November 9, 2009

Turkey – Review of Political and Economic Developments
November 9, 2009

Political Developments

Finally!  The merger of DP and ANAP, the two center-right opposition parties both of which had experienced parliamentary majority individually in the not-so-distant past but were decimated during the 2007 general elections after botching up their merger, finally took place last week. With the former chairperson of ANAP Mesut Yılmaz joining DP, it will be also represented in the parliament. Whether the new improved DP will be able to make inroads into AKPs base remains to be seen, but it will have to  make a concerted effort to attract youth vote to be relevant in the next decade.

Term limits? What is that? Devlet Bahçeli was reelected as the chairperson of the Nationalist Movement Party (MHP) for a sixth term after the by-laws of the party was amended to eliminate term limits at a party convention. The convention was preceded by harsh rhetoric between the MHP and AKP leaderships on alleged interference of AKP to “undermine and disrupt” the MHP congress. In his two hour acceptance speech, Bahçeli criticized the AKP for its Islamic discourse and declared the AKP’s efforts to protect the Palestinians an artificial attempt.

In the risk group?  The death toll from swine flu climbed to 27 on Sunday as the vaccination campaign was mired in a bizarre political rant last week.  Speaking at his party’s parliamentary group meeting on Tuesday, Erdoğan said people should make their own decision on whether to get the vaccine after publicly chiding Minister of Health Recep Akdağ who received his shot in front of TV cameras for being proactive. The Turkish Doctors’ Union (TTB) announced on Wednesday in a written statement that Erdoğan’s refusal to get vaccinated resulted in an "irreparable" blow to the Health Ministry's credibility and cast doubt on "how competent [the government] will be in managing a nationwide pandemic." It turns out that Erdoğan was reacting to a statement attributed to Akdağ – later denied – that the President and Prime Minister would also get vaccinated. Since neither of them fits into any of the risk groups, the fact that their vaccination ever became an issue should be a cause of concern for the allocation and distribution of vaccines that are in short supply. Erdoğan's remarks further confused the public opinion over the safety of the vaccine. It turns out that Turkey ordered batch vaccines that contain thimerosal which is a mercury-based preservative that has been phased out of childhood immunizations since 2001 due to concerns that it may be linked to autism. Thimerosal-free vaccines are provided in single-dose shots that have not so far been available in Turkey.
“Why are they getting involved?”  Sudanese President Al-Bashir was set to attend a meeting of the Organization of the Islamic Conference (OIC) in Istanbul on the weekend. He did not show up on Sunday with the rest of the Sudanese delegation and the Sudanese government said that he cancelled the trip to deal with the coalition discussions in Khartoum. He is wanted by the International Criminal Court (ICC) on charges of war crimes and crimes against humanity in Darfur. The European Union asked Turkey to reassess its invitation to al-Bashir, the Reuters news agency reported Friday, citing an anonymous Foreign Ministry source. Last year, the Government hosted al-Bashir twice: a bilateral visit in January and then at multilateral cooperation talks with African leaders in August. Gül responded to journalists’ inquiries later on Friday about reconsidering al-Bashir’s visit, the Anatolia news agency reported. “This is a regional meeting, and as members of international organizations we understand it as such,” he said. “Therefore, we will treat all members equally.” “Why are they getting involved?” he asked. You really don’t get it, do you??

“You are it” Erdoğan’s resourcefulness never ceases to amaze me. During a TV interview Sunday, he was saying that those who have not been to Darfur shouldn’t talk. He was there and he didn’t see anything wrong. Do people have to play tag with you? Really, if you have been to Darfur – and you were when you were not supposed to for the same reasons as today- and have not seen the human misery that was caused by the civil war, you should really get your eyes examined or get your cataracts removed.

What/Who is genetically modified? New regulations regarding controls for genetically modified organisms, or GMOs issued last week created quite a stir in Turkey. These regulations stipulate that says GM-food should be controlled and should have necessary permission before entering the market. However, it also says that if food or feed contains GMO less than 0.9 percent, it will be “treated as GM-food.”  Regulation and labeling of GM food and feed, a very controversial subject in Europe became a confused and convoluted debate in Turkey along the lines of the opposition and the ruling party. Opponents claim that was “prepared by GMO companies,” and those lax regulations would create irreversible genetic pollution in Turkey. Another concern is that a GMO-laced agriculture would jeopardize exports of agricultural products to European countries with stricter regulations.

Economic Developments

Different strokes… While there are signs of fragile recovery in the global economy, recent macroeconomic forecasts for Turkey are mixed. They cover a range of 1.5 percent to 3.7 percent for growth prospects in 2010. For 2009, GDP decline estimates range between 5.5 percent and 6.5 percent with the exception of EPA’s own estimate of 7.8 percent.


Briefly

Trade data for September showed continued declines in exports and imports that registered 33.6 percent and 30.4 percent y-o-y respectively. Trade deficit was $27 billion for the January-September period, compared to $58.4 billion for the same period in 2008. On a bright note, however, export figures provided by the Turkish Exporters Assembly (TİM) showed that exports in October were up 4.6 percent y-o-y.
Headline inflation was up 5.1 percent (y-o-y) in October while the core inflation (measured by Index D) rose 4.6 percent.

According to data released by the Treasury, non-tax revenues during the first nine months of the year was TL 7 billion compared to TL 7.9 billion for the whole year in 2008, Of this, TL 1.8 billion was from 3G license payments – non-replicable- and TL 2.1 billion as an installment payment from the Telecom privatization.
“Fall Grid Sale” Turkey will raise $1.2 billion by selling three power grids on Friday, although payments are likely to come next year.  Eti Gümüş, owned by Yıldızlar SSS Holding, agreed to pay $485 million for the Osmangazi network in the west, where it owns a ceramic plant. Çalık Holding, which has interests in energy and media, bid $441.5 million for the northern Yeşilırmak grid. Aksa bought the northern Çoruh grid for $227 million.  Çalık may bid in other electricity sales too, Saim Dinç, chief executive of Çalık Enerji, told reporters after the second auction while the company is still evaluating how to pay for the Yeşilırmak purchase. Çalık Holding, managed by Erdoğan’s son-in-law, purchased for  $1.25 billion Turkey’s second-biggest media group in a non-competitive bid last year that was financed  loans from state-run banks Halkbank and Vakıfbank along with financing from Qatar. Çalık  and Italy’s ENI SpA are planning to build an oil pipeline linking Samsun with the Mediterranean coast at Ceyhan. The asset sales agency said Friday it plans to sell four more grids next week, without naming them. “Crede in Turchia” UniCredit plans to provide $6 billion annually within five years for energy, transportation and infrastructure projects in Turkey, said Vittorio Ogliengo, a member of Unicredit’s executive management committee. Commenting on the global financial crisis and UniCredit’s position in Turkey, Ogliengo said, “We have been in Turkey during the crisis, and remained here even during the worst times. After all, we have overcome the bottom. Over this period, we have continued investing in Kyrgyzstan, Bulgaria, Baltics, Kazakhstan and Russia. We never considered leaving any of them during the crisis.” Now that the institution has overcome the crisis and gained much experience, it is not likely to leave these markets due to other new developments, he said. “Such [an exit] debate cannot be possible particularly for Turkey. I expect 2010 will be better and open to developments for Turkey,” he said, clearly refuting some rumors that UniCredit whose joint venture with the Koç Group is the majority shareholder of Yapı Kredi would leave Turkey due to the crisis.

Will need every drop. The special consumption tax (ÖTV) levied on tobacco products is expected to rise in 2010 according to Minister Şimşek, Ministry officials told the Anatolia news agency that they expect to collect TL 12 billion from the tobacco industry this year. In the 2010 budget, the government expects to collect TL 16.4 billion liras in tobacco-based ÖTV. The implied 41.5 percent increase in the ÖTV collected from tobacco products is seen as a harbinger of other tax hikes to finance the large budget deficit foreseen in 2010..