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Cablegate: Turkish Regional Economic Integration Ideas

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Dianne Wampler 10/27/2006 09:57:10 AM From DB/Inbox: Dianne Wampler

Cable
Text:


UNCLAS SENSITIVE ANKARA 06122

SIPDIS
CX:
ACTION: ECON
INFO: RAO FAS MGT PMA FCS POL DCM AMB CONS PA

DISSEMINATION: ECON /1
CHARGE: PROG

APPROVED: ECON:TGOLDBERGER
DRAFTED: ECON:TGOLDBERGER
CLEARED: NONE

VZCZCAYI867
RR RUEHC RUEHXK RUCNCIS RUEHSF RUEHBM RUEHTH
RUCPDOC
DE RUEHAK #6122/01 2991458
ZNR UUUUU ZZH
R 261458Z OCT 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 9624
INFO RUEHXK/ARAB ISRAELI COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUEHSF/AMEMBASSY SOFIA 1087
RUEHBM/AMEMBASSY BUCHAREST 0918
RUEHTH/AMEMBASSY ATHENS 7542
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 ANKARA 006122

SIPDIS

SENSITIVE

USDOC FOR ITA/MAC/CHERIE RUSNAK
USTR FOR LISA ERRION

E.O. 12958: N/A
TAGS: ETRD ECON BEXP PREL TU
SUBJECT: TURKISH REGIONAL ECONOMIC INTEGRATION IDEAS

REF: ANKARA 5781

SENSITIVE BUT UNCLASSIFIED.

1. (SBU) Guven Sak, the multitasking guru behind the
Turkish-Israeli-Palestinian effort to develop the Erez Industrial
Zone in northern Gaza, is widening his sights to new areas for
economic and business cooperation between Turkey and its less
developed neighbors. Backed by TOBB, the powerful national business
federation, Sak is brainstorming ideas for integrating Turkey's
economy with Mediterranean and Gulf states through an expanded "QIZ"
initiative, with the Black Sea littoral through the Black Sea
Economic Cooperation (BSEC) Business Council, and with the Caucasus
and Central Asia in cooperation with the U.S. Chamber of Commerce's
new Eurasia Business Platform. Sak argues that regional integration
contributes to Turkey's economic stability and that good ties with
its often troubled neighbors will make Turkey a more attractive
partner for EU membership. On October 19, Sak outlined for us the
various initiatives that he and his team at the Ankara-based
Economic Policy Research Institute (www.tepav.org.tr) are developing
in cooperation with TOBB's new "University of Economics and
Technology." He sees economic cooperation with the United States as
playing an important role in moving all of these initiatives
forward.

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-----------------------------
Not Giving Up on Erez Project
-----------------------------

2. (SBU) Back from a September visit to Tel Aviv, Gaza and
Jerusalem -- his third this year -- Sak remains convinced of the
potential of TOBB's Erez initiative to provide jobs and income for
Gazans. Sak said he was well received by Israeli officials at high
levels. In what he said was a new development since the war with
Hizballah, Sak found them interested in mechanisms for fostering
economic and institutional development in Gaza and the West Bank.
This was particularly true meeting with Defense Ministry officials
to discuss security arrangements for the Erez crossing. At the same
time, he lamented that some officials, notably in the Finance
Minisry, did not understand that encouraging Palestinian development
meant streamlining complex tax transfer arrangements and providing
other incentives for Palestinian areas, even if such measures are
not available within Israel.

3. (SBU) Sak said the next step is for the Palestinian Chamber to
decide to attend the next "Ankara Forum" (the TOBB-sponsored
grouping of Israeli, Palestinian, and Turkish business associations)
scheduled for November in Tel Aviv. Sak said this required
political courage and President Abbas's support, which was not yet
there. He also volunteered that stronger leadership was needed in
the Palestinian Chamber, saying he had heard that former economy
minister Mazen Sinokrot would be a good advocate for Palestinian
business interest in peace and job creation. Sak said U.S. support
could be helpful in encouraging Israel to include the Erez crossing
in new security arrangements for Gaza crossings.

-----------------
A New QIZ Concept
-----------------

4. (SBU) But TOBB's Erez scheme is just a start. During a June
trip, Sak stopped in Amman to visit the Tajammouat QIZ, where he met
zone managers and a Turkish investor and got a better idea of the
challenges of the QIZ program, especially meeting the 35% local plus
Israeli value-added requirement for products to enter the United
States duty-free. Sak said he is looking for ways to encourage
Turkish trade and investment with the Arab world. He thought that
U.S. duty and quota free access for goods produced in regional
Turkish-sponsored "Special Economic Zones" on the Erez model could
be such an incentive. Analogously to the QIZ program, which is
limited to joint production with Israeli companies, Sak suggested
that local content from countries with which the U.S. has FTA's
could be cumulated with Turkish and U.S. content in such zones so as
to meet more easily the 35% value-added duty free requirement. He
thought this would overcome the challenge of turning new U.S. FTA's
into the viable export and job generators and would encourage
Turkish investment and technology and management transfer to the
region. Sak said he was working on a proposal that he hoped to
share with the Turkish MFA before the next meeting of the
U.S.-Turkey Economic Partnership Commission.

------------------------------
Black Sea Business Cooperation
------------------------------

5. (SBU) An MFA official told us recently that even if Black Sea
Economic Cooperation (BSEC) was not producing much in the way of new
initiatives, at least it was obliging neighbors like Armenia,
Azerbaijan, Greece, and Turkey to sit in the same room and talk to
each other. Sak said that's not enough. He is working with the
BSEC Secretariat on ideas to activate and strengthen the BSEC
Business Council, looking to APEC's Business Council as a model. As
a first step, he said Turkey will encourage the creation of a
"registry" of companies doing business in the region. This would
help, he hoped, create new business-to-business ties and foster a
stronger business constituency for shared interests in the region.
He is discussing this with Turkish officials in the run-up to
Turkey's rotational BSEC leadership next year.

---------------------------------------
Excited About Caucasus and Central Asia
---------------------------------------

6. (SBU) Sak is looking forward to participating in a November 14
meeting in Istanbul of AmChams from Turkey, the Caucusus and Central
Asia organized by the U.S. Chamber of Commerce's new "Eurasia
Business Platform." He said TOBB and Turkish companies are already
very active in this region and that there are diverse opportunities
for cooperation with U.S. companies. Like the U.S. Chamber, which
recently published a study of regional transportation logistics, Sak
thinks development of regional trade networks is key to the region's
development. He understood that USAID and the EU were working on
trade facilitation projects, and said TOBB is working with its
counterpart Kazakh business organization to develop a proposal for a
privately-managed border crossing. This model, which works on a BOT
basis, has worked in Turkey as a tool for streamlining border
procedures and strengthening incentives to boost cross border trade
flows. On a longer-term track, Sak is studying potential land
routes between Turkey and the east that avoid Russian and Iranian
territory using trans-Caspian ferries.

--------------------------------------------- --
Opportunities for Regional Economic Discussions
--------------------------------------------- --

7. (SBU) Relieved of responsibilities as the public member of the
Monetary Policy Council and having turned over ERPI's programs on
domestic economic reform to former Central Bank Governor
Serdengecti, Sak is able to give his full time attention to regional
integration schemes. He thinks big, but also in concrete, practical
steps. Turkey's economic dynamism and its advanced business sectors
are creating new opportunities for Turkish companies to contribute
to regional economic stability and growth. Sak's ideas about
fostering trade and investment networks are a welcome alternative to
Turkey's traditional mercantilist approach, as epitomized by Trade
Minister Tuzmen's "neighbors policy." Sak sees economic cooperation
with the U.S. Government and companies as prerequisites to the
success of these initiatives, which should provide grist for a
regional discussion within the U.S.- Turkey Economic Partnership
Commission.
WILSON

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