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Dianne Wampler  02/23/2007 08:43:44 AM  From  DB/Inbox:  Dianne Wampler

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UNCLAS    SENSITIVE     ANKARA 00385

SIPDIS
CX:
    ACTION: PA
    INFO:   ECON AMB DCM POL PMA

DISSEMINATION: PAO /1
CHARGE: PAS

APPROVED: PAO: DSREEBNY
DRAFTED: ACAO: BBALL
CLEARED: CAO: EMCKAY; ECON: TGOLDBERGER; POL: JWEINER

VZCZCAYI870
RR RUEHC RUEHIT RUEHDA
DE RUEHAK #0385/01 0531509
ZNR UUUUU ZZH
R 221509Z FEB 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 1059
INFO RUEHIT/AMCONSUL ISTANBUL 2182
RUEHDA/AMCONSUL ADANA 1681

UNCLAS SECTION 01 OF 02 ANKARA 000385 
 
SIPDIS 
 
SENSITIVE 
NOT FOR INTERNET DISTRIBUTION 
 
E.O. 12958: N/A 
TAGS: PREL PGOV ECON SOCI TU
SUBJECT: Kayseri: Eye of the Anatolian Tiger 
 
REFTEL:  Ankara 0038 
 
¶1.  (SBU) Summary:  Kayseri, a city of one million people in the 
center of Turkey, is one of the centers of Turkey economic 
revival.  The business elite tends to recycle investment capital 
back into the city, and credit is usually obtained overseas.  The 
limits on Kayseri's development are its fickle labor market, which 
copes with migration to Istanbul and from rural areas, as well as 
increasing competition from Chinese goods.  Politically, Kayseri is 
conservative, but not especially religious.  The ruling Justice and 
Development Party (AKP) controls the province's parliamentary 
delegation and city government, a situation that is unlikely to 
change any time soon.  End Summary. 
 
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A Booming Economy 
----------------- 
 
¶2.  (U) Kayseri's growing economic weight is evident.  On the edge 
of town, a massive industrial park produces an increasingly wide 
array of goods, including furniture, textiles, appliances, 
machinery, and tools.  Most of Kayseri's goods are produced for 
Turkey's domestic market, but exports are growing, with an estimated 
forty percent eventually exported. 
 
¶3.  (U) Many Kayseri business leaders credit their success in part 
to a tradition of re-investing profits in family conglomerates in 
the region.  For example, Irfan Basyazicioglu, who started with an 
animal feed factory in the 1960s, and used the steady profits to 
fund real estate investments and other small factories in Kayseri. 
"Business people in Istanbul are looking to earn a quick dollar," 
he says.  "Here in Kayseri, we pay attention to things like debt 
ratios.  We don't like to rely on outside credit.  We prefer 
controlled, natural, steady growth." 
 
¶4.  (U) Those who do seek credit to start their businesses have 
traditionally looked outside of Turkey.  Mehmet Filiz, leader of a 
local young business owner's association, says that until recently, 
Kayseri  factory owners found that credit was more cheaply financed 
from overseas, in spite of caution about the instability of Turkey's 
 
economy.  Turkish banks were seen as unreliable, unimaginative, and 
bogged down with red tape.  In the past few years, however, 
relaxation of rules on foreign partnerships and acquisitions 
provided Turkish banks with an infusion of know-how and capital that 
they are using to invest in domestic business.  Domestic credit 
services are still second-rate, Filiz says, but he predicts that 
some of the market leaders such as Garanti Bank and Ak Bank will 
soon become the lenders of choice. 
 
¶5.  (U) The relatively strong position of Turkey's currency at the 
moment is a concern for Kayseri's exporters.  Facing competition 
from Asia and developing countries that take advantage of EU 
favorable-treatment rules, factory owners are hoping that the lira 
will slide in the coming year to a rate of 1.6 lira to the dollar, 
from the current 1.4 lira to the dollar rate. 
 
¶6. (SBU) China is of particular concern to Kayseri's business elite. 
The mere mention of competition from Chinese goods produces a 
torrent of invective about the "illegal" subsidies provided to 
state-run businesses and the "poor quality" that is undercutting 
superior Turkish goods.  Kayseri's Deputy Governor, Mehmet Ali 
Ceviker, worries that in spite of the stereotype of cheap Chinese 
products, their quality is actually increasing.  He is not alone - 
business owners from every sector are looking for a strategy to deal 
with increasing competition from Chinese goods, but have found 
little strategic thinking from either the government or business 
groups. 
 
---------------------------- 
Good Help Is So Hard To Find 
---------------------------- 
 
¶7. (U) The primary complaint of Kayseri's business elite is that it 
is increasingly difficult to find qualified labor.  Basyazicioglu 
actively recruited a university-trained engineer, offering him a 
competitive salary and benefits package, but lost him to the lure of 
Istanbul.  Basyazicioglu had to fill the position with an elementary 
school graduate. 
 
¶8. (SBU) Bulent Kalpaklioglu, a real estate entrepreneur, echoes the 
sentiment, saying that educated and skilled workers prefer Istanbul's 
cosmopolitan attractions to the conservative, provincial countryside, 
no matter how many pseudo-cosmopolitan trappings are created to retain 
the elite.  "When it's a social faux pas to drink wine in a public 
setting, you're never going to keep the people you need," he comments. 
 
¶9. (SBU) The "brain drain" would be acceptable to Kayseri's business 
leaders if they felt that there were alternatives among the waves of 
migrants coming from nearby rural areas.  Instead, they mainly see 
migrant workers with no skills or special training.  Even graduates 
of Kayseri's well-respected magnet industrial high schools often 
pursue their careers in Istanbul or Ankara.  Kayseri expects little 
from the central government, but the business community asserts that 
a training program for internal migrants would help with 
unemployment while increasing their profit margins.  Officials at 
the Kayseri governor's office insist that such a program is in the 
works, but admit that it has a long way to go. 
 
¶10. (U) Despite the obvious boom in Kayseri's business sector, there 
is a disconnect between the rhetoric of employers and employees. 
Officials in the city government state that "whoever wants a job in 
Kayseri can find one," but this is contradicted by the noticeable 
presence of beggars on the streets, a rare sight in other parts of 
Turkey. 
 
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All AKP, All The Time (National Edition) 
---------------------------------------- 
 
¶11. (U) In the center of Turkey's conservative heartland, Kayseri is 
AKP country, the home of Foreign Minister Gul and a bastion of 
electoral strength for the ruling Justice and Development Party. 
All of Kayseri's eight MPs are from AKP.  Gul is a beloved figure, 
and is well known among the business elite who speak of him as 
"Abdullah" rather than "Mr. Gul." 
 
¶12. (SBU) Despite their glowing descriptions of the current 
government and appreciation for its religious roots, the people of 
Kayseri are more concerned with stability than they are with 
ideology.  "This is not Konya," says one business owner, referring 
to the politically religious sentiments further west.  "We want 
political stability the most, whatever the color of the government," 
says another. 
 
------------------------------------- 
All AKP, All The Time (Local Edition) 
------------------------------------- 
 
¶13. (SBU) The AKP mayor of Kayseri, Mehmet Ozhaseki, is arguably one 
of Turkey's most popular mayors.  In the 2004 local elections, he 
was re-elected for the third time with a whopping seventy percent of 
the vote.  His popularity is attributed to massive infrastructure 
investments and close ties to the business community.  When asked 
about a possible parliamentary run, Ozhaseki's staff coyly stated 
that he was waiting for the results of the presidential election in 
May, and would then test the waters in the expectation of a 
"high-level" (read: minister level) position were he to enter 
parliament. 
 
¶14.  (SBU) The Kayseri city government both relies on and is hemmed 
in by budgetary links to the central government.  Of the 310 
trillion YTL city budget, around thirty percent comes from 
government funds allocated from Ankara.  However, the local taxes, 
rents, and fees that comprise the remainder are kept in the same 
centralized accounts.  "We have to ask for everything from Ankara, 
every last penny," says Mustafa Yalcin, the mayor's Chief of Staff. 
"It's not as much of a problem at the moment as we are all from the 
same political party.  We are afraid that if the parties change, all 
of our work will come to a grinding halt." 
 
¶15.  (SBU) Like the "brain drain" of Kayseri's workforce, the Kayseri 
municipality is plagued by the flight of tax revenue to Istanbul. 
Since most of Kayseri's major businesses have their headquarters in 
Istanbul, corporate taxes often end up in Istanbul's coffers rather 
than in Kayseri, where goods are produced.  According to Yalcin, 
Istanbul is more attractive for some headquarters because they are 
subject to fewer solicitations for charitable donations.  In 
Kayseri, where a business may be a top taxpayer, owners are under 
pressure to support local NGOs and charities. 
 
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Comment 
------- 
 
¶16.  (SBU) Kayseri's business and political leaders are 
bullish.  The region's economy is starting to attract foreign 
investment, and the city is benefiting from ever-expanding 
infrastructure projects.  Economic and political stability is a 
priority and Kayseri's decision-makers see no cause for concern. 
The main checks on Kayseri's growth will be increasing competition 
for skilled labor and the willingness of local businesses to adapt 
to global market changes.  In both of areas, Kayseri will be at the 
mercy of Turkish politics and economics.  End Comment. 
 
WILSON