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

111425Z Aug 03

UNCLAS SECTION 01 OF 02 ANKARA 005075 
 
SIPDIS 
 
 
SENSITIVE 
 
 
STATE FOR E, EB/IFD AND EUR/SE 
TREASURY FOR OASIA - MILLS AND LEICHTER 
NSC FOR BRYZA 
 
 
E.O. 12958: N/A 
TAGS: EFIN TU
SUBJECT: MORE ON PRIVATIZATION,UZANS, AND BRSA 
 
 
REF: A. A) ANKARA 4956 
     ¶B. B) ANKARA 4832 
     ¶C. C) ANKARA 4528 
 
 
¶1.  (SBU) SUMMARY: RECENT MEETINGS WITH BANKING REGULATORS 
AND THE PRIVATIZATION AUTHORITY HAVE REINFORCED THE MESSAGE 
THAT: A) GOT OFFICIALS BELIEVE THE UZANS' FAILED PURCHASE OF 
PETKIM WILL NOT HVE A SIGNIFICANT EFFECT ON TURKEY'S 
PRIVATIZATION PROGRAM, BUT B) THE IMAR BANK CASE IS 
RATCHETING UP PRESSURE ON THE BRSA.  END SUMMARY. 
 
 
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GOT OFFICIALS ASSERT PRIVATIZATION PROGRAM ON TRACK DESPITE 
PETKIM FAILURE: 
--------------------------------------------- ------- 
 
 
¶2. (SBU) THE UZAN GROUP'S STANDARD KIMYA FAILED TO COME UP 
WITH THE REQUIRED $240 MILLION INITIAL PAYMENT AND CREDIBLE 
BANK GUARANTEES FOR THE REMAINING $365 MILLION DUE AUGUST 6 
FOR THE PURCHASE OF STATE-OWNED PETKIM.  THE FAILURE TO PAY 
DISQUALIFIES THE UZANS FROM THE PETKIM PRIVATIZATION AND, 
ACCORDING TO PRIVATIZATION AUTHORITY (PA) PRESIDENT KILCI'S 
COMMENTS IN THE PRESS, FROM ALL FUTURE PRIVATIZATION TENDERS. 
 
 
 
 
¶3. (SBU) IN AN AUGUST 7 MEETING WITH EMBOFFS, PA VICE 
PRESIDENT HIDAYET KAYA POINTED OUT THAT THE UZAN GROUP HAD 
PREVIOUSLY PARTICIPATED IN SEVERAL PRIVATIZATIONS AND HAD 
ALWAYS MADE REQUIRED PAYMENTS.  NOW, OBVIOUSLY, THE SITUATION 
HAD CHANGED AND THE PRIVATIZATION BOARD WOULD HAVE TO BE MORE 
CAREFUL ABOUT THE FINANCIAL CREDIBILITY OF BIDDERS. 
 
 
¶4. (SBU) THOUGH IT IS A BLOW TO THE UZANS, KAYA ARGUED THAT 
THE TEMPORARY FAILURE OF THE PETKIM PRIVATIZATION IS NOT A 
SIGNIFICANT BLOW TO THE OVERALL PRIVATIZATION PROGRAM. KAYA 
WAS AT PAINS TO EMPHASIZE THAT THE PA IS MOVING QUICKLY TO 
RE-BID PETKIM, RE-ENGAGING WITH COMPANIES THAT HAD EXPRESSED 
INTEREST THE FIRST TIME AROUND, AS WELL AS WITH OTHER 
COMPANIES.  THOUGH THE PRECISE TIMING IS NOT YET CLEAR, THE 
PA HOPES TO PUT OUT THE NEW TENDER QUICKLY, PROBABLY BY 
SEPTEMBER, WITH BID COLLECTION BY DECEMBER AND A FINAL DEAL 
BY JANUARY. 
 
 
¶5. (SBU) KAYA CLAIMED THAT THE PETKIM DELAY WOULD NOT BE 
SIGNIFICANT FROM A BUDGETARY STANDPOINT.  BEFORE THE TENDER, 
THE GOVERNMENT HAD PROJECTED $500 MILLION IN RECEIPTS FOR 
PETKIM, THOUGH THE UZANS ACTUAL BID WAS HIGHER.  FOR 2003, 
THE REVENUE WHICH THE TURKISH STATE WILL NO LONGER RECEIVE IN 
THE FORM OF THE UZANS' DOWN PAYMENT IS $240 MILLION, WHICH, 
DEPENDING ON EXCHANGE RATES, IS ABOUT 1.4 PERCENT OF 
PROJECTED 2003 TOTAL PUBLIC SECTOR REVENUE.  IF, AS SEEMS 
LIKELY, THE RE-BID PETKIM TENDER GARNERS A BID ROUGHLY IN 
LINE WITH THE $500 MILLION PROJECTION, THE FISCAL IMPACT OF 
THE CURRENT TENDER'S FAILURE WILL BE TO SHIFT THE REVENUE 
INTO 2004 RATHER THAN LOSE IT OUTRIGHT.  ON THE MUCH MORE 
SIGNIFICANT TUPRAS AND TEKEL PRIVATIZATIONS, KAYA CONFIRMED 
THE TIMETABLE DESCRIBED BY PRESIDENT KILCI IN REF C: DEALS BY 
DECEMBER OR JANUARY BUT ONLY A PORTION OF THE PAYMENT IN CASH 
AT THAT TIME.  THOUGH THESE SALES ARE UNLIKELY TO PRODUCE 
SIZABLE REVENUES WITHIN THE 2003 BUDGET YEAR, IT WOULD MEAN 
THE PRIVATIZATION PROGRAM IS MOVING AHEAD AND BROADLY IN LINE 
WITH THE FUND PROGRAM.  KAYA NOTED THAT TUPRAS AND TEKEL, 
UNLIKE PETKIM, WERE ATTRACTING GREAT INTEREST FROM POTENTIAL 
BUYERS. 
 
 
¶6. (SBU) THE MUCH MORE POLTICALLY-SENSITIVE TURK TELEKOM 
PRIVATIZATION, HOWEVER, CONTINUES TO INCH FORWARD AT A 
SNAIL'S PACE.  KAYA'S COLLEAGUE HANDE ASCILI, RESPONSIBLE FOR 
THE TURK TELEKOM PRIVATIZATION, EXPLAINED THAT UNLIKE THE 
OTHER PRIVATIZATIONS, BY LAW THE TURK TELEKOM DEAL IS BEING 
SUPERVISED BY A BROADER GROUP OF GOVERNMENT AGENCIES THAN THE 
PRIVATIZATION AUTHORITY ALONE.  A VALUATION IS EXPECTED TO BE 
COMPLETED IN AUGUST AFTER WHICH THE "VALUE ASSESSMENT" 
COMMITTEE FORMED IN 2002 WILL REVIEW IT. ERNST AND YOUNG AND 
ROTHSCHILD HAVE BEEN RETAINED AS CONSULTANTS.  THE 
PRIVATIZATION IS MOST LIKELY TO TAKE PLACE IN 2004.  DESPITE 
THE SLOWNESS OF THE TURK TELEKOM PROCESS IN THE PAST BOTH 
PRIVATIZATION AUTHORITY OFFICIALS STRESSED THE CURRENT 
GOVERNMENT'S STRONG COMMITMENT TO PRIVATIZATION. 
 
 
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THE IMAR BANK CASE'S NEGATIVE IMPACT ON BRSA: 
-------------------------------------------- 
 
 
¶7. (SBU) AS REPORTED IN REFS A AND B, THE IMAR BANK CASE 
THREATENS TO WEAKEN THE AUTHORITY OF INDEPENDENT BANK 
REGULATOR BRSA. MANY LOCAL OBSERVERS, PARTICULARLY IN THE 
PRESS, ARE BLAMING THE BRSA FOR FAILING TO CATCH THE 
IRREGULARITIES AT IMAR BANK AT AN EARLIER STAGE.   BRSA VICE 
PRESIDENT TEOMAN KERMAN, WITH WHOM EMBOFFS MET AUGUST 8, 
APPEARED AT LEAST AS STRESSED AS BRSA PRESIDENT AKCAKOCA A 
WEEK EARLIER.  KERMAN ADMITTED THAT BRSA WAS LOSING THE 
PUBLIC RELATIONS BATTLE OVER IMAR.  HAVING TAKEN OVER 22 
BANKS IN RECENT YEARS, AND HAVING REFERRED MANY BANKING CRIME 
CASES TO PROSECUTORS, KEMAN NOTED THAT IT IS NOT SURPRISING 
MANY PEOPLE WOULD SEEK OPPORTUNITIES TO GO AFTER THE AGENCY. 
TO MAKE MATTERS WORSE, TURKEY'S MEDIA GROUPS ALSO OWN BANKS, 
AND SOMETIMES RESENT BRSA'S TREATMENT OF THEIR OWN OR 
COMPETITORS' BANKS. 
 
 
¶8. (SBU) KERMAN ALSO RAILED AGAINST THE PARLIAMENTARY 
ANTI-CORRUPTION COMMISSION'S TRANSMISSION OF TWO FILES TO 
PROSECUTORS RELATING TO ALLEGED BRSA CORRUPTION, CITING 
KERMAN HIMSELF.  ACCORDING TO KERMAN, THE CORRUPTION 
ALLEGATIONS DO NOT ARISE FROM TANGIBLE EVIDENCE OTHER THAN 
BRSA HAVING ALLEGEDLY SOLD ASSETS OF INTERVENED BANKS FOR 
LESS THAN SOME SAY THEY ARE WORTH.  KERMAN HAS BEEN REBUFFED 
IN HIS ATTEMPTS TO GET THE COMMISSION OR PROSECUTORS TO LOOK 
AT HIS VERY MODEST ASSETS AND LIFESTYLE FOR EVIDENCE OF ANY 
PERSONAL GAIN, RATHER THAN ASSUMING THE SALE OF ASSETS FOR 
LESS THAN THEIR ASSUMED WORTH INDICATED CORRUPTION HAD TAKEN 
PLACE. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DEUTSCH