Turkish Forum

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  • WSJ Exclusive: Interview With Turkish PM Erdogan

    WSJ Exclusive: Interview With Turkish PM Erdogan

    06 October, 2009 03:10:00
    SABAH ENGLISH
    Capone example used to refer to Dogan
    Erdogan used the example of famous American gangster Al Capone’s tax evasion incident in the 1930’s, to describe the current situation with Dogan to the Wall Street Journal.
    ‘A ROUTINE TAX AUDIT’
    Prime Minister Erdogan answered questions reading the recent five billion lira tax levy issued for media mogul Aydin Dogan for the US’ prestigious newspaper, The Wall Street Journal. Erdogan went on to state the following regarding Dogan; “This incident is simply a routine tax investigation. The example of Al Capone may come to mind. Capone was extremely rich, however he spent the rest of his life in prison.”
    ………………..
    THE WALL STREET JOURNAL

    • BUSINESS
    • OCTOBER 5, 2009

    Turkish Premier Defends Media Tax Battle

    A $3.2 Billion Fine Threatens Standing of the Dogan Group

    By MARC CHAMPION

    ISTANBUL — Turkey’s Prime Minister Recep Tayyip Erdogan defended his government’s crippling $3.2 billion demand in fines and penalties against the country’s largest media business, comparing the case with the U.S. pursuit of gangster Al Capone on tax-evasion charges in the 1930s.
    Mr. Erdogan, interviewed Sunday at the elegant waterside offices that serve as the government’s home when in Istanbul, also said his country had resolved its dispute with the International Monetary Fund over the fund’s demand he should make Turkey’s tax authority independent. He said he would like to see a new IMF program for Turkey agreed “soon.”
    Marek Belka, director of the IMF’s Europe department, declined to comment. Turkey is hosting the annual meeting of the IMF and the World Bank in Istanbul this week.

    Agence France-Presse/Getty ImagesTurkish Prime Minister Recep Tayyip Erdogan and his wife, Emine, arrive at the convention of his Justice and Development party in Ankara on Saturday.

    video

    WSJ Exclusive: Interview With Turkish PM Erdogan

    5:22In an exclusive interview, Turkey’s Prime Minister Recep Tayyip Erdogan discusses Iran’s nuclear aspirations, Israel and the ongoing border dispute with Armenia.

    Mr. Erdogan also challenged the intense focus on checking Iran’s nuclear-fuel program, saying it wasn’t the biggest problem in the Middle East. And he said he was certain Turkey and Armenia would sign an agreement to reopen their closed border and establish diplomatic relations on Oct. 10, provided Armenia doesn’t alter the text.
    The tax case against Dogan Yayin Holding AS — which owns roughly half the television and newspaper market in Turkey — has drawn concern at home and abroad. Days after a $2.5 billion fine was announced last month, the European Commission in Brussels expressed “serious concerns” over the implications for press freedom in Turkey and said it would include the incident in its report later this month on progress in Turkey’s talks to join the European Union. The Organization for Security and Cooperation in Europe also has expressed concern.
    “The issue here is of a routine tax examination,” Mr. Erdogan said. “In the U.S., too, there are people who have had problems with evading taxes. Al Capone comes to mind. He was very rich but then he spent the rest of his life in jail. … Nobody raised a voice when those events happened.”
    “There are no legal grounds for these tax [demands], they are baseless,” said a senior executive at the Dogan group, who asked not to be named. He said the Dogan group had been singled for attention out after the media group published stories alleging corruption in fundraising for the ruling party. He said 30 tax inspectors had been at the group’s offices for a year since, combing through its books.
    By the end of this week, Turkey’s finance ministry is due to decide on whether to insist on its decision that Dogan group provide $3.2 billion in collateral, the full amount of the fine plus interest and penalties to date, while the group appeals the fine in court.
    The senior Dogan executive said the company would file for a court injunction if the finance ministry stuck to its demand. If it were implemented, “We would be inoperative; we’d be out of the picture,” the executive added.
    Mr. Erdogan said the Dogan group can challenge the fine in court and has already settled one tax-evasion case out of court, related to its petroleum business Petrol Ofisi. Asked if it was acceptable for the government to demand collateral that would collapse the company before the case reaches court, Mr. Erdogan said the court might issue an injunction, or the group could settle first.
    He bristled at the comparison some critics have drawn between his government’s pursuit of Dogan group and the Russian government’s bankrupting of oil company Yukos with back-tax charges, under then-President Vladimir Putin.
    “I find it to be very ugly, very improper. I think those words have been expressed by some people from the Dogan group, like the daughters of [chairman Aydin] Dogan,” Mr. Erdogan said. He described the charges as “disrespectful” to both himself and Mr. Putin as elected leaders.
    Mr. Erdogan said the case against the Dogan group was part of a broad government policy aimed at cleaning up Turkey’s large underground economy and bringing it onto the books. That is the same reason for which he said he had resisted the IMF’s request to depoliticize the tax authorities. “We need to work hand in hand,” with the tax service in that effort, he said.
    Earlier this year, Dogan group was hit with a $500 million fine in connection with the sale of a minority stake in its television unit to Axel Springer AG, of Germany. A $2.5 billion fine came Sept. 8, this time for unpaid taxes sales of shares within the group.
    The Dogan executive said the transactions were aimed at unwinding cross ownership within the group, to make units more attractive to outside buyers, and weren’t tax liable.
    Late last month, the finance ministry told the group it had 15 days to provide collateral for the fine, plus penalties and interest, amounting to $3.2 billion in total. That deadline expires Friday, the Dogan executive said. The group is now in talks to sell its stake in Petrol Ofisi to its partner, Austria’s OMV AG, to help cover the fines.
    The Dogan group gets little sympathy in Turkey, said Soli Özel, a prominent columnist with Habertürk, an independent daily. That’s because the group used its media and connections to further its business interests in the past. Still, “this is ultimately about shutting up all sources of opposition, and you cannot have a democracy like that,” said Mr. Özel.
    “We have never been against freedom of the press,” said Mr. Erdogan.
    The prime minister’s Justice and Development, or AK, party came to power in 2001, challenging the secular elite — including Mr. Dogan — that had long run Turkey. Though the AK party triggered concerns among some with its Islamist roots, in government it has pursued economic and other reforms that opened the way to membership talks with the EU and created the kind of macroeconomic stability long lacking in Turkey.
    Despite a sharp drop in growth in the first quarter, Turkey appears to have weathered the financial crisis relatively well. Whereas IMF programs negotiated for some other countries in emerging Europe are about “preventing collapse, that’s not the case in Turkey,” said Mr. Belka. A facility would instead aim to boost growth by freeing credit for use in the private sector.
    Write to Marc Champion at marc.champion@wsj.com

  • (ECO) NEW GLOBAL ORDER SHOULD BE ‘RESPONSIBLE GLOBALIZATION’, ZOELLICK

    (ECO) NEW GLOBAL ORDER SHOULD BE ‘RESPONSIBLE GLOBALIZATION’, ZOELLICK

    ZWorld Bank Group President, Robert Zoellick,
    said Tuesday the new global order should be “responsible globalization”.
    Speaking at the inauguration of the annual meetings of IMF and World Bank in Istanbul, Zoellick said that international institutions and countries should work for a globalization that is accountable. As a result of the global crisis, more than 59 million individuals will lose jobs. Up to 50,000 babies may die in the least developed regions of Africa, Zoellick stressed.
    The whole humanity calls on us not to permit a global crisis again in the
    future, Zoellick said.

    AA

  • (ECO) ISTANBUL IS A BRIDGE BETWEEN CIVILIZATIONS, ERDOGAN

    (ECO) ISTANBUL IS A BRIDGE BETWEEN CIVILIZATIONS, ERDOGAN

    ETurkish Prime Minister Recep Tayyip Erdogan said Tuesday Istanbul was a bridge not only between continents but also between civilizations, cultures, economies and commercial regions.Speaking at the inauguration of the annual meetings of IMF and World Bank in Istanbul, Erdogan said that he welcomed all to Turkey and Istanbul with warm regards. Turkey and Istanbul hosted the annual meetings of IMF and World Bank in
    1955. Turkey hosts the meetings again after 54 years. I would like to express the happiness of my people and myself over welcoming you, the distinguished guests, to Istanbul one more time, Erdogan said.
    I hope that the meetings in Istanbul would be beneficial at a time when we
    are going through a critical process as far as global economy is concerned,
    Erdogan underlined. You are now on lands that invented the first currency in history. I would like to use this opportunity to remind you that you are also in a city that spreads on two continents, Erdogan said. The Bosphorus Strait connects Asia to Europe. I am confident that the city
    of Istanbul, a city which unites civilizations, cultures and economies, will be
    the host for a meeting that will leave a mark on the global economy and will help us bring together our strengths and experiences, Erdogan said.Erdogan stressed that strong policy measures have yielded positive results
    in the world. This is a pleasing development. However, we must not let go precautions in our economies, Erdogan said.There is a need to re-evaluate the distribution of roles and responsibilities in the global economy, Erdogan noted.
    I, once again, want to welcome you all to Turkey and Istanbul and hope that
    you will enjoy the beauties of an unique city Istanbul, Erdogan also said.

    AA

  • Turkish Airlines and Asiana Airlines form code share agreement

    Turkish Airlines and Asiana Airlines form code share agreement

    Published by Ozgur Tore   
    Tuesday, 06 October 2009
    Turkish Airlines has signed a new code share agreement with Asiana Airlines from South Korea as part of an expansion program. The new code share agreement which will go into effect on October 25th, 2009 will enhance the flow of trade and tourism between Turkey and Korea.

     As an outcome of the new code share agreement signed between Turkish Airlines and Asiana Airlines, passengers from Seoul will be able to connect on Turkish Airlines’ network to any of its 119 international destinations including routes to Turkey, Europe, North America, South America, Russia, Central Asia and the Middle East.

    Passengers from Istanbul will also be able to enjoy the convenience of Asiana Airlines’ wide network of connections to South Korea, and other popular destinations in Japan, China and South-East Asia. Asiana Airlines’ network covers 82 international destinations.

    A1

     

    FTNNEWS

  • Global economy expanding says IMF

    Global economy expanding says IMF

    The global economy is expanding again and financial conditionsJ have improved significantly, the International Monetary Fund (IMF) has said.

    But in its latest World Economic Outlook, the IMF said the “pace of recovery is expected to be slow”.

    It added that the recovery is likely to be “insufficient to decrease unemployment for quite some time”.

    On Wednesday, the IMF cut its forecast for the amount that banks are likely to lose in bad loans and investments.

    The total it expects banks to lose between 2007 and 2010 is now $3.4tn (£2.1tn), down from its previous estimate of $4tn.

    This reduction is a direct result of the improved outlook for the global economy.

    Separately, the head of the European Central Bank (ECB) said that the 16 countries in the eurozone should withdraw stimulus packages in the next two years.

    “From an ECB point of view, it is important to do what is necessary to exit as soon as possible,” Jean-Claude Trichet said at a meeting of EU finance ministers and central bank governors in Gothenburg.

    “It is important in our view that it starts as soon as the recovery starts. It is something which is essential for the recovery itself.

    “I would say, in our own view, at the latest in 2011.”

    Recovery risks

    The global recovery is being led by Asia, where economies have “withstood the financial turmoil much better than expected,” the IMF said.

    But gains are now being seen in developed economies, where “financial market sentiment and risk appetite have rebounded”, it added.

    Despite the improved outlook, however, the fund said there were a number of risks to the recovery.

    It cited major government stimulus packages, central bank support and restocking by companies that have run down inventories as three temporary factors that “will diminish during the course of 2010”.

    It also highlighted the fact that banks are being forced to hold more cash in reserve, which will limit the amount of credit available “for the remainder of 2009 and into 2010”.

    With less money available to companies and individuals to borrow, and therefore invest, demand may be stifled.

    Most serious, it concluded, was the fact that “private demand in advanced economies remains very weak”.

    Increased growth

    The IMF predicts that the US economy will contract by 2.7% in 2009, before growing by 1.5% next year.

    The eurozone, it thinks, will shrink by 4.2% this year and grow by 0.3% in 2010.

    It has upgraded its forecast for UK economic growth to 0.9% next year, up from a previous estimate of 0.2%. This puts the UK top of Europe’s leading economies for growth in 2010, alongside France.

    The German economy, the IMF thinks, will grow 0.3% next year, while the Spanish economy will shrink by 0.7%.

    The world’s fastest-growing economy in 2010 will be Singapore, which will expand by 4.1%, closely followed by Taiwan, Slovakia, South Korea and Hong Kong, according to the fund.

    BBC

  • Turkey Proceeds with its Economic Recovery Plans

    Turkey Proceeds with its Economic Recovery Plans

    Turkey Proceeds with its Economic Recovery Plans

    Publication: Eurasia Daily Monitor Volume: 6 Issue: 174September 23, 2009

    By: Saban Kardas

    On September 16, Turkey’s Economy Minister Ali Babacan revealed the government’s medium term economic plan for 2010-2012, prepared by the state planning agency. Babacan acknowledged that the contraction in growth by the end of the year may reach 6 percent, rather than the previous estimate of 3.6 percent. According to his forecasts, the economy will experience growth rates of 3.5 percent in 2010, 4 percent in 2011 and 5 percent in 2012. The government also expects the budget deficit to reach 62.8 billion TL ($42.9 billion), then starting to fall to 50 billion TL ($33.8 billion) in 2010 and 45.1 billion TL ($30.5 billion) in 2011, and 39.1 billion TL ($26.4 billion) in 2012. Similarly, the current account deficit is also forecast to reach $18 billion. Babacan acknowledged that despite a modest recovery, unemployment is set to remain at around its current rate of 14 percent in 2010, which is well above the pre-crisis rate of 10.8 percent (www.cnnturk.com, www.ntvmsnbc.com, September 16).

    The global financial crisis was a serious blow to the Turkish economy, which led to a drastic decline in production and employment in sectors heavily dependent on exports. Although the government initiated several economic stimulus packages, their effectiveness has proven limited. They slowed the contraction of the economy, but are far from stimulating a sustainable economic recovery. The soaring budget deficit due to the economic crisis has been a growing concern among economists (EDM, August 11).

    Therefore, economists expected the government to focus on taking precautions to address the budget deficit in 2010-2012. In contrast to initial speculation that the government might have set unrealistic targets in terms of growth and fiscal balances, experts evaluating the middle term economic plan argued that it is based on a realistic prognosis of the economic conditions and a pragmatic outlook to address the problems. Rather than expecting an ambitious short term recovery, the government prefers a gradual approach aimed at improving economic conditions (Anadolu Ajansi, Today’s Zaman, September 17).

    Following the announcement of the plan, international credit rating agencies also responded positively. Standard & Poor raised Turkey’s credit rating outlook from negative to stable, while Moody’s upgraded the outlook on Turkey’s Ba3 bond rating from stable to positive (www.ntvmsnbc.com, September 18).

    On the implementation side, one factor that makes economists believe that the plan is realistic is the decision to introduce a “fiscal rule” into public administration starting from 2011. Once it is in place, it is expected to contribute to long term fiscal stability, by setting limitations on public spending. This rule was required by the IMF as part of the loan negotiations with Ankara (EDM, January 29).

    However, the role of the IMF in the implementation of the plan has proven controversial. Ankara was engaged in protracted negotiations for over a year with the IMF in order to secure a loan. Despite the recent announcement of progress in these talks, it remains unclear whether Turkey will eventually sign a stand-by deal. The critics of the AKP’s economic policies argue that an agreement with the IMF is necessary to inject credibility into its economic policies and boost confidence in the market, contributing to a more sustainable recovery.

    However, some analysts believe that the medium term plan indicates that the government might implement the precautions without the IMF, while others speculate that the IMF could remain an option. Babacan also added to the sense of confusion. On the one hand, he said that Turkey will discuss the new medium term plan with the IMF. If both sides achieve consensus, Ankara will prefer to sign a stand-by deal. On the other hand, he maintained that although an IMF loan would help the Turkish economy, the IMF financing was not necessary for the implementation of the plan. He added that the plan was prepared on the assumption that in case an agreement was reached with the IMF, the extra resources would be channeled into the domestic market directly, in order that the banking sector could distribute money for private consumption and investment (www.cnnturk.com, September 16).

    The IMF welcomed the plan and found it realistic, reflecting the impact of the global financial crisis on Turkey. In addition to the fiscal rule, the announcement supported Ankara’s plan to cut the ratio of public debt to GDP. It called on Turkey to adopt supporting policies and structural reforms, including measures to address areas that create spending pressures, so that Ankara might achieve its goal of controlling public debt (www.cnnturk.com, September 17).

    Prime Minister Recep Tayyip Erdogan announced that Turkey had survived the crisis without IMF loans. It could continue its path without IMF assistance and would not accept IMF requirements concerning taxes and spending. Therefore, the future of an IMF deal remains uncertain (Hurriyet Daily News, September 18).

    Another major aspect of the plan is that it does not foresee any major hikes in corporate, income and value-added taxes, which equally motivates the government to restrict IMF involvement. Although there were widespread expectations that the government might opt for tax increases to reduce the budget deficit burden, it refrained from pursuing this policy. This decision partly reflects the government’s desire to limit the effect of the economic recovery plan on consumers and the markets, by avoiding policies that might curb economic activity. The government believes that the Turkish economy could recover quickly based on its own dynamics, as long as it is kept vibrant, once the global economic environment starts to improve.

    One factor that boosts the government’s self-confidence is the condition of the Turkish banking sector. Babacan, therefore, argued that unlike other Western economies where the collapse of the financial institutions triggered the economic crisis, the Turkish banking system remained intact and was in good condition. Consequently, he expects a rather smooth economic recovery, centered on the private sector (www.cnnturk.com, September 16).

    Despite the government’s positive outlook on the Turkish economy’s vibrancy, the implementation of the plan and a sustainable economic recovery will also depend upon developments in the global economy. Moreover, the government’s ability to withstand the spending pressures to be generated by the next general election slated for 2011 will be a major test of its determination to reduce public debt, a core element of Turkey’s medium-term economic plan.

    https://jamestown.org/program/turkey-proceeds-with-its-economic-recovery-plans/