US embassy cable - 03ANKARA5757

UNCLAS ANKARA 005757 
 
SIPDIS 
 
 
SENSITIVE 
 
 
DEPARTMENT FOR E, EB/IFD/OMA, AND EUR/SCE 
TREASURY FOR OASIA - MILLS AND LEICHTER 
NSC FOR MCKIBBEN 
 
 
E.O. 12958: N/A 
TAGS: EFIN, EINV, PREL, TU 
SUBJECT: AMBASSADOR'S CALL ON MINISTER OF FINANCE 
 
 
1.  (SBU) SUMMARY: IN HIS FIRST MEETING WITH FINANCE MINISTER 
UNAKITAN, THE AMBASSADOR EXPRESSED HIS VIEW THAT TURKEY HAD A 
GREAT OPPORTUNITY TO BUILD ON RECENT GOOD NEWS BY 
ACCELERATING REFORMS AND RESOLVING INVESTMENT DISPUTES. THE 
FINANCE MINISTER CLAIMED THE GOT WAS STRONGLY COMMITTED TO 
REFORM AND TO FISCAL RESTRAINT.  UNAKITAN VOLUNTEERED TO TRY 
TO ASSIST IN RESOLVING PROBLEMS, INCLUDING THOSE OUTSIDE HIS 
PORTFOLIO.  HE OFFERED TO MEET WITH CARGILL ON ITS INVESTMENT 
DISPUTE.  FOLLOWING THE MEETING, UNAKITAN HELD AN UNRELATED 
PRESS CONFERENCE IN WHICH HE ANNOUNCED A SURPRISINGLY STRONG 
PRIMARY SURPLUS FOR THE MONTH OF AUGUST. END SUMMARY. 
 
 
2.  (SBU) IN HIS FIRST MEETING WITH FINANCE MINISTER KEMAL 
UNAKITAN, THE AMBASSADOR SAID THAT TURKEY NOW HAS A GREAT 
OPPORTUNITY TO TAKE ADVANTAGE OF THE RECENT RUN OF FAVORABLE 
ECONOMIC NEWS: IF TURKEY CAN COMPLETE THE IMF'S SIXTH REVIEW 
IN A TIMELY MANNER, MAINTAIN FISCAL DISCIPLINE, AND RESOLVE 
SOME INVESTMENT DISPUTES IT WOULD BE IN A GOOD POSITION.  THE 
AMBASSADOR NOTED, HOWEVER, THAT MANY AMERICAN INVESTORS HAVE 
SIGNIFICANT PROBLEMS. 
 
 
3.  (SBU) WHEN UNAKITAN ASKED FOR SPECIFICS, THE AMBASSADOR 
CITED THE MOTOROLA CASE, AS WELL AS THE ZONING PROBLEM FACING 
CARGILL. POINTING OUT THESE WERE JUST TWO OF MANY.  UNAKITAN 
SAID HE COULD NOT COMMENT ON MOTOROLA.  ON CARGILL, HE 
CLAIMED IGNORANCE OF THE PROBLEM, SAID HE HAD WORKED WITH 
CARGILL AS A BUSINESSMAN AND WOULD BE OPEN TO MEETING WITH 
THEM.  UNAKITAN WENT ON SAY THAT HE HAD TRIED TO RESOLVE 
PROBLEMS FOR AMERICAN COMPANIES BEFORE--NOTABLY FOR 
CITIBANK--AND THAT HE WAS WILLING TO PLAY THAT ROLE, 
INCLUDING FOR PROBLEMS OUTSIDE HIS AREA OF RESPONSIBILITY. 
THANKING UNAKITAN FOR THE OFFER, THE AMBASSADOR STRESSED THE 
IMPORTANCE OF RESOLVING BUSINESS PROBLEMS, AND PREDICTED 
DISPUTE RESOLUTION WOULD HELP ATTRACT INVESTORS FROM ALL 
COUNTRIES, NOT JUST FROM AMERICA. 
 
 
4. (SBU) ON THE ECONOMIC REFORM PROGRAM, UNAKITAN INSISTED 
THAT TURKEY WOULD PURSUE THE PROGRAM BECAUSE IT IS GOOD FOR 
TURKEY, NOT BECAUSE IT IS THE IMF'S. IF AN EXTERNAL SHOCK CAN 
BE AVOIDED, UNAKITAN WAS CONFIDENT THE GOVERNMENT COULD BRING 
DOWN INFLATION AND THE DEBT-TO-GDP RATIO, AND ACHIEVE LOWER 
INTEREST RATES AND SUSTAINABLE GROWTH.  THE KEY WAS FISCAL 
DISCIPLINE AND ACHIEVING THE 6.5 PERCENT PRIMARY 
SURPLUS-TO-GDP RATIO FOR 2003.  UNAKITAN ALSO SAID THAT THE 
PRIME MINISTER WAS STRONGLY COMMITTED TO THE PROGRAM, AND 
THAT THE GOVERNMENT IS TRYING TO ACCELERATE THE PRIVATIZATION 
PROCESS.  UNAKITAN JOKED THAT HE IS THE MOST UNPOPULAR PERSON 
IN THE GOVERNMENT BECAUSE HE IS ALWAYS SAYING NO TO PEOPLE 
WHO WANT TO SPEND MONEY, AND HE INSISTS ON REVENUE 
COLLECTION.  UNAKITAN ADMITTED THAT IT WAS EASY TO TALK ABOUT 
IMPLEMENTING THE REFORMS BUT VERY DIFFICULT TO DO. 
 
 
5. (SBU) THE AMBASSADOR URGED UNAKITAN NOT TO WORRY TOO MUCH 
ABOUT BEING POPULAR, NOTING THAT IN U.S. HISTORY UNPOPULAR 
POLITICAL FIGURES HAD LATER ACHIEVED RESPECT FOR HAVING DONE 
THE RIGHT THING.  WITH REGARD TO THE DANGER OF EXTERNAL 
SHOCKS, THE AMBASSADOR POINTED OUT THAT THE U.S. FINANCIAL 
ASSISTANCE WAS INTENDED TO SHIELD TURKEY FROM PRECISELY SUCH 
SHOCKS RELATED TO THE WAR IN IRAQ.  THE AMBASSADOR ALSO 
THANKED UNAKITAN FOR HIS MINISTRY'S COOPERATION WITH TREASURY 
TAX ADVISORS AND ON TERRORISM FINANCE.  UNAKITAN SEIZED ON 
THE LATTER POINT TO SAY COMBATTING FINANCIAL CRIMES IS VERY 
IMPORTANT TO THE GOT AS WELL, WHICH HAD COME TO POWER SEEKING 
TO FIGHT CORRUPTION. 
 
 
6.  (SBU) FOLLOWING THE MEETING, UNAKITAN HELD AN UNRELATED 
PRESS CONFERENCE, IN WHICH HE ANNOUNCED A PRIMARY SURPLUS OF 
TL 15.5 QUADRILLION (USD 11.2 BILLION) FOR JANUARY THROUGH 
AUGUST 2003.  THIS AMOUNTS TO 76 PERCENT OF THE FULL YEAR 
PRIMARY SURPLUS TARGET AND BEATS ANALYSTS EXPECTATIONS. 
NOTE: THE IMF'S DEFINITION OF THE PRIMARY SURPLUS TYPICALLY 
DIFFERS FROM THE GOT'S, SUCH THAT THESE NUMBERS ARE NOT THE 
FINAL NUMBERS THE IMF WILL USE.  END NOTE. OF THE TL 15.5 
QUADRILLION EIGHT-MONTH SURPLUS, FIVE QUADRILLION WERE IN THE 
MONTH OF AUGUST ALONE.  UNAKITAN ATTRIBUTED THIS SURPRISINGLY 
STRONG AUGUST PERFORMANCE LARGELY TO BONUS PAYMENTS TO PUBLIC 
WORKERS BEING PAID IN JULY INSTEAD OF AUGUST AND TO IMPROVED 
TAX RECEIPTS FOLLOWING THE "TAX PEACE" LAW. 
EDELMAN