‘Genocide’ bill may discourage investors

Gökhan Kurtaran - ISTANBUL- gokhan.kurtaran@hurriyet.com.tr

A possible boycott of French firms might slow down investments, says Yves Marie Laouenan.

A possible Turkish boycott of French products and companies would not only harm bilateral trade relations but also possibly discourage new French investment in Turkey, a top executive of the Turkish French Trade Association (CCIFT) said yesterday. 
“We should bear in mind a possible boycott of French products and firms in Turkey might also slow down investments from France, the second biggest foreign direct investor in Turkey,” said Yves Marie Laouenan, vice president of the CCIFT. 
With tensions heating due to the French Parliament’s decision last week to penalize any denial of the 1915 events as genocide, “trade and business relations established over many years should be taken care of,” he told the Daily News.
France ranks the fifth biggest European direct investor in Turkey with $10.3 billion worth of investments between 2000 and 2010, following the Netherlands, Germany, the United Kingdom and Luxembourg, respectively, according to data from Turkey’s Central Bank.
French investments in the country were only $1.6 billion in 2000. Even in the midst of the European economic crisis, Turkey managed to attract $816 million in the first half of this year, the data showed. 
“We do not want to be involved in politics, we want to trade and enhance economic relations between both countries,” said Laouenan, noting that the French Senate rejected a similar genocide bill in the past.
 Laouenan said Hrant Dink, a Turkish-Armenian journalist assassinated in 2007, was among the pioneers who put his signature to a letter urging French politicians to withdraw from passing such a bill in 2006. “A similar petition will soon be launched and presented to French senators,” Laouenan said.
“Nearly 100,000 Turkish people work in French firms in Turkey,” said Zeynep Necipoğlu, the head of the association calling on both sides to calm down and care more about economic relations between the countries. Currently, more than 300 French firms operate in Turkey, including Schneider, Areva, St Gobain, Lafarge, Danone, L’Oreal, Carrefour, Total, BNP Paribas, AXA, Groupama and Dexia. 
“The bill has not been accepted by the French Senate and we will continue to express the sensitivity of the issue to French senators,” Necipoğlu said.
Last week, Turkish EU Minister Egemen Bağış warned that “Turks decide on their own,” implying citizens might boycott French goods as they did before against Italy. However, any attempt to boycott trade with France would fail to achieve results, Ümit Boyner, head of Turkish Industry & Business Organization (TÜSİAD), said in an interview with the Daily News Dec. 28 following the minister’s comments.

December/30/2011

PRINTER FRIENDLY

Turkey may play bond game against France

Gökhan Kurtaran- ISTANBUL 

Hürriyet Daily News gokhan.kurtaran@hurriyet.com.tr

The Turkish Central Bank could withdraw its nearly 23 billion euros of reserves from France after the EU member’s recent move to fine any denial of an Armenian ‘genocide’ in 1915, economists tell the Daily News. However, such a sharp move could risk Turkey’s EU bid, they add.

Christian Noyer, govenror of the Bank of France, reviews his speech before a conference on the euro area’s sovereign debt crisis in Paris on Dec 19. Turkey’s Central Bank has its second highest amount of reserves in France with 28.8 billion liras, according to official data. The United States comes first with 48.6 billion liras. REUTERS 

“The Central Bank could withdraw its reserves from France as part of its economic sanctions in the future,” Erol Katırcıoğlu, professor of the economics department of Istanbul Bilgi University, said yesterday. 

“Looking at the steps taken by the Turkish government and the tone of the political rhetoric, we can expect such a move,” Katırcıoğlu told the Hürriyet Daily News in a phone interview yesterday. However, such a move would strengthen opponents to Turkey’s EU membership bid and denounce Turkey as an “unreliable partner.”

It is the right of Turkey to withdraw its reserves from France, according to Kerem Alkin of Istanbul Commerce University. “This might not hurt the French economy but will prove Turkey is serious about sanctions,” Alkin said.

Recent investment 

Turkey’s Central Bank has its second highest reserves in France with 28.8 billion liras, following the United States with 48.6 billion liras. 

In the midst of the eurozone crisis, Turkey invested around 17.7 billion liras in French government bonds last year, according to data provided by the Central Bank. 

By the end of last year, the bank’s total investments in various banks stood at 110.1 billion liras. The bank had 17.7 billion reserves in Germany, 4.8 billion in Belgium, 4.5 billion in the Netherlands and 1.3 billion in the United Kingdom.

“The French economy might face serious difficulties if the Turkish Central Bank withdraws reserves, as most of it is in French government bonds,” said Mehmet Usta, deputy chairman at Aktif Bank, who also served as general manager at Banque de Bosphore in France between 1994 and 2007. “German bonds would be the primary choice of the Central Bank instead of French bonds,” he said. 

Noting the rising need for liquidity in France due to the ongoing European debt crisis, “Turkey’s investment in the country would still play an important role economically if France could not compensate the amount from any other source immediately,” he said. 

Yet, responding to Daily News questions, Yücel Yazar, press counselor of the Central Bank, declined to comment on the issue. “Our data is open for everyone and clear enough, unfortunately we cannot comment on this issue now,” Yazar said. 

Turkey might impose additional economic sanctions against France if the country insists on accepting the bill punishing any denial of Armenian “genocide” at the French Senate, said Ali Babacan, Turkey’s deputy prime minister, responding to Daily News questions Dec. 23. k HDN

December/27/2011

Deputy PM silent on pressure on lenders

ISTANBUL - Hürriyet Daily News

ALİ BABACAN

Turkey’s Deputy Prime Minister Ali Babacan neither denied nor confirmed pressure on French investment banks in Turkey to leave the country after the parliamentary approval of a bill on punishing any denial of Armenian genocide allegations.

“If France continues to insist on the bill, Turkey can launch new economic sanctions on France,” Babacan said to the Hürriyet Daily News, telling of the sanction announced by Turkish Prime Minister Recep Tayyip Erdoğan.

“Turkey’s Banking Regulation and Supervision Agency (BRSA) would smoothly and quietly pass such a message to the banks,” if such a decision was made, he said on the sidelines of a meeting with Banks Association of Turkey (TBB) Dec. 23. 

Due to the political tension between the countries, Turkey’s economic administration recently asked two French investment banks to end all their operations in Turkey and leave the country, reported Sabah, a Turkish daily, Dec. 22.

Erdoğan announced only the first stage of sanctions and there will be further stages, Babacan said. 
“There is no doubt that we will have some sanctions as the bill moves stage by stage through the French Parliament,” Babacan said. Turkey would take further actions should France move further to make the bill a law in the future.

“We have not received any inquiries yet on the issue, but still, executives are concerned,” a source told the Daily News by phone Dec. 22. The source from a French investment bank active in Turkey was speaking under the condition of anonymity.

“The claims are baseless,” said Yesim Sözen, an expert from the banking regulator, in an email response to Daily News questions.

December/24/2011

Head of trade body resigns on tensions

GÖkhan Kurtaran- ISTANBUL - Hürriyet Daily News

gokhan.kurtaran@hurriyet.com.tr

Guilaume has resigned from his post as the chairman of Turkish-French Trade Association.

Oliver Guilaume, French chairman of Turkish-French Trade Association (CCIFT), has resigned unexpectedly from his post. A top business board claims the decision was related to the rising political tension between the two countries.
“I was informed by the association he resigned for personal reasons,” Banu Antonetti, head of Turkish-French Business Council at Foreign Economic Relations Board of Turkey (DEİK), told the Daily News during a phone interview yesterday.

However, Antonetti said the political pressure over French firms in Turkey might have played a role in his unexpected resignation. 

“Turkey has already been late in lobbying against the bill, and now it is time to think about what will happen after the voting of the bill in the French Parliament,” Antonetti said
The CCIFT declined to comment on the issue.

Gauilaume is also general manager of Sanofi Aventis, one of the largest pharmaceutical French firms in Turkey. CCIFT currently has 450 member firms, 150 of which are French. 

No letter to Sarkozy
A letter prepared Dec. 17 by CCIFT addressing French President Nicholas Sarkozy was not signed by Guilaume, the president of the association at the time. Instead, the original letter bears the name and signature of Zeynep Necipoğlu, vice president of CCIFT, who signed as president.
“French firms have encountered political pressure on acting against the bill punishing the denial of the so-called Armenian genocide,” said a source from DEİK speaking to Hürriyet Daily News on condition of anonymity. 
According to the source, Gaillaume resigned “due to the political pressure on his shoulders.” Previously Ankara requested the Turkish-French Business Council to urge French firms in Turkey to have a press meeting but it was cancelled due to unwillingness of the firms to participate. 
“Later last week, French firms were asked to sign a letter to Sarkozy,” the source said. According to the source, the rising tension on the political level puts the French firms in an increasingly difficult position in Turkey.

December/21/2011

Auto companies driving fast, riskily in credit lane

Gökhan Kurtaran- ISTANBUL- Hürriyet Daily News

gokhan.kurtaran@hurriyet.com.tr

The attractive yearend campaigns by Turkish car sellers tend to boost the country’s already fragile credit growth, according to economists. ‘We should also bear in mind that the attractive discount packages boosting car sales will also widen the country’s trade deficit eventually,’ economist Emre Alkin tells the Daily News

This file photo shows models posing in front of brand new cars during an automobile show in central Istanbul. Recent boost in automotive credits might cause the government’s targets for credit growth rate to fail, according to economist Nurhan Toğuç.A recent hike in car loan campaigns in Turkey increases the risk of dangerous credit growth, fueling the country’s ever-widening trade gap, several economists warn. 

“Turkey will not be able to meet its 25 percent credit growth target in the second half of the year,” said Nurhan Toğuç, chief economist of Ata Invest based in Istanbul.

Automotive companies and distributors have recently started to offer packages alleviating a recently increased special consumption tax (SCT) on motor vehicles. 

“These offers, discounts and credits might cause the government’s targets for credit growth rate to reach beyond expectations,” Toğuç told Hürriyet Daily News in an interview yesterday.

Turkey’s Central Bank’s bid to slow down the credit growth expansion is not efficient since companies continue to offer attractive discounts and partial payment of the SCT in joint campaigns with lenders to reach sales targets for the yearend, she said.

Bank’s efforts not enough“Unfortunately the sole measures taken by the Turkish Central Bank are not efficient,” she said, adding that Turkey’s Banking Regulation and Supervision Agency (BBDK) should also control the lender’s consumer credits. “I doubt whether the government will be able to meet its 20 percent credit growth expansion target for next year.” The government had increased special taxes on motor vehicles in October in order to slow down car imports, said Emre Alkin, an Istanbul-based economist. However, the tax hike could not be the sole instrument to solve the country’s trade deficit problem, Alkin told the Daily News yesterday.

The tax rate on motor vehicles with engine volumes higher than 2,000 cubic cm was increased from 84 to 130 percent and resulted in a 25 percent increase on Oct. 13. The rate on cars with engine volumes of between 1,600 and 2,000 cubic cm was also increased by 12.5 percent. 

The Turkish automotive industry is expected to exceed last year’s sales record of 793,000 as it has already hit 735,033 in the first 11 months, according to data by the Automotive Manufacturers’ Association (OSD). 

“We should also bear in mind that the attractive discount packages boosting car sales will also widen the country’s trade deficit eventually,” Alkin said. Automotive finance credits make up nearly 7 percent of the consumer credit, he said. “Turkey’s import bill is piling up and so are the concerns about the trade deficit.” 

Turkey’s 12 month cumulative trade deficit has reached $78.6 billion, or about 10 percent of the gross domestic product, he said, adding that the government should stick to its target of curbing the country’s peaking imports. “The import of motor vehicles will increase this month, further widening the trade deficit,” he said.

Recently Peugeot launched a yearend package for sales on credit for 18 months, while Citroen introduced the same package for 15 months. Honda recently announced the company covers 50 percent of the special consumption taxes on all its cars with engine volumes higher than 2,000 cubic cm. Volkswagen also fixed the exchange rate for the yearend sales and offered a discount package for 4,000 Turkish Liras for some models.

“Financing the current account deficit through hot money is inevitable for Turkey,” Selim Somçağ, an Istanbul-based economist, said yesterday. Turkey’s economic administration board should focus on the wider picture as the country’s imports have reached an “unmanageable level,” raising concern in the midst of the eurozone crisis, he said. 

December/20/2011

Economists see no future in EU

Gökhan Kurtaran-Istanbul- Hürriyet Daily News

Two renowned economists tell the Daily News that Turkey’s future does not lie in membership to the European Union, but in its own region and Asia. Turkey’s economy should be plugged into emerging markets, they say.

‘Orientation toward the east is crucial for Turkey, which aims to rank among the 10 biggest economies of the world by 2023,’ says economist Jacques. DAILY NEWS photo, Emrah GÜRELTurkey’s future does not lie in membership to European Union but in its own region and Asia, according to renowned economists.

“I think Turkey’s future will not be best served by too strongly being orientated towards Europe,” Martin Jacques, a professor at the London School of Economics, and author of “When China Rules the World,” told the Hürriyet Daily News. 

All projections shows emerging countries will continue to grow twice as faster as the developed world in the near future and Turkey’s economy should be plugged into those economies, just like the rising global power China, according to Jacques.

“Orientation towards east is crucial, for the country which aims to rank among the top 10 economies of the world by 2023,” Jacques said in an interview yesterday. 

Turkey can use its economic potential and think big rather than relying on the European Union, according to Paul Romer, senior fellow at Stanford University’s Institute for Economic Policy and ranked in the U.S.’s 25 most influential people by Time magazine in 1997. Turkey does not need to join European Union but focus on major projects in its region, Romer told the Daily News in a recent interview.

“Turkey could start forming new major economic hubs in North African and Middle East countries boosting its economic power as Great Britain once did with Hong Kong,” he said. “A few years ago I was in Istanbul and I thought it was a good idea for Turkey to join EU,” he said, adding that his views has changed after witnessing the economic performance of the country and political stability in midst of the economic crisis in Europe and unrest in Middle East and North Africa. 

“A large plot of unoccupied land, large enough for millions of people to live can be allocated by Turkey in any country in the region and turned into an economic hub, a new economic zone, such as Hong Kong,” he said.

‘UK might leave EU’

China, long humiliated by western countries and particularly by European leaders, is now in a position to finance the debts of Europe, Jacques said. “French President Nicholas Sarkozy asked China to support the debt hit union,” he said, adding that the answer would be not be positive. 

“The U.K. will most probably leave the union and search for new alternatives,” said Jacques, adding that the in the long run Chinese businessmen will take over the European firms in difficulty of financing their debts. 

“In the long run, Iran is definitely a potential partner for China.” The question is that whether Turkey will decide to take part in the “old world or a new one.”

December/16/2011

No US-Turkey free trade zone deal in the pipeline

Gökhan Kurtaran- ISTANBUL - Hürriyet Daily News

The United States is currently not open to signing a free trade deal with Turkey, which would boost mutual trade, according to a top Turkish business representative. The focus for the US is Asia today, a senior US trade official confirms.

This company photo shows metal casting employees working at a plant in Michigan. Turkish businessmen support the establishment of a free trade zone with the US. AFP Photo

The U.S. vice president expressed support for enhancing trade relations with Turkey during a recent visit, but the absence of a free trade deal between the two weakens potential cooperation, a Turkish business association head has said.

 “The United States is not open to signing a free trade agreement with Turkey,” Rıza Nur Meral, the head of the Confederation of Businessmen and Industrialists of Turkey (TUSKON), told the Hürriyet Daily News during a phone interview yesterday. 

“Their possible concerns might be groundless as we can increase the trade in all ways, in terms of both imports and exports through a free trade agreement,” said Meral. 

“What Turkey has learned through the free trade agreements we signed with many countries in recent years stimulates both imports and export, which are generally followed by significant foreign direct investment,” he said. “The same could be realized with the U.S. too.”

U.S. Vice President Joe Biden said during an Istanbul meeting on Dec. 3 that Turkish-U.S. economic and military relations were improving and that there had been a 45 percent rise in trade between the two countries this year when compared with the same period last year. 

However, such a deal with Turkey still needs time, according to Lorraine Hariton, special representative for Commercial and Business Affairs of the U.S. State Department.

“We have just ratified three free trade agreements with South Korea, Colombia and Panama,” Hariton told the Daily News on the sidelines of the Istanbul event. 

“I think we can take a broader look to our trade relations [with Turkey] now,” she said, adding that her country was currently focusing on free trade deals in Asia.

“Enhancing trade relations with Turkey is a great opportunity as it’s a fast developing country we want to trade with,” Hariton said. 

According to Meral, the establishment of the same type of trade agreement as the U.S. has with Jordan and Israel, in which goods manufactured in Turkey could be exported to the U.S. market without being subjected to any duty tariff barriers, is “inevitable” if trade is going to increase.

Turkey’s exports fall significantly short compared with U.S. exports to the country, according to official data by the U.S. Census Bureau. Turkey’s total export to U.S. rose to $4.20 billion last year from $3 billion in 2000, while imports from the U.S. to Turkey rose to $10.5 billion from $3.7 billion in the same period.

In the first nine months of this year, Turkey’s exports to the U.S. market hit $3.93 billion while imports from the U.S. broke an all-time record in September with a figure of $11.13 billion.

December/04/2011

Regional free zone attempt stillborn

ISTANBUL - Hürriyet Daily News

A regional trade zone project, which aimed to bulid strong ties between Turkey, Syria, Lebanon and Jordan, has failed to last even seven months, according to officials. The latest Turkish sanctions on Syria automatically canceled the plan.

This March 29 photo shows a banking conference in Istanbul to enhance ties among so-called Shamgen countries. AA photo

“Shamgen,” a step toward creation of a free trade area between Turkey, Syria, Lebanon and Jordan, officially came to an end due to the rising tensions between Turkey and Syria, according to a Central Bank official. The plan, inspired by the EU Schengen Agreement, was launched eight months ago.

“Shamgen included the development of close bonds between Central Banks of the member countries including Syria, but as part of the sanctions imposed on Syria it came to an end officially,” the Central Bank source told the Hürriyet Daily News Nov. 30.

“Shamgen was a new project we were all working toward, but as the political climate has changed in the region, it’s definite that the project ended,” he said. 

Central banks break ties

The Turkish Central Bank has suspended all ties with the Syrian Central Bank within the scope of Turkey’s economic sanctions unveiled by Turkish Foreign Minister Ahmet Davutoğlu on Nov. 30.

Taking its name from the word “Sham,” the classical Arabic name for Syria, the ambitious project began with Turkey signing free-trade and visa-exemption agreements with Syria, Jordon and Lebanon in 2007, 2009 and 2010 respectively. 

Turkey’s Central Bank had organized the Enhancing Shamgen Banking conference in Istanbul on March 28 and 29, bringing together top officials of central banks from the Shamgen member states.

“Although this conference is a step toward improving relations between the banking sectors of Turkey, Syria, Lebanon and Jordan in the short term, it is expected to contribute to the formation of a single market with the inclusion of other countries in the region in an area circumscribed by the Persian Gulf, Red Sea and the Mediterranean,” Turkey’s then Central Bank Gov. Durmuş Yılmaz said at the conference.

December/01/2011

New pipeline might pass Nabucco target

ISTANBUL - Hürriyet Daily News

Gökhan Kurtarangokhan.kurtaran@tdn.com.tr

The recently announced Trans-Anatolian Pipeline project by Azerbaijani state-owned SOCAR might surpass Nabucco, as it might be more feasible to connect this line with Southeastern European Pipeline and Trans Adriatic Pipeline (TAP) in the short-run, said the top representative of TAP.
“Europe talks about the Turkmen gas, almost two-thirds of which they lost to Russia with a 2003 agreement,” Cenk Pala, Turkey’s representative of TAP Project, told the Hürriyet Daily News yesterday at the sidelines of a roundtable discussion on Southern Corridor in Istanbul. 
Nabucco has already lost its importance due to lack of European leadership and lack of resources to secure the needed supply, he said. “Nabucco is a commercially driven project and no investment decision can be made unless the supplies are granted beforehand.” 
He said Europe was already late to take a share in Turkmen gas but can still make use of the vast gas resources of Iraq, although no sooner than 2020. 
[HH] EU backs Nabucco
However, Heinz Hilbrecht, former director of European Commission Department of Energy, said the European Union continues to back the Nabucco project to diversify its energy dependency from Russia to other sources. 
“Through Gazprom, Russia continues to pressure Turkmenistan not to supply gas for Nabucco,” said Hilbrecht. Not only Azerbaijani gas, but Turkmen and Iraqi gas will be needed in the future, he said. 
“The legal framework for the Caspian Sea basin has not been settled yet,” said İlter Turan, professor of political science at Istanbul Bilgi University’s international relations department. Wolfgang Sporrer, Caspian regional manager of OMV Gas & Power, said, “Negotiations still continue between parties, and the Nabucco consortium has no difficulty in financing the project.” 
“Everybody keeps complaining about the delay in Nabucco, but not about the delay in Russia’s South Stream project,” Hilbercht said. Despite Russia’s effort to promote the South Stream Project, it was too expensive to be realized, he said. 
Azerbaijan and Turkey agreed Oct. 26 to transfer 6 billion cubic meters of gas per year from the second phase of the Shah Deniz field and to ship 10 billion cubic meters to European customers via Turkey. 
SOCAR’s latest proposal of Trans-Anatolian Pipeline project has not been announced with many details, Pala said. “Still, the project opens more opportunities for connecting it with transporting TAP has across Turkey, Greece, Albania and to southern Italy and further to western Europe.” 
Pala said TAP’s total capacity will be nearly 10 billion cubic meters, which would be easy to provide through the Trans-Anatolian Pipeline project. 
SOCAR announced the Trans-Anatolian Pipeline project to carry Azeri gas through Turkey with approximate capacity of 16 to 17 billion cubic meters on Nov. 17 in Istanbul.

November/30/2011

Crisis hits refinery sector in Europe

ISTANBUL - Hürriyet Daily News | GÖKHAN KURTARAN - gokhan.kurtaran@hurriyet.com.tr

European refineries are facing closures due to poor demand, a result of slow growth and the euro crisis, according to an oil professional. Meanwhile Turkey and the Middle East are seeking ways to increase their production capacities

The ongoing European economic crisis has paved the way for a significant decline in oil products in debt-hit European countries. Turkey is likely to attract more investments both in refinery and storage facilities as European plants close, the executive of a global energy company said.

“Many refineries will close in Europe due to a slow in demand for oil products,” said Mark Lewis, managing director of London FACTS Global Energy Group. The slowdown in European economic growth is causing a decline in demand in oil products and if the trend continues, eastern countries -- including Turkey -- are likely to divert the route of the oil products from west to the east.

The timing, location and pace of future refinery closures will have an important impact on European storage requirements, Lewis said. “Turkey may soon play a crucial role in regional oil and gas supply.”

Turkey has just agreed invest $5 billion with Azerbaijan in a joint refinery development project in the western province of İzmir. The deal was settled in October and the refinery is scheduled to commence operations in 2015, with the capacity to process 10 million metric tons of crude oil. On June. 28, Kuwait approved a $14.5 billion refinery construction capable of producing 615,000 barrels per day while earlier this year Saudi Arabia has also announced it will complete the 400,000 barrels per day capacity refinery in Yanbu city with a Chinese partner.

Meanwhile back in January, Shell announced plans to close its German Harburg refinery and convert it into a storage site after failing to find a buyer, while United States oil major ConocoPhillips is considering either selling its Wilhelmshaven refinery or turning it into a terminal, according to Reuters.

This year France has shut both its 105,000 barrel per day Berre refinery owned by Lyondell Basell Industries, and the Total Dunkirk Refinery, due to a collapse in demand. A number of refineries in Germany, Sweden, the U.K., Italy and Romania have either closed down or have recently gone up for sale.

This is good news for Turkey, Lewis said. “We can see the growing economy and rising demand in Turkey in oil products,” citing “rising demand, increased crude supply and growth in oil products trade in Turkey,” as reasons for a potential increase in investments. Expanding storage opportunities will “increase the importance of the country,” he said.

Euro crisis 'ticking bomb' for Turkey

Sunday, November 27, 2011
GÖKHAN KURTARAN
ISTANBUL - Hürriyet Daily News

The eurozone crisis is ‘a ticking time bomb’ that lies at Turkey’s doorstep, according to Daren Acemoğlu, a Massachusetts Institute of Technology professor who is ranked among the world’s top economists. Speaking to the Hürriyet Daily News, Acemoğlu urged the Turkish Central Bank to raise interest rates to create room to maneuver later



Influential economist Daron Acemoğlu warns Turkey on the eurozone crisis. DAILY NEWS photo, Emrah GÜREL

The eurozone debt crisis has turned the European economy into “a ticking time bomb” that lies at Turkey’s door, according to a top economist who has been ranked among the most influential thinkers of our time.

Speaking to the Hürriyet Daily News in an interview last week, Daron Acemoğlu, a professor at the Massachusetts Institute of Technology (MIT), also urged the Turkish Central Bank to raise interest rates from their current historic lows.

“The European time bomb lies at the door for Turkey,” Acemoğlu said. “The Turkish economy is closely connected to the European economy. Thus, it is open to all possible shocks.”

Regarding the possibility of a new global recession, Acemoğlu put the chance as high as 50 percent. “If there is a new recession in Europe, Turkey would go back to experience 2009 once again,” he said, a year when the Turkish economy contracted by 4.7 percent.

Despite the positive effects of economic reforms, Turkey should “increase interest rates” in order to put the brakes on strong domestic demand, Acemoğlu said, adding that such a move would provide the policy flexibility that would be necessary following a possible shock from the eurozone.

The Turkish Central Bank’s one-week repo rate remains at 5.75 percent, while the overnight interest rate corridor stands at 5 to 12.5 percent. Year-end inflation target is at 5.5 percent, but many analysts foresee it exceeding 9 percent. Meanwhile, Turkey’s current account deficit has neared 10 percent of gross domestic product – unsustainable in the eyes of many economists.

“Turkey aims to slow down credit expansion while keeping interest rates too low. This is not the right thing to do,” Acemoğlu said. According to the 44-year old economist, today’s Turkey has similarities with the pre-crisis period of U.S. and European economies.

“A key [sign] of an economic crisis is overspending and overconsumption, which generally is followed by a sharp decline in consumption later on, creating serious problems,” he warned.

Low savings rate the problem
Underlining the chronic current account gap, Acemoğlu recounted the booming 1990s, which ended with the 2001 crisis.

“Nearly 60 percent of Turkey’s exports are to the European market,” he said. “A possible slowdown in the eurozone could create problems regarding the financing of the current account deficit.”

The current low interest rate policy “encourages people and firms to spend rather than save,” according to Acemoğlu, who pointed toward the low savings rate of around 12 percent of gross domestic product.

Putting pressure on banks to lend less instead of raising interest rates is “a wrong method,” Acemoğlu said, adding: “A key reason that the country should raise interest rates is to have the possibility to cut the rate in case a serious crisis [in the eurozone] occurs. If you keep rates low while the economy grows by 10 percent annually, what will you do when the crisis hits?”

Regarding the possibility of being added to the BRICS grouping, Acemoğlu said it was too early for this. “Turkey needs to prove its sustainability for some four or five more years,” he said. “One cannot see Turkey as an economic model just because it has posted [high economic growth]. What matters is turning this into a sustainable and balanced economic growth.”

Acemoğlu also described Kemal Derviş, a former economy minister who steered Turkey out of the 2001 crisis, as the man who planted “the seeds of Turkey’s 10 years of economic growth.” Compared to Derviş, today’s technocrats in Italy’s Mario Monti and Greece’s Lucas Papademos have a major disadvantage in that they are “running not just the economy ministry but the whole government,” Acemoğlu said.

Proud of Turkey’s OECD offer

Reminded of Turkey’s offer to appoint him as the permanent representative to the Organisation for Economic Co-operation and Development (OECD), Daren Acemoğlu said he was “proud” of this offer. “I have not rejected it, but I prefer to write my books and continue my academic life,” he said. “Maybe I can consider this offer in the future.”

If he had accepted, Acemoğlu, who became a professor at the age of 33, would have been the first Turkish-Armenian to have been appointed to such a post.

In March, Turkish Foreign Minister Ahmet Davutoğlu confirmed the offer, saying that it was “inconceivable” for the government to discriminate between the citizens of the Turkish Republic. “We can appoint everyone [who is qualified] to represent Turkey. In this respect, the main criterion for us is qualification. Indeed, we have offered Daron Acemoğlu to represent us at the OECD a few months ago,” Davutoğlu said.
Sunday, November 27, 2011

No business retreat in east after deadly attacks

Thursday, November 24, 2011
Gökhan Kurtaran
ISTANBUL- Hürriyet Daily News



Two security personnel and an electrician were killed in an attack in Batman. DHA photo

Turkey’s plan to explore and produce oil in the country’s southeast will continue undeterred by recent terror attacks, said Energy Minister Taner Yıldız said yesterday.

“Turkey will continue its investments in the country’s southeastern and eastern region with determination,” Yıldız told the Daily News. His remarks came a day after the country’s state-run Turkish Petroleum Corporation (TPAO) signed a deal with Royal Dutch Shell to conduct oil exploration in Southeast Anatolia and the outlawed Kurdistan Workers’ Party (PKK) killed three at an existing oilfield in the southeast.

The PKK killed the three workers in an attack on an oilfield in the southeastern province of Batman overnight, Anatolia news agency reported. Two security personnel and an electrician were shot dead in Şelmo field, which is operated by Dallas-based firm Transatlantic Petroleum. The field is the second largest in Turkey.

“This is not just an attack targeting oil fields and natural gas lines in the country, but also Turkey’s development,” said Yıldız.

“In total Turkey produces nearly 3,000 barrels of oil per day from 82 wells and hundreds of locals work in field operation,” said Yıldız, adding that the attacks also targeted Kurdish people living and working in the region.

“The ones killed are locals, from Elazığ and Batman, eastern provinces of Turkey; they are quarreling at the cost of locals’ livelihoods,” he said.

Previous attacks on gas and oil pipelines in the area, as well as he Nov. 23 Batman attack, target Turkey’s political stability, the minister said. “The outlawed PKK has no capacity to represent Kurdish people at all.”

The PKK is listed as a terrorist organization by Turkey, the United States and the European Union.

In 1993 and 1994, some firms stopped operations in the region due to security reasons after terrorist attacks in the area, Yıldız said. “We will increase the security measures and our investments in the region,” he added.

“I do not think the matter is that complicated,” said Yıldız on the juxtaposition of the attack and Turkey’s deal with Shell.

TPAO’s deal with Shell finalized terms on seismic research off the Mediterranean province of Antalya, as well as land-based drilling work in the southeastern province of Diyarbakır.
Thursday, November 24, 2011

Ukraine delegation invites companies for mega projects

Tuesday, November 22, 2011
GÖKHAN KURTARAN - gokhan.kurtaran@hurriyet.com.tr
ISTANBUL - Hürriyet Daily News



Attendees listen to a speech by Selçuk Tayfun, deputy secretary general of ICOC, during a business meeting in Istanbul.

Ukraine is calling on leading Turkish firms to take a share in the country’s giant projects, ranging from energy to construction initiatives worth approximately $15 billion, the top executive of a Turkish business council said yesterday.

Turkish firms have been invited to collaborate on these projects as Turkey has already proved its capacity through its investments in Ukraine, according to Ruşen Çetin, chairman of Turkish-Ukrainian Business Council of Foreign Economic Relations Board (DEİK).

The many energy, infrastructure and construction projects designed by Ukrainian President Victor Yanukovych are likely to attract Turkish firms to form consortiums.

The Ukrainian president will visit Turkey on Dec. 22 to meet Turkish Union of Chambers and Commodities Exchange (TOBB) and leading Turkish firms to finalize some of the projects, Çetin added.

“Ukraine plans to construct a liquefied natural gas [LNG] terminal in one of the Black Sea ports of Ukraine in order to receive, store and re-gasify liquid natural gas,” said Vladyslav Kaskiv, head of the Ukrainian State Agency for Investment and National Projects of Ukraine (SAINPU) while also noting the possibility of delivering the gas to Ukrainian and European consumers.

The project envisages the construction of a LNG terminal with a total capacity of 10 billion cubic meters of natural gas per year. The country aims to attract $9.5 million investment in biomass energy in the Kyiv region.

There are also separate plans for businesses from the two countries to work together on sport facilities build in preparation for the Ukrainian Winter Olympic Games bid in 2022. The project, named “Olympic Hope 2020,” would take place in the valley of Borzhava, in the southern Ukrainian Carpathian Mountains. Residence blocks, hotels and winter sport facilities would be built on a plot of nearly 350,000 square meters of land.

In addition, the Ukrainian “Clean City” project envisages the construction of 10 centers with a total capacity for household waste of up to 2 million tons per year, as well as the realization of the “Open World” initiative, which is designed to develop broadband network access for nearly 20,000 schools across Ukraine.

Ukraine is also planning to spend 40 million euros on the construction of a 10-megawatt solar power plant and 150 million euros on the construction of a 100-megawatt wind farm. On average, 1 MW of power can supply electricity to as many as 300 U.S. households per year. According to TurkStat figures, the average person in Turkey consumes 540 kW of electricity in one year.

“Turkish construction firms have nearly $20 billion in contracts in nearly 90 countries,” said Selçuk Tayfun, deputy secretary general of Istanbul Chamber of Commerce, noting that the Ukrainian construction projects of Turkish firms were worth $3.7 billion.
Tuesday, November 22, 2011

Iraq-Turkey air link cut by debt dispute

Monday, November 21, 2011
GÖKHAN KURTARAN
ISTANBUL- Hürriyet Daily News


Turkey bans state-owned Iraqi planes to land on the Turkish soil in a reaction to a similar decision by its neighbor starting from midnight Nov 20 over a debt row. Company photo

A relatively tiny Iraqi debt to Turkey, compared with the developing mutual trade volume, has resulted in a diplomacy problem that has frozen flights between the two countries.

Turkey decided to ban state-owned Iraqi planes landing on its soil in a reaction to a similar decision by its neighbor starting from midnight Nov. 20. In response, Turkish exporters switched air traffic routes to road freight.

“Already dense traffic on Turkey’s Iraqi border may turn worse if the conflict between the states is not resolved in the short run,” said Alp Doğan of the International Transportation Association.

Especially trucks departing from Istanbul and from Turkey’s southern province of Mersin contribute heavily to the traffic at the border gates, Doğan told the Hürriyet Daily News yesterday. “Turkey should open the two planned border gates to lessen the traffic as the some trucks wait for nearly five days at the Habur gate.”

Solving the problem might take days, according to Ercüment Aksoy, head of the Turkish-Iraqi Business Council at Foreign Economic Relations Board of Turkey (DEİK).

“Unfortunately, Iraqi authorities reacted in an emotional way by banning Turkish planes from landing on Iraqi soil,” he said. “Turkey’s trade with Iraq is too valuable to be ruined with such moves.”

Iraq has banned all Turkish flights from landing in the country starting from 11:45 p.m. on Nov 20 in response to a dispute over millions of dollars owed by an Iraqi government oil company to Turkey. Iraqi Transportation Ministry spokesman Karim al-Nuri said the decision to block Turkish planes from Iraq was in response to a Turkish threat to seize Iraqi planes over a two-decade-old debt.

“In return, Turkey has also banned the landing of Iraqi Airways planes,” said Aksoy after a meeting with Iraqi officials.

“The Turkish Foreign Ministry formed a crisis desk at the weekend to solve the problem,” he said, adding that many Turkish businessmen could not travel to Iraq to participate in business meetings and to bid on tenders in Iraq due to canceled flights.

However, Aslan Kurt, chief executive of MNG Cargo, one of four Turkish carriers flying to Iraq, said he was hopeful for a quick resolution. “The temporary conflict will not harm much of our business,” Kurt said after a press meeting in Istanbul yesterday.

Previously four Turkish companies launched a case in a Turkish court demanding $20 million in return for unpaid debts dating to 1990, and they obtained an order to take possession of planes owned by Iraqi Airways, said Zafer Çağlayan, Turkey’s economy minister, in a statement yesterday. “Two out of four Turkish firms have dropped the case,” said Çağlayan, adding that negotiations with two firms were ongoing, as of yesterday evening.

He said the total amount of debt to these two countries was $18 million.

Talks between both countries’ foreign ministries continued yesterday evening as parties were still working on existing mutual agreements to find a solution to the problem, the Daily News learned.

Iraq was Turkey’s fifth largest export market in 2010, following Germany, the U.K., Italy and France. Turkey’s exports to Iraq have increased more than sevenfold from $718 million in 2003 to $6 billion last year, according to Turkey’s Foreign Trade Under secretariat data. The volume reached $10 billion in the first half of 2011.
Monday, November 21, 2011