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Cablegate: Turkey Investment Issues: Good News for Cargill,

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

UNCLAS SECTION 01 OF 03 ANKARA 004332

SIPDIS

SENSITIVE

DEPT FOR E, EB/CBA AND EUR/SE
USTR FOR LERRION
TREASURY FOR OASIA - MILLS AND ADKINS
USDOC/ITA/MAC FOR DAVID DEFALCO
EXIM FOR PAUL TUMMINIA
TDA FOR SNYDER

E.O. 12958: N/A
TAGS: EINV EMIN ECPS BEXP TU
SUBJECT: TURKEY INVESTMENT ISSUES: GOOD NEWS FOR CARGILL,
MOTOROLA, MINING AND TELECOMS

REF: A. ANKARA 608
B. ANKARA 3336

Summary
-------

1. (SBU) In recent months, the Turkish Government has taken
several steps to resolve outstanding disputes with U.S.
companies and to open its economy to foreign investment. The
most notable recent step was the passage of industrial zones
legislation that Cargill believes will solve the zoning
problem at its sweetener plant in Orhangazi, but there have
also been positive developments for Motorola, as well as in
telecoms, mining and other areas. The
politically-influential Turkish Union of Chambers and
Commodity Exchanges also appears to be taking a greater
interest in promoting foreign investment, but a more
systematic effort to improve investment climate, including
resolution of other longstanding energy sector disputes,
still seems to be lacking. End Summary.

-------
Cargill
-------

2. (U) The Turkish Parliament on June 22 approved Law 5195,
amending existing industrial zones legislation. Mustafa
Sayinatac, Cargill,s Director for Corporate Affairs and
Business Development, told us June 16 that Cargill considers
this legislation to be the solution to the zoning problem at
its Orhangazi sweetener plant. In a June 12 letter to the
Ambassador (para 13), Cargill CE0 Warren Staley stated that
this legislation provided the framework necessary for a
durable solution to this issue and thanked the Embassy for
its support. The legislation is a success story in the
USG,s efforts to resolve U.S. investment problems and
contribute to a healthier investment climate in Turkey.
Since the late 1990,s, a number of senior officials at State
and other agencies have worked with several Ambassadors in
advocating for Cargill at the highest levels in the GOT.

3. (SBU) Sayinatac told us that, under the law, the Industry
and Commerce Ministry is to issue implementing regulations
within three months. Cargill will apply for designation of
its facility as an industrial zone and will then reapply for
all necessary permits. While Cargill does not anticipate any
difficulties in completing this process, we note that the
Industry Ministry has been the source of delays in moving
forward draft legislation on industrial zones, and that some
observers, including in the GOT, believe that only a
constitutional amendment will permanently resolve the zoning
issue (ref A).

---------------------
Mining Law Amendments
---------------------

4. (U) Law 5177, published in June 2004, amended existing
legislation with a view toward making mining more accessible
to foreign investment by streamlining permit requirements and
procedures and removing limits on mining on certain types of
land. In particular, environmental impact statements (EIS)
will no longer be required for exploration activities. The
law will require the Environment Ministry to complete an EIS
for non-exploration mining activities within three months of
application. It also makes it possible for mining companies
to apply for "public benefit" expropriation of lands adjacent
to those in their license areas. The Energy and Natural
Resources Ministry will now be represented on boards deciding
on land use in protected areas and designation of national
parks.

5. (U) The U.S. Newmont Mining company recently sold its
Ovacik Mine in western Turkey to a Canadian company.
However, Newmont plans to continue exploration activities in
Turkey. A Newmont representative told us recently that
continuing and redundant permit issues with the Ovacik Mine
were the main reasons for the decision to sell it.

------------------------------------
Positive Developments in Other Areas
------------------------------------

6. (SBU) Motorola: Sources at the Scowcroft group advised
EUR/SE and the Ambassador in late June that Motorola and the
TMSF have agreed in principle on the terms of a settlement on
Motorola,s nearly USD 2 billion claim on Telsim, but the
deal has not yet been finalized (protect).

7. (U) Turk Telecom Privatization: Law 5189, entering into
force early in July, removed the 45 percent limitation on
foreign participation in the upcoming privatization of the
Turk Telecom monopoly, as well as prior limits on foreign
ownership of Telsim.

8. (U) Copyright Enforcement: Legislation passed earlier
this year banned street sales of books, films and music and
gave wider authority to law enforcement agencies to intervene
against pirates without the intervention of the rightholder.
Copyright piracy appears to be moving away from open sales of
unauthorized material to "under the counter" sales of these
goods. Representatives of the publishing and film industries
in Turkey, tell us that piracy in Istanbul is down by more
than half so far this year.

--------------------------------------------- --------------
Small Progress on Other Issues Affecting Investment Climate
--------------------------------------------- --------------

9. (SBU) There has been no change in the GOT,s policy on
data exclusivity protection for pharmaceutical patents.
Howver, there has also been no formal announcement that the
implementation date of GOT's data exclusivity policy will be
in 2007, as feared by industry. Similarly, there has been no
movement toward a final decision recently in Victor and
Kristy Bedoian,s court case to annul the transfer of their
hotel in Van, or in the administrative court cases on their
residency and operating permits. In the Dillingham
international arbitration case, an Ankara court on July 19
upheld an earlier court decision approving the right of
Dillingham,s Turkish partner to withdraw funds from their
joint venture on the basis of only the Turkish partner,s
signature; however, the court also ordered an investigation
) to begin in October - into whether the Turkish partner was
owed the money withdrawn. Furthermore, there have been no
developments in long-standing energy sector disputes.

-------------------------------------------
TOBB Getting Involved in Investment Climate
-------------------------------------------

10. (U) The Turkish Union of Chambers and Commodity Exchanges
(Turkish acronym TOBB) launched a "Foreign Capital Assembly"
with the goal of attracting FDI. This body includes many
company members of the Foreign Capital Association (Turkish
acronym YASED) and is to be led by YASED Chair Saban
Erdikler, with TOBB President Hisarciklioglu serving as
Honorary President. YASED believes this new body could help
in mobilizing TOBB,s support as an institution in attracting
FDI.

11. (SBU) At the same time, there has been no progress in
implementing recommendations of the high-level Investor
Advisory Council (IAC), which held its inaugural meeting in
March. The Investment Environment Improvement Committees
(Turkish acronym YOIKK), which are charged with implementing
investment reforms, have not even convened for meetings since
November 2003. (A meeting set for July 16 has been
postponed).

-------
Comment
-------

12. (SBU) Recent developments for Cargill, Motorola, the
mining sector and others should have a positive impact on
Turkey,s global business image and may in time lead to
increased FDI inflows. However, it is one thing to pass
legislation and another for the state administration and the
courts to implement and protect the reforms embodied in these
laws. While the AK Party government appears to have (mostly)
shed the ambivalence that previous governments had about the
desirability of foreign capital, it does need to pursue a
more systematic approach and maintain a more consistent focus
on investment climate if it is to effect a turnaround in its
ability to attract FDI.
13. (U) Text of Cargill Letter

July 12, 2004

Dear Ambassador Edelman,

Our Turkish colleagues have informed me that the Industrial
Zone law passed by the Turkish Government has recently been
approved and signed by the President of the Republic.

You and a number of your predecessors are aware of the
struggle we faced over many years to overcome numerous legal
challenges to our Orhangazi sweetener facility. We are
confident that this amendment provides the framework to
permanently resolve these problems.

Cargill has always perceived the Orhangazi problem to be
linked to the overall issue of low Foreign Direct Investment
in Turkey. We hope this legislation, coinciding with strong
GDP growth and declining inflation, sends a positive message
to attract further investment flows to the Country.

I understand that you and many of your colleagues in the
Embassy have provided considerable time and effort to assist
in the resolution of this issue. I am delighted to be able
to offer sincere and heartfelt thanks to you and the team for
a job well done.

Sincerely,

Warren R. Staley
Chairman and Chief Executive Officer, Cargill
P.O. Box 5724
Minneapolis, MN 55440-5724

End text Cargill letter.
DEUTSCH

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