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Cablegate: Business Optimism in Small Anatolian City

VZCZCXRO6193
RR RUEHDA
DE RUEHAK #3658/01 1721316
ZNR UUUUU ZZH
R 211316Z JUN 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 6745
INFO RUEHIT/AMCONSUL ISTANBUL 0847
RUEHDA/AMCONSUL ADANA 0901
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 ANKARA 003658

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN TU
SUBJECT: BUSINESS OPTIMISM IN SMALL ANATOLIAN CITY

REF: (A) ANKARA 3656 (B) ANKARA 2673 (C) 05 ANKARA 6326

1. (SBU) Summary: Afyon, three hours southwest of Ankara, is a
central Anatolian city of 150,000, home to marble mines and Turkey's
licit opium production. A recent visit to Afyon revealed a city
with extensive commercial ties to the U.S. that is trying to build
up its tourism industry. Businessmen and industry experts told us
that, despite successful marble and food production sectors,
uncertainties over the exchange rate and the overall economic
situation loom. End summary.

--------------------------------------
AFYON'S LIFEBLOOD: THE MARBLE INDUSTRY
--------------------------------------

2. (SBU) Afyon is one of Turkey's largest marble-producing regions,
with over 400 local businesses involved in the sector. Several
marble mines are located in Iscehisar, 20 kilometers northeast of
Afyon's city center. Melih Yurter, president of Afyon's Chamber of
Commerce and Industry, told us that 20 percent of Turkey's marble
exports come from within Afyon's provincial borders and nearly 70
percent of these exports are destined for the U.S.

3. (SBU) Hakan Emre, general manager of marble producer Tureks, told
us that Afyon's smaller marble companies lack the infrastructure to
make international export contacts, leaving them vulnerable to
swings in local demand. Larger companies subcontract production to
the smaller firms. Emre noted that competition in the U.S. market
brings prices down, but said that he wants to increase the U.S.
share in his company's portfolio because U.S. demand is
ever-increasing.

---------------
FOOD PRODUCTION
---------------

4. (SBU) Second only to marble, food production is an increasingly
important part of Afyon's local economy. Yurter told us that
one-third of Istanbul's meat consumption comes from Afyon. The
region is known for its sausage and cream, and it is home to sugar
and sugar beet factories. Yurter told us that 22 percent of
Turkey's eggs are produced in Afyon, and that poultry production is
back to normal after the country's avian influenza outbreak earlier
this year. Yurter noted that, although there were no incidents in
Afyon, the outbreak had a psychological impact.

5. (SBU) Afyon, whose name means "opium" in Turkish, is also home to
Turkey's largest poppy and alkaloid producing plant (ref A).
However, Yurter told us that the plant does not have a significant
economic impact on the province.

---------------------------
THERMAL TOURISM ON THE RISE
---------------------------

6. (SBU) Yurter told us that the Ministry of Culture and Tourism
recently identified four different thermal areas in the province,
and will be offering incentives for tourism development. Afyon is
already home to two thermal resorts, with plans in the works to
construct a third in the coming year. Yurter explained that Afyon
has adapted the traditional "hamam" (Turkish bath) to the more
modern "spa" culture. He views thermal tourism as one of the areas
of highest potential growth in the province. The Chamber of
Commerce and Industry is also looking for ways to promote tourism to
the region's historic ruins and picturesque rock structures.

-----------------
FUTURE CHALLENGES
-----------------

7. (SBU) Afyon's businesses are feeling the impact of recent
volatility. Emre told us that these uncertainties have affected his
industry, saying that keeping an eye on the economy and exchange
rate is "like a second job for us." Yurter, on the other hand,
expressed optimism regarding the recent "correction" in the value of
TL, due its positive impact on Afyon exporters. Yurter listed high
energy and labor costs as major problems for Afyon industry,
especially given increasing competition from China.

-------
COMMENT
-------

8. (SBU) Given its location on the road to the Mediterranean resort
town of Antalya, Afyon has tourist potential. Although economic
uncertainty affects Afyon as it does the majority of Turkish cities,
both Emre and the members of the Chamber of Commerce and Industry
were relatively upbeat about the situation in the province and
prospects for the future.


ANKARA 00003658 002 OF 002


WILSON

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