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PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
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DE RUEHIT #0049/01 0300459
ZNR UUUUU ZZH
P 300459Z JAN 09
FM AMCONSUL ISTANBUL
TO RUEHC/SECSTATE WASHDC PRIORITY 8737
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASH DC PRIORITY
RUEKJCS/DIA WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 ISTANBUL 000049 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR INTERNATIONAL AFFAIRS - JROSE/KMATHIESEN 
USDOC FOR 4200/ITA/MAC/EUR/CRUSNAK 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV TU
SUBJECT: ISTANBUL BUSINESS LEADERS VOICE CONCERNS RE IMF 
AGREEMENT, LOCAL ELECTIONS 
 
¶1. (SBU) Summary.  On January 23, Ambassador Jeffrey 
accompanied by Consul General met with members of the board 
of directors of the Turkish Industrialists and Businessmen's 
Association (TUSIAD).  The discussion focused on concerns 
related to the global economic slowdown and its effects on 
the Turkish economy.  Discussion at separate luncheon 
meetings with members of the American Business Forum Turkey 
(ABFT), an American Chamber of Commerce affiliate, and with 
the Turkish American Business Association (TAIK) echoed 
concerns raised by the TUSIAD board and underscored the 
significant effect the global economic crisis has had on both 
foreign investors and Turkish companies.  End Summary. 
 
¶2. (SBU) Ambassador Jeffrey, Consul General and Principal 
Commercial Officer met on January 23 with Arzuhan Yalcindag, 
Chairman of the Board of the Turkish Industrialists and 
Businessmen's Association (TUSIAD) and TUSIAD board members 
Ferit Sahenk and Ali Kibar.  TUSIAD external relations 
officer Zafer Gazi and TUSIAD representative in Brussels 
Badadir Kaleagasi also sat in on the meeting.  Founded in 
1973, TUSIAD is a voluntary association of Turkey's largest 
manufacturing, financial and construction sector businesses. 
TUSIAD is one of the most influential Turkish NGOs, focusing 
not only on economic issues but also on political and social 
issues.  Its "fundamental aim" is to institutionalize a 
market economy and consolidate a democratic order in Turkey. 
Yalcindag, like her predecessors, is an active commentator on 
economic, political and social issues facing Turkey.  In her 
opening remarks to Ambassador she noted that TUSIAD is 
acknowledged as an objective observer and has credibility 
with the Turkish government (GOT). 
 
¶3. (SBU) Ambassador also met on January 22 with the American 
Business Forum in Turkey (ABFT), one of two American Chamber 
of Commerce affiliates in Istanbul, to discuss concerns 
particular to U.S. companies in Turkey, and with the Turkish 
American Business Association (TAIK) to review events of 
interest to Turkish companies who do business with the United 
States.  Both events were luncheon meetings with 
on-the-record remarks by the Ambassador.  The Ambassador's 
remarks highlighted the growing bilateral commercial 
relationship, but cautioned that Turkey must still address 
investor concerns regarding the investment climate and 
commercial environment.  He cited inefficiencies and 
inequities in the judicial system, improving but still 
insufficient IPR protection, and an enormous informal sector 
as areas that where reform is badly needed.  He described 
U.S. support for Turkey's EU accession and underscored the 
importance of working together to facilitate the large-scale 
investments in Caspian energy and infrastructure that will 
bolster Turkey's role as an energy hub for Europe. 
 
¶4. (SBU) During the TUSIAD meetings, Ferit Sahenk, Chairman 
of Dogus Holding, one of Turkey's four largest industrial 
conglomerates, gave an overview of recent economic 
developments, explaining that at first the GOT ignored the 
global credit crisis but that significant reductions in 
export figures finally forced the GOT to acknowledge the 
crisis.  He noted that this is the first experience Turkey 
has had with a crisis that is global in nature, rather than 
caused by policy failures on the part of the GOT.  In this 
case, Turkey and Turkish policy makers are not to blame for 
the crisis and in many ways Turkey is in better shape to 
withstand the crisis than other emerging markets, he argued. 
Turkey and, in particular, Turkish firms have a greater 
exposure to international credit markets than in past years - 
corporations, particularly in the real sector are 
significantly exposed.  Bank exposure on the other hand is 
relatively healthy, he explained.  There are few toxic assets 
and weak banks have either merged or been submerged over the 
past ten years. 
 
¶5. (SBU) According to Sahenk, Turkey exists in a risk-adverse 
environment and a new IMF agreement is key to restoring 
confidence in the economy.  However, upcoming municipal 
elections have affected GOT thinking with regard to a new IMF 
program, he noted.  Ali Kibar, Chairman of Kibar Holding, 
explained that February would be a difficult month for the 
GOT budget, with a minimum of USD 12 billion in payments for 
election-related spending coming due, but no clear indication 
when or from where the funds to pay for those expenditures 
would materialize.  Sahenk agreed, noting that the GOT has 
clear financial liabilities and that pre-election spending 
was affecting government accounts.  Kibar claimed the GOT 
 
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planned to delay physical payment as a direct result of the 
need to keep funds liquid in advance of the local elections. 
Yalcindag believes the GOT will seek to stall the IMF 
agreement until after the March 29 municipal elections in 
part to avoid scrutiny of government accounts.  Nonetheless, 
Sahenk stressed the need 
for an IMF agreement as soon as possible, noting that market 
expectations are for an IMF program in the region of USD 
20-25 billion.  Domestic confidence is low despite abundant 
lira liquidity and basically healthy economic fundamentals. 
He argued that an IMF agreement would restore confidence and 
help provide a 'level of comfort' that would ensure the 
rollover of foreign currency denominated syndicated loans. 
 
¶6. (SBU) Kibar noted that the GOT needs to exercise more 
fiscal and regulatory discipline to ensure a level playing 
field for foreign companies.  If not, Turkey risks a 
credibility loss in the future with potential investors. 
Kibar, who is a joint venture partner with Hyundai in an auto 
assembly plant, expressed sentiments shared by U.S. company 
representatives at a January 22 luncheon with ABFT members. 
ABFT members cited a range of issues affecting foreign 
investors in Turkey including the difficulty of obtaining 
work permits for expatriate managerial staff as well as a 
general lack of transparency on the part of GOT officials and 
the strain Turkey's large informal sector places upon 
licensed businesses. 
 
¶7. (SBU) ABFT members called on the Ambassador to manage and 
improve the perception of the U.S. in Turkey, which is not as 
favorable as it could be.  They noted that ABFT had worked 
hard with parent companies in the United States to advocate 
against the Armenia resolution in previous years.  Yalcindag 
explained that the Armenia resolution was also a very 
important one for TUSIAD and that she and members of the 
board of directors planned to visit Washington soon to 
discuss the issue on the Hill.  Kibar also addressed the 
issue of anti-Americanism in Turkey noting that anti-Western 
feelings have risen at least in part because Turks blame the 
United States for the current economic difficulties.  Energy 
is also a very important issue for Turkey and the U.S. is 
viewed as less helpful than the EU on this topic, Kibar 
explained.  Kaleagasi expressed his happiness with the 
elevation of MP Egemen Bagis to State Minister for EU affairs 
noting that this was a very good sign.  ABFT members 
expressed concern that the GOT had lost interest in the EU 
process, but welcomed the selection of Bagis as EU negotiator. 
Wiener