VZCZCXRO8015
PP RUEHDA
DE RUEHIT #0086/01 0621417
ZNR UUUUU ZZH
P 031417Z MAR 09
FM AMCONSUL ISTANBUL
TO RUEHC/SECSTATE WASHDC PRIORITY 8807
INFO RUEHAK/AMEMBASSY ANKARA PRIORITY 8135
RUEHDA/AMCONSUL ADANA PRIORITY 2386
RHEHAAA/WHITE HOUSE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEKJCS/DIA WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 ISTANBUL 000086 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR 4200/ITA/MAC/EUR/CRUSNAK 
 
E.O. 12958: N/A 
TAGS: EINV ECON ETRD TU
SUBJECT: AMCHAM SURVEY HIGHLIGHTS INVESTOR CONCERNS 
 
REF: 2007 ANKARA 670 
 
Sensitive but Unclassified. Please protect accordingly. 
 
¶1. (U) Summary.  The third annual American Business Forum 
Turkey investment survey highlights U.S. investor 
disillusionment with the pace of reform and concerns 
regarding macroeconomic stability.  A large majority of 
surveyed investors nonetheless remain confident in Turkey's 
market potential and plan to stay in the market.  The survey 
highlighted areas where the U.S. business community believes 
reforms are needed including transparency in government 
contracting, intellectual property rights protection and the 
efficiency of the legal system.  USG engagement with the 
Turkish government on reforms designed to improvement 
investment climate and enhance market access was viewed as 
crucial.   End Summary, 
 
¶2. (U) The American Business Forum Turkey (ABFT), an 
affiliate of the American Chamber of Commerce, released its 
third annual survey on the business and investment climate in 
Turkey in February.  The survey polled 105 respondents, up 
from 51 in 2007 (baseline) and 72 in 2008.  Respondents were 
evenly split between services (50) and industry (55.) 
General outcomes track with previous years, but reflect the 
impact of the ongoing financial crisis as well as a loss of 
investor confidence in GOT macroeconomic policy 
implementation, as little progress has been made following 
the 2007 general election.  ABFT Chairman Galip Sukaya noted 
that U.S. executives remain optimistic about the market 
potential of Turkey and the quality of the workforce but are 
disappointed in the pace of reforms. 
 
General Market Perceptions 
-------------------------- 
 
¶3. (U) A large majority of surveyed investors have a positive 
impression of market potential (76%), believe investing in 
Turkey was a good idea (75%), plan to stay in the market 
(79%) and would recommend Turkey to potential investors 
(71%.)  These numbers track with previous years.  Fewer 
respondents than previous years expect expansion (54% vs. 64% 
in 2008) while only 40% of respondents (vs. 62% in 2008) see 
improved prospects for growth in the coming year.  Note: 
These responses are almost certainly affected by the on-going 
global recession.  End Note. 
 
¶4. (U) The 2009 survey reported a clear drop in optimism 
related to the ruling party compared to 2008.  In 2008, 67% 
of respondents were confident the new government would create 
a more attractive environment for foreign investment.  This 
number dropped to 48% in 2009.  The survey reported drops of 
similar magnitude (approximately 15-20 percentage points) in 
responses to questions related to the government's ability to 
maintain a stable macroeconomic environment, tackle important 
micro issues and accelerate EU harmonization efforts. 
 
¶5. (U) An overwhelming majority (85%) of investors believed 
USG efforts to engage the government of Turkey (GOT) to 
improve the investment climate and enhance market access were 
important.  A majority (55%) of respondents believe tension 
in the bilateral relationship stemming from disagreements 
over Iraq, Iran or Israel policy or the passage of an Armenia 
Resolution by Congress could adversely affect the operating 
environment for their company. 
 
Specific Investor Concerns 
-------------------------- 
 
¶6. (U) The survey reported a clear loss of confidence in GOT 
policy making, with only 31% of respondents expressing 
confidence in the ability of current officials to ensure 
macroeconomic stability and 39% confident that Turkey's 
macroeconomic indicators will be stable in the coming year. 
ABFT Board member Jeffrey Kemprecos noted that investors were 
expecting much bolder reforms in 2008 following elections in 
the summer of 2007. 
 
¶7. (U) Survey results on infrastructure, taxation and the 
legal system track with previous years.  Two thirds of 
respondents (66%) believed electricity costs were not 
reasonable compared to other markets.  Selective enforcement 
of laws was also cited as a problem - only 29% of investors 
surveyed believed environmental laws were applied equally to 
 
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all businesses.  Almost three quarters of respondents (74%) 
claimed that personal income taxes were too high.  Only 40% 
of respondents saw total taxation (including levies, fees and 
excise taxes) as comparable to other countries in which their 
company operates. 
 
¶8. (U) The legal system is viewed as inefficient (only 33% 
believe otherwise) and biased against foreign investors (only 
42% believe foreign and domestic investors are treated 
equitably.)  Just 43% of respondents believed they would get 
a fair hearing in court.  Under one third (30%) of 
respondents believed IPR is well protected.  (Note:  The GOT 
is aware of this shortfall, State Minister for EU Affairs 
Egemen Bagis acknowledged as much to the annual general 
meeting of the international investors association (YASED) 
noting that revisions to the Commercial Code currently under 
discussion would remedy shortfalls in the IPR regime.  End 
Note.) Although corruption exists -- 54% cited it as an issue 
within the legal system -- the effects of corruption pale in 
comparison to the challenges posed by inefficiency within the 
court system and a general bias against foreign investors. 
 
¶9. (U) U.S. investor views of the workforce are generally 
positive.  Recent labor market reforms appear to have 
positively influenced investor sentiment.  However, 
education, particularly for blue collar workers, remains a 
source of complaints.  Only 40% of respondents believed the 
high-school level education system adequately serves the 
business community's needs.  Investors would prefer to see a 
greater focus on practical training rather than theory. 
Infrastructure is generally viewed favorably with privatized 
airports and telecom cited as particular bright spots. 
 
¶10. (SBU) Comment.  ABFT's annual survey is a useful means of 
quantifying investor sentiment with regard to both government 
policies and much needed reforms.  Following the summer 2007 
general elections that returned the ruling AKP to power, the 
U.S. investor community (along with Turkey's business 
community in general) experienced a surge of optimism.  AKP 
had performed well during its first term in office and was 
the most business friendly party to hold office in decades. 
However, as ABFT notes in its 2009 Survey press release, many 
now view 2008 as a "lost year".  A combination of 
bureaucratic inertia and political mis-steps distracted from 
the business of economic reform and the U.S. investor 
community has ratcheted expectations down accordingly. 
Together with Embassy Ankara we will continue to work with 
ABFT and other U.S. - Turkish business organizations to press 
the GOT for positive action on the economic reform agenda. 
End Comment. 
Wiener