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Cablegate: Participants Positive About Turkey's Potential At

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. Summary: At the third annual meeting of Turkey's
Investment Advisory Council, participants were generally
optimistic about Turkey's current investment climate and its
future potential. Turkish PM Erdogan emphasized the GOT's
commitment to making Turkey an attractive center for global
investment while State Minister Babacan touted recent
structural reforms as the basis for Turkey's stronger economy
(or less vulnerable economy, or more attractive market for
FDI). Turkey's Foreign Investor's Association agreed with the
positive atmosphere portrayed in media reports and stated
that, for the most part, foreign investors in Turkey are
optimistic about future potential. End summary.

2. The third meeting of the Turkish Investment Advisory
Council (IAC) took place in Istanbul on June 28 - 29. PM
Erdogan, State Minister Ali Babacan, Finance Minister Kemal
Unakitan, Trade and Industry Minister Ali Coskun, IMF Deputy
Managing Director Anne Krueger, and representatives from the
IMF, the World Bank, the European Investment Bank, and twenty
multinational companies participated in the event.

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3. According to press reports, the general mood of the
meeting was relatively positive, with the participants
praising the GOT's performance in realizing the commitments
it made in previous IAC meetings. Investor concerns focused
on limited competition, judicial barriers, lack of IPR
protection and the administrative barriers they face in
Turkey. As a result of the meeting, the participants issued
a Declaration of Outcomes, which calls for the GOT to focus
its efforts on increasing privatization and deregulation,
improving research and development, innovation, and
technology adoption and the use of quality standards, and
deepening the financial market developments and efforts to
reduce the informal economy. In delivering the consensus
findings of the investors, Citigroup Vice Chairman Michael
Klein went out of his way to praise the GOT for holding the
IAC, and for its accomplishments, saying "there are strong
hands on the tiller." Though there is no reason to doubt
Klein,s sincerity, there may be some connection with
Citigroup,s rumored interest in buying a bank in Turkey.

4. In his address to the council, PM Erdogan expressed the
GOT's determination to complete the economic transformation
it started. He stressed the importance of the economic and
political stability Turkey has achieved in recent years,
which have mitigated the negative effects of short-term
fluctuations in the economy. Erdogan added that preparing a
favorable investment environment and making Turkey an
attractive center for global investment was a strategic
target for the GOT.

5. State Minister Babacan stated that recent structural
reforms and successful debt management have strengthened the
Turkish economy and made it more resistant to external
shocks. He added that Turkey's international competitiveness
has increased with the overall improvement in the economy and
the GOT's 2006 FDI inflow forecast stands at between USD 13.5
and 24.2 billion.

6. Mustafa Alper, Secretary General of the Foreign Investors
Association, confirmed the press reports and said that
overall the meeting was very positive and participants were
pleased with the government's progress. He added that even
though Turkey's economy had been shaken by recent market
fluctuations, investors generally consider them temporary and
see Turkey's investment climate as healthy. He mentioned,
however, that in the margins of the meeting some participants
expressed concern about the current political debate taking
place in Turkey and its ability to affect the markets.
Overall, though, investors remain optimistic about Turkey's
potential, Alper said.

7. The participants who signed the IAC declaration are:

Muhammed A. Alshaya Alshaya, Kuwait
Jacob A. Frenkel American International Group,
Paul Matthys Arcelor S.A., Luxembourg
Jacques de Larosiere BNP Paribas, France
Charles Giancarlo Cisco Systems, USA
Michael Klein Citigroup Inc., USA
Phillippe Varin Corus Group, UK-Netherlands
Paul N. Wright Eldorado Gold Corp, Brazil
Paolo Monferino Fiat S.P.A., Italy
Jacques Vincent Groupe Danone, France
Joong-Geol Kim Hyundai Motor Co, South Korea
Stef Wertheimer ISCAR, Israel
Hans-Joachim Koerber Metro AG, Germany
Yasuo Hayashi Mitsui, Japan
Darryl Edwards Nortel Networks Corp., Canada
Johannes Feldmayer Siemens AG, Germany
Yoshimasa Ishii Toyota Motor Corp, Japan
Diego Beilacqua Unilever N.V., Netherlands


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