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

191541Z Jan 06

UNCLAS SECTION 01 OF 03 ANKARA 000206 
 
SIPDIS 
 
TREASURY FOR INTERNATIONAL AFFAIRS - CPLANTIER 
NSC FOR MERKEL AND MCKIBBEN 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EAGR TU
SUBJECT:  Tourism Key to Economic Impact of Avian 
Influenza 
 
 
This cable was coordinated with Congen Istanbul. 
 
¶1. (SBU) Summary:  Unless the Avian Influenza outbreak 
continues to expand and stays in the headlines, the 
economic impact for the overall Turkish economy is likely 
to remain confined to the poultry sector and additional 
hardships for poor families with backyard flocks.  The 
larger risk -- that the AI scare would hit the critical 
tourism industry -- will only materialize if the AI story 
persists over the next month or two when most tourists 
book their summer visits.  Though there is anecdotal 
evidence of sluggish bookings, it is still too early to 
be sure there will be a significant effect on growth and 
jobs.  End Summary. 
 
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AI Fears Hit Commercial Poultry Sector Hard 
------------------------------------------- 
 
¶2. (SBU) The screaming headlines about Avian Influenza in 
recent weeks and the broader public's fears have had the 
greatest economic impact on Turkey's commercial poultry 
industry.  Though almost entirely for domestic 
consumption, the poultry industry is well-developed in 
Turkey, with modern plants using international-standard 
methods.  The industry has also taken strong measures to 
protect against contamination from AI-measures that have 
been effective to date.  Recognizing the effectiveness of 
these measures, the Ministry of Agriculture has no plans 
to cull birds in commercial operations. 
 
¶3. (SBU) Despite the safety of meat from commercial 
operations, public fears -- fueled by sensationalist 
press coverage -- have translated into the bottom falling 
out of the domestic poultry market. Poultry Association 
officials confirmed to us that sales are down over 90%. 
With egg sales off sharply as well, companies are 
slaughtering egg-laying chickens rather than incurring 
the cost of feeding them.  Naturally, feed companies are 
also being hit hard, and neither the poultry nor the feed 
companies have sufficient storage capacity to allow them 
to wait until the public resumes buying chicken and eggs. 
Press is reporting that layoffs at poultry plants are 
imminent.  Some companies may face bankruptcy absent 
government assistance. 
 
¶4. (SBU) Ismail Koksal, Secretary General of the Union of 
Turkish Chambers of Commerce (TOBB) confirmed press 
reports that TOBB and poultry sector leaders met on 
January 14 with five government ministers, led by Deputy 
Prime Minister Abdullatif Sener.  The poultry sector 
requested the government consider some combination of 
loans and/or postponement of tax, social security premia, 
and electricity bills.  The GOT ministers have set up a 
working group that is evaluating possible measures, and 
is expected to announce its decisions in the next few 
days. 
 
¶5. (SBU) Though towns with heavy concentrations of 
poultry producing plants, mostly in western Turkey, are 
likely to suffer severe local recessions, the broader 
impact on the economy of the collapse of poultry sales is 
likely to be minor.  Total sector sales are estimated to 
be around $2.5 billion, accounting for less than one 
percent of GDP.  In terms of employment, however, Koksal 
told us the poultry sector directly employs 120,000 
workers, but indirectly employs 500,000 workers, out of a 
total work force of 24 million. 
 
--------------------------------------------- - 
Villagers' Loss of Chickens Harder to Quantify 
--------------------------------------------- - 
 
¶6.  (SBU) Much harder to quantify, but much broader in 
its impact on the poorest segment of society will be the 
culling of backyard flocks.  The Turkish Union of 
Chambers of Commerce (TOBB) estimates there are about 20 
million backyard fowl in Turkey.  Approximately 1 million 
have been culled to date.  We understand that the 
Ministry of Health is in favor of culling all of these 
backyard fowl, but that the Ministry of Agriculture is 
opposed to such a sweeping cull as economically and 
logistically unfeasible. 
 
¶7. (SBU) Villagers, and recent migrants to cities, tend 
to keep chickens and to rely on them as a source of 
protein or income.  If a large share of these chickens 
are culled, the loss would only add to the financial 
stress of these families, who tend to be among the 
poorest segment of Turkish society.  The impact, however, 
would not be visible in macroeconomic data, and is 
extremely difficult to quantify.  If, as promised, the 
authorities are able to compensate the families for the 
lost birds, however, this would obviously mitigate the 
impact.  A massive compensation program, both for 
commercial poultry operations and culled backyard fowl, 
could have a budgetary impact. The amounts announced so 
far (about $26 million) would have a negligible impact 
but ultimately compensation will have to be a much larger 
-- but still unknown -- sum. 
 
------------------------------------- 
Impact on Tourism is the Big Question 
------------------------------------- 
 
¶8. (SBU) Far more important for Turkey's overall economic 
situation is the potential impact on the tourism 
industry, which, directly or indirectly, is a major 
employer in Turkey.  As one of Turkey's few labor- 
intensive foreign currency earning industries, loss of 
tourism revenue would set back the country's efforts to 
translate its recent spurt of economic growth into job 
creation.  Moreover, with the growing current account 
deficit increasingly viewed as the single greatest 
vulnerability in an otherwise improved economic 
situation, Turkey can ill afford a major setback in 
tourism, which helps finance the balance of payments 
through inflows of foreign exchange from tourists. 
Deutsche Bank's Istanbul economic analyst calculates 
that, even if tourism receipts are flat from 2005 to 
2006, he would elevate his projection for the -- already 
worrisome -- current account deficit for 2006 from 6.2% 
of GDP to 6.6%.  If tourism revenues drop by 10% in 2006, 
he would project a whopping 7% current account deficit. 
The IMF Deputy Resrep told us the Fund has not yet seen 
hard evidence of an impact on tourism, but is looking at 
all scenarios, including very dire scenarios if the virus 
mutates to allow human-to-human transmission. 
 
¶9. (SBU) On the other hand, Turkey has enjoyed strong 
growth in tourism in recent years, despite concerns that 
the continued real appreciation of the lira would 
diminish Turkey's competitiveness as a tourist 
destination.  In 2005, tourism revenues are estimated to 
have increased 20% to around $16 billion.  With Turkey's 
2005 current account deficit estimated to come in at 
about $22 billion, it is hard to overemphasize the 
importance of tourism receipts. 
 
------------------------------------- 
Too Early to Ascertain Tourism Impact 
------------------------------------- 
 
¶10. (SBU) The timing of the AI outbreak may be 
fortuitous: it is still early enough in the winter that 
tourist bookings for the May-October season could still 
come through.  A key factor will be whether the 
authorities seem to have the AI problem under control in 
the next few weeks, or whether the headlines are still 
about spreading outbreaks among birds or, worse still, 
among people. 
 
¶11. (SBU) The tone of foreign governments' and 
international organizations' comments-that could affect 
tourists' decisions-have mostly been restrained.  A WHO 
official specifically commented on travel last week, 
saying there was no reason to cancel plans to travel to 
Turkey.  On the other hand, Russia's Chief Epidemiologist 
discouraged Russians (along with Germany the leading 
source of visitors) from traveling to Turkey.  Greece has 
reportedly issued a travel warning. 
¶12. (SBU) To date, the evidence that bookings are being 
affected is anecdotal and somewhat contradictory.  The 
big German tourist operator TUI said bookings for Turkey 
are sluggish but it is too early to say how the season 
will turn out.  Both a leading travel agency and the 
Turkish travel agents association denied to ConGen 
Istanbul that their bookings are down; they thought the 
situation could be managed if the politicians and press 
handled it well.  TOBB's Koksal, who is also a former 
Tourism Ministry official, expressed the hope that bird 
flu might not cause many Russians cancel trips to Turkey, 
given their track record of not canceling at the time of 
the Iraq war or after terrorist attacks. 
 
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Comment 
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¶13.  (SBU) The impact on the overall economy from the AI 
scare can still be contained, provided there are not 
continued new outbreaks -- especially in humans -- that 
fuel sensational press coverage and could hit the tourism 
industry. Much will depend on events in the critical next 
few weeks. 
Wilson