Identifier
Created
Classification
Origin
09ANKARA118
2009-01-23 13:51:00
UNCLASSIFIED
Embassy Ankara
Cable title:
TURKEY - NO AUTOMOTIVE PACKAGE YET, BUT EXPECTED
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UNCLAS SECTION 01 OF 02 ANKARA 000118
SIPDIS
DEPT FOR EEB/TPP/MTAA BNAFZIGER AND EUR/SE DMARSH
DEPT PLEASE PASS USTR FOR RMALMROSE AND MMOWREY
E.O. 12958: N/A
TAGS: ECON EFIN ETRD PREL WTO TU
SUBJECT: TURKEY - NO AUTOMOTIVE PACKAGE YET, BUT EXPECTED
SOON
REF: A. A) STATE 4753
B. B) ANKARA 85
C. C) ANKARA 117
UNCLAS SECTION 01 OF 02 ANKARA 000118
SIPDIS
DEPT FOR EEB/TPP/MTAA BNAFZIGER AND EUR/SE DMARSH
DEPT PLEASE PASS USTR FOR RMALMROSE AND MMOWREY
E.O. 12958: N/A
TAGS: ECON EFIN ETRD PREL WTO TU
SUBJECT: TURKEY - NO AUTOMOTIVE PACKAGE YET, BUT EXPECTED
SOON
REF: A. A) STATE 4753
B. B) ANKARA 85
C. C) ANKARA 117
1. Summary. Turkey has not yet implemented a formal program
to stimulate its automotive industry, but the sector has been
publicly clamoring for support and action is expected soon.
The automotive sector is one of Turkey's most important
growth engines and it has been hit especially hard by the
crisis. A GOT working group was only recently established to
devise an automotive sector package. Based on press reports,
such a program will likely be focused on tax incentives for
both producers and consumers. There has not yet been any
mention of an explicit linkage to exports or to local content
requirements. As 80 percent of Turkey's automotive production
is exported, however, any program will obviously have the
effect of supporting exports. End summary.
2. As has been the case with most of its crisis response, the
GOT has been dilatory in formulating a rescue package for its
automotive sector. Calls for government support began late
in 2008 when automotive exports began to nosedive, plummeting
35.4 percent in the fourth quarter from the same period in
2007 (and 45.4 percent in December alone). In early January
2009, press reports began to describe a potential GOT rescue
package focused mostly on tax incentives. Among the ideas
discussed were:
-- reductions in taxes for producers who maintain a certain
level of employment or who work on developing
environmentally-friendly vehicles;
-- temporarily reduced social security taxes for automotive
workers;
-- lower energy prices for automotive production facilities;
-- tax discounts to consumers who buy
environmentally-friendly vehicles; and
-- restarting a defunct program where consumers who trade in
high-emission older vehicles receive a Special Consumption
Tax exemption on a new vehicle purchase (Comment: The program
was shut down because enterprising Turks established a
secondary market in cheap, polluting vehicles to help get the
tax exemption, defeating the purpose of the program. End
Comment.)
3. Several GOT ministers, including Industry Minister
Caglayan and Finance Minister Unakitan, have spoken about the
need for a rescue package, but it was only on January 19 that
the Economic Coordination Board established a working group
to devise sectoral stimulus packages (with a focus on
automobiles and textiles). This undersecretary-level group
will include the State Planning Organization and the
ANKARA 00000118 002 OF 002
Ministries of Treasury and Finance. No date has been set for
the group to present its proposals. The potential size and
content of sectoral support packages is also an issue in
ongoing GOT negotiations with the IMF (ref B). The GOT has
yet to give the IMF the details of its proposed packages or
to define how much they will cost. This is a further
indication of how undefined the GOT program is at this point.
4. The automotive sector is one of the pillars of Turkey's
economy and of its recent export-led growth. According to
Foreign Trade Undersecretariat statistics, automotive
manufacturing directly employs 46,000 people and the related
parts and service industries employ an additional 1.25
million. Automotive goods are the second largest category of
export goods (behind steel but ahead of textiles) and in 2008
exports reached USD 17.5 billion. The sector is highly
dependent on exports, with over 80 percent of its production
going overseas, mostly to Europe (much of the production
comes from factories owned by European automakers). As a
result, it has proven especially vulnerable to the downturn
in Europe and exports have fallen dramatically.
5. Comment: While none of the measures described in para 2
have been explicitly linked to export promotion, any stimulus
package that reduces producer costs will have the effect of
making Turkey's automobiles more competitive both at home and
abroad. Turkey can be expected to make some effort to ensure
that any package meets WTO rules. At the U.S.-Turkey Trade
and Investment Framework Agreement meeting on January 13, the
GOT raised the U.S. automaker bailout and expressed its
concern over whether the program violates the WTO. They
seemed to take to heart AUSTR Christopher Wilson's point that
a program that is crafted to avoid linkage to exports or to
local content should be WTO-compliant (see ref C). End
comment.
Visit Ankara's Classified Web Site at
http://www.intelink.sgov.gov/wiki/Portal:Turk ey
Jeffrey
SIPDIS
DEPT FOR EEB/TPP/MTAA BNAFZIGER AND EUR/SE DMARSH
DEPT PLEASE PASS USTR FOR RMALMROSE AND MMOWREY
E.O. 12958: N/A
TAGS: ECON EFIN ETRD PREL WTO TU
SUBJECT: TURKEY - NO AUTOMOTIVE PACKAGE YET, BUT EXPECTED
SOON
REF: A. A) STATE 4753
B. B) ANKARA 85
C. C) ANKARA 117
1. Summary. Turkey has not yet implemented a formal program
to stimulate its automotive industry, but the sector has been
publicly clamoring for support and action is expected soon.
The automotive sector is one of Turkey's most important
growth engines and it has been hit especially hard by the
crisis. A GOT working group was only recently established to
devise an automotive sector package. Based on press reports,
such a program will likely be focused on tax incentives for
both producers and consumers. There has not yet been any
mention of an explicit linkage to exports or to local content
requirements. As 80 percent of Turkey's automotive production
is exported, however, any program will obviously have the
effect of supporting exports. End summary.
2. As has been the case with most of its crisis response, the
GOT has been dilatory in formulating a rescue package for its
automotive sector. Calls for government support began late
in 2008 when automotive exports began to nosedive, plummeting
35.4 percent in the fourth quarter from the same period in
2007 (and 45.4 percent in December alone). In early January
2009, press reports began to describe a potential GOT rescue
package focused mostly on tax incentives. Among the ideas
discussed were:
-- reductions in taxes for producers who maintain a certain
level of employment or who work on developing
environmentally-friendly vehicles;
-- temporarily reduced social security taxes for automotive
workers;
-- lower energy prices for automotive production facilities;
-- tax discounts to consumers who buy
environmentally-friendly vehicles; and
-- restarting a defunct program where consumers who trade in
high-emission older vehicles receive a Special Consumption
Tax exemption on a new vehicle purchase (Comment: The program
was shut down because enterprising Turks established a
secondary market in cheap, polluting vehicles to help get the
tax exemption, defeating the purpose of the program. End
Comment.)
3. Several GOT ministers, including Industry Minister
Caglayan and Finance Minister Unakitan, have spoken about the
need for a rescue package, but it was only on January 19 that
the Economic Coordination Board established a working group
to devise sectoral stimulus packages (with a focus on
automobiles and textiles). This undersecretary-level group
will include the State Planning Organization and the
ANKARA 00000118 002 OF 002
Ministries of Treasury and Finance. No date has been set for
the group to present its proposals. The potential size and
content of sectoral support packages is also an issue in
ongoing GOT negotiations with the IMF (ref B). The GOT has
yet to give the IMF the details of its proposed packages or
to define how much they will cost. This is a further
indication of how undefined the GOT program is at this point.
4. The automotive sector is one of the pillars of Turkey's
economy and of its recent export-led growth. According to
Foreign Trade Undersecretariat statistics, automotive
manufacturing directly employs 46,000 people and the related
parts and service industries employ an additional 1.25
million. Automotive goods are the second largest category of
export goods (behind steel but ahead of textiles) and in 2008
exports reached USD 17.5 billion. The sector is highly
dependent on exports, with over 80 percent of its production
going overseas, mostly to Europe (much of the production
comes from factories owned by European automakers). As a
result, it has proven especially vulnerable to the downturn
in Europe and exports have fallen dramatically.
5. Comment: While none of the measures described in para 2
have been explicitly linked to export promotion, any stimulus
package that reduces producer costs will have the effect of
making Turkey's automobiles more competitive both at home and
abroad. Turkey can be expected to make some effort to ensure
that any package meets WTO rules. At the U.S.-Turkey Trade
and Investment Framework Agreement meeting on January 13, the
GOT raised the U.S. automaker bailout and expressed its
concern over whether the program violates the WTO. They
seemed to take to heart AUSTR Christopher Wilson's point that
a program that is crafted to avoid linkage to exports or to
local content should be WTO-compliant (see ref C). End
comment.
Visit Ankara's Classified Web Site at
http://www.intelink.sgov.gov/wiki/Portal:Turk ey
Jeffrey