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  TURKEY

REPUBLICAN REFERENCE

Area (sq.km)
770,760

Population
66,493,970

Capital
Ankara

Currency
Lira

President
Ahmet Necdet Sezer

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Background:
Turkey was created in 1923 from the Turkish remnants of the Ottoman Empire. Soon thereafter the country instituted secular laws to replace traditional religious fiats. In 1945 Turkey joined the UN and in 1952 it became a member of NATO. Turkey occupied the northern portion of Cyprus in 1974 to prevent a Greek takeover of the island; relations between the two countries remain strained. Periodic military offensives against Kurdish separatists have dislocated part of the population in southeast Turkey and have drawn international condemnation.

Update No: 061 - (23/05/02)

Turkey is an absolutely key geopolitical player right now, just as it was throughout the Cold War. At the junction of three of the world's main arenas of power, two continents, Europe and Asia, and the Middle East, it is now vital to the campaign against the 'axis of evil.'

Combating the 'axis of evil'
This phrase has attracted a lot of criticism, the US strategists lumping together two improbable allies in Iran and Iraq, implacable foes in the 1980s and either side of the Shi-ite-Sunni divide of Islam. North Korea is an incongruous appendage, and Cuba recently even more so. For the word 'axis' now carries a definite connotation of an alliance of malign force, as of Nazi Germany and Fascist Italy. There is of course nothing of the kind between the aforementioned states.
Yet Iraq is strongly suspected of weapons of mass destruction and refusing to allow UN inspectors into the country to check the situation. The Bush Administration is now apparently determined to overthrow Saddam. The only conceivable bases for the US and the UK to operate from are those in NATO ally, Turkey, or Kuwait.
The leader of neither country is eager for any assault on their troublesome neighbour. They know that Saddam is not developing terror weapons with them in mind. The Kuwaitis fear an Islamic fundamentalist backlash if they allow Western dispositions on their territory again, the Turks an independent Kurdistan emerging in the north of a post-Saddam Iraqi space.
The US has of course huge leverage with both of them and could yet overcome any objections if serious military action is contemplated. Vice-president Cheney was in Ankara meeting Premier Bulent Ecevit in April. What was discussed was of course top secret. But preparations against Saddam were no doubt top of the agenda.
It is perhaps no coincidence that the IMF has suddenly become optimistic about the Turkish economy, releasing a US$1bn tranche. This brings the total the IMF has extended to Turkey to US$9bn since the financial crisis in early 2001. 
The Turks are recoiling from a massive economic crisis that broke out last year. GDP is down by 7% year-on-year and inflation is at 73.1%. With a huge trade deficit of over US$9bn, the economy is in poor shape.

Closer to Europe
What Ankara would most like to see is movement on entry with the EU. Negotiations are opening up in the course of the coming Spanish presidency. But there are many hurdles. The very size of the Turkish population is number one at 65-70m, compared with an average eight million for other candidate entrants. Turkey's dubious human rights record is another, involving allegations of torture and brutal oppression of the 20m Kurds, plus unnecessarily harsh treatment of the Islamicist political party, which has been banned.
The omens are good for improvements here. The 550-seat parliament has approved measures to make it more difficult to ban political parties.
One obstacle to EU entry has been largely removed, the outright opposition of Greece. Rapprochement between Ankara and Athens has been under way for some time. A possible peace accord in Cyprus is bringing the Greeks and Turks on the island together. Premier Bulent Ecevit and Foreign Minister Ismail Cem are adamantly pro-opening up to Greece, which means compromises all round, including over disputed Aegean islands.

Ecevit's health scare
Premier Ecevit, aged 76, had a health scare in mid-May and may well not last out his term until 2004. His dominance of his own party, Democratic Left, and the 3-party coalition is crucial to the stability of the government. His premature departure from the scene would lead to a political crisis, whose outcome is difficult to foretell.

A brighter future
Things can only improve for the Turks. At least the IMF is committed to a massive credit programme of US$16bn or more, the largest on its books. 
The economy minister, Kemal Dervis, is much respected abroad and is pushing economic reforms. The future looks rather brighter than last year. 

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AVIATION

US Boeing is all smiles with tender win in Turkey

US aerospace manufacturer, Boeing, has been awarded a US$2bn tender to supply early warning aircraft to Turkey, Integrated Defence Systems Vice President and general manager, Dr Roger Roberts, announced, New Europe has reported. Boeing participated in the tender against Israeli company, Elta Electronic Industries of the Israel Aircraft Industries (IAI) group, which offered the Phalcon. The tender was for up to seven aircraft. "Turkey chose us as the winner and accepted our bid to supply early warning planes on the Boeing 737 platform," Roberts said at a press conference for the global defence industry press in the US. "We are now negotiating the contract terms. We have business opportunities to supply these aircraft in several other countries, including South Korea," the media quoted him as saying.
IAI's failure follows another loss to Boeing in the US$1.7bn tender to supply four early warning planes to Australia. The first customer of Boeing's early warning planes, Australia pressured Turkey to select the Boeing planes so as to reduce their own costs through economies of scale. Also, a wider deployment of planes will facilitate the accumulation of experience and operational guidelines.
The loss of the Australian tender was a matter of concern for the Israeli defence establishment. Worries are that a bigger supply by Boeing and its partner, Westinghouse, which supplied the radar, will greatly undermine its own status on the global market. The Phalcon has so far only been supplied to Chile, while advanced negotiations to supply the planes to India are currently under way. The US torpedoed the supply of the planes to China.

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FOREIGN ECONOMIC RELATIONS

Chinese Prime Minister visits with view to enhance economic ties

Chinese Prime Minister Zhu Rongii arrived in Turkey recently for a three day visit with the aim of proving trade relations between the two countries.
The first Chinese premier to visit Turkey in 16 years, Zhu was expected to raise the issue of China's Turkic-speaking Muslim Uighur minority during talks with Turkish leaders such as Prime Minister Bulent Ecevit and Deputy Prime Minister Develet Bahceli. Beijing has previously accused anti-Chinese groups in Turkey of supporting Muslim separatists in China's northwest. However, Turks have also expressed concern over China's treatment of the Uighur minority "I hope my visit will help to expand the friendship and cooperation between our countries," Zhu was quoted by Associated Press as saying.
With Turkey pinning its hopes on its tourism sector and hopeful of attracting visitors from China, talks were also expected to be held on cooperation in this sector. The Chinese premier's visit is part of a wider tour that will also take him to Egypt and Kenya.

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FOREIGN LOANS

Turkey, World Bank sign US$1.35bn loan agreement

State Minister Kemal Dervis and World Bank Vice-President Johannes Lynn signed on 24th April the public and finance sector adjustment loan (PFPSAL2) worth of US$1.35bn, Anatolia News agency has reported. 
Speaking at the signing ceremony, Lynn said that the World Bank expected the recovery of Turkish economy by the implementation of the economic programme. 
"The programme is on the right track. The World Bank tries to support the social dimension of the programme, meaning issues of agriculture, social support systems, education and health. Turkey is on the way to recovery," Lynn said. 
State Minister Dervis said that the support of the World Bank to the economic programme is very important. The World Bank loan aims to support medium-term reform programmes in financial and public sectors. The World Bank Executive Board approved the loan on 16th April. The loan will be released to Turkey in three tranches worth of US$ 450m. 
The financial sector part of PFPSAL-2 aims to support the reforms undertaken in public banks and to strengthen the banking regulations carried out by the Banking Regulatory and Supervisory Agency. The public sector part of the loan aims to rationalize public expenditures and investment programmes and to contribute to regulations aiming to develop an effective administration in public sector.

IMF approves US$1bn drawing for Turkey

Turkey is striving to turn around its economy after decades of weak performance and to address deep-rooted structural problems that remain a drag on growth. These structural issues are the focus of a new reform effort undertaken with the support of a three-year Stand-By arrangement approved on February 4th, for a total amount of SDR 12.8bn (about US$16bn). On April 15th the IMF Executive Board completed its first review of Turkey's economic performance under the Stand-By credit, enabling the country to draw up to SDR 867.6m (about US$1bn) immediately, it was reported in the IMF Survey of April 29th.
After the Executive Board discussion, Anne Krueger, IMF First Deputy Managing Director and Acting Chair, said: "The Turkish authorities have made considerable progress in implementing their ambitious economic reform programme. In the past, financial indiscipline and structural weaknesses had prevented Turkey from realising its economic potential and created an environment of highly volatile growth and inflation over several decades. The programmes addresses these weaknesses and should reduce the vulnerability of the economy to shocks. It represents a further decisive step away from the interventionist policies of the past and will lay the groundwork for a more consistent economic performance in the future.
"In this regard, the positive momentum of macro-economic adjustment and structural reform hat the authorities have maintained since last fall have been encouraging. The authorities efforts have been rewarded by a substantial decline in interest rates, a strong balance of payments position and an associated appreciation of the Turkish lira and a drop in inflation and in inflation expectations. Despite these positive developments, downside risks remain. In particular, the timing and strength of the recovery in output are as yet uncertain, and financial markets remain alert to the possibility of further shocks. Unwavering implementation of the programme with the undivided support of the government coalition is needed to bring the Turkish economy onto a sustainable growth path.
"Fiscal developments remain on track, but strict budget implementation must continue to ensure debt sustainability. While the authorities remain firmly committed to the target of a public sector primary surplus of 6.5 per cent of GNP for 2002, they need to remain mindful of possible downside implementation risks and stand ready to take further offsetting measures to safeguard the primary target.
"To be sustainable, the achievement of the overall budget targets will need to be underpinned by decisive reforms in public employment and budget mechanisms. In this regard, efforts to improve expenditure management, streamline tax policy, and strengthen revenue administration are encouraging. On the tax side, it will be important to avoid complicating the tax code with additional incentives. On the expenditure side, credible estimates of over-staffing in state economic enterprises are required to lay the basis for the much needed downsizing in this sector."

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FOREIGN INVESTMENT

Treasury launches web site to attract foreign investment

The Treasury Undersecretariat opened an internet web page to increase direct foreign investments in Turkey, Anatolia News Agency has reported. 
Releasing a statement on 3rd May, the treasury said that internet services would enable it to directly and rapidly reach foreign investors. 
Noting that it had opened a web page "www.investinginturkey.gov.tr" to inform investors, treasury said that its web page "www.hazine.gov.tr" had also a link to this web page under the title "Investment in Turkey". 
It added that through the e-mail on the web page, investors had the opportunity of conveying their questions and opinions about the problems they faced during process of investment in Turkey and within scope of the reform programme for improvement of investment in Turkey.

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MINERALS & METALS

Government calls for higher private investment in boron

Turkish State Minister, Sukru Sina Gurel has called on the private sector to invest in the country's rich boron reserves, as the state itself does not have the means to do so. Gurel said Eti Holding, the operator of Turkey's boron mines, has attained important shares in the world raw and refined boron markets. He added, however, that prices of its products were low as they were not end products.
Turkey is losing a substantial value added because of that, the state minister told a news conference in Ankara, the Turkish Daily News reported. "They could make joint investments with Eti Holding, they could make investments on their own, and we would give logistical and technological support to them," Gurel explained, referring to prospective private investors.
Turkey's boron mines were excluded from the privatisation list in 2001 due to government fears that the production of the strategic minerals might be taken over by foreigners. Turkey is believed to be sitting on 63 per cent of the world's entire boron reserves.
The government has specified 10 basic boron products for private sector investment. Moreover, once work is completed on other types of products they too will be open for private enterprise, Gurel said.
The minister further noted that the state would not offer a specific incentive to such investors. Asked whether the private sector had shown any interest, the minister said there were too many of them taking interest in the wrong fields.

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