT KILCI IN REF C: DEALS BY
DECEMBER OR JANUARY BUT ONLY A PORTION OF THE PAYMENT IN CASH
AT THAT TIME. THOUGH THESE SALES ARE UNLIKELY TO PRODUCE
SIZABLE REVENUES WITHIN THE 2003 BUDGET YEAR, IT WOULD MEAN
THE PRIVATIZATION PROGRAM IS MOVING AHEAD AND BROADLY IN LINE
WITH THE FUND PROGRAM. KAYA NOTED THAT TUPRAS AND TEKEL,
UNLIKE PETKIM, WERE ATTRACTING GREAT INTEREST FROM POTENTIAL
BUYERS.


6. (SBU) THE MUCH MORE POLTICALLY-SENSITIVE TURK TELEKOM
PRIVATIZATION, HOWEVER, CONTINUES TO INCH FORWARD AT A
SNAIL'S PACE. KAYA'S COLLEAGUE HANDE ASCILI, RESPONSIBLE FOR
THE TURK TELEKOM PRIVATIZATION, EXPLAINED THAT UNLIKE THE
OTHER PRIVATIZATIONS, BY LAW THE TURK TELEKOM DEAL IS BEING
SUPERVISED BY A BROADER GROUP OF GOVERNMENT AGENCIES THAN THE
PRIVATIZATION AUTHORITY ALONE. A VALUATION IS EXPECTED TO BE
COMPLETED IN AUGUST AFTER WHICH THE "VALUE ASSESSMENT"
COMMITTEE FORMED IN 2002 WILL REVIEW IT. ERNST AND YOUNG AND
ROTHSCHILD HAVE BEEN RETAINED AS CONSULTANTS. THE
PRIVATIZATION IS MOST LIKELY TO TAKE PLACE IN 2004. DESPITE
THE SLOWNESS OF THE TURK TELEKOM PROCESS IN THE PAST BOTH
PRIVATIZATION AUTHORITY OFFICIALS STRESSED THE CURRENT
GOVERNMENT'S STRONG COMMITMENT TO PRIVATIZATION.


--------------------------------------------
THE IMAR BANK CASE'S NEGATIVE IMPACT ON BRSA:
--------------------------------------------


7. (SBU) AS REPORTED IN REFS A AND B, THE IMAR BANK CASE
THREATENS TO WEAKEN THE AUTHORITY OF INDEPENDENT BANK
REGULATOR BRSA. MANY LOCAL OBSERVERS, PARTICULARLY IN THE
PRESS, ARE BLAMING THE BRSA FOR FAILING TO CATCH THE
IRREGULARITIES AT IMAR BANK AT AN EARLIER STAGE. BRSA VICE
PRESIDENT TEOMAN KERMAN, WITH WHOM EMBOFFS MET AUGUST 8,
APPEARED AT LEAST AS STRESSED AS BRSA PRESIDENT AKCAKOCA A
WEEK EARLIER. KERMAN ADMITTED THAT BRSA WAS LOSING THE
PUBLIC RELATIONS BATTLE OVER IMAR. HAVING TAKEN OVER 22
BANKS IN RECENT YEARS, AND HAVING REFERRED MANY BANKING CRIME
CASES TO PROSECUTORS, KEMAN NOTED THAT IT IS NOT SURPRISING
MANY PEOPLE WOULD SEEK OPPORTUNITIES TO GO AFTER THE AGENCY.
TO MAKE MATTERS WORSE, TURKEY'S MEDIA GROUPS ALSO OWN BANKS,
AND SOMETIMES RESENT BRSA'S TREATMENT OF THEIR OWN OR
COMPETITORS' BANKS.


8. (SBU) KERMAN ALSO RAILED AGAINST THE PARLIAMENTARY
ANTI-CORRUPTION COMMISSION'S TRANSMISSION OF TWO FILES TO
PROSECUTORS RELATING TO ALLEGED BRSA CORRUPTION, CITING
KERMAN HIMSELF. ACCORDING TO KERMAN, THE CORRUPTION
ALLEGATIONS DO NOT ARISE FROM TANGIBLE EVIDENCE OTHER THAN
BRSA HAVING ALLEGEDLY SOLD ASSETS OF INTERVENED BANKS FOR
LESS THAN SOME SAY THEY ARE WORTH. KERMAN HAS BEEN REBUFFED
IN HIS ATTEMPTS TO GET THE COMMISSION OR PROSECUTORS TO LOOK
AT HIS VERY MODEST ASSETS AND LIFESTYLE FOR EVIDENCE OF ANY
PERSONAL GAIN, RATHER THAN ASSUMING THE SALE OF ASSETS FOR
LESS THAN THEIR ASSUMED WORTH INDICATED CORRUPTION HAD TAKEN
PLACE.


DEUTSCH

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