Cablegate: Commerical Developments in Se Turkey

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




E.O. 12958: N/A

1.(SBU-BUS SENS) Summary: The business mood in
the southeast Turkey commercial community remains
downbeat with deep concerns about cotton prices
and persistently high unemployment typifying most
commercial discussions. There is an element of
hope voiced by some border provinces regarding
future export opportunities to Iraq and Syria
which is somewhat tempered by concerns about
security in Iraq and as yet unclear outcomes in
the Iraq reconstruction major bidding arena for
which many southeast Turkish businesses aspire to
be significant subcontract recipients. The EU is
also interested in commercial development in the
region, adding a new EU Information Center in
Adana on January 14 to its existing EU
Information Center in Gaziantep. End Summary.

Cotton (prices) are king - and erasing already
thin margins

2. (SBU BUS) Recent conversations with both
major Adana and Gaziantep textile producers, such
as BOSSA and SANKO, reveal broad concern about
very high cotton raw material prices brought on
by major Chinese buying. For those companies
whose leading textile outlets are in the U.S.,
the concurrent drop in the value of dollar-
denominated revenues is only squeezing margins
more and even major textile producers in the
region already are predicting, at best, break-
even to losing years in 2004. A leading cotton
importer commented to PO recently that the sudden
recent spike in cotton raw materials was
unanticipated by most -even major - textile
producers and was hitting regional textile
producers' bottom lines very hard. PO
discussions with major producers corroborate this
importer observation. The major importer also
observed that Chinese purchases of synthetic
textile raw material is also causing similar
consternation in the non-cotton textile producing
sector in Southeast Turkey. He summed up the
situation by saying, "four-fifths of the textile
people (in the southeast) are scared by the raw
material price increases and the other fifth are
just plain fatalistic about where the textile
market is headed."

Gazing toward border trade for economic renewal

3. (SBU SUS SENS) Municipalities and chambers of
commerce and industry throughout southeast
Turkey are concerned about persistent high
unemployment and lack of job creation, appealing
for special treatment in Iraq reconstruction
business because of perceived losses from the
last decade of sanctions imposition on Iraq.
Business leaders make similar appeals, but
grudgingly seem to accept explanations about
transparency and open competition in the Iraq
reconstruction process sooner than their local
government counterparts.

4.(SBU BUS SENS) Business leaders in Adana,
Mersin, Iskenderun, Antakya and Gaziantep have
voiced great interest in developments in Iraq
reconstruction contracting and some
disappointment upon realization that few, if any,
of them are sufficiently large to qualify for the
major contracts on the immediate Iraq
reconstruction . Many, however, are looking
forward to public award of the major contracts so
that they can strategize to attract significant
subcontract work. Others, while still very
interested in gaining subcontracts, seem to be
more blindly relying on southeast Turkey's
proximity to Iraq or unspecified "natural
advantages for Turkish business in Iraq" to
deliver work to them.

Some Turkish companies already exploring
footholds in Iraq

5.(SBU SUS SENS) Consulate personnel have met
with about a half dozen contacts in the last
month who are already doing work in Iraq or
setting up offices to perform contracts and/or
find Iraqi partners for future joint ventures.
Some of these contacts are performing limited
contracts for the U.S. military, such as
providing a motor pool in Kirkuk, or catering for
a military unit. Most of these business
activities seem perceived as test projects by the
Turkish companies, many of whom have experience
in military contracting on Incirlik air base.
The Adana Chamber of Commerce claims that two
million dollars of commerce have taken place
between Adana and Iraq this year, but details on
that trade flow have not been forthcoming.

6.(SBU BUS SENS) Other companies and chambers of
commerce are thinking longer-term and setting up
offices in Iraq to host Turks looking for
businesses and contracts to serve as long-term
business relationships. The Sabanci Group soon
will set up in or near Irbil while the Adana
Chamber of Commerce is looking to establish a
"guest house for businessmen" in or near Kirkuk.
Other Gaziantep and Silopi consulate contacts are
already setting up small textile production
businesses and investing in small real estate
ventures and construction, with local Iraqis, as
far south as Mosul. These Turkish textile
producers are asking whether there will be quotas
on textiles produced in Iraq that they might wish
to sell in the U.S., while the real
estate/construction investors are interested in
OPIC coverage of their assets sent to Iraq for

Talking seriously about Syria

7.(SBU BUS SENS) Since even before the recent
Assad visit to Ankara, local southeast Turkey
press has buzzed with news of Syrian and Turkish
border trade meetings. Most have centered on
visits to regional chambers of commerce by the
Aleppo chamber of commerce. Interest in
increased border trade seems highest in Hatay,
Gaziantep, Kilis, and Adana provinces. Still,
despite the talk of future increased trade and
sincere mutual Turkish-Syrian interest in its
development, few contracts seem to have
materialized. The effort seems to first aim to
legitimize ongoing grey area cross-border traffic
as a first step toward expansion into new
business sectors. To this end, the Syrian trade
delegation in Gaziantep will become a consulate
soon and the Aleppo Chamber of Commerce will
start "sister chamber" relationships in Adana,
Gaziantep and Antakya.

8.(SBU BUS SENS) Additionally, (presumably)
wealthy Syrian consumption of (relative) Turkish
luxury goods is apparent throughout Hatay, where
Mercedes with heavily tinted windows and Arabic
license plates, are frequent sights and Adana's
small mall, where Arabic is now a frequently
overheard language at dress shops, perfume
counters and toy stores, as well as the Real and
Carrefour department stores. The Real has even
set up a diplomatic exceptions window to cater to
these Syrian customers who seem to have
diplomatic credentials as the information at the
new counter is in Arabic. (N.B. The U.S.
Consulate is the only diplomatic mission in
southeast Turkey other than the newly-opening
three-person Syrian consulate in Gaziantep, two
hours drive away with a similar small mall.)

EU interested, but in what?

9.(SBU BUS SENS) The EU is also interested in
commercal development in the region, adding a
new EU Iformation Center in Adana on January 14
to its xisting EU Information Center in
Gaziantep. Cosulate personnel attended the
office's opening o find that no EU personnel
were in attendance a the opening. Turkish
organizers were mildly dsappointed about the
lack of EU personnel involement, but expained
that EU interest this weekwas inEU Preident
rodi's trip to Ankara. Acoringto severl f
te offices' organizers, th Adana office is one
of the eight offices apprved for Turkey by the
EU. They further explaind that eleven offices
were proposed by Turkish rganizers, but the EU
refused to support the thee proposals which
asked to be coordinated throuh the Turkish
government in Ankara. In fct,sveral Turkish
organizersfousd n te esiability of "a
direct line to Brussel trogh heoffice" and
the advantage that they thought such contact
could have for Adana in the long-term. They
noted, however, that the "direct line" came at a
cost, at least for for now in pride, because EU
organizers had declined to provide much
information technology and other explanatory
information about the EU and its structures,
explaining that EU interest in the office was
limited to collecting commercial information on
southeast Turkish small and medium size
enterprises (SME's) for EU commercial
assessments. Turkish event organizers said that
they were also chagrined to learn that, by EU
commercial standards, there are few, if any, non-
SME's in Turkey.

© Scoop Media

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