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DE RUEHIT #0059 0321310
ZNR UUUUU ZZH
P 011310Z FEB 08
FM AMCONSUL ISTANBUL
TO RUEHC/SECSTATE WASHDC PRIORITY 7840
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHDA/AMCONSUL ADANA PRIORITY 2335
RUCPDOC/DEPT OF COMMERCE WASH DC PRIORITY
RUEATRS/DEPT OF TREASURY WASH DC PRIORITY

UNCLAS ISTANBUL 000059 
 
SIPDIS 
 
SIPDIS 
 
TREASURY FOR J.ROSE 
USDOC FOR 4200/ITA/MAC/EUR/PDYCK/CRUSNAK 
 
 
E.O. 12958: N/A 
TAGS: ELAB EIND ASEC TU
SUBJECT: FACTORY EXPLOSION UNDERSCORES DANGER OF UNREGISTERED 
ECONOMY 
 
¶1.  (U) All newspapers gave front-page billing to a January 31 
explosion at an unlicensed factory in Istanbul's Zeytinburnu 
district that killed 23 people and injured more than 100.  Around 
half of those killed were onlookers or passersby.  According to 
Zeytinburnu Mayor Murat Aydin, a fire in an unlicensed fireworks 
depot spread to the unregistered Irnak Textiles jean processing 
plant on a lower floor.  The Irnak Textiles boiler exploded, 
collapsing the top two floors of the five-story building and 
damaging surrounding buildings. 
 
¶2.  (U) Of the five companies in the building, Aydin claimed only 
Irnak Textiles was unlicensed.  However, the company housing the 
fireworks was licensed only to produce plastic goods.  Defending his 
office against widespread accusations of negligence, Aydin claimed 
the municipality had closed Irnak Textiles several times and finally 
resorted to filing charges after it was repeatedly reopened without 
proper permits. 
 
¶3.  (U) The tragic incident brought Turkey's informal economic 
sector into the limelight.  Of Turkey's 22 million workers, the 
Turkish Statistics Institute estimates 47% are unregistered, with 
1.1 million unregistered workers in Istanbul alone.  Unregistered 
workers have no collective bargaining rights, are typically 
uninsured and are not eligible to participate in 
government-sponsored retirement and disability programs.  Yaman 
Toruner, former governor of the Central Bank of Turkey and current 
member of AKBank's board of directors, estimates the informal sector 
accounts for 34% of Turkey's $500 billion GNP. 
 
¶4.  Comment.  Business leaders have long argued the informal economy 
tilts the playing field by giving an unfair advantage to unlicensed 
companies who do not pay corporate/employment taxes or fairly 
compensate workers.  In a December conversation with Istanbul AmCham 
affiliate, State Minister Mehmet Simsek acknowledged that the 
informal economy was a drag on both government revenues and the real 
economy.  However tax evasion (a primary incentive for operating an 
unregistered business) is popularly viewed as a "victimless crime" 
and labor market reforms are both technically difficult and 
unpopular with voters.  Now this deadly accident has prompted many 
media commentators to argue that unlicensed businesses are dangerous 
as well as bad for business.  It remains to be seen whether the 
Irnak Textiles explosion will be the impetus the government needs to 
take difficult steps to tackle the unregistered economy.  End 
Comment. 
 
 
WIENER