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TURKEY


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 237,972 182,848 147,700 21
         
GNI per capita
 US $ 2,790 2,500 2,530 92
Ranking is given out of 208 nations - (data from the World Bank)

Books on Turkey

REPUBLICAN REFERENCE

Area (sq.km) 
780,580

Population 
68,893,918

Capital 
Ankara 

Currency 
Lira 

President 
Ahmet Necdet Sezer 



Update No: 100 - (25/08/05)

The French put a spanner in the works
Despite last December's unanimous invitation from the 25 governments of the European Union (EU) to Ankara to begin the accession process, both sides have been drifting apart over the past few months, a process hastened by the collapse of the European constitution in France and the Netherlands.
The resignation of Turkey's senior diplomat charged with preparing for its talks on membership of the EU has heightened the tension over the country's proposed accession. Murat Sungar, head of Turkey's special department for EU affairs, submitted his resignation with just two months to go before the scheduled start of talks on October 3rd.
Mr Sungar denied he had resigned because he was unhappy with the lack of progress in Ankara's efforts to prepare for what are being seen as increasingly tough negotiations to join the 25-member bloc.
But his resignation comes in the midst of a diplomatic tiff with France that threatens to derail the accession talks before they begin. Recep Tayyip Erdogan, the Turkish prime minister, is said to be furious with Dominique de Villepin, his French counterpart, who called recently for Turkey to recognise Cyprus before it could begin the talks. Mr de Villepin's comments were seen in Ankara as further evidence of double standards in the EU's treatment of Turkey. Actually the French Prime Minister was not representing the EU and his remarks are widely interpreted in the context of his candidacy in the next French presidential elections.
Mr Erdogan said he was "saddened" by the comments: "It is out of the question for us to discuss or consider any new conditions with regard to October 3rd."
Brussels has been at pains to distance itself from the French prime minister's intervention and reassure Turkey that the EU is not trying to erect new hurdles to delay the start of the negotiations. Nevertheless, France could single-handedly block the start of talks, since the negotiations require a unanimous mandate from the 25 member states - though Mr de Villepin stopped short of threatening to use France's veto.
But his remarks point to a problem with Turkey's EU policy that Mr Erdogan and his government have been trying to gloss over: that Turkey must address the question of its policy over Cyprus, an EU member. The Mediterranean island has been divided into Turkish Cypriot and Greek Cypriot territories since 1974, when Turkey invaded to thwart a coup that would have united Cyprus with Greece. The international community recognises the Greek Cypriot government in Nicosia as representing the whole island; Turkey recognises the government of the Turkish Republic of Northern Cyprus.
Cyprus joined the EU in May last year, and in late July Turkey signed a protocol extending its existing agreements with the union to include the island. But it declared at the time that this did not mean it recognised the Greek Cypriot government. Some commentators wonder whether this position is tenable in the face of Turkey's policy of seeking nothing less than full EU membership.
At the least, they say, Ankara must take account of the fact that Cyprus is now a real hurdle in its accession process. "Cyprus, and Turkey's membership [of the EU], are internal matters in Europe now, and we need to take measures accordingly," said Murat Yetkin, a columnist on the daily Radikal newspaper, in a column recently.
Representatives of the 25 member states are to meet in September to discuss Turkey and Cyprus. "The only question is to what extent the declaration in any way limits the impact of the signing [of the protocol]," said Hans-Jorg Kretschmer, head of the European Commission office in Ankara. He said it was "too soon to say" whether Mr de Villepin's comments would create a new condition or whether Turkey would have to address the problem immediately.
Turkey feels it already has made significant concessions on Cyprus without any concrete reward, either for the Turkish Cypriots, who remain formally outside the EU, or for Turkey. Any move to recognise Cyprus would inflame nationalist opinion within Turkey.There is a growing view inside Turkey that Cyprus may be the issue that exposes most vividly its differences with the EU. 

Partnership, rather than full membership, proposed by Turkish academic 
"It's finished," says Hasan Unal, a professor at Bilkent University, of Turkey's accession process. He has opposed full EU membership from the outset, saying an alternative arrangement would suit Turkey better. What is needed urgently, he says, is a way of stabilising the relationship between Ankara and Brussels that avoids excessive expectations and disappointments on both sides. "We have to sort out a new relationship between Turkey and the European Union," he says.
The task for Mr Erdogan's government ahead of October 3rd, however, is to keep the accession process in full view and to avoid being distracted by political rows.
"This government is so driven into a corner that it doesn't know what to do," Mr Unal says. "The next few months are going to be very difficult."

Turkey confident tourism will rise despite recent terrorism
As if this was not trouble enough, there has been a resurgence of terrorism. A bomb attack on a restaurant in the Turkish city of Istanbul injured a Dutch tourist and a waiter, Turkish media reported recently. According to the authorities, the bomb was either on a timer or remotely controlled, was hidden under a table, the reports said.
Five people were also recently killed in a bomb attack in the Turkish holiday resort of Kusadasi. No group claimed responsibility for that attack, but Turkish authorities assumed involvement by militants from the Kurdish Workers Party (PKK).
Officials stated that recent bombings in western coastal towns, the heart of Turkish tourism, would jeopardise Turkey's hope to attract 20m tourists this year and to raise its tourism income to 18bn Euro this year. However, Foreign Minister Abdullah Gul assured the public that security measures have been taken. Resorts along the southwest Aegean coast are famous among foreign tourists and the region is dependent on tourism.
Meanwhile, the State Institute of Statistics (DIE), announced data for tourism in the second quarter. Turkey's tourism income of the year amounted to 3.8bn Euro. The total tourism revenue in the first 6 months of the year was 5.8bn Euro, Anadolu News Agency reported.
According to economists, tourism revenue was not so impressive when compared to the number of visitors, but it is expected that this year the revenues will reach 18bn euro. Tourism plays a vital role as far as balance of payments is concerned but if it declines below expectations then it will lead to bigger current account deficit.
According to the DIE data, foreign visitors accounted for 3.2bn euro of tourism income in the second quarter. Some 71% of foreigners' spending was personal expenses, while the remainder was money they spent on package tours. Some 99% of citizens' tourism spending was for personal purposes. In the first six months, foreign visitors accounted for 4.7bn Euro Euro of Turkey's total tourism income. Some 7.7m visitors were foreign. The number of visitors exceeded 8.7m, with per capita expenditure at 658 Euro.
Meanwhile, the World Tourism Organisation (WTO) announced in its latest report that Turkey was the eighth country in the world which earned the most revenue from tourism in the year 2004 - a total of 15.9bn Euro. Meanwhile, world tourism revenue rose 10.3% in 2004 compared to 2003 and reached 622bn Euro. 

Top Turkish banker urges domestic investment banking
A top banker recently announced that domestic investment in Turkey's banking sector should be encouraged despite the benefits of foreign investment in financial services. Ersin Ozince, the head of the Turkish Banking Association said in Bilecik that a healthy development of Turkey's banking sector will benefit the country than any other sector, Anadolu News Agency reported.
Ozince is chief executive of Is Bank, the majority shareholder in Turkey's leading glass manufacturer. He was in Bilecik to help lay the foundations for a new Sisecam glass factory.
He expressed satisfaction that there are hundreds of foreign investors in Turkey's banking sector but added that there is a place in each country for support of its own domestic investors without deviating from international agreements governing investors' rights.
Ozince recalled that foreign investment in Turkey played a vital role in opening doors for Turkey to global markets that would benefit Turkey as well as the foreign countries involved. Since the crisis of 2001 Turkey has reduced the number of its banks from 81 to fewer than 50. Turkey adopted significant reforms in the sector with the increased stability attracting foreign capital.
However, he added that Turkish people have the natural right to want most of the investment to be Turkish. "This does not mean we should be against foreign investment, for among registered capital aimed at the banking sector foreign capital naturally has a high position," said Ozince.
He predicted that Istanbul can become Turkey's financial centre and stressed that Turkey should be more attentive to developing its services sector and especially its banking sector. Domestic investment is an important component of this development.
Several European banks have acquired control of Turkish banks this year, with a possible sale of Garanti Bank the latest deal in play. Unicredito, together with its Turkish partner, Koc Holding, is acquiring Yapi Kredi Bank in a deal that values the bank at two billion Euro, ad Fortis bought Disbank for about one billion Euro. Garanti is controlled by the Dogus Group, which owns about half of the shares, with the whole valued at an estimated five billion Euro.

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AVIATION

Russia to offer new attack helicopter version at tender 


Russia's Kamov Helicopters and state arms trader, Rosoboronexport, will offer a new version of the Ka-50 Black Shark attack helicopter, adapted to Turkish requirements, at an upcoming helicopter tender in Turkey, Interfax News Agency reported.
"I don't think our chances look any slimmer than before. They remain high and we'll offer a new version of the Ka-50 helicopter, of course. The helicopter's configuration is being specified right now," Kamov's general designer, Sergei Mikheyev, told Interfax. 
He said direct sales will be negotiated this time. But an offset procedure will also be discussed and part of the work may be handed over to Turkish firms. "Licences may be sold, so Turkey might obtain know-how in the deal," Mikheyev said. At the initial stage, Turkey will buy not more than 50 attack helicopters, although information is available that the number of helicopters Turkey will buy will not exceed 30, he said. The tender is expected to be announced early in 2006 and the first helicopters will be supplied to Turkey 18 months after the winner is announced. "This schedule is more rigorous than the previous ones," said Mikheyev. 

Turkish airline buys 10 Canadian Bombardier planes 

Turkey's newly established Izmir Airlines (IHY) signed a deal worth 275m Euro with Canadian aircraft maker Bombardier to buy 10 regional passenger jets for its fleet, Anatolia News Agency reported recently. 
During the signing ceremony for the aircraft, IHY Chairman, Ekrem Demirtas, said that five of the CRJ900 and Q400 planes would be delivered next year while the remainder, Bombardier's new "C" series, in 2010. James E. Daily, Bombardier's vice president for international sales and marketing, said at the signing ceremony that they have started a long-lasting relationship with IHY, an airline which he believes to be "young and dynamic." Regarding the financing of the deal, Demirtas said they would work with Canadian Eximbank and other Turkish banks. He explained that they preferred to buy new planes instead of used ones as they gave priority to security and comfort. Izmir's tourism trade and the city's industry would benefit when IHY begin flights from the Aegean city, according to Demirtas.

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BANKING

Rabobank gains majority stake in Turkey's Sekerbank 

Dutch Rabobank recently announced that it has signed an agreement to buy a majority stake in Turkey's Sekerbank. Under the terms of the agreement, Rabobank will begin by acquiring 36.5 per cent for 78m Euro per share, and will eventually raise its stake to 51 per cent at the same share price, Anadolu News Agency said in a report. 
The acquisition of the 36.5 per cent stake is expected to close after the summer. The deal for the 36.5 per cent is valued at approximately 91m Euro. 
Under the deal, if the public offer fails to retrieve a sufficient quantity of shares, the pension fund would sell an additional stake that will complement Rabobank's holdings to 51 per cent. 
Rabobank, the only bank with a triple A rating from the rating institutions said that the acquisition is in line with its international strategy of buying small groups, or taking a majority share in small groups, with strong positions inside and outside large cities. 
"Rabobank will acquire a majority stake in Sekerbank and will furnish ample capital to finance the future growth of the bank," the Dutch group said in a separate statement issued recently. 
With Rabobank, Sekerbank would be linked to a really committed strategic investor with the best reputation. Hasan B. Goktan, chairman and general manager of Sekerbank, explained that Sekerbank wants to be perceived by clients as the most trusted bank to handle their financial transactions. Rabobank said Sekerbank would have a particular focus on retail business, mortgage lending, SMEs and an affinity with the local food and agribusiness sector. 
"Our aim is to develop local community banks which operate close to their clients, with a particular focus on the non-metropolitan areas," said Harry de Roo, member of the managing board of Rabobank International. 
Sekerbank was established in 1953, with the mission of intermediating between the government and the domestic sugar beet sector, making payments and providing cash advances while Rabobank has been present in Turkey since 1996. The Rabobank Group is the largest financial service provider in the Dutch market, with domestic market shares ranging between 25-40 per cent, according to the report. 

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CREDIT RATINGS

Capital Intelligence upgrades Turkey's ratings 

Capital Intelligence recently raised Turkey's long-term foreign currency and local currency ratings to BB-minus, from B-plus, and affirmed its outlook as stable, reflecting Turkey's strong economic performance and declining fiscal and debt ratios. The Turkish economy enjoyed a third year of high growth in 2004, with real gross domestic product (GDP) rising by 8.9 percent, and should expand by six per cent this year and 2006, the rating agency said, Deutsche Presse-Agentur (dpa) reported. 
Inflation was at its lowest since the early 1970s, supported by relatively prudent fiscal and monetary policies and fast productivity growth, while the Turkish central bank's implicit inflation target of below eight percent by end of the year was within reach.
While strong domestic demand growth and high oil prices have pushed the external current account deficit above five percent of GDP, a confidence-driven pick-up in private capital inflows has kept the balance of payment in surplus and enabled the central bank to accumulate a record level of foreign exchange reserves.
The public sector deficit fell for a third year in 2004 to 6.2 per cent of GDP while the primary balance saw a record surplus of 6.8 per cent of GDP. Expenditure management improved, tax administration was stepped up and the budget constraints of state enterprises hardened. The outlook for public finances was favourable, Capital said. Budget over-performed in the first five months and was on course to meet the primary surplus target of 6.5 per cent of GDP for the year. 

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ENERGY

Shahdeniz gas field to meet 15% of Turkey's needs in gas 

Shahdeniz gas condensate field is expected to meet 15 per cent of Turkey's needs in gas (43,185 billion cubic metres) until 2020, Botas company told Azertaj recently. 
In 2007 Turkey is expected to buy 24 billion cubic metres of gas from Russia, 9.5 billion from Iran and two billion from Azerbaijan. Turkey is seeking to get some gas through transit of gas from Azerbaijan, Iran, Russia, Kazakhstan, Turkmenistan, Egypt, Syria, and Iraq to the European countries. The intergovernmental agreement on laying of 3.4 kilometres pipeline worth 4.6 billion from Turkey via Greece to Austria has already been signed. The pipeline with 13 billion cubic metres throughput is expected to be put into operation in 2011. In eight-nine years, the pipeline will transport 30 billion cubic metres of gas from Turkey to Europe.

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FOREIGN LOANS

Akbank OKs 200m Euro loan for Erdemir group 

Turkish bank Akbank recently gave a thumbs up to a 200m Euro loan for steel giant Erdemir and its associate Isdemir. Akbank's Kurtul said, "We are proud of lending to the Erdemir group, the life and soul of the Turkish economy." He added that Akbank would continue to back investments of manufacturers through long-term loans. The signing ceremony was held at Akbank headquarters. The participants in the ceremony were Erdemir Chairman, Recai Berber, Erdemir general manager, Kerim Dervisoglu, Isdemir general manager, Atamer Giyici and Akbank general manager, Zafer Kurtul, and his assistant in charge of corporate banking, Ziya Akkurt, Anadolu News Agency reported. 
Akbank said the steel giants would use the nine-year loan to finance investments. The loan has a grace period of two years. The investments aim at modernising and expanding the capacity of Erdemir while transforming Isdemir into a flat steel producer. Erdemir's Berber stated that the loan would bring current modernisation and transformation to a new phase. The loan would help to establish flat steel manufacturing and Turkish industry will no longer depend on international supplies. Berber said the group would proceed with improvements already launched at Erdemir and Isdemir.
Thirteen groups including the world's largest steel producers have entered bids to take part in the privatisation of Turkey's largest steel business, state-owned Erdemir a Turkey's privatisation agency announced on July 15. The agency said that eight of the 13 companies or consortiums qualified to bid for Erdemir, were not Turkish. Companies from Russia, Korea, France, Britain, Ukraine and Luxembourg have entered bids for the privatisation of Erdemir. Nine bidders are of foreign origin, while the remaining four are local, including the Turkish Army Fund Oyak Group.
The bidders included the Eregli Joint Venture Group, a consortium of 23 Turkish businesses that pooled their resources to offer a bid following intense opposition in Turkey to Erdemir's possible sale to non-Turkish companies, the agency said. Among the participants in the consortium are Borusan A.S., MNG Holding, Kibar Holding and Fiba Holding. Large foreign steel producers such as Anglo-Dutch steel company Corus, Luxembourg-based Arcelor, Mittal Steel, US Steel Corp., Russia's Novolipetsk and Severstal have expressed interest in Erdemir.
Erdemir had sales of US$3.3bn in 2004, its most profitable year ever. The company predicted flat steel production capacity of seven million tons by 2007 and 10m tons by 2010. Final bids for the 46.12 per cent block sale of the company will be submitted to the privatisation agency on September 26. 
Mittal Steel officials have said in the event they are successful in their bid for Erdemir, the Turkish steel giant will become "Europe's jewel" regarding its addition to Mittal's production capacity in the European market.
During a business meeting in Ankara, prime minister Recep Tayyip Erdogan on July 14 slammed "Europe's jewel" because according to him, Erdemir has no influence in the world market. Erdogan said Erdemir was not in a good state and even faced problems in renewing its technology. He said the company owed its profitability to conditions in world markets. "So why should the state carry this burden?" he asked. He stated that as Erdemir has become a tool for political cronyism, so foreign or local, the highest bidder would take the company. A further 3.17 per cent stake held by the Turkish development bank in the steelmaker will be sold off together with the block sale. 

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FOREIGN TRADE

Iran, Turkey to revive trade 

During a two-day meeting of the Iran-Turkey joint border committee, director general of the exports and imports regulations department at ministry of commerce, Abbas Hosseini said that Iran and Turkey will ease the regulations that delay imports and exports, Anatolia News Agency recently reported. 
Hosseini lead an Iranian delegation to Ankara. Both sides agreed at the meeting to ease control at the transit of goods and open new border markets to revive their trade.
Hosseini said the consignments whose weight is below one thousand tons would be checked on border and no sample will be sent to the related centres in Tehran or Ankara for checking. He added that both sides are to establish new border markets to raise trade and expedite economic development in border areas.

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