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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: 068 - (01/01/03)

New government shapes up
The Turks have a new government, one moreover, with an Islamicist orientation, for the first time since the Welfare Party was in power in the late 1990s. The Justice and Development Party, AKP, claims with some reason to have nothing in common with Islamic fundamentalism. Its leader, Tayyip Erdogan, was imprisoned for some days at the time for reciting four lines of supposedly inflammatory religious verse when he was Mayor of Istanbul, moreover a highly popular mayor.
The military in Turkey have always been very wary of religious extremism and were responsible for curtailing Welfare's term in 1999. Erdogan revamped the Islamicists as AKP and distanced himself from extremism of any stamp. But his prison record disqualifies him from being prime minister and his deputy Abdullah Gul, a former academic and banker, has taken the post, at least temporarily. One of the first things the new government is likely to introduce is a bill in parliament changing the constitution, to allow Erdogan to take over the reins, although to do so AKP will have to win over four non-AKP MPs on the vote. 
Erdogan's assumption of the premiership would not be likely to portend new trouble with the secularists in the army and the constitutional court, the two guardians of Turkey's secular path since the time of Ataturk (1923-38), the father of the nation. For one thing, the chief of Turkey's general staff, General Hilmi Ozkok, has made it clear that the army should keep out of politics, if at all possible. Unlike his predecessors' hawkish tirades about not giving up an inch of Turkish territory in Cyprus, he has clearly stated that the matter is one for the politicians. He has also been emollient about the victory of AKP. The Turks have a moderate CGS at the helm.
Edrdogan has indicated his own moderation by touring European capitals to reassure their leaders of AKP's respectable credentials and of its firm resolve to lead Turkey into the EU, if at all possible. Athens was, naturally, the first port of call, where he declared a new UN plan to reunite the island as "an acceptable basis for negotiation." He also suggested, rather controversially, that at its next summit in Copenhagen in December, the EU should give Turkey a firm date for beginning negotiations on entry, as part of deal to clinch a settlement in Cyprus.

The EU conundrum
It is abundantly clear why the Turks want to join the EU, those of all political persuasions. Only a handful of religious fanatics would have any reservations about joining the rich man's club.
But why should the EU want to accept Turkey, a vast nation of 70 million, far poorer than the European average and so entitled on existing rules to inordinate subsidies? EU entry would permit the Turks to migrate to other parts of Europe in even greater numbers than previously, greatly exacerbating the acute problem with immigration that has fed the rise of the far right in one European country after another. It is hardly surprising that according to the polls conducted by Eurobarometer this year across Europe, only 31% are in favour of Turkey's membership, while 47% are against, making it the most unpopular of all the 13 applicant countries. Among the French, with its high population of Muslim immigrants, the figure against is 55%, and in Germany, with its four million Turks already and its four million unemployed, it is 34%, with a record 21% don't knows.
But the latter two statistics could be rather encouraging; they imply that 45% of Germans are in favour and if 21% don't knows are split correspondingly to the total share out, a potential 55% in favour. It may be this result that has helped motivate Chancellor Schroeder to press for a definite date for EU negotiations with Turkey in discussions with the French. 
The misgivings of many European leaders and opinion formers generally were revealed by the reactions to another eminent Frenchman's views on the subject, Chirac's former rival, ex-president Valery Giscard. In early November Giscard, the head of the convention examining the constitutional future of Europe, said in Brussels that Turkey was not "a European country," that it had "a different culture, a different approach and a different way of life." All a not so guarded way of saying that it is Islamic and that Islam is incompatible with Europe's Christian heritage.
Giscard's remarks were immediately given a ritual disclaimer by spokesmen for national governments and the Brussels Commission. But it is noteworthy that no political heavyweight spoke out against him, excepting Premier Blair. But then Giscard was anticipating dissent from that quarter and dismissed it in advance: "only those opposed to the European project," a thinly disguised reference to the Anglo-Saxon powers, "are in favour of Turkey joining."

Everything hinges on the US and the Middle East
The main Anglo-Saxon power in favour of Turkish entry is of course the US, which has long appreciated the key role of its bulwark of NATO in the troubled Middle East. Turkey is offering the US continued use of bases on its soil to the US, whatever its misgivings about the intervention in Iraq. The US and the UK have been deploying their air forces from Turkish bases to maintain "no-fly zones" in Iraq for more than eleven years now.
The Turkish army is contemplating an intervention of is own in the Kurdish north if US and the UK troops invade from the south, as looks increasingly probable. The aim is not permanent occupation, but to stem an influx of refugees such as happened in 1991. Turkey has enough Kurds as it is, its military believes. 
Turkish generals already see their country as an embattled front line against illegal immigrants from Asia. More than 13,000 were detained trying to enter Turkey from Iraq in the first 10 months of this year. Most were Iraqi (that is Iraqi Kurds), but Indians and Bangladeshi were among them too.
Several areas of Turkey near the border are under emergency rule. Even though the government offers political support for Kurdish troops battling Saddam in Iraq, hundreds of Turkish troops are operating in Northern Iraq to root out remnants of Kurdish guerrilla forces there.

The Turkish model
If the US is successful in installing a pro-Western democrat state in Iraq post-Saddam, then the pressure will mount for a democratisation of sorts for the rest of the Arab Middle East. This would inevitably mean groups of an Islamic persuasion coming to prominence in the electoral process, some if not many of which could prevail at the ballot box to the embarrassment of the pro-Western elites involved and of the West. Turkey with its moderate Islamic government now in charge could offer a model of how the Middle East should evolve in Western terms. 
That will be the moment to press for Turkish entry into the EU. The security of the Middle East and of Europe's oil supplies would be the high stakes to play for. From being an embarrassing encumbrance, Turkey's membership could suddenly be seen as what it is likely to prove, a sine qua non of the pacification of this vital region and an imperative necessity of the resolution of the Arab-Israeli dispute and much else besides, preparing the way for the lasting integration of the Middle East into "the new world order" championed by the US, the Pax Americana being unfolded by the Bush Administration.

Reform still in place
If the AKP is to offer a model of moderate Islamicism for other Middle Eastern countries, it needs to be successful on the vital economic front. If it won such a decisive victory, being the first party to be able to rule on its own since 1960, that is because of the resounding failure of the previous coalition government which presided over a catastrophic contraction of the economy. Turkey suffered devastating earthquakes earlier in the decade, but this cannot account for all the problems by a long chalk. Indeed, the list of its economic difficulties would be endless.
The population are not expecting miracles, but need at least hope. The previous government brought in a brilliant émigré banker to try and rectify the mess, Kemal Dervish, but too late. He was able to do enough to keep the IMF happy and on course to continue its US$16bn loan, the largest going to any of its country clients. Inflation at over 50%, indeed 70% for long on an annual basis, is due to come down to 33-31% this year. Recovery from the worst of the slump, which saw a 9% drop in GDP in 2001 and a spate of banking crashes and bankruptcies in industry, is under way, GDP having risen by 4.5% in the first half of this year.
The government has a new figure to calm the markets and inspire hope not just in owners of stocks and shares. The new economy minister, Ali Babacan, is in his own person an example of the popular capitalism and open society that AKP is anxious to portray as its goals. He started work in the family business aged six. Before going into politics, Babacan worked for QRM, a Chicago-based financial consultancy. He is a graduate of the prestigious Kellog Business School in the US. Kellog is famed for its team-work approach and Babacan, at only 35 and without previous experience in government is keen to stress his eagerness to work with more "experienced ministers" as colleagues.
The AKP promises political and economic liberalisation, ranging from rapid privatisation to transparent market-based regulation, combined with more help for their poor. A tall order indeed, when an economy is in dire straits and the human rights record leaves a lot to be desired. But the international conjuncture is perhaps becoming propitious for a breakthrough for Turkey. Like everyone else, the Turks are awaiting further developments. 

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AUTOMOBILES

EIB awards 150m Euro for Toyota in Turkey


The European Investment Bank (EIB) is providing a loan of 150m Euro to Toyota Otomotiv Sanayi Turkiye AS for the modernisation of an existing vehicle manufacturing plant in Adapazari in the eastern Marmara region, some 120 kilometres east of Istanbul. The investment will increase the plant's capacity to accommodate the production of selected models of the new Toyota Corolla model family, reports New Europe.
According to an EIB press release, the project will provide an important economic impulse to the eastern Marmara region of Turkey, which has not yet recovered from the economic effects of August 1999. The project will directly create new jobs with the number of employees expected to double from about 1,150 in 2001 to nearly 2,500 by the year 2005 in the plant itself.
In addition, it can be expected that for each new job another indirect job will be created at suppliers and related services. Once operational in 2004, the project is expected to contribute between 1.1-1.4bn Euro per year to the country's domestic product. As some of these local suppliers are subsidiaries of EU and Japanese company's, this will lead to additional employment and foreign direct investments.
As a major private sector operation, the project is also fully in-line with the Euro-Mediterranean Investment Partnership Facility (FEMIP), reflecting the recent decisions of the European Council of Barcelona.

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BANKING

Turkish bank reforms under threat

Just as Turkey's bold banking reforms are being hailed as the greatest achievement of economic measures backed by the International Monetary Fund, a court decision threatens to unravel that victory, the Financial Times has reported.
The Council of State, Turkey's top court for such disputes on 22nd November suspended the banking authorities' seizure of Pamukbank, the country's sixth-largest bank. Regulators had said its US$2bn capital shortfall posed a threat to the banking system.
"If the court, for reasons that are not economic, back-tracks on a case like this, it is undermining the credibility of regulators and potentially, the reform process itself," said Phil Pool, emerging markets economist at ING.
The IMF, which has begun wide-ranging consultations with Ankara, fears a potential upset to its successful programme in Turkey, which is backed by a US$16bn loan.
Mehmet Emin Karamehmet, Pamukbank's reclusive former owner, argued that he had insufficient time to avoid a takeover by increasing Pamukbank's capital and merging it with Yapi Kredit, another bank he still controls but would have to divest if the takeover were upheld.
In its submission to the Council of State, the quasi-independent Banking Regulation and Supervision Agency said it had found Mr Karamehmet's merger proposal to be unacceptable.
The agency also decided the planned capital increase would be insufficient to plug the weakness generated by years of excessive and unprofitable lending to other companies owned by Mr Karamehmet.
If such counter-arguments are overruled, a subsequent Council of State decision to cancel the takeover would have two immediate effects.
"Firstly, it would tell people in the business community that if you lend your bank depositors' money to your own companies, you can get away with it," said one official. "Secondly, the independence of the banking regulators would be called into question: they would be reluctant to act the next time an insolvent bank threatened the system."
The country's weak banking sector triggered two financial crises, in November 2000 and February 2001. After a bumpy start, the BRSA has begun creating a credible system of banking regulation.

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FINANCIAL NEWS

IMF backs Ankara to carry out reforms

The International Monetary Fund on 3rd December expressed confidence that Turkey's new administration could usher in economic reform and avoid tipping the country into bankruptcy, the Financial Times has reported.
After a decade in which divided coalitions drove the country towards bankruptcy, Michael Deppler, the fund's European director, said he saw the country "emerging out of a crisis period."
Mr Deppler, who has been coming to Turkey for the past four years, said after two days of meetings with ministers from the newly elected Justice and Development Party (AKP): "I've been quite impressed by the unity of this government. The policies in Turkey have not always been consistent because of a division of views. What is nice to see is a consistency of views across the government."
The party, led by former Islamists who say they are wedded to political and economic liberalization, wants to renegotiate Turkey's three-year IMF-backed economic rescue programme to provide more support for the poor and for agriculture.
Mr Deppler said it was natural for the new government to seek changes to the existing programme, backed by a US$16bn IMF loan. But he also said the existing programme was already successful, with inflation this year lower than targeted and growth higher than planned. Turkey was also in a relatively comfortable position to service its big public sector debt following a big drop in interest rates after the election. 
"My conviction is that Turkey is emerging out of crisis period," said Mr Deppler. "The new government is well-placed to bring Turkey out of an era that was rather unhappy in the 1990s."

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TELECOMMUNICATIONS

Turkcell calls on new government for reform

The head of Turkcell is calling on Turkey's new government to push ahead with necessary telecoms privatisation and deregulate the market, New Europe reported recently. Chief executive, Muzaffer Akpinar, believes that the incoming government under the Justice and Development Party (AKP) has to ensure that a pending reconstruction of banks does not damage Turkey's fragile telecommunications sector.
The AKP has brought with it the hope of a stable one-party government for the first time in over 10 years. Echoing the sentiments of many fellow businessmen, Akpinar welcomed the party's pledge to drag the country out of a long-time economic crisis, which Turkcell has also suffered under with rising debt costs and declining phone usage. Akpinar believes the new ruling party may even have to accept the privatisation of landline monopoly, Turk Telecom, even if the sector's global downturn means a lower sale price, media have noted.

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