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

UNCLAS SECTION 01 OF 03 ANKARA 004332 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR E, EB/CBA AND EUR/SE 
USTR FOR LERRION 
TREASURY FOR OASIA - MILLS AND ADKINS 
USDOC/ITA/MAC FOR DAVID DEFALCO 
EXIM FOR PAUL TUMMINIA 
TDA FOR SNYDER 
 
E.O. 12958: N/A 
TAGS: EINV EMIN ECPS BEXP TU
SUBJECT: TURKEY INVESTMENT ISSUES: GOOD NEWS FOR CARGILL, 
MOTOROLA, MINING AND TELECOMS 
 
REF: A. ANKARA 608 
     ¶B. ANKARA 3336 
 
Summary 
------- 
 
¶1. (SBU) In recent months, the Turkish Government has taken 
several steps to resolve outstanding disputes with U.S. 
companies and to open its economy to foreign investment.  The 
most notable recent step was the passage of industrial zones 
legislation that Cargill believes will solve the zoning 
problem at its sweetener plant in Orhangazi, but there have 
also been positive developments for Motorola, as well as in 
telecoms, mining and other areas.  The 
politically-influential Turkish Union of Chambers and 
Commodity Exchanges also appears to be taking a greater 
interest in promoting foreign investment, but a more 
systematic effort to improve investment climate, including 
resolution of other longstanding energy sector disputes, 
still seems to be lacking.  End Summary. 
 
------- 
Cargill 
------- 
 
¶2. (U) The Turkish Parliament on June 22 approved Law 5195, 
amending existing industrial zones legislation.  Mustafa 
Sayinatac, Cargill,s Director for Corporate Affairs and 
Business Development, told us June 16 that Cargill considers 
this legislation to be the solution to the zoning problem at 
its Orhangazi sweetener plant.  In a June 12 letter to the 
Ambassador (para 13), Cargill CE0 Warren Staley stated that 
this legislation provided the framework necessary for a 
durable solution to this issue and thanked the Embassy for 
its support.  The legislation is a success story in the 
USG,s efforts to resolve U.S. investment problems and 
contribute to a healthier investment climate in Turkey. 
Since the late 1990,s, a number of senior officials at State 
and other agencies have worked with several Ambassadors in 
advocating for Cargill at the highest levels in the GOT. 
 
¶3. (SBU) Sayinatac told us that, under the law, the Industry 
and Commerce Ministry is to issue implementing regulations 
within three months.  Cargill will apply for designation of 
its facility as an industrial zone and will then reapply for 
all necessary permits.  While Cargill does not anticipate any 
difficulties in completing this process, we note that the 
Industry Ministry has been the source of delays in moving 
forward draft legislation on industrial zones, and that some 
observers, including in the GOT, believe that only a 
constitutional amendment will permanently resolve the zoning 
issue (ref A). 
 
--------------------- 
Mining Law Amendments 
--------------------- 
 
¶4. (U) Law 5177, published in June 2004, amended existing 
legislation with a view toward making mining more accessible 
to foreign investment by streamlining permit requirements and 
procedures and removing limits on mining on certain types of 
land.  In particular, environmental impact statements (EIS) 
will no longer be required for exploration activities.  The 
law will require the Environment Ministry to complete an EIS 
for non-exploration mining activities within three months of 
application.  It also makes it possible for mining companies 
to apply for "public benefit" expropriation of lands adjacent 
to those in their license areas.  The Energy and Natural 
Resources Ministry will now be represented on boards deciding 
on land use in protected areas and designation of national 
parks. 
 
¶5. (U) The U.S. Newmont Mining company recently sold its 
Ovacik Mine in western Turkey to a Canadian company. 
However, Newmont plans to continue exploration activities in 
Turkey.  A Newmont representative told us recently that 
continuing and redundant permit issues with the Ovacik Mine 
were the main reasons for the decision to sell it. 
 
------------------------------------ 
Positive Developments in Other Areas 
------------------------------------ 
 
¶6. (SBU) Motorola:  Sources at the Scowcroft group advised 
EUR/SE and the Ambassador in late June that Motorola and the 
TMSF have agreed in principle on the terms of a settlement on 
Motorola,s nearly USD 2 billion claim on Telsim, but the 
deal has not yet been finalized (protect). 
 
¶7. (U) Turk Telecom Privatization: Law 5189, entering into 
force early in July, removed the 45 percent limitation on 
foreign participation in the upcoming privatization of the 
Turk Telecom monopoly, as well as prior limits on foreign 
ownership of Telsim. 
 
¶8. (U) Copyright Enforcement:  Legislation passed earlier 
this year banned street sales of books, films and music and 
gave wider authority to law enforcement agencies to intervene 
against pirates without the intervention of the rightholder. 
Copyright piracy appears to be moving away from open sales of 
unauthorized material to "under the counter" sales of these 
goods.  Representatives of the publishing and film industries 
in Turkey, tell us that piracy in Istanbul is down by more 
than half so far this year. 
 
--------------------------------------------- -------------- 
Small Progress on Other Issues Affecting Investment Climate 
--------------------------------------------- -------------- 
 
¶9. (SBU) There has been no change in the GOT,s policy on 
data exclusivity protection for pharmaceutical patents. 
Howver, there has also been no formal announcement that the 
implementation date of GOT's data exclusivity policy will be 
in 2007, as feared by industry.  Similarly, there has been no 
movement toward a final decision recently in Victor and 
Kristy Bedoian,s court case to annul the transfer of their 
hotel in Van, or in the administrative court cases on their 
residency and operating permits.  In the Dillingham 
international arbitration case, an Ankara court on July 19 
upheld an earlier court decision approving the right of 
Dillingham,s Turkish partner to withdraw funds from their 
joint venture on the basis of only the Turkish partner,s 
signature; however, the court also ordered an investigation 
) to begin in October - into whether the Turkish partner was 
owed the money withdrawn.  Furthermore, there have been no 
developments in long-standing energy sector disputes. 
 
------------------------------------------- 
TOBB Getting Involved in Investment Climate 
------------------------------------------- 
 
¶10. (U) The Turkish Union of Chambers and Commodity Exchanges 
(Turkish acronym TOBB) launched a "Foreign Capital Assembly" 
with the goal of attracting FDI.  This body includes many 
company members of the Foreign Capital Association (Turkish 
acronym YASED) and is to be led by YASED Chair Saban 
Erdikler, with TOBB President Hisarciklioglu serving as 
Honorary President.  YASED believes this new body could help 
in mobilizing TOBB,s support as an institution in attracting 
FDI. 
 
¶11. (SBU) At the same time, there has been no progress in 
implementing recommendations of the high-level Investor 
Advisory Council (IAC), which held its inaugural meeting in 
March.  The Investment Environment Improvement Committees 
(Turkish acronym YOIKK), which are charged with implementing 
investment reforms, have not even convened for meetings since 
November 2003.  (A meeting set for July 16 has been 
postponed). 
 
------- 
Comment 
------- 
 
¶12. (SBU) Recent developments for Cargill, Motorola, the 
mining sector and others should have a positive impact on 
Turkey,s global business image and may in time lead to 
increased FDI inflows.  However, it is one thing to pass 
legislation and another for the state administration and the 
courts to implement and protect the reforms embodied in these 
laws.  While the AK Party government appears to have (mostly) 
shed the ambivalence that previous governments had about the 
desirability of foreign capital, it does need to pursue a 
more systematic approach and maintain a more consistent focus 
on investment climate if it is to effect a turnaround in its 
ability to attract FDI. 
¶13. (U) Text of Cargill Letter 
 
July 12, 2004 
 
Dear Ambassador Edelman, 
 
Our Turkish colleagues have informed me that the Industrial 
Zone law passed by the Turkish Government has recently been 
approved and signed by the President of the Republic. 
 
You and a number of your predecessors are aware of the 
struggle we faced over many years to overcome numerous legal 
challenges to our Orhangazi sweetener facility.  We are 
confident that this amendment provides the framework to 
permanently resolve these problems. 
 
Cargill has always perceived the Orhangazi problem to be 
linked to the overall issue of low Foreign Direct Investment 
in Turkey.  We hope this legislation, coinciding with strong 
GDP growth and declining inflation, sends a positive message 
to attract further investment flows to the Country. 
 
I understand that you and many of your colleagues in the 
Embassy have provided considerable time and effort to assist 
in the resolution of this issue.  I am delighted to be able 
to offer sincere and heartfelt thanks to you and the team for 
a job well done. 
 
Sincerely, 
 
Warren R. Staley 
Chairman and Chief Executive Officer, Cargill 
P.O. Box 5724 
Minneapolis, MN 55440-5724 
 
End text Cargill letter. 
DEUTSCH