VZCZCXRO3653
PP RUEHDA RUEHVK
DE RUEHAK #0118/01 0231351
ZNR UUUUU ZZH
P 231351Z JAN 09
FM AMEMBASSY ANKARA
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UNCLAS SECTION 01 OF 02 ANKARA 000118 
 
SIPDIS 
 
DEPT FOR EEB/TPP/MTAA BNAFZIGER AND EUR/SE DMARSH 
DEPT PLEASE PASS USTR FOR RMALMROSE AND MMOWREY 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD PREL WTO TU
SUBJECT: TURKEY - NO AUTOMOTIVE PACKAGE YET, BUT EXPECTED 
SOON 
 
REF: A. A) STATE 4753 
     ¶B. B) ANKARA 85 
     ¶C. C) ANKARA 117 
 
¶1. Summary. Turkey has not yet implemented a formal program 
to stimulate its automotive industry, but the sector has been 
publicly clamoring for support and action is expected soon. 
The automotive sector is one of Turkey's most important 
growth engines and it has been hit especially hard by the 
crisis.  A GOT working group was only recently established to 
devise an automotive sector package.  Based on press reports, 
such a program will likely be focused on tax incentives for 
both producers and consumers.  There has not yet been any 
mention of an explicit linkage to exports or to local content 
requirements. As 80 percent of Turkey's automotive production 
is exported, however, any program will obviously have the 
effect of supporting exports.  End summary. 
 
¶2. As has been the case with most of its crisis response, the 
GOT has been dilatory in formulating a rescue package for its 
automotive sector.  Calls for government support began late 
in 2008 when automotive exports began to nosedive, plummeting 
35.4 percent in the fourth quarter from the same period in 
2007 (and 45.4 percent in December alone).  In early January 
2009, press reports began to describe a potential GOT rescue 
package focused mostly on tax incentives.  Among the ideas 
discussed were: 
 
-- reductions in taxes for producers who maintain a certain 
level of employment or who work on developing 
environmentally-friendly vehicles; 
 
-- temporarily reduced social security taxes for automotive 
workers; 
 
-- lower energy prices for automotive production facilities; 
 
-- tax discounts to consumers who buy 
environmentally-friendly vehicles; and 
 
-- restarting a defunct program where consumers who trade in 
high-emission older vehicles receive a Special Consumption 
Tax exemption on a new vehicle purchase (Comment: The program 
was shut down because enterprising Turks established a 
secondary market in cheap, polluting vehicles to help get the 
tax exemption, defeating the purpose of the program. End 
Comment.) 
 
¶3. Several GOT ministers, including Industry Minister 
Caglayan and Finance Minister Unakitan, have spoken about the 
need for a rescue package, but it was only on January 19 that 
the Economic Coordination Board established a working group 
to devise sectoral stimulus packages (with a focus on 
automobiles and textiles).  This undersecretary-level group 
will include the State Planning Organization and the 
 
ANKARA 00000118  002 OF 002 
 
 
Ministries of Treasury and Finance.  No date has been set for 
the group to present its proposals.  The potential size and 
content of sectoral support packages is also an issue in 
ongoing GOT negotiations with the IMF (ref B).  The GOT has 
yet to give the IMF the details of its proposed packages or 
to define how much they will cost.  This is a further 
indication of how undefined the GOT program is at this point. 
 
¶4. The automotive sector is one of the pillars of Turkey's 
economy and of its recent export-led growth.  According to 
Foreign Trade Undersecretariat statistics, automotive 
manufacturing directly employs 46,000 people and the related 
parts and service industries employ an additional 1.25 
million.  Automotive goods are the second largest category of 
export goods (behind steel but ahead of textiles) and in 2008 
exports reached USD 17.5 billion.  The sector is highly 
dependent on exports, with over 80 percent of its production 
going overseas, mostly to Europe (much of the production 
comes from factories owned by European automakers).  As a 
result, it has proven especially vulnerable to the downturn 
in Europe and exports have fallen dramatically. 
 
¶5. Comment:  While none of the measures described in para 2 
have been explicitly linked to export promotion, any stimulus 
package that reduces producer costs will have the effect of 
making Turkey's automobiles more competitive both at home and 
abroad.  Turkey can be expected to make some effort to ensure 
that any package meets WTO rules.  At the U.S.-Turkey Trade 
and Investment Framework Agreement meeting on January 13, the 
GOT raised the U.S. automaker bailout and expressed its 
concern over whether the program violates the WTO.  They 
seemed to take to heart AUSTR Christopher Wilson's point that 
a program that is crafted to avoid linkage to exports or to 
local content should be WTO-compliant (see ref C).  End 
comment. 
 
 
Visit Ankara's Classified Web Site at 
http://www.intelink.sgov.gov/wiki/Portal:Turk ey 
 
Jeffrey