This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 ADANA 000042 
 
SIPDIS 
 
SENSITIVE 
 
NOT FOR INTERNET DISTRIBUTION 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EFIN TU ADANA
SUBJECT: TURKEY: SOME ENTREPRENEURSHIP EMERGING IN EASTERN MED ZONE 
 
¶1. (SBU) Summary: The adaptability of the business community 
along Turkey's eastern Mediterranean coast to new opportunities 
created by the changes and growth in Turkey's economy contrasts 
with the rest of the region's traditional agricultural and 
industrial communities.  These coastal businesses are both more 
entrepreneurial and more anxious to take advantage of the 
region's location to build links with other countries in the 
region.  In visits to the Turkish-Arab Businessmen Association, 
the Mersin Free Zone and discussions with Mersin shipping agents 
we saw this new vision at work. End Summary. 
 
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TURAB LOOKS TO MIDDLE EAST FOR GROWTH 
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¶2. (U) TURAB (Turkish-Arab Businessmen Association) was 
established in 2003 by a group of businessmen with the purpose 
of promoting bilateral trade between Turkey and Arab countries, 
and certain countries in Central Asia such as Turkmenistan, 
Azerbaijan, Kazakhstan.  They chose the port city of Mersin to 
the west of Adana as TURAB's headquarters due to its central 
position in the Middle East region and transportation 
capabilities.  The association plans to open branches in 
Turkey's largest cities in 2006 and to establish a commercial 
network that would speed up data exchange among members. 
TURAB's President, Mehmet Hadra, told us he was counting on 
increasing Turkish exports to the region of products like 
automotives; durable goods; textiles and apparel; processed 
food; organic food and vegetables; and construction materials. 
 
¶3. (U) Association members doing business with Arab countries 
explain that they export to the bulk of those countries through 
L/C's (letter of credit) or EFT's based on CAD (Cash Against 
Documents).  They have only had payments problems with Algeria 
and Sudan.  They said that in some cases, most commonly with 
Sudan and Algeria, they use "hawala" networks (informal transfer 
outside the banking system).  (Note: The use of such systems is 
illegal in Turkey.End Note)  Given Mersin's newly privatized 
port facilities and the region's large land transport industry, 
Hadra and his colleagues see potential for increasing transit 
trade, including for U.S. companies, through Turkey to Iraq and 
other countries in the region. 
 
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MERSIN FREE ZONE SEES PRIVATIZED PORT AS A BOON 
--------------------------------------------- -- 
 
¶4. (U)  Mersin Port is indeed a port of growing importance in 
the Mediterranean basin. Established on an area of 776.000 sqm, 
the Mersin Free Zone (MFZ) started its activity in 1987 as the 
first free zone of Turkey.  The Port was recently "privatized" 
(actually a long term management concession agreement) and is 
now being run by a private Singaporean company that has plans to 
make significant investments. 
 
¶5. (U) Linked to the port is the Mersin Free Zone.  Turkey's 
free zones lost much of their attraction to investors when they 
were stripped of some of their tax free status for income and 
corporate taxes in 2005.  Nonetheless, Edvar Mum, the General 
Director of the zone's management company, MESBAS, says he is 
optimistic.  He believes that SME's from the EU are migrating to 
the east, namely, Turkey and Romania.  He is also counting on 
the new port management to bring in more transshipment business 
to Iraq, Egypt, and other countries in the region, as well as to 
the Turkish hinterland.  Mr. Mum said he hoped Mersin eventually 
could challenge Alexandria's container transshipment business. 
Furthermore, Mum hopes  that some of the exemptions will be 
restored.  He said some AKP (Justice and Development Party) MP's 
are preparing to present a proposal to the Turkish parliament 
that extend the time restriction in tax exemption until 2019. 
The zone's annual trade volume figure for 2004 was $2.7 million, 
while it was around  $2.0 million for 2005. 
 
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YUMURTALIK IS BECOMING REGIONAL SHIPBUILDING CENTER 
--------------------------------------------- ------ 
 
¶6.  (U)  With an area of 4.5 million square meters, the Adana 
Yumurtalik Free Trade Zone (TAYSEB) to Adana's east is one of 
the largest free trade zones in Turkey and the first and only 
Turkish free trade zone designed for heavy industry. With nearly 
unlimited space and a solid supply of electricity, water and 
communications infrastructure, TAYSEB provides opportunities for 
E.O. 12958: N/ 
a wide variety of industrial and commercial busiess, including 
heavy industry and transit operations. 
 
¶7.  (U)  TAYSEB's manager, Muharrem Pusa, says that 18 
companies are active in the zone, hree of which have made n 
investment of about $40milio. ANK idusries owns a large 
plot tht t hpe tous fo apetrochemical business whih t 
hoes vetualycoul 
be link to the growig Ceyhan energy hub. 
He is most excited about a new $350 million shipyard project by 
Turkish Hay Sipbuilding, which will create one of Turkey's 
lagest shipyards.  Expected to reach full capacity i 4 years, 
it will be capable of building 12 ship per year.  On completion 
of the dockyard, Pusat expects an annual sales volume would be 
around $1billion, compared to about $80 million in 2005. 
 
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REGIONAL SHIP REPAIR, REFIT BUSINESS 
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¶8.  (U)   Meanwhile, another shipyard project, in the Silifke 
area near Mersin, was approved by the National Security Council 
(MGK) in 1999 and allocated 425,000 square meters of land by the 
Turkish Cabinet.  In October 2003, a joint venture of the Mersin 
Chamber of Shipping, Mersin Chamber of Industry and Commerce, 
and Silifke Chamber of Industry and Commerce group called the 
Ortak Girisim Grubu (MOGG) was awarded a 49-year BOT 
(build-operate-transfer) contract for the port.  However since 
March 2004, when the opposition CHP won local municipal 
elections, several lawsuits citing environmental concerns have 
been filed against the project.  If the legal disputes are 
settled, this could become the first civilian dockyard to 
service ships from Turkey as well as those from Syria, Lebanon, 
Israel and Egypt, says Cihad Lokmanoglu, the President of the 
Mersin Chamber of Shipping. 
 
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COMMENT: WELCOME ENTREPRENEURIALISM 
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¶9.  (U)  This positive outlook along the coast is an example of 
how the improvements in Turkey's overall economy are being 
reflected in the regions.  It reflects the changing economic 
base of this corner of Turkey, which is moving away from 
traditional industry, such as textiles, and agriculture (fruits 
and cotton), to a services-oriented economy.  Many local 
businesspeople see the region's future in bridging Turkey to the 
Middle East.  Transit business with northern Iraq holds 
considerable potential in the medium term, while the longer term 
depends on economic and political stability and development in 
the neighborhood. 
REID