TURKISH BUSINESS RELIEVED OVER START OF EU

UNCLAS SECTION 01 OF 02 ANKARA 005986 SIPDIS SENSITIVE TREASURY FOR INTERNATIONAL AFFAIRS - CPLANTIER NSC FOR MCKIBBEN E.O. 12958: N/A TAGS: ECON EFIN ECIN TU EU SUBJECT: TURKISH BUSINESS RELIEVED OVER START OF EU ACCESSION TALKS REF: A. ANKARA 5978 ¶B. ANKARA 5932 ¶1. (SBU) Summary: As expected, the business community breathed a collective sigh of relief over the start of EU accession talks, though many claimed they had always been confident of the outcome. The business community has been among a key constituency in support of EU accession, however, their comments reflect that they were not immune to the national frustration with perceived EU obstructionism. Business leaders also tend to be more aware than most Turks of the difficulties that lie ahead. In private, business contacts take a more positive tone, recognizing the value of the EU accession process--rather than just the end result--as a pro-reform stabilizing force that allows businesses, both domestic and foreign, to invest and plan for a longer time horizon. End Summary. -------------- Business Breathes a Sigh of Relief: -------------- ¶2. (SBU) Though many businesspeople insisted they never had any doubt the EU talks would go forward, Turkish business leaders breathed a collective sigh of relief over the long-awaited start of EU accession talks. A taste of what was in store had the talks not started was the market sell-off Monday morning in reaction to the negative news flow (ref b). Once the news flow turned around in the middle of the day on Monday, Turkish financial markets embarked on an extended rally--so much so that the Central Bank intervened in the foreign exchange market on Tuesday to brake the appreciation of the lira. Rifat Hisarciklioglu, the President of the Union of Turkish Chambers of Commerce (TOBB) spoke for the entire business community when he congratulated the GOT on this "historic" moment. -------------- -------------- Business Leaders Not Immune to National Frustration: -------------- -------------- ¶3. (SBU) In their public comments, a number of businessmen tended to reflect the national mood of wounded pride and frustration with perceived EU obstructionism. Over the weekend, perhaps out of a desire to show solidarity with the Government position and maintain pressure on the EU, TUSIAD, the Istanbul-based association of leading industrialists, publicly said it supported the Government's unwillingness to cross its "red lines." Oguz Satici, the President of the Exporters' Union said the the negotiations were "a test for the EU not for us. If the negotiations had not begun it would damage the interests of the EU worse than those of Turkey." Ankara Chamber of Industry Chariman Zafer Caglayan said the EU had tested Turkey's patience and that "the EU is a road having many bends; it has 35 open drainage ditches." Most extreme of all--and not representative--was the anti-EU position of Ankara Chamber of Commerce Chairman Sinan Aygun who likened the EU process to the notorious Sevres treaty after World War I, which to the Turkish mind symbolizes humiliation and subjugation by the western powers. -------------- Market Analysts Accentuate the Positive: -------------- ¶4. (SBU) Market analysts in Istanbul, who speak to a more financial--and more international--audience than the business leaders, were uniformly positive on the EU news. Analysts such as Baturalp Candemir of EFG Istanbul Securities or Tevfik Aksoy of Deutsche Bank point to the stabilizing impact of the "EU anchor." Candemir noted that the EU accession process will "make it difficult for Turkish governments to abandon the implementation of sound economic policies and reverse reforms." Echoing a widely-held view among economists and the business community, Candemir expects a "positive impact on growth rates, privatization and capital inflows." -------------- EU Improves Investment Outlook: -------------- ¶5. (SBU) A number of analysts and business leaders commented on the favorable impact on investment, including foreign investment. Privately, many contacts have told us that the start of the EU accession process allows businesses to invest and plan with a longer time horizon. Mustafa Alper of the Foreign Investors' Association (YASED) said the EU decision was extremely positive for foreign investment, expecting a pick-up in the pace of FDI. Aclan Acer, of the Dogus Group, told Istanbul econoff that he expects large inflows of investment during the accession preriod. -------------- Realism About the Road Ahead: -------------- ¶6. (SBU) Several business leaders noted that the way ahead would not be easy. Former Istanbul Chamber of Industry Husamettin Kavi said the accession period would be extremely difficult for Turkey, particularly with regard to services, agriculture and environment. Guler Sabanci, CEO of the giant Sabanci conglomerate, though overall very positive in tone, noted there would be difficulties from now on. -------------- Comment: -------------- ¶7. (SBU) The mixed statements by many business leaders probably reflect a combination of realism about the difficulties ahead and their frustration as Turkish citizens over perceived EU goalpost-moving. On the other hand, the market reaction--a huge rally--is probably a more meaningful indicator of what the EU accession really means for Turkish business prospects than the public posturing of the leaders of business associations. Turkish business had pushed hard for the GOT to get to October 3 and will clearly reap huge benefits from Turkey's new status as an accession country, as well as from the stabilizing and reformist accession process itself. -------------- MCELDOWNEY