VZCZCXRO2903
RR RUEHDA
DE RUEHAK #0038/01 0091209
ZNR UUUUU ZZH
R 091209Z JAN 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 0518
INFO RUEHIT/AMCONSUL ISTANBUL 1893
RUEHDA/AMCONSUL ADANA 1499
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 ANKARA 000038 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN BEXP SOCI TU
SUBJECT: KAYSERI'S BOOM SHOWS TURKEY'S PROMISE, POLITICS PERMITTING 
 
Ref: 2006 Adana 244 
 
¶1.  (SBU)  A recent visit to the thriving central Anatolian city of 
Kayseri showed the potential for expanding the geographical base of 
U.S.-Turkey trade beyond the megalopolis of Istanbul and how 
economic stability and openness are spreading growth in Turkey's 
regional cities, creating opportunities for entrepreneurs, and 
expanding prosperity.  Kayseri has a long entrepreneurial history, 
but had mostly been known for the businesspeople it exported to 
other Turkish cities, especially Istanbul and Adana.  The Sabanci 
family, which owns the country's second largest industrial group, is 
the most prominent example.  Other Kayserians who made a name for 
themselves elsewhere include Rifat Hisarciklioglu, the head of the 
national business federation TOBB, and economist turned politician 
Foreign Minister Abdullah Gul. 
 
¶2.  (SBU)  Over the past decade, however, Kayseri's entrepreneurs 
have begun staying put and investing and growing at home.  Meeting 
with economic and commercial officers in December, Kayseri's 
business leaders attributed their success to traditional values of 
religion, work and family.   Kayseri's success in combining 
traditional values and business acumen was also highlighted in a 
January 2006 report by the European Stability Initiative called 
"Islamic Calvinists" (http://www.esiweb.org).  But the business 
leaders also emphasized that the business-friendly policies of the 
AKP government, particularly monetary stability following decades of 
high and volatile inflation, have made it possible for them to plan 
for the future and expand through investment.  Board members who 
produce in the textile, home appliance, food processing and 
furniture sectors for the domestic market and export told us they 
can no longer finance their companies' growth out of their family or 
local resources.  They are increasingly turning to Istanbul banks 
and financial markets for funding, something that would have been 
unthinkable just a few years ago. 
 
¶3.  (SBU)  Since the 2001 financial crisis through 2006, exports 
from Kayseri more than doubled, from $327 million to over $700 
million and the number of export oriented firms increased from 342 
to 572.  The Boydak Group, headed by Mustafa Boydak, who is also 
chairman of the Chamber of Industry, is an example of the city's 
success.  The company has grown beyond its roots in the local 
textile industry to furniture production and higher tech industries 
like making fiber optic cable.  Boydak said he has made two 
investments in the United States, in small companies in Florida and 
New Jersey.  He is selling the cables in Central America.  Other 
successful companies are producing bedding and home textiles, medium 
and high-quality furniture, and small appliances.  The head of 
another company told us that in addition to his Kayseri factories, 
he had purchased factories in Algeria and Russia. 
 
¶4.  (SBU)  Chamber members told us that this growth has led to a 
shortage of both skilled and unskilled labor in the city, which has 
a population of over 600,000.  (This contrasts with an official 
unemployment rate of 9%, which the businessmen said must be wrong.) 
 The panorama from the roof of the Chamber of Industry shows the 
physical impact of the city's transformation.  Former agricultural 
fields are covered with new housing development, and a busy downtown 
bisected by broad boulevards was covered in winter smog.  Located at 
the base of snow-covered 3000 meter Mount Erciyes and close to the 
historical region of Cappadocia, the Chamber leaders also envision 
the city's future as a tourism destination.  The region is known for 
its foods, especially a cured-beef called pastirma, local cheese, 
and a ravioli-like dish called manti, as well as fruits and 
vegetables and even wine. 
 
¶5.  (SBU)  About 65 representatives of Kayseri's business community 
turned out for a presentation by visiting Exim Bank regional 
officer.   They asked sharp, business-oriented questions, and stayed 
afterwards to pepper the Exim officer with specific questions 
related to their own business problems.  It seems likely that some 
new business for Exim may result.  This was a follow-up to the July 
seminar on doing business with the United States that was 
co-sponsored by the U.S. Chamber of Commerce and the Turkish 
national business federation TOBB, and financed in part by USAID. 
As in the other regional cities in which the seminar was held 
(Gaziantep, Ankara, and Izmir), Kayseri businesspeople were very 
interested in doing business with U.S. companies (both for import 
and export), but had little knowledge about how U.S. markets work. 
As knowledge spreads, and if good economic policies and regional 
growth continue, trade with Turkey's regions promises to be an 
important source of growth in overall U.S.-Turkey trade. 
 
¶6.  (SBU)  Comment:  Kayseri is not alone in its dramatic 
transformation as a commercial center.  Like the success of the 
Southeastern city of Gaziantep (reftel), Kayseri shows what Turkish 
entrepreneurship can accomplish when government provides a stable 
framework for growth and then gets out of the way and lets companies 
and businesspeople do their jobs.  The growth of small and 
medium-sized business in cities like Kayseri will help Turkey grow 
 
ANKARA 00000038  002 OF 002 
 
 
out of its employment problems and vast income disparities and ease 
the transition from an antiquated agricultural sector that currently 
accounts for 27% of the workforce.  But this will not happen if the 
sound monetary and fiscal policies implemented by the AKP government 
since 2003 with the support of the IMF do not continue. 
Furthermore, the World Bank and OECD argue that economic growth 
cannot be sustained and spread unless there are deeper reforms, 
including in the education and judicial sectors.  Such reforms take 
time and demand political will.  That's why this year's elections 
are so critical for Turkey's economic, as much as its political 
future.  More to follow. 
MCELDOWNEY