LABOR UPSET THAT GOT WILL USE UNEMPLOYMENT FUNDS

UNCLAS ANKARA 001512 SENSITIVE SIPDIS C O R R E C T E D COPY CAPTION DEPARTMENT FOR DRL/ILCSR MMITTELHAUSER E.O. 12958: N/A TAGS: PGOV ELAB TU SUBJECT: LABOR UPSET THAT GOT WILL USE UNEMPLOYMENT FUNDS FOR INFRASTRUCTURE PROJECTS REF: A. ANKARA 1475 ¶B. ANKARA 1468 ¶1. (U) Summary. The Government of Turkey passed a law last August that will allow it to dip into a fund for unemployment insurance and transfer payments for "infrastructure development" projects, primarily in the Southeast. The law is unpopular with labor unionists because while the fund is not public and is mostly made up of employee and employer contributions, it is being used by the GOT as an unofficial line of credit. The GOT's need to draw on this low-hanging fruit may be a sign that they are running out of public sources to spend their way into pre-election favor. End Summary. ¶2. (U) On August 17, President Gul approved a law which, among other things, will permit the government to use 75 percent of the profits turned over by the unemployment insurance fund in 2009 to put towards "infrastructure investment" projects, predominantly in the southeast of Turkey (such as the Guneydogu Anadolu Kalkinma Projesi, or GAP). According to the Ministry of Finance, this translates into a loan of TL 4.5 billion (approximately $3.1 billion, at today's rates). The law stipulates that 75 percent of the sum will be repaid in 2010, and the remaining 25 percent will be repaid over 2011-2012. Each year's market rates will determine the interest rate for repayment of the sum. ¶3. (U) This law has generally upset labor confederation officials. Labor Attache met with the heads of the Turk-Is, Hak-Is, TESK and DISK confederations to discuss the law. The confederations said they consulted with the GOT to express their concerns about the law when it was being considered, but that they were unable to secure amendments to the draft that would have addressed those concerns. The confederations agreed among themselves that the new law is a salient issue because the fund itself is not public. The fund was created by contributions from workers (25 percent),employers (50 percent) and the state (25 percent) with the purpose of helping people when they are unemployed. However, with singlehanded passage of the law -- and without taking unions' wishes into consideration -- it is being handled by the government as a public fund that can be used for short-term fiscal relief with no accountability. ¶4. (U) In addition, since the purpose of the fund is to help those who are unemployed, the confederations are concerned that the GOT's decision to put the money towards "infrastructure investment" projects would not target the beneficiaries for which the fund was created. When Labor Attache met with Is-Kur, the State Employment office, its director assured her that the projects that were to be targeted by these funds were supposed to generate employment in the GAP area. The State Planning Office of the Prime Ministry further elaborated that the GAP region will have prominence, but the East, North, and Eastern Black Sea Development Projects also will be considered. ¶5. (SBU) The TESK confederation president said he was so disappointed in the law that TESK was going to approach like-minded parliamentary representatives from the Republican People's Party (CHP) to see if they would agree to approach the Constitutional Court to review the law and possibly strike it down. ¶6. (U) Comment. While the State Planning Office of the Prime Ministry said that 2.64 million TL has been withdrawn already, no projects have been identified to receive funding. According to the law, the funds to be used will have to be appropriated by the end of this calendar year, and unused funds must be returned. Media sources have speculated that the GOT is trying to use the money to further its goals for the Democratic Opening initiative (reftels),or possibly to influence public opinion -- especially in the Southeast -- in the run-up to possible early elections in 2010. JEFFREY "Visit Ankara's Classified Web Site at http://www.intelink.s gov.gov/wiki/Portal:Turkey"