VZCZCXRO3951
RR RUEHDA
DE RUEHDA #0123/01 3041016
ZNR UUUUU ZZH
R 311016Z OCT 07
FM AMCONSUL ADANA
TO RUEHC/SECSTATE WASHDC 4624
INFO RUEHAK/AMEMBASSY ANKARA 1167
RUEHKB/AMEMBASSY BAKU 0011
RUEHGB/AMEMBASSY BAGHDAD 0124
RUEHIT/AMCONSUL ISTANBUL 1008
RUEHSI/AMEMBASSY TBILISI 0009
RUEHDA/AMCONSUL ADANA 1227

UNCLAS SECTION 01 OF 02 ADANA 000123 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EPET PREL ENRG TU
SUBJECT: TURKEY: ADANA'S STAGNANT ECONOMY STILL AWAITING BTC-FUELED 
REBOUND 
 
¶1.  (U)  SUMMARY.  Adana's business leaders are starting to 
develop alternatives to the big business-driven model that 
characterized the city's early growth.  While an overvalued 
lira, financial mismanagement and removal of textile quotas in 
2005 have led to closures of several large textile businesses in 
the city, the textile sector remains number one, constituting 
over 30% of the local economy.  Adana business leaders envision 
textiles, the food and agriculture industry, and trade shows to 
be key growth sectors in the future.  Botas International 
Limited (BIL), Baku-Tblisi-Ceyhan (BTC) pipeline's operating 
company in Turkey, is keeping apace with ambitious business 
markers with plans to increase the daily flow of crude oil by 
20% in 2008.  Despite hope the Ceyhan area, with its neighboring 
industrial zone, will become an energy hub rivaling Houston or 
Rotterdam, job growth has not matched expectations.  END SUMMARY. 
 
¶2. (U)  While Adana has benefited from and contributed to 
Turkey's six-year-old economic boom, locals complain of 
chronically high unemployment, heavy dependence on declining 
industries (especially textiles) and the effects of an 
overvalued lira.  Beyond these ills, which are shared by many 
cities in Anatolia, Adana is suffering the psychological wounds 
of falling from the top ranks of Turkish cities even as 
neighbors such as Kayseri and Gaziantep surge forward. 
 
ADANA'S EARLY START PROVIDED NO ADVANTAGE 
--------------------------------------------- -------------- 
------------------ 
 
¶3. (U)  Adana Chamber of Commerce (ACC) President Saban Bas 
noted that Adana's economic evolution has been entirely contrary 
to the experiences of Istanbul and Ankara, where small and 
medium enterprises  (SMEs) developed a foothold in the economy 
and were able to evolve naturally into larger corporations.  The 
city's famous entrepreneur, Haci Omer Sabanci, made his fortune 
- and Adana's - through building megafactories in the 
industrial, agricultural and textile sectors.  During this 
golden age in the 1950s, very few employment opportunities 
existed outside Sabanci's companies or unskilled agricultural 
labor.  (Sabanci's first factory, Bossa, was Turkey's largest 
integrated textile facility and remains one of the largest 
employers in Adana with over 2800 employees.)  Bas argued that 
after the bulk of Sabanci's business moved to Istanbul in the 
late 1960s, Adana had to learn how to rebuild its small and 
medium commercial structures from the ground up, leaving it 
deeply disadvantaged. 
 
¶4.  (U)  As the GOT stepped up its fight against PKK militants 
in the late 1980s, there was a significant spike in migration to 
Adana, overwhelming the city's infrastructure and job market. 
Bas added that with the introduction of cotton-picking machines, 
seasonal agricultural workers were also left without jobs.  With 
few white-collar job opportunities in Adana, the well-educated 
children of Adana's elite seek education and work opportunities 
abroad or in Turkey's other major cities, resulting in brain 
drain.  Bas agreed that Adana's present 16% unemployment rate 
remains one of its biggest problems. 
 
THE FUTURE OF ADANA'S ECONOMY 
--------------------------------------------- -------- 
 
¶5.  (U)  Bas pointed out the change in textile quotas, 
increasing competition from the Far East, and the overvalued 
lira has had a negative impact on the sector, forcing many 
textile companies to fold.  Despite its flagging fortunes, he 
envisions a rebound, as Turkey develops a textile strategy to 
combat cheap exports such as filling a high-end niche in 
ready-to-wear fashions or home textiles.  Hosting trade shows 
may also develop into Adana's specialty, Bas said, as the city 
possesses one of the country's largest covered expo centers. 
The ACC has started organizing trade fairs - such as agriculture 
and food stuffs - that he hopes will change conventional ways of 
doing business.  He argues Adana has the potential to become 
Turkey's center of innovation for the agriculture, food and 
beverage sectors. 
 
¶6. (U)  Umit Ozgumus, Adana Chamber of Industry (ACI) President, 
was less sanguine about the textile business, but agreed with 
Bas that Adana shouldn't be afraid of exploiting positive 
aspects of its traditional economic base - agriculture.  Ozgumus 
said the city should modernize agriculture and capitalize on its 
strategic geographic location with the next 20 years.  He 
acknowledged Turkey can't compete with developed foreign 
countries in large-scale farming, but made a strong case for 
pursuing important market niches such as organics.  To exploit 
these opportunities, Ozgumus said the province is establishing 
the Adana Organized Agricultural Zone (AOIZ).  Ozgumus also 
 
ADANA 00000123  002 OF 002 
 
 
pointed out Adana is on its way to becoming one of the prime 
packaging centers of Turkey.  In addition to the six packaging 
companies in the AOIZ, two new companies are presently under 
construction, which, when complete, will increase Adana's share 
in the national packaging sector to 20%. 
 
ADANA-YUMURTALIK FREE ZONE: STILL WAITING FOR INVESTORS, JOBS 
--------------------------------------------- -------------- 
--------------------------------------------- - 
 
¶7.  (U)  Built on an area of 4,500,000 square meters and 
designed to serve heavy industry, AYFZ became operational in 
¶1999.  Director Muharrem Pusat, who has been managing the zone 
since its foundation, said that, despite the moribund appearance 
of the zone, 90% of the unoccupied parcels had been reserved by 
30 companies in the chemistry, shipbuilding, iron and steel, and 
textile sectors.   Most investors, however, have not yet begun 
construction of their facilities.  Hay, a Turkish shipbuilding 
company, had in 2006 announced the launch of the country's 
largest dockyard, has yet to break ground owing to financial 
problems.  (Akdeniz, another Turkish shipbuilding company, has 
started the construction of their dockyard.) 
 
¶8.  (U)  According to Pusat, foreign businesses currently 
operating in the zone are SABIC of Saudi Arabia, a petrochemical 
plant; and Kingspan of Ireland, a manufacturer of PVC panels. 
Pusat said an Italian company is negotiating with Kingspan on 
panel door production, and a Spanish company has visited the 
zone to talk about the feasibility of a cement factory.  Pusat 
posits the zone will attract investors because it is the ideal 
position geographically - and because it is near the 
Baku-Tbilisi-Ceyhan pipeline.  Pusat surmises when the zone 
becomes fully operational, it will employ approximately 10,000 
people.  This, he said, will lead to a flurry of other economic 
opportunities - housing, restaurants, markets and retail shops. 
 
BTC PIPELINE RAMPING UP TO PUMP MORE 
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--------------------------- 
 
¶9.  (U)  In July 2006, BIL became fully operational. BIL 
President and Chairman Salih Pasaoglu said to date more than 245 
vessels had been loaded on tankers, and over 200 million barrels 
of oil had been pumped to the Ceyhan port since launching in 
June 2006.  Pasaoglu said BIL envisions increasing daily crude 
oil flow from the present capacity of 1 million barrels a day to 
1.2 million by mid-2008, and further to 1.6 million by 2009. 
The second expansion depends on attracting oil volumes other 
than those from BP's off-shore Azerbaijan field.  To date, BP 
has not yet found the additional volumes necessary to make the 
second expansion economically viable. 
 
¶10.  (U)  BIL employs approximately 550 people, 280 of whom work 
within Ceyhan Terminal and at BIL's four pump stations in 
Turkey.  The remaining 270 employees are from subcontracting 
companies providing catering and security services.  Terminal 
Operations Group Manager Selcuk Tufan pointed out that following 
the closure of the refinery in Mersin, Turkey has only one 
refinery in Kirikkale to meet domestic oil demand.  He posited 
only one additional refinery in Ceyhan would likely be necessary 
to meet domestic demand, despite rumors that two or three 
companies may get the go ahead. 
 
COMMENT 
---------------- 
 
¶11.  (SBU)  Adana's business community is starting to complain 
less about the demise of the textile industry and beginning to 
explore developing new sectors.  Expectations that Ceyhan will 
become a new energy hub, rivaling Rotterdam in scope and 
importance, remain far-fetched, though local planners appear to 
be reaching closure on some new investments that will fulfill 
some of the BTC's job- and revenue-creation promise.    END 
COMMENT. 
GREEN