By Leyla Bouton
Ali Akkanat, a tanned Turkish entrepreneur, is hoping that rich foreigners will return to his country soon. He needs them to justify the construction of a second 18-hole golf course at his five-star resort on the Mediterranean.
The 15 per cent occupancy rate at his Sirene Hotel –compared with 55 per cent this time last year- is testimony to the damage wrought on the Turkish tourism industry by war in neighbouring Iraq.
“Starting with the first bomb, we stopped getting reservations and began to receive cancellations,” says Mr Akkanat. Since the war ended, “the cancellations have stopped but people are still hesitating about whether to come to Turkey”.
Officially, the number of tourists flying into the nearby city of Antalya has soared following the unexpectedly rapid US defeat of Saddam Hussein. But with many of the recent arrivals on cheap last-minute bookings, Mr Akkanat has written off the Easter and early summer season. He hopes, however, to see an influx of the wealthier European visitors he is targeting in the second half of this year.
His cautious optimism reflects the general economic mood in a country that has suffered from intermittent bouts of political uncertainty since a deveastating financial crisis in 2001.
Interest rates on treasury bills – crucial because they affect the government’s already large debt servicing bill – are now back to “low” levels of 50 per cent after rising to around 70 per cent in recent political upsets.
The turbulence started with the protracted collapse last year of the three-party coalition, government, followed by disappointment at the performance of the Justice and Development party (AKP) elected in November.
The AKP’s pursuit of a multi-billion-dollar US war compensation package ended in failure after parliament on March 1 failed to allow the deployment of US troops for war against Baghdad.
The speedy end to the war meant that neither the $24bn (€21.7bn) compensation offer withdrawn by the US nor the troop deployment rejected by Ankara proved necessary in the end. Lasting damage was inflicted, however, on Turkey’s much vaunted strategic partnership with the US.
But all eyes are now on the government to see whether it will act on its promise last month to pursue half-finished structural reforms agreed by the last government with the International Monetary Fund. Reforms ranging from sweeping privatisation to the encouragement of foreign direct investment are designed to eliminate both a vicious debt trap and chronic double-digit inflation.
Such an overhaul is also essential if Turkey, which has yet to achieve the European Union’s political criteria for starting accession talks, is to meet the EU’s economic conditions for actual membership. The omens for progress are mixed. Investor scepticism runs high over the government’s commitment to the IMF programme.
Encouragingly, the government’s recent letter of intent to the IMF quietly drops a controversial early plan to rewrite a public procurement law designed to eliminate corruption from state tenders. Kemal Unakitan, the finance minister, in London this week to promote big Turkish privatisation projects, also reported healthy investor appetite for the likes of Tekel, the cigarette and alcohol monopoly, and Turpras, the quasi-monopolistic oil refiner.
It remains to be seen how smoothly Mr Unakitan, father of a successful tax amnesty that delivered a $4bn windfall, will be able to pull off privatisation deals. The AKP has replaced many of the experienced staff at the government’s Privatisation Administration with people close to it – a trend justified by Recep Tayyip Erdogan, prime minister, as necessary to deliver results.
It is also not clear how the government will handle ‘strategic” objections likely to be raised in some quarters to Russian oil companies bidding for Tupras.
Renewed investor jitters this week – over tensions between the AKP and the country’s influential generals – also showed how easily politics can dominate sentiment without fast progress on economic reform.
At yesterday’s meeting of the National Security Council, the general were expected to warn the AKP, which says it has eschewed its Islamist roots, to avoid steps underming the country’s secular order. They are likely to refer in particular to the parliamentary speaker’s attempt to have his wife host an official reception wearing a headscraf –Islamic headgear banned in state buildings. Another source of contention has been a recent foreign ministry circular instructing embassies to receive an Islamist group known as National View.
“Political tensions can occur in Turkey but they should not affect the economy,” Sureyya Serdengencti, governor of Turkey’s newly independent central bank, told parliament yesterday, adding, in a possible plea to the government to press on with economic reforms: “We should all concentrate on our business at hand.”
Many provincial businessmen, including Mr Akkanat, continue to argue that some of the IMF-backed reforms are flawed. ‘They stress the need to lower inflation rather than to boost employment,” he says. But as local peasant women continue to labour over his $7.5m golfcourse, he joins other critics in hoping the government will act decisively after “a lot of talk”.
(From the Financial Times, May 1, 2003)