TURKISH FOREIGN TRADE MINISTER TUZMEN'S VIEWS ON

C O N F I D E N T I A L ANKARA 001990 SIPDIS E.O. 12958: DECL: 11/17/2018 TAGS: ECON PREL EFIN TU IZ GG SUBJECT: TURKISH FOREIGN TRADE MINISTER TUZMEN'S VIEWS ON IRAQ, GEORGIA, IMF REF: ANKARA 1920 Classified By: Ambassador Ross Wilson for reasons 1.4 (b) and (d) ¶1. (C) SUMMARY. In a November 12 meeting, the Ambassador spoke with Kursad Tuzmen, State Minister for Foreign Trade, on a range of issues, with special attention to the future of Iraq and Georgia. Tuzmen was pessimistic about Iraq, but sees opportunities to reshape Iraq's future through trade and investment. On Georgia, Tuzmen noted that the new Georgian PM has a close relationship with Turkey and that a free trade agreement with Georgia had been concluded successfully. He saw the need for a new Turkey-IMF relationship to calm the markets and Turkish business. END SUMMARY. Iraq -------------- ¶2. (C) Tuzmen said he has traveled three times to Baghdad in the last three months and found striking Iran's growing influence. He admitted that all sides had made mistakes over the last five years, including Turkey, but argued that without a new approach Iraq will be "lost" to Iran and the regional balance will be drastically altered. ¶3. (C) Tuzmen cited two principal obstacles to constructive change in Iraq - corruption and indecisiveness. He spoke with frustration of open solicitations for bribes from high-level Iraqi officials. At the same time, the Iraqi government's reluctance to take decisions hinders development, as was the case with a Turkish proposal for creating a free trade zone on the border and opening additional crossing points, an initiative that has not moved at all due to Iraqi hesitation. ¶4. (C) Despite this, Tuzmen sees great opportunity in Iraq, with increasing trade ties eventually leading to greater investment. He cited the heavy investment of Turkish construction firms in northern Iraq as an example of how Turkey can play a positive role in rebuilding Iraq and tying it more closely to the West, but noted that increased investment would require a "sincere approach to solving problems" from the Iraqis. Georgia -------------- ¶5. (C) Tuzmen described Turkish relations with Georgia as excellent. He regards new PM Mgaloblishvili, previously ambassador to Turkey, as a friend. Tuzmen anticipated that Turkey's ties to Georgia would strengthen once the bilateral free trade agreement comes into force. Financial Crisis and the IMF -------------- ¶6. (C) Tuzmen admitted that Turkey is beginning to feel pain from the financial crisis; and stated that the economy is unlikely to fully recover until 2011. When Ambassador Wilson mentioned the symbolic utility that an agreement with the IMF could have in calming market fears, Tuzmen acknowledged that over the next two to three months Turkish industry will face difficulties due to the credit crunch, and that some financing mechanism is necessary to help bridge that period. Changes to Free Zone Law -------------- ¶7. (SBU) Tuzmen said he would be speaking late in the day before parliament on proposed amendments to the law that permits free economic zones within Turkey. The amendments would address EU concerns over the income and corporate tax exemptions for companies operating in these zones. While the amendments would remove the tax exemption for service companies, the exemption for productive industry would remain in place until Turkey achieves full membership in the EU. Tuzmen stated that this would help protect over 55,000 jobs and billions of dollars in investment. Visit Ankara's Classified Web Site at http://www.intelink.sgov.gov/wiki/Portal:Turk ey SILLIMAN