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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: 066 - (22/10/02)

Everybody in Turkey is awaiting the outcome of parliamentary elections on November 3rd. These could dramatically change the political landscape.

Government coalition in trouble
The crisis has blown up because the elderly premier, Bulent Ecevit, became seriously ill earlier this year and was obviously unable to carry out his duties, with several extended trips to hospital. Elections, due for April 2004, were brought forward, as defections mounted from his party to a new party under former foreign minister, Ismail Cem.
The three parties in the coalition are all receiving less than 10% in opinion polls, the threshold they must surmount for any parliamentary representation at all.
This is hardly surprising in the wake of a financial collapse and industrial downturn last year that saw GDP fall by 9.4% with a spate of bankruptcies and redundancies. GDP is now bouncing back, rising by 4.7% in the first half. But this is natural after such an event and is hardly likely to save the bacon of the beleaguered coalition. 

Markets and military in a turmoil
Both the markets and the military are showing signs of alarm at recent developments.
The markets are concerned as to whether the elections will go ahead as planned. Merrill Lynch has advised investors in its most recent report to stay cautious until the issue is decided, avoiding the lira and maintaining a middleweight position in Turkish Eurobonds.
This disquiet may be settled by the barring of the head of the Islamic-oriented party, Recep Tayyip Erdogan, the country's most popular politician, from running, a decision made by the High Electoral Board. The board is one of the institutions guaranteeing Turkey's secular state, of which the lynchpin is the army.
Erdogan's party, the Justice and Welfare party, is the successor to the Welfare party, itself also Islamic-oriented, that was banned in the late 1990s. There is a strong current of Islamicism in Turkey and that a party expressing it should attract a strong following, 18% in one recent poll, is hardly surprising.
Erdogan was a popular mayor of Istanbul in the 1990s and decided to move onto the national stage after the banning of Welfare. He has always insisted that he is no fundamentalist and is, indeed, keen on EU entry and the military alliance with the US.
Nevertheless, the board ruled that Erdogan cannot run, the pretext being his conviction on charges of reading a poem, some three years ago, that the court found to incite religious hatred. The country's laws disqualify candidates with criminal records from running for office.

Ban could backfire
The leadership of the Justice and Development Party is likely to be taken over by Abdullah Gul. Erdogan may be barred from running, but he cannot be barred from campaigning for his successor.
A sympathy vote for the party could augment its already substantial constituency and give it a really formidable result.
The real dark horse in the elections is the new party of Ismail Cem, which has attracted the support of the defectors from Ecevit's party. All is in the melting pot and Turkey is eagerly awaiting the elections.

The Iraqi crisis
Looming over everything is the prospect of war in Iraq, with Turkey as a forward base for US troops.
The Turkish government, is patching together a makeshift policy on Iraq. It feels obliged to toe the line of the issue with Washington, its vital ally. The risks of doing so are, nevertheless, huge. The Turks are averse to 'regime change' for geopolitical reasons - basically their fear of Iraq's dismemberment and an independent Kurdistan - even while they could benefit economically from it and the restoration of normal ties.
The US is likely to reassure Turkey that the territorial integrity of Iraq will be retained. It need not fear an independent Kurdistan. In that case it makes sense for Turkey to back an invasion if it happens and give the US use of bases and airports, which it has anyway under longstanding agreement.

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FINANCIAL NEWS

US attack on Iraq could cost Turkey US$150bn, business council says


The Turkish-Iraqi Business Council issued a report on 30th September stating that the Gulf crisis cost Turkey US$100bn in 12 years including alternative costs, and that a possible US operation against Iraq will cost US$150bn to Turkey, Anatolia News Agency has reported. 
The report indicates that Turkey's loss from the Gulf crisis was much higher than US$44bn, the amount so far calculated by adding up measurable items. 
A possible US operation against Iraq would cost Turkey US$70bn and this would reach US$150bn including alternative costs in 10 years...

Economy minister says relations with IMF better than in past

State Minister for Economy, Masum Turker, said on 24th September that he did not think that the elections would be postponed, stressing that he did not think that the "economy would be negatively influenced by this if it is delayed," Anatolia News Agency reported.
When journalists reminded Turker of the initiatives to delay the elections, he said: "I don't favour postponement of elections. I don't think that the elections will be delayed, but our economy will not be negatively influenced if they are delayed because there is an existing government before the other government is established." 
Turker said: "There are valuable bureaucrats in Turkey, we should not think negatively. Some circles want to create uncertainty. We expect the citizens to be sensitive in this respect." 
Turker said that relations with the International Monetary Fund (IMF) are better than in the past. Responding to the questions of reporters, Turker said some commitments given to the IMF could not be fulfilled because of the elections, and that some of them could not be implemented as the parliament did not work. 
Turker said this would not constitute a problem. He said: "We will talk with the IMF and tell them the facts. If necessary, some commitments can be transferred to the next period in line with the realities. No important problem erupted during the talks we carried out with the IMF officials. They also pointed out that they are pleased with the programme."...

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FOREIGN LOANS

World Bank to release US$500m for Turkey earlier than scheduled

State Minister Masum Turker said on 1st October that the World Bank will permit Turkey to use US$500m earlier than scheduled to extend support to Istanbul approach until the end of this year, Anatolia News Agency has reported. 
Speaking in a news conference after meeting with World Bank President, James Wolfensohn, and IMF Managing Director Horst Koehler, Turker said that Turkish bureaucrats will start working with World Bank officials to extend support to Istanbul approach. 
The US$500m of credit constitutes part of the US$5bn of World Bank's Country Assistance Strategy (CAS) credit to be given to Turkey between 2003-2006 June. 
Turker said that the US$500m will be transferred to this year rather than next year, therefore the credit will be used six months earlier. 
Noting that the second part of the US$500m of social risk reducing credits worth of US$100m which will be used for education, this will be transferred to Turkey by the end of this year. Turkey has received the first part worth US$100m of this credit. 
Referring to his meeting with IMF Managing Director Koehler, Turker said that they reached a consensus of opinion with the IMF regarding the fourth review. Turker said that when the first review is completed, IMF Executive Board Directors would convene in the second half of November for US$1.6bn of tranche, adding that this will not now happen in the second half of November due to the early elections..."

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TRANSPORT 

Start of Trans-Asia train service announced at ECO meeting in Turkey

Transportation Minister, Naci Kinacioglu, said on 27th September that a Trans-Asia regular train service would start in October, Anatolia News Agency has reported. 
The Economic Cooperation Organization (ECO) Fourth Meeting of Transportation and Communication Ministers ended in western Izmir province. Reading the final statement of the meeting, Kinacioglu said that 1998-2007 action plan had been reviewed. Kinacioglu noted, "the need to reconstruct Afghanistan was discussed and the technical support of member countries to lay optic fibre cables to this country was requested." 
They took into consideration new proposals about facilitation of international load transportation through highways, decreasing visa fees, and facilitation in border gates, Kinacioglu stated. Kinacioglu added that the fifth meeting will be held in Kyrgyzstan in 2004. 
ECO Secretary General, Sayed Mojtaba Arastau, said that the member countries explained the initiatives they had fulfilled in the last year and what they would put into practice in the following year. Arastau noted that development of trade and the solution of transportation problems were the main targets of the member countries. Reminding the meeting that the seventh summit of heads of state and governments of ECO member countries would be held in Istanbul in October, Arastau said that this would be the first meeting that an official from Afghanistan would attend the meeting. Arastau added that a representative of the World Trade Organization would also take part in the summit.

Turkey, Iran sign transport protocol

Turkey and Iran signed on 26th September a joint protocol at the end of the Transportation Joint Commission Meeting that continued between the transportation ministries of the two countries for three days, Anatolia News Agency has reported. 
Transportation Minister, Naci Kinacioglu, said that they proposed to open Turkish ports to Iranian transportation companies during technical meetings and noted that this decision would increase transportation between the two countries. 
Kinacioglu stated that they agreed that officials of the two countries concerned with land transportation and customs would meet for four times a year in Gurbulak and Bazargan and solve current problems. They also agreed to find ways to increase railway transportation, Kinacioglu pointed out. Kinacioglu said that Turkey would join the tender to be opened for the railway car need of the Iranian railways. They also took up development of charter transportation, he added. 
Iranian Minister of Roads and Transport, Ahmad Khoram, said that they had achieved good results from their meeting. Existing agreements on transportation should be reviewed from time to time, Khoram noted. 

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