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Cablegate: Ambassador's Call On Minister of Finance

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

110714Z Sep 03

UNCLAS ANKARA 005757

SIPDIS


SENSITIVE


DEPARTMENT FOR E, EB/IFD/OMA, AND EUR/SCE
TREASURY FOR OASIA - MILLS AND LEICHTER
NSC FOR MCKIBBEN


E.O. 12958: N/A
TAGS: EFIN EINV PREL TU
SUBJECT: AMBASSADOR'S CALL ON MINISTER OF FINANCE


1. (SBU) SUMMARY: IN HIS FIRST MEETING WITH FINANCE MINISTER
UNAKITAN, THE AMBASSADOR EXPRESSED HIS VIEW THAT TURKEY HAD A
GREAT OPPORTUNITY TO BUILD ON RECENT GOOD NEWS BY
ACCELERATING REFORMS AND RESOLVING INVESTMENT DISPUTES. THE
FINANCE MINISTER CLAIMED THE GOT WAS STRONGLY COMMITTED TO
REFORM AND TO FISCAL RESTRAINT. UNAKITAN VOLUNTEERED TO TRY
TO ASSIST IN RESOLVING PROBLEMS, INCLUDING THOSE OUTSIDE HIS
PORTFOLIO. HE OFFERED TO MEET WITH CARGILL ON ITS INVESTMENT
DISPUTE. FOLLOWING THE MEETING, UNAKITAN HELD AN UNRELATED
PRESS CONFERENCE IN WHICH HE ANNOUNCED A SURPRISINGLY STRONG
PRIMARY SURPLUS FOR THE MONTH OF AUGUST. END SUMMARY.


2. (SBU) IN HIS FIRST MEETING WITH FINANCE MINISTER KEMAL
UNAKITAN, THE AMBASSADOR SAID THAT TURKEY NOW HAS A GREAT
OPPORTUNITY TO TAKE ADVANTAGE OF THE RECENT RUN OF FAVORABLE
ECONOMIC NEWS: IF TURKEY CAN COMPLETE THE IMF'S SIXTH REVIEW
IN A TIMELY MANNER, MAINTAIN FISCAL DISCIPLINE, AND RESOLVE
SOME INVESTMENT DISPUTES IT WOULD BE IN A GOOD POSITION. THE
AMBASSADOR NOTED, HOWEVER, THAT MANY AMERICAN INVESTORS HAVE
SIGNIFICANT PROBLEMS.


3. (SBU) WHEN UNAKITAN ASKED FOR SPECIFICS, THE AMBASSADOR
CITED THE MOTOROLA CASE, AS WELL AS THE ZONING PROBLEM FACING
CARGILL. POINTING OUT THESE WERE JUST TWO OF MANY. UNAKITAN
SAID HE COULD NOT COMMENT ON MOTOROLA. ON CARGILL, HE
CLAIMED IGNORANCE OF THE PROBLEM, SAID HE HAD WORKED WITH
CARGILL AS A BUSINESSMAN AND WOULD BE OPEN TO MEETING WITH
THEM. UNAKITAN WENT ON SAY THAT HE HAD TRIED TO RESOLVE
PROBLEMS FOR AMERICAN COMPANIES BEFORE--NOTABLY FOR
CITIBANK--AND THAT HE WAS WILLING TO PLAY THAT ROLE,
INCLUDING FOR PROBLEMS OUTSIDE HIS AREA OF RESPONSIBILITY.
THANKING UNAKITAN FOR THE OFFER, THE AMBASSADOR STRESSED THE
IMPORTANCE OF RESOLVING BUSINESS PROBLEMS, AND PREDICTED
DISPUTE RESOLUTION WOULD HELP ATTRACT INVESTORS FROM ALL
COUNTRIES, NOT JUST FROM AMERICA.


4. (SBU) ON THE ECONOMIC REFORM PROGRAM, UNAKITAN INSISTED
THAT TURKEY WOULD PURSUE THE PROGRAM BECAUSE IT IS GOOD FOR
TURKEY, NOT BECAUSE IT IS THE IMF'S. IF AN EXTERNAL SHOCK CAN
BE AVOIDED, UNAKITAN WAS CONFIDENT THE GOVERNMENT COULD BRING
DOWN INFLATION AND THE DEBT-TO-GDP RATIO, AND ACHIEVE LOWER
INTEREST RATES AND SUSTAINABLE GROWTH. THE KEY WAS FISCAL
DISCIPLINE AND ACHIEVING THE 6.5 PERCENT PRIMARY
SURPLUS-TO-GDP RATIO FOR 2003. UNAKITAN ALSO SAID THAT THE
PRIME MINISTER WAS STRONGLY COMMITTED TO THE PROGRAM, AND
THAT THE GOVERNMENT IS TRYING TO ACCELERATE THE PRIVATIZATION
PROCESS. UNAKITAN JOKED THAT HE IS THE MOST UNPOPULAR PERSON
IN THE GOVERNMENT BECAUSE HE IS ALWAYS SAYING NO TO PEOPLE
WHO WANT TO SPEND MONEY, AND HE INSISTS ON REVENUE
COLLECTION. UNAKITAN ADMITTED THAT IT WAS EASY TO TALK ABOUT
IMPLEMENTING THE REFORMS BUT VERY DIFFICULT TO DO.


5. (SBU) THE AMBASSADOR URGED UNAKITAN NOT TO WORRY TOO MUCH
ABOUT BEING POPULAR, NOTING THAT IN U.S. HISTORY UNPOPULAR
POLITICAL FIGURES HAD LATER ACHIEVED RESPECT FOR HAVING DONE
THE RIGHT THING. WITH REGARD TO THE DANGER OF EXTERNAL
SHOCKS, THE AMBASSADOR POINTED OUT THAT THE U.S. FINANCIAL
ASSISTANCE WAS INTENDED TO SHIELD TURKEY FROM PRECISELY SUCH
SHOCKS RELATED TO THE WAR IN IRAQ. THE AMBASSADOR ALSO
THANKED UNAKITAN FOR HIS MINISTRY'S COOPERATION WITH TREASURY
TAX ADVISORS AND ON TERRORISM FINANCE. UNAKITAN SEIZED ON
THE LATTER POINT TO SAY COMBATTING FINANCIAL CRIMES IS VERY
IMPORTANT TO THE GOT AS WELL, WHICH HAD COME TO POWER SEEKING
TO FIGHT CORRUPTION.


6. (SBU) FOLLOWING THE MEETING, UNAKITAN HELD AN UNRELATED
PRESS CONFERENCE, IN WHICH HE ANNOUNCED A PRIMARY SURPLUS OF
TL 15.5 QUADRILLION (USD 11.2 BILLION) FOR JANUARY THROUGH
AUGUST 2003. THIS AMOUNTS TO 76 PERCENT OF THE FULL YEAR
PRIMARY SURPLUS TARGET AND BEATS ANALYSTS EXPECTATIONS.
NOTE: THE IMF'S DEFINITION OF THE PRIMARY SURPLUS TYPICALLY
DIFFERS FROM THE GOT'S, SUCH THAT THESE NUMBERS ARE NOT THE
FINAL NUMBERS THE IMF WILL USE. END NOTE. OF THE TL 15.5
QUADRILLION EIGHT-MONTH SURPLUS, FIVE QUADRILLION WERE IN THE
MONTH OF AUGUST ALONE. UNAKITAN ATTRIBUTED THIS SURPRISINGLY
STRONG AUGUST PERFORMANCE LARGELY TO BONUS PAYMENTS TO PUBLIC
WORKERS BEING PAID IN JULY INSTEAD OF AUGUST AND TO IMPROVED
TAX RECEIPTS FOLLOWING THE "TAX PEACE" LAW.
EDELMAN

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