VZCZCXRO9973
PP RUEHDA
DE RUEHAK #1093/01 1291310
ZNR UUUUU ZZH
P 091310Z MAY 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 2016
INFO RUEHIT/AMCONSUL ISTANBUL PRIORITY 2654
RUEHDA/AMCONSUL ADANA PRIORITY 1929
RUEATRS/DEPT OF TREASURY WASHDC
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 ANKARA 001093 
 
SIPDIS 
 
TREASURY FOR INTERNATIONAL AFFAIRS - JROSE 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON PGOV TU
 
SUBJECT: GROWTH HELPING ANATOLIAN BACKWATERS, BUT WORRIES ABOUT 
MILITARY IN POLITICS 
 
 
1.(SBU) Summary: Economic growth seemed to be having an impact in 
the North-Central Anatolian towns of Kastamonu and Cankiri, towns 
have traditionally been backwaters.  The Chamber of Commerce 
Presidents in both towns implied displeasure with the military's 
meddling in politics even though they did not seem to be AKP 
supporters.  End Summary. 
 
----------------------------------------- 
Kastamonu and Cankiri No Longer Exporting People 
----------------------------------------- 
 
¶2. (SBU) On May 2 and 3, we visited the provincial capitals of 
Kastamonu and Cankiri, both north of Ankara in areas that have 
traditionally been economic backwaters.  The government officials 
and businessmen we met told us that both provinces had long been 
sources of out-migration, mostly to Istanbul.  Kastamonu province, 
in particular, was said to be the source of roughly a million 
residents of greater Istanbul. 
 
¶3. (SBU) Our contacts uniformly told us that  out-migration had 
stopped in recent years and that they saw increased local economic 
opportunity as an important factor.  Both provinces are 
middle-income provinces by Turkish standards, largely dependent on 
smallholder agriculture, animal husbandry or forestry.  In both 
provinces, government officials and chamber of commerce presidents 
described new factories, growing services sectors, increased raw 
material exports and other signs of an economic upturn. 
 
¶4. (SBU) The Kastamonu chamber president said marble exports had 
increased 100% and there were prospects of new gold and copper 
exports.  Garlic production continues to be profitable and Turkey's 
housing boom has helped the local wood products industry.  A factory 
manufacturing doors had opened, and a new shipyard on the Black Sea 
was under construction.  In Cankiri, there were new thermal power 
plants and salt factories tapping into the province's huge salt 
reserves.  Both provinces had seen additional university and medical 
facilities open their doors. 
 
--------------------------------------------- - 
Controversial Investment Incentives Spread the Wealth 
--------------------------------------------- -- 
 
¶5. (SBU) Interlocutors in both provinces cited the introduction of 
investment incentives in Turkey's lower-income provinces as having 
spurred local investment.  These incentives, adopted in 2004 against 
the IMF's wishes were designed to provide job-creation incentives in 
the 49 lowest-income provinces.  For firms creating new jobs, the 
incentives provide exemptions on employer payroll taxes as well as 
subsidized electricity and free land.  The Cankiri chamber president 
complained about a (IMF-supporeted) revision to the law that made it 
harder for businesses to qualify. 
 
¶6. (SBU) In the case of Cankiri province, the new investments seem 
attributable to the province being one of the most westerly and most 
accessible to Istanbul of the provinces covered under the investment 
incentive scheme.  The province includes a piece of the major 
highway that crosses northern Turkey from Istanbul. By establishing 
plants in the town of Cerkes, near this highway, companies can 
benefit from the investment incentives yet have easy access to 
Istanbul.  The Governor and Chamber of Commerce President told us 
one of the largest ceramic factories in Europe had recently been 
established in Cerkes, as had a Reebok factory. 
 
------------------ 
Unemployment "Yok" 
------------------ 
 
¶7. (SBU) Not only did our interlocutors debunk the urban myth that 
provincial Anatolia is not benefiting from Turkey's growth, they 
also downplayed the unemployment problem in their provinces.  Even 
the relatively negative Cankiri chamber president said it seemed 
there was not much of an unemployment problem and agreed with his 
Kastamonu counterpart and his own Governor that local businesses 
were having difficulty finding qualified employees. 
 
----------------------------------- 
Angst About Economic Transformation 
----------------------------------- 
 
¶8. (SBU) Despite the generally positive economic news, several 
contacts voiced concerns about how local people were being effected 
by Turkey's economic transformation and its increased integration 
with the global economy.  At the same time new factories were 
opening in Cerkes, for example, a factory that produces clothing for 
the UK-based Marks and Spencer retail chain was closing because of 
 
ANKARA 00001093  002 OF 002 
 
 
Chinese competition. The Cankiri Chamber of Commerce President 
asserted it was not in the U.S. interest to allow Turkey's textile 
sector to be ruined by Chinese competition.  The Kastamonu chamber 
president grumbled that the booming marble exports are processed in 
China before being re-exported to the U.S. -- value-added that 
Turkey has been unable to capture. He also  said the expansion of 
mostly-foreign supermarket chains (a key sector for recent Foreign 
Direct Investment) has wiped out 70% of small grocery-owners.  The 
Chief of Police in Cankiri said it was very difficult for the 
province's many retired people to get by on their pensions. 
 
----------------- 
Tourism Potential 
----------------- 
 
¶9. (SBU) Both in Cankiri and Kastamonu, Government officials 
enthused about their provinces' tourism potential.  Kastamonu, with 
its lush alpine slopes of pine forests, Black Sea coastline, and 
Ottoman houses and mosques seemed to have real potential.  Instead 
of the private sector taking the lead, however, in both cities 
tourism promotion was the responsibility of the local offices of the 
Ministry of Tourism.  The officials in the tourism offices struck us 
as lacking the marketing savvy needed to get the word out about the 
local attractions.  Nevertheless, Kastamonu province has succeeded 
in attracting a modest flow of tourists, mostly from Ankara or 
people seeking relief from the intense summer heat in Mediterranean 
Turkey and Israel.  Cankiri seemed to have further to go to attract 
tourists. 
 
----------------------------------- 
Local Businessmen Support Democracy 
------------------------------------ 
 
¶10. (SBU) In both towns, the Chamber of Commerce Presidents 
expressed support for democracy, by implication criticizing the 
military's April 27 interference in politics.  Both men distanced 
themselves from "fundamentalists," whom the Kastamonu president 
characterized as only 10% of the vote.  The Cankiri President 
implied he was a supporter of the nationalist MHP party, but he said 
the worst democracy is better than the best dictatorship.  The 
Kastamonu president commended the AK Party's stewardship of the 
economy and also highlighted the importance of democracy. 
 
------- 
Comment 
------- 
 
¶11. (SBU) Like other recent visits to provincial Anatolian 
locations, we found anecdotal evidence that the rising tide of 
Turkish and global growth is lifting all ships, contrary to the 
urban myth that the growth is principally benefiting elites in big 
cities.  The investment incentives may not be creating additional 
investment for Turkey as a whole but they do appear to be moving 
some investment out of traditional industrial centers like Istanbul, 
Bursa and Izmir towards lower- and middle-income provinces further 
east, thereby moderating regional disparities.  On the other hand, 
the angst about structural change could undermine the political 
benefits to the ruling party of the broad-based growth, as grocers 
wiped out by supermarket chains or employees in textile factories 
that compete with China could express their disgruntlement at the 
polls. 
 
¶12. (SBU) The two seemingly non-AKP Chamber of Commerce presidents' 
support for the democratic process suggests the April 27 military 
statement did not play well with provincial Anatolian merchants and 
could help AKP with this constituency in the elections. 
 
Wilson