PRIVATE SECTOR MEETINGS INFORM U.S. - TURKEY EPC

UNCLAS SECTION 01 OF 02 ISTANBUL 000159 SIPDIS DEPT PLEASE PASS USTR FOR LERRON DEPT PLEASE PASS USTDA FOR DSTEIN USDOC FOR 4200/ITA/MAC/EUR/PDYCK/CRUSNAK USDOC FOR 3133/ITA/USFCS/OIO/CEEBIC/MCOSTA USDA OSEC FOR DUS TERPSTRA USDA FAS FOR OCRA FOR CURTIS, FLEMINGS E.O. 12958: N/A TAGS: ECON EINV ETRD TU SUBJECT: PRIVATE SECTOR MEETINGS INFORM U.S. - TURKEY EPC ¶1. (U) Summary: The third meeting of the U.S. - Turkey Economic Partnership Commission began in Istanbul with a full-day session devoted to the private sector. These private sector meetings were designed to inform the government-to-government meetings that followed on February 9 (septel.) Private sector representatives grappled with ways to increase bilateral trade and investment. Turkish business representatives noted that competition for market share in the U.S., particularly from China is stiff. U. S. business representatives cited a lack of transparency and excessive regulation as deterrents to increased growth and investments, but in general expressed optimism about recent economic reforms. End Summary. ¶2. (U) Members of the U. S. delegation to the third U.S.-Turkey Economic Partnership Commission (EPC) participated in a day of private sector meetings in Istanbul on February 8,2007. Business Forum events were organized by the Union of Chambers and Commodity Exchanges of Turkey (TOBB) and Turkey's Foreign Economic Relations Board (DEIK). The U. S. Delegation was led by EEB A/S Daniel Sullivan and included representatives of the Departments of Commerce and Energy. Istanbul events included a book release/press conference, a luncheon with remarks by A/S Sullivan a business forum session and a meeting with the American business community organized by AmCham affiliate the American Business Forum Turkey (ABFT). ¶3. (U) The day began with a book launch/press conference organized by TOBB Chairman Rifat Hisarciklioglu. Hisarciklioglu and Athens-based U. S. Chamber of Commerce regional representative Kristal Alley announced the release of a handbook on Doing Business in the United States jointly developed by TOBB and the U. S. Chamber with USAID financing. Alley briefly described the joint business development project that led to the publication of the handbook. A/S Sullivan noted that these initiatives have the potential to deepen our relationship and that the program Alley described is completely private-sector led. ¶4. (U) Following the book lunch, at a lunch organized by DEIK and TOBB, A/S Sullivan and MFA Energy Coordinator Mithat Balkan described the outlook on regional energy security and cooperation from both government's perspectives. Balkan stressed that Turkey's geographic location makes it a critical player. He noted the Baku-Tbilisi-Ceyhan (BTC) pipeline is proving to be of great commercial value. He cited U. S. involvement in the BTC pipeline project as proof that cooperative efforts to create alternate energy distribution projects could succeed. Both A/S Sullivan and Balkan stressed the need to improve trade relations and increase energy efficiency, Balkan urged support for a common energy policy and sought assistance in reducing the number of oil tankers transiting the Bosphorous. ¶5. (U) After lunch, DEIK hosted a "Business Forum" where the two delegations listened to ideas and suggestions from the business community about how to increase flows of trade and investment between Turkey and the U.S. USDOC DAS Paul Dyck's remarks at the forum covered the US-Turkey trade relationship, touched on market access issues that impede these figures from meeting their potential, and then noted some ways in which we could strengthen the bilateral commercial relationship including by fostering innovation and encouraging private sector partnerships such as the TOBB - U.S. Chamber initiative. Guven Sak, Director of the Economic Policy Research Institute, described efforts to increase bilateral trade including customs modernization and joint production in third countries as well as ways of increasing foreign direct investment. ¶6. (U) The business forum also featured presentations by representatives from various sectors. In general, the Turkish business community expressed its disappointment with the relatively low level of bilateral trade, underscored the importance of the GSP program and complained about the threat China poses to manufacturers. Presentations made by U.S. company representatives are noted. -Construction: Turkish companies are having trouble breaking into the U.S. market. -Tourism: Although this is the fastest growing sector in Turkey, few Americans visit, and most are cruise line passengers. -Textiles: Exports to the EU are doing fine, but Turkey's share of the U.S. market is too low. -Insurance (AIG): Recent reforms mean opportunities for U.S. companies are growing in this sector. -Steel Industry: Difficult to compete with China; U.S. market is hard to break into. -Jewelry: Stressed the need for continued inclusion in the GSP program. -Food (ADM): Government involvement in the Turkish market is unhelpful. Supply and demand are out of balance; government subsidies distort the market. -Natural Stones: Turkey has unrealized potential in this sector; GSP is vital for Turkish exporters. -Energy (GE): Turkish industry needs more investment in research and development as well as better technology. -Automotive Spare Parts: Difficult to compete with China; U.S. market is hard to break into. During the subsequent Q&A session, one participant asked for assistance with customs and security-related delays at U.S. ports and called for the inclusion of Turkey in the Container Security Initiative. A/S Sullivan agreed to look into the matter. ¶7. (U) The final event of the day was a private meeting between the U.S. delegation and representatives from the U.S. companies. The mood was generally positive, with several executives noting that recent economic reforms had made Turkey a much more attractive market. The main concern shared by all was the need for more transparency on the part of the Turkish government. Many pharmaceutical company representatives described difficulties in bringing new products to the market. Medicines are being introduced to the market two or three years behind the U.S. market due to delays on the part of the GOT. Representatives from other sectors described difficulties completing projects due to excessive red tape and/or corruption. One suggested way forward was for the GOT to accelerate the rate of EU harmonization. ¶8. (U) A/S Sullivan and members of the EPC delegation returned to Istanbul on February 10 and 11. The Consul General hosted a dinner on the 10th that provided an opportunity for A/S Sullivan to interact with senior business leaders, both U.S. and Turkish, in an informal setting. During a lively conversation A/S Sullivan described progress the delegation made during February 9 Ankara meetings. In response to a question, he noted that Qualified Industrial Zones (QIZ),long a topic of great interest in Turkey, required legislative action and were thus problematic. He urged the group to think beyond textiles, noting that QIZs including textiles were an absolute non-starter for the U.S. The conversation quickly turned to Iraq, with one representative from an oil company urging the U.S. to consider providing payment guarantees and/or bridge loans to the Iraqi government in an attempt to regulate payment and ensure on time deliveries of fuel. ¶9. (U) A/S Sullivan cleared this message. JONES