VZCZCXRO5194
RR RUEHDA
DE RUEHAK #7562/01 3571416
ZNR UUUUU ZZH
R 231416Z DEC 05
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 2176
INFO RUEHIT/AMCONSUL ISTANBUL 9392
RUEHDA/AMCONSUL ADANA 0157
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 ANKARA 007562 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR CHRIS PLANTIER 
 
E.O. 12958: N/A 
TAGS: ECON EAID EFIN TU
SUBJECT: DPM SENER ENGAGED ON ECONOMIC, INVESTMENT, AND EU 
ISSUES 
 
 
¶1.  (SBU)  Summary.  Deputy Prime Minister Sener, who has 
coordinating responsibility for economic issues, told the 
Ambassador that despite Turkey's successful economic 
recovery, more work needs to be done: interest rates are too 
high, the current account deficit is large, and obstacles to 
foreign and domestic investment need to be reduced.  Sener 
said Turkey is taking on the challenges of developing its 
poorest regions, especially the Southeast, and of adapting 
its legislation to EU norms, but that it needs and 
appreciates the help of the United States.  Sener seemed 
engaged on his portfolio and ready to work with the U.S., 
including on investment climate issues.  End Summary. 
 
------------------------------ 
Economy and Investment Climate 
------------------------------ 
 
¶2.  (SBU)  Sener, who is responsible for coordinating 
economic policy at the cabinet level, told the Ambassador on 
December 21 that the economy had stabilized since the 2001 
crisis and is growing strongly with relatively low inflation. 
 He particularly noted the GOT's success in reducing its 
fiscal deficit, noting that in 2006 there will be an overall 
public sector surplus for the first time in decades.  He was 
also pleased by increases in both exports and foreign and 
domestic investment.  Nonetheless, interest rates of 8% per 
year for government borrowing remain too high.  This has led 
to an "overvaluation" of the exchange rate and consequent 
large trade and current account deficits.  Sener compared the 
current account deficit to those of other EU candidate 
countries that also ran large current account deficits during 
their accession periods. 
 
¶3.  (SBU)  Sener said that a new law allowing foreign 
individuals to purchase real estate will be passed by 
Parliament in the near future, the previous law having been 
invalidated by the Constitutional Court.  He noted that 
companies continue to be able to buy property in Turkey. 
Responding to the Ambassador's observation that U.S. and 
Turkish companies continue to complain about an unpredictable 
judicial system, unfairly applied and excessive regulation, 
and lack of adequate IPR protection as required by its TRIPS 
and other international commitments, Sener said that the 
government is aware of these problems and is addressing them 
through the Investment Climate Coordinating Board that is 
chaired by State Minister Babacan.  He said the Board 
prioritized IPR and agreed with the Ambassador that Turkey's 
competitive position in the world will increasingly depend on 
its success in protecting intellectual property.  Sener said 
Turkey was ready to "jump into the sea" and compete in the 
global economy in the context of rule of law.  Any temporary 
losses would, he said, be offset by the long-term gains. 
 
--------------------- 
Southeast Development 
--------------------- 
 
¶4.  (SBU)  Sener noted that underdevelopment is not only a 
feature of Southeastern Turkey, but of the entire eastern 
region.  The Southeast Anatolia Project (GAP) concentrates on 
irrigation projects.  Sener said that the IMF's unwillingness 
to exclude from its calculation of the primary budget balance 
spending on projects financed by foreign concessional loans 
limits the government's ability to take advantage of such 
lending.  The biggest problem in the Southeast, Sener said, 
comes from instability in neighboring countries, notably 
Iraq, that limits Turkish exports to the region. 
 
------------ 
EU Accession 
------------ 
 
¶5.  (SBU)  Reaching to his desk for a calendar of the 
screening process, Sener said that the process of checking 
Turkish laws and regulation against the EU acquis was moving 
along well.  Initial screening of 7 chapters and detailed 
screening of 4 chapters had been completed.  By June, initial 
screening of 23 chapters and detailed screening of 19 
chapters would be complete.  While Turkey would have the 
advantage in the accession process of already having a 
customs union with the EU, Sener said that the agriculture 
chapter will be the most hardest, given the 30% share of the 
population involved in agriculture and their low level of 
education, which makes their transition to other sectors 
difficult.  The Ambassador also noted that agriculture will 
also be difficult because of European sensitivities on the 
subject. 
 
ANKARA 00007562  002 OF 002 
 
 
 
¶6.  (SBU)  Jokingly, Sener observed that in every country 
that had joined the EU, the party that had guided it through 
the accession process had been subsequently voted out of 
office.  The accession process will undoubtedly be long and 
difficult, with many chances for things to go wrong.  In the 
short-term the Cyprus issue is the biggest risk, but in the 
medium-short term the domestic politics of economic 
transformation will also create risks.  The Ambassador noted 
the United States' strong commitment to Turkey's accession 
and readiness to do whatever it could to help, although it 
was not a direct party.  Sener took the opportunity to say 
that PKK terrorism is a major concern of the Turkish public 
and that U.S. support on this issue will be very helpful. 
WILSON