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Dianne Wampler  02/08/2007 10:23:11 PM  From  DB/Inbox:  Dianne Wampler

Cable 
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UNCLAS    SENSITIVE     ANKARA 00263

SIPDIS
CX:
    ACTION: ECON
    INFO:   PA RAO FCS POL DCM CONS AMB FAS MGT PMA

DISSEMINATION: ECON /1
CHARGE: PROG

APPROVED: ECON:TGOLDBERGER
DRAFTED: ECON:DSADIKLAR
CLEARED: ECON:ASNOW

VZCZCAYI964
RR RUEHC RUEATRS RHEHAAA RUEHIT RUEHDA RUEHBS
DE RUEHAK #0263 0390557
ZNR UUUUU ZZH
R 080557Z FEB 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 0883
INFO RUEATRS/DEPT OF TREASURY WASHDC
RHEHAAA/NSC WASHDC
RUEHIT/AMCONSUL ISTANBUL 2078
RUEHDA/AMCONSUL ADANA 1632
RUEHBS/USEU BRUSSELS

UNCLAS ANKARA 000263 
 
SIPDIS 
 
TREASURY FOR INTERNATIONAL AFFAIRS - JROSE 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN TU
SUBJECT:  GOT POSTPONES FULL PRIVATIZATION OF STATE BANK 
 
 
1.(SBU) Summary: The Privatization Agency(PA) confirmed February 6 
that media rumors that the GOT would opt for an Initital Public 
Offering(IPO) for a 25 percent stake over a block sale of a majority 
stake in Halkbank, Turkey's second-largest state-owned bank.  Press 
reports suggest that this decision came after lobbying from small 
business groups -- Halk Bank's principal customers. Combined with 
other delays, the Halk Bank delay means that the structural reform 
agenda under the IMF program is likely to be particularly weak in 
2007, an election year. End Summary. 
 
¶2. (U) The PA announced February 6 that rather than the expected 
block sale of 100 percent of Halkbank shares to a single investor, 
25 percent of the bank's shares will be privatized through an 
Initial Public Offering (IPO) in the first half of 2007.  PA 
President Metin Kilci told the press the IPO would be based on the 
2006 financial statements of the bank, which implies a deadline of 
May 22, 2007 for the process to be completed according to Turkish 
capital markets rules. Kilci underlined that he expected the IPO to 
be completed by May this year. Kilci said soon the PA would go on a 
road show once the financial statements are cleared by the Capital 
Markets Board. 
 
¶3. (SBU) This is the second time this year that GOT has stepped back 
from planned privatizations.  First was the electricity distribution 
privatization, postponed to an indefinite date.  Press is also 
reporting that the TEKEL tobacco tender, scheduled to take place in 
February, will likely to be postponed. Market optimism over a block 
sale had underpinned markets in recent weeks following the 
government's decision to pull the electricity distribution sale. 
Although markets did not react to the news, analysts largely 
attributed the lack of reaction to continued global bullishness on 
Emerging Market risk.  Both privatization postponement decisions 
were made public by Prime Minister Erdogan, suggesting that the 
decisions were political and designed to deal with criticism from 
labor unions, and some businesspeople. 
 
¶4. (SBU) Turkey's leading business NGO TOBB President Rifat 
Hisarciklioglu welcomed the IPO news noting that the decision would 
be favorable for all parties. Turkey's NGO president for Handicraft 
and Artisan Cooperatives (TESKOMB) Akgul said TESKOMB was against 
the block sale of the bank, and the IPO decision was the right 
decision to take. Halkbank is the state-owned bank where artisans, 
SMEs enjoyed state-subsidized loans -- hence the fears about 
privatization. 
 
¶5. (SBU) Comment: Under Turkey's IMF program, the GOT committed to 
finalizing the tender process for Halk Bank by the end of May 2007 
as a structural benchmark.  Today's decision could put the next 
review at risk. Some analysts point out that from GOT's point of 
view in an election year, a minority-share IPO makes a lot of sense 
because it allows a degree of privatization while maintaining state 
control.  Meanwhile, it will allow the market to value the shares, 
providing a benchmark against which to evaluate eventual bids for 
the block sale. On the other hand it sends a signal of wavering 
commitment to privatization and will mean lower FDI inflows than had 
been expected if the block sale buyer was foreign. Market players 
calculate a $1 - $1.5 billion IPO, in comparison to expected 
receipts of at least $6 billion from the block sale. At least two 
major U.S. financial groups are reportedly interested in Halk and 
are likely to be disappointed by the postponement. 
 
Wilson