Books on Turkey
Ahmet Necdet Sezer
Update No: 097 - (26/05/05)
New Pope; no new dispensation
The Turks are the most forward-looking of the Islamic peoples. They followed
Ataturk, their leader in 1923-38 into a secular state. And his spirit lives on.
The Islamicist party in charge, the Justice and Development Party, is in the
No one in Turkey can be too happy at the accession of Benedict XVI to the
papacy. As Cardinal Joseph Ratzinger, he was implacably opposed to the idea of
Turkey's entry into the EU. He said of it that it would be a derogation of
Europe's Christian heritage.
Actually it would be an enhancement of its new-found secularist heritage and an
affirmation to the entire Muslim world that the West is not anti-Islamicist. One
can but hope that wiser counsels eventually prevail than those of the former
head of the Congregation of Doctrinal Purity of the Catholic Faith, in other
words of the former Grand Inquisitor himself!
The EU beckons, nevertheless
In fact things are looking up in this regard for Turkey. According to World Bank
Turkey Director Andrew Vorkink, foreign investors are aware of the economic and
political stability in the country. Turkey's receiving a date for the beginning
of accession talks with the EU has also contributed to the stability, added
Vorkink. He remarked that the Second Investment Advisory Council Meeting in
Istanbul on April 29th was positively affected by the EU's decision to begin
accession talks later this year. ''Foreign investors look at Turkey as a
European country,'' said Vorkink, even if the new pope does not.
Vorkink indicated that Turkish Premier Recep Tayyip Erdogan took notes on the
criticism and advice of foreign high level managers and assured all parties that
his government would act based on these comments. The CEOs of foreign companies
wish for tax reforms, transparency in local companies, reforms in
administrations, reforms in bankruptcy law and further privatisations, including
the privatisations of Tupras, Erdemir and Turk Telekom.
Vorkink said that Turkey is ranked number Five in the world in terms of
quickness in establishing new business. ''Apparently, direct capital investment
in Turkey is slow at the moment. Yet Poland, who just joined the EU, and
candidate countries Romania and Bulgaria also face similar problems in
attracting direct foreign capital investment.''
The new Turkish frontier for FDI
Vorkink has remarked recently that foreign investors have more confidence in the
Turkish economy than local ones. ''This is rather a very interesting
development,'' said Vorkink.
Vorkink stated that the Istanbul meeting will help in reaching positive goals.
''We will witness a tremendous increase in the amount of foreign investments in
Turkey later this year,'' commented Vorkink. He stressed that many
multi-national firms in Turkey follow Turkish economy and politics closely.
''These multi-national firms also follow international developments closely.''
Election of Kemal Dervis to the UNDP chairmanship
Meanwhile, Vorkink remarked that the election of the former economics maestro of
Turkey in the previous government, Kemal Dervis, Turkish Republican People's
Party (CHP) deputy from Istanbul, to the Chairmanship of the United Nations
Development Programme (UNDP) is an excellent decision.
''Dervis's election is a sign that Turkey is one of the leading countries
globally,'' he stressed.
Israel-Turkey hotline set up
Israel and Turkey are to set up a hot line for instant communications,
Israeli Prime Minister Ariel Sharon said during a visit by Turkish Prime
Minister Recep Tayyip Erdogan. Erdogan is to visit the Al Aqsa Mosque in the Old
City of Jerusalem, Islam's third-holiest site, built on the ruins of the
biblical Jewish Temples. The site, claimed by both Israel and the Palestinians,
is one of the most potentially explosive issues in the region.
In a gesture ahead of Erdogan's trip, Turkey gave the Palestinian Authority the
title deeds of lands and property in the West Bank and Gaza it had acquired
during the nearly 400-year rule of the Ottoman Empire, the Turkish daily
Turkey hopes the 140,000 pages of deeds, covering the years 1500 to 1914, will
help Palestinians defend their rights in local and international courts, the
Milliyet also reported that Turkey has sent 25,000 police uniforms to the
Palestinian security forces.
Israel and Turkey, an overwhelmingly Muslim state, have long had strong military
ties and important trade links. But relations grew strained last year when
Erdogan, whose party has its roots in Turkey's Islamic movement, strongly
criticised Israel's treatment of the Palestinians.
The hot line between the prime ministers' offices is to boost joint anti-terror
efforts and other co-ordination.
"We learned from experience that even when you have close intelligence
contacts there is great significance to contacts between leaders and between
countries at the highest level," Sharon said, noting that Israel already
has such hot lines with the US, Britain, the European Union and Russia.
Turkey is one of Israel's few friends in the Muslim world and the two have close
economic and military ties. Bilateral trade between the countries was estimated
at US$1.2bn (£630m) in 2002, and Turkey has bought three billion dollars (£1.6bn)
worth of Israeli weapons since 1996. Turkey is also a top foreign vacation
destination, visited by some 300,000 Israelis a year.
Exports and national wealth bloom as inflation withers
Several years of fiscal discipline, backed by a US$19bn International Monetary
Fund standby agreement, which ended in February 2005, have paid off. Turkey's
economy, plunged into a deep recession in the aftermath of the February 2001
financial crisis, has now recorded 3 years of strong growth. In 2004, gross
domestic product rose by a spectacular 9.9%.
"The Turkish economy grew fastest among the Organisation for Economic
Cooperation and Development countries and fastest in the world according to
preliminary data for 2004," Abdullatif Sener, the deputy prime minister,
announced at the end of March.
The good news is compounded by a steady decline in inflation, which has plagued
Turkey for decades. Annual consumer inflation was 7.94% at the end of March,
down from 65.1% 3 years earlier and 11.83% in 2004.
In light of improving indicators, Ali Babacan, the economy minister, recently
said Turkey would probably meet the Maastricht criteria for Euro membership in
the next few years. For the time being, the government is maintaining its 5%
year-end growth target, but there are already signs that gross national product
increase this year will overshoot this goal.
The sharp increase is fuelled by a steady rise of exports, which reached
US$62.7bn in 2004. In view of a 26% increase recorded between January 1st and
March 15th, Kursad Tuzmen, the state minister in charge of foreign trade, says
he expects export revenues could reach US$75bn at the end of this year, up from
a US$71bn target. The automotive sector alone accounts for 19% of total exports.
Exports and tourism revenues are much needed to narrow the widening current
account deficit, which reached US$15.1bn last year, or about 5% of GNP. More
than 17m tourists visited Turkey last year, bringing net revenues of US$13.36bn,
a 20.5% increase from the previous year. For 2005, the government has set an
ambitious target of 20m visitors and US$20bn in revenues.
Many analysts see the current account deficit as the main cloud hanging over
Turkey's economy, and the World Bank has issued warnings. "There is some
risk as long as there is a perception that the current account deficit is too
big," explains Asaf Savas Akat, economics professor at Istanbul's Bilgi
University. He said, however, that the deficit can easily be financed in the
Translating growth into new jobs is one of the major challenges the Turkish
government faces. So far, growth has not had a significant impact on the
unemployment rate, which remains above 10% and particularly affects young
Sener, the deputy prime minister, recently announced that the private sector
created 896,000 jobs last year, but 252,000 were lost in the public sector and
many more are needed.
Foreign direct investments, which are currently modest but on the rise, could
help boost employment.
Reining in the informal economy and broadening the tax base are also tasks the
government will have to address. To compensate for low tax revenues, the
government is currently relying on excise taxes that are hindering the
development of some sectors of the economy.
Privatisation, which has suffered many setbacks over the years, appears to be
gaining momentum. During the first quarter of 2005, US$585m entered the
government's coffers through privatisations.
The bidding process for a 55% stake in Turk Telekom, which is attracting the
attention of foreign players, will end on May 31st, and a public offering has
been launched for the petrochemical company Petkim. A tender for a 51% block
sale of the oil refiner Tupras is expected to be opened this year.
The IMF is still perceived as a factor of confidence and a guarantee of strong
fiscal discipline, which Turkey needs to decrease its heavy debt burden.
After much delay, the Turkish government has signalled it is ready to finalise a
new US$10bn agreement, which was announced in December 2004.
Turkey, Israel sign industrial research, development cooperation agreement
Turkey and Israel signed a cooperation agreement on industrial research and
development during Turkish Premier Recep Tayyip Erdogan's tour of Israel,
Anatolia News Agency reported.
Turkish Industry and Trade Minister, Ali Coskun, and Israeli Deputy Premier,
Ehud Olmert, signed the agreement on 1st May.
Coskun told reporters: "This agreement is very important in terms of
consolidation of economic cooperation between our two countries. Bilateral
relations have been further strengthened with the agreement."
Meanwhile, Olmert said that the agreement is a step for development of relations
between Turkey and Israel, adding that it is also important for peace process.
The agreement envisages encouragement of cooperation in industrial research and
development between two countries. The cooperation will be on the areas of
informatics, laser and optic, mecatronic, food, agricultural products and
agricultural genetic, renewable energy, nanotechnology, aerodynamic and space
technologies, biotechnology and irrigation technology.
Meanwhile, during his tour of Israel, Premier Erdogan held meetings with Israeli
Deputy Prime Ministers Ehud Olmert and Shimon Peres as well as main opposition
party Shinuy leader Tommy Yosef Lapid.
FOREIGN ECONOMIC COOPERATION
Syrian minister wants closer economic cooperation with Turkey
Syrian Minister of Economy and Trade, Amir Husni Lutfi, said that the number of
Turkish investors active in Syria increased and there were many opportunities
for Turkish businessmen to invest in Syria, Anatolia News Agency reported.
Addressing the Turkish-Arab Economy Forum, Aksu said that Syria wanted to take
part in international platforms and speeded up economic reforms to this end.
Referring to the bilateral trade between Turkey and Syria, Lutfi said that the
aim was to make Turkey enter the Arab market and to make Arabs enter the Turkish
"We wish Turkey to join the EU," said the Syrian Minister and stressed
that this would be in the interests of Turks and Arabs. He also underlined the
need for cooperation between Turkey and Syria.
Turkey takes steps to lure foreign investors
Since 2002, Turkey has taken several important measures to improve its
investment environment. A new law on foreign direct investment, adopted in June
2003, enshrined the principle of equal treatment for domestic and foreign
Yet, given Turkey's huge potential for growth and the size of its internal
market, it still attracts disappointingly low inflows of FDI.
On average, Turkey has received only US$1bn a year since 1990, although
performance was better in 2004 with US$2.6bn.
The World Bank's country director for Turkey, Andrew Vorkink, recently said
foreign direct investment should reach 5% of gross national product in a country
Turkey's newfound political stability and the prospect of European Union
accession should change this situation.
"The opening of EU membership negotiations may be the main point in finally
bringing Turkey into its own in terms of foreign direct investment," Saban
Erdikler, chairman of the YASED foreign investors association, told a press
conference on April 8th.
A survey of YASED members conducted in March found that they were positive about
the economic environment, but they listed an insufficient legal framework,
bureaucratic red tape and high taxes as the most important obstacles to foreign
After its first meeting in March 2004, the council recommended several steps to
increase Turkey's attractiveness, including streamlining procedures at the
sectoral level, improving dispute-resolution mechanisms, developing a
corporate-tax regime, improving the efficiency of import procedures and
protecting intellectual rights.
But much remains to be done. High taxes and energy costs are still affecting
Turkey's competitiveness, say advisers.
Although the government appears determined to attract foreign players, legal
setbacks send an ambivalent message. The Turkish president, Ahmet Necdet Sezer,
has recently vetoed legislation allowing foreign investors to buy into the media
The year 2005 could be a turning point for Turkey. Now that the country has
achieved the economic and political stability that are the main prerequisites
for FDI inflow, foreigners are showing interest in several sectors, such as
banking, media, telecommunications and energy.
TeliaSonera, the largest Nordic telephone company, recently announced it wanted
to buy 27% of mobile operator Turkcell for US$3.1bn.
Several foreign groups are taking part in the bidding process for Turk Telekom,
which ends on May 31st, and the oil refiner Tupras is expected to attract
"We believe Turkey could get US$5bn this year, of which US$1.5bn would be
real estate," says Mustafa Alper, secretary general of YASED.
"Including privatisation and mergers, FDI could go up to US$8bn to
Rules on property ownership are relaxed for foreigners
Thousands of foreigners, attracted by Turkey's pleasant climate, natural beauty,
hospitable population and competitive prices, are buying houses in Turkey.
Between January 2003 and July 2004, foreigners spent some US$1.9bn on real
estate, after property laws were revised in 2003 to ease restrictions on
non-Turkish owners. In tourist resorts like Kusadasi, Antalya or Bodrum,
real-estate agencies have opened up, catering almost exclusively to the needs of
Citizens of 68 different countries own property in Turkey. Greeks of Turkish
origin top the charts with investments concentrated especially in big cities
like Istanbul, Bursa and Izmir. Germans follow closely and tend to prefer
Antalya, as do the Dutch. Syrians prefer Hatay and Gaziantep province, closer to
their border, while Americans favour the Turkish capital, Ankara. Altogether,
foreigners spent more than US$1bn on property in 2004.
A recent decision by the Constitutional court to cancel part of the real estate
law is currently causing some confusion. "It may have a psychological
impact," admits Haluk Sur, president of GYODER, the Association of Real
Estate Investment Companies. "It is very important to stress that the
decision does not affect private buyers, who tend to buy apartment or villas.
The Constitutional court only wants stronger guarantees for people or companies
buying over 300 donum," or 30 hectares, about 74 acres. The government is
expected to introduce legal amendments to clarify the matter.
Property developers are confident that the real estate boom is only just
beginning. Says Mustafa Suzer, owner of Suzer Plaza, which houses the
Ritz-Carlton hotel in Istanbul: "We have a big development project in the
south, aimed at foreigners as well as locals. We want to build 5,000 to 10,000
houses, with health facilities, education and shops."
Middle and upper middle class Turks, as well as foreigners, are expected to
increase their investments in property, thanks to the growing political and
economic stability that is making long-term housing loans possible. The Finance
Ministry and the Capital Markets Board are working to develop the framework for
a mortgage system adapted to Turkey.
"In order for the system to reach the level we expect, the fall in interest
rates has to continue and inflation targets must be reached," says Sur.
Long-terms mortgage loans are expected to give a strong boost to the real estate
sector. While housing loans reach 53% of gross domestic product in the United
States, their level in Turkey is only 1%. Fuelled both by domestic and foreign
sales, the real estate sector in Turkey appears to have plenty of potential for
TOBB offers millions in loans to SMEs
Turkish Union of Chambers and Commodities Exchanges (TOBB) Chairman Rifat
Hisarciklioglu and Halk Bank general manager Hasan Cebeci signed a protocol
outlining a loan programme in Ankara on April 14th, Anadolu news agency
reported. According to the protocol, TOBB it will lend 100 million Turkish liras
to small- and medium-sized enterprises (SMEs) through Halk Bank. The loans carry
a term of one year. According to Hisarciklioglu, this partnership combining
TOBB's business expertise and Halk Bank's experience with SMEs would benefit all
the parties involved in it. He added, "The credit volume created with
returns in one year will reach 170m Turkish liras and the cost to SMEs for this
loan will be 12.6% interest." Hisarciklioglu stated that SMEs would now be
able to secure loans at rates similar to those of competitor countries. The
ceiling amount for each SME is expected to be 50,000 Turkish liras and
Hisarciklioglu predicted that 5,000 SMEs will participate.
IMF approves new US$10bn economic development loan for Turkey
The Executive Board of International Monetary Fund (IMF) has approved a
three-year stand-by arrangement of US$10bn to support Turkey's economic and
financial programme through May 2008, Anatolia News Agency reported.
The IMF released US$837.5m immediately, with a remaining balance to be
distributed in eleven equal instalments.
The board also approved a one-year extension of Turkey's repurchase expectations
totalling about US$3.80bn arising in 2006.
Following the Executive Board's discussion on Turkey, IMF Managing Director
Rodrigo de Rato made a statement, "Turkey's economic performance is at its
strongest in a generation. Growth was 8 per cent on average over the last three
years, while inflation has fallen to single digits, its lowest level in more
than 30 years. Strong policy implementation under the previous Fund-supported
programme has given rise to this impressive performance. Together with the EU's
decision to open accession negotiations, this signals a sea change in Turkey's
Noting that Turkish authorities' new three-year programme was designed to extend
these gains in economic performance and reduce Turkey's remaining
vulnerabilities, de Rato said, "the government's commitment to maintain the
primary surplus target at 6.5 per cent of GNP will steadily reduce the public
debt and help contain the current account deficit. Continued independence of the
central bank, together with next year's introduction of full inflation
targeting, will help consolidate the reduction in inflation. These macroeconomic
policies should facilitate further reductions in interest rates and generate
"Implementation of structural fiscal reform will be central to the success
of the new programme. The tax administration reform should be implemented in
full to improve compliance and reduce the size of the underground economy. Tax
reform needs to focus on raising revenues by simplifying the tax system and
eliminating exemptions. Selective tax relief erodes the tax base, undermines
compliance and should be avoided. Expenditure reform should gradually reduce the
social security deficit, while improving the quality of spending," he said.
De Rato stressed, "Turkish authorities' structural reform agenda should
also help sustain growth. Passage of the new Banking Law later this year should
strengthen banking supervision, while the SDIF is making progress towards
resolving the stock of non-performing assets.
"Success in this year's privatisations and implementation of the
recommendations of this year's Investment Advisory Council should help improve
the business climate. Labour market flexibility will also need to be improved to
ensure that Turkey's recent strong growth performance results in new job
Referring to the issue of the non-complying disbursement, de Rato said,
"the Executive Board reviewed a non-complying purchase made by Turkey under
its previous Stand-By Arrangement. Revised data indicate that expenditure levels
reported to assess the 2002 primary balance for the fourth review were slightly
higher than reported to the Board at the time. The Executive Board took note of
the improvements brought about in the collection and dissemination of the data
in question and concluded that the deviation was minor (0.13 per cent of GNP)
and did not alter the assessment of the fiscal situation under the programme.
"Accordingly, the Executive Board granted Turkey's request for a waiver of
the noncomplying purchase."
Meanwhile, IMF said about the new stand-by arrangement, "Turkey has
concluded the last Fund-supported programme successfully and the impressive
outcome has laid solid foundations for the new programme.
"These reforms have delivered a decisive break with Turkey's history of
high and variable inflation, and low and volatile growth. Output has recovered
strongly from the 2001 recession, with annual growth rates averaging 8 per cent
over the last three years. Inflation is now well below 10 per cent and
government debt has declined to 63.5 per cent of GNP."
"The overriding goals of the new programme are to create conditions for
sustained growth that will raise living standards and reduce unemployment;
facilitate convergence towards the EU economies; and bring about an orderly exit
from Fund support. The programme's macroeconomic framework is centred on
achieving high and sustained growth of around 5 per cent each year. In 2005,
slower domestic demand and continued export growth are expected to lower the
current account deficit to 4.4 per cent of GNP. Inflation is targeted at 8 per
cent this year, declining to the low single digits by the end of the programme.
"The programme also envisages a 5 percentage point decline in the overall
fiscal deficit that should help reduce the government's net debt ratio by a
further 10 per cent of GNP," IMF added.
MINERALS & METALS
Steelmaker Erdemir signs 200m Euro loan deal
Turkish iron and steel maker Erdemir signed an agreement for a 200m Euro
syndicated loan underwritten by the Nippon Export and Investment Insurance in
Istanbul on April 13th, Anadolu news agency reported. The money will be used to
boost and upgrade capacity and convert works at steel concerns Erdemir and
Isdemir. The loan is part of the Overseas Untied Loan Insurance (OULI) programme.
Anadolu quoted Recai Berber, chairman of Erdemir Group, as saying that both
steelmakers will share the funds equally. Berber said the funds would be used to
finance upgrades at Erdemir's hot rolling mill and sheet rolling mill and at
Isdemir's steel workshops. He said the sheet rolling mill would be the first
such facility in Turkey to manufacture steel for the shipbuilding industry. BNP
Paribas, Calyon, Bank of Tokyo-Mitsubishi Ltd, HSBC and Standard Chartered Bank
arranged this 10-year loan at an interest rate of Libor plus 0.30%. Michael
Piquet, BNP Paribas European director for medium-term export loans, believes the
deal is a milestone as far as BNP's financial operations in Turkey are
concerned. BNP Paribas recently acquired a 50% stake in Turkish Economy Bank (TEB).
Turkey launches tourism campaign in US
Turkey launched a tourism promotion campaign in the United States, one of the
leading tourism markets in the world, the Turkey's Culture and Promotion Attaché's
Office in New York said, Anadolu News Agency reported.
The office said Turkey aims to reach 40m Americans with this campaign and noted
that history; culture and nature were highlighted in the promotion campaign,
which would continue until the end of October. Meltem Onhon, Turkey's deputy
attaché in New York said that the campaign was carried out in New York, Los
Angeles, Chicago and Washington. Onhon pointed out that the number of US
tourists travelling to Turkey increased this year by 35% in January and February
when compared with the same months of 2004. Drawing attention to the positive
effects of efficient promotion of Turkey in the United States that were seen in
tourism statistics, Onhon said the number of US citizens visiting Turkey
increased by 31% in 2004 when compared with 2003, and reached 291,102.