Identifier | Created | Classification | Origin |
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05ANKARA7562 | 2005-12-23 14:16:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Ankara |
VZCZCXRO5194 RR RUEHDA DE RUEHAK #7562/01 3571416 ZNR UUUUU ZZH R 231416Z DEC 05 FM AMEMBASSY ANKARA TO RUEHC/SECSTATE WASHDC 2176 INFO RUEHIT/AMCONSUL ISTANBUL 9392 RUEHDA/AMCONSUL ADANA 0157 RUEATRS/DEPT OF TREASURY WASHDC |
UNCLAS SECTION 01 OF 02 ANKARA 007562 |
1. (SBU) Summary. Deputy Prime Minister Sener, who has coordinating responsibility for economic issues, told the Ambassador that despite Turkey's successful economic recovery, more work needs to be done: interest rates are too high, the current account deficit is large, and obstacles to foreign and domestic investment need to be reduced. Sener said Turkey is taking on the challenges of developing its poorest regions, especially the Southeast, and of adapting its legislation to EU norms, but that it needs and appreciates the help of the United States. Sener seemed engaged on his portfolio and ready to work with the U.S., including on investment climate issues. End Summary. -------------------------- Economy and Investment Climate -------------------------- 2. (SBU) Sener, who is responsible for coordinating economic policy at the cabinet level, told the Ambassador on December 21 that the economy had stabilized since the 2001 crisis and is growing strongly with relatively low inflation. He particularly noted the GOT's success in reducing its fiscal deficit, noting that in 2006 there will be an overall public sector surplus for the first time in decades. He was also pleased by increases in both exports and foreign and domestic investment. Nonetheless, interest rates of 8% per year for government borrowing remain too high. This has led to an "overvaluation" of the exchange rate and consequent large trade and current account deficits. Sener compared the current account deficit to those of other EU candidate countries that also ran large current account deficits during their accession periods. 3. (SBU) Sener said that a new law allowing foreign individuals to purchase real estate will be passed by Parliament in the near future, the previous law having been invalidated by the Constitutional Court. He noted that companies continue to be able to buy property in Turkey. Responding to the Ambassador's observation that U.S. and Turkish companies continue to complain about an unpredictable judicial system, unfairly applied and excessive regulation, and lack of adequate IPR protection as required by its TRIPS and other international commitments, Sener said that the government is aware of these problems and is addressing them through the Investment Climate Coordinating Board that is chaired by State Minister Babacan. He said the Board prioritized IPR and agreed with the Ambassador that Turkey's competitive position in the world will increasingly depend on its success in protecting intellectual property. Sener said Turkey was ready to "jump into the sea" and compete in the global economy in the context of rule of law. Any temporary losses would, he said, be offset by the long-term gains. -------------------------- Southeast Development -------------------------- 4. (SBU) Sener noted that underdevelopment is not only a feature of Southeastern Turkey, but of the entire eastern region. The Southeast Anatolia Project (GAP) concentrates on irrigation projects. Sener said that the IMF's unwillingness to exclude from its calculation of the primary budget balance spending on projects financed by foreign concessional loans limits the government's ability to take advantage of such lending. The biggest problem in the Southeast, Sener said, comes from instability in neighboring countries, notably Iraq, that limits Turkish exports to the region. -------------------------- EU Accession -------------------------- 5. (SBU) Reaching to his desk for a calendar of the screening process, Sener said that the process of checking Turkish laws and regulation against the EU acquis was moving along well. Initial screening of 7 chapters and detailed screening of 4 chapters had been completed. By June, initial screening of 23 chapters and detailed screening of 19 chapters would be complete. While Turkey would have the advantage in the accession process of already having a customs union with the EU, Sener said that the agriculture chapter will be the most hardest, given the 30% share of the population involved in agriculture and their low level of education, which makes their transition to other sectors difficult. The Ambassador also noted that agriculture will also be difficult because of European sensitivities on the subject. ANKARA 00007562 002 OF 002 6. (SBU) Jokingly, Sener observed that in every country that had joined the EU, the party that had guided it through the accession process had been subsequently voted out of office. The accession process will undoubtedly be long and difficult, with many chances for things to go wrong. In the short-term the Cyprus issue is the biggest risk, but in the medium-short term the domestic politics of economic transformation will also create risks. The Ambassador noted the United States' strong commitment to Turkey's accession and readiness to do whatever it could to help, although it was not a direct party. Sener took the opportunity to say that PKK terrorism is a major concern of the Turkish public and that U.S. support on this issue will be very helpful. WILSON |