Turkey plans giant transportation projects by 2015

Another important project, a highway beneath Istanbul Strait, is expected to end by 2015.
Another important project, a highway beneath Istanbul Strait, is expected to end by 2015.

Giant projects of Turkish Transportation Ministry will be in service by 2015.

According to the data by the ministry, Turkey keeps making great investments in the transportation sector.

Marmaray, a rail transport project on construction of an undersea rail tunnel under the Istanbul Strait, will start to serve on October 29, 2013. Marmaray rail tube tunnel will link the city’s Asian and European sides via an undersea commuter train line. The project also includes the modernization of suburban rail lines along the Sea of Marmara from Halkali on the European side to Gebze on the Asian side.

Another important project, a highway beneath Istanbul Strait, is expected to end by 2015. The Istanbul Strait Road Tunnel Crossing will be used only by light vehicles.

One of Built Operate and Transfer model projects is Gebze-Orhangazi-Izmir Highway whose tender will take place on January 10, 2012.

Meanwhile, North Marmara Highway, including the third Bosporus bridge in Istanbul, will start to serve in 2015.

04 September 2011 Sunday

Ankara: AA

Syria expands offensive near Turkey border

Syrian tanks stormed two northwestern towns near the border with Turkey on Wednesday, expanding a military offensive to crush protests, local residents said a day after Ankara pressed Syrian President Bashar al-Assad to end killings of civilians.

The Syrian Observatory for Human Rights said at least one woman was killed and 13 people injured when 12 tanks and armoured vehicles, along with 10 large buses full of troops, entered the towns of Taftanaz and Sermin, around 30 km (19 miles) from the border with Turkey.

On Tuesday, Syrian forces killed four villagers in the nearby town of Binnish, rights campaigners said.

“The three towns are near Idlib (the provincial capital) and are close to each other geographically and in family ties. Daily protests in the region have been unabated since the start of Ramadan,” a local resident, who gave his name as Ali, told Reuters by phone, referring to the annual Muslim fasting month that began last week.

Turkey, whose southern province of Iskenderun borders Idlib, demanded on Tuesday that Damascus stop the killing of civilians and said it would watch events in Syria in the coming days.

The message from Turkey, long one of Syria’s most valued allies, raised pressure on Assad, who said his forces would continue to pursue “terrorist groups”.


Turkey says to welcome Korea’s proposals on nuclear power plant

Turkish economy minister has said his country would welcome proposals from South Korea in a project to build a nuclear power plant.

“My ministry and the Turkish government are open to every proposal by South Korean companies over the issue of nuclear power plant,” Zafer Caglayan told reporters during a meeting with South Korean Knowledge Economy Minister Choi Joong-Kyung in Seoul.

Turkey plans to construct two nuclear plants, one in the southern town of Akkuyu on the Mediterranean coast — which will be constructed by Russia’s state-owned atomic power company ROSATOM with an estimated cost around 20 billion USD.

Construction of the Akkuyu nuclear power plant is planned to start in 2013 and the first reactor is planned to generate electricity in 2018.

The other nuclear plant is planned to be built in the Black Sea province of Sinop. Turkey had been negotiating with Japan’s TEPCO company which last week informed Turkey that it had withdrawn from the project.


Global Economic Downturn: A Crisis of Political Economy

By George Friedman

Classical political economists like Adam Smith or David Ricardo never used the term “economy” by itself. They always used the term “political economy.” For classical economists, it was impossible to understand politics without economics or economics without politics. The two fields are certainly different but they are also intimately linked. The use of the term “economy” by itself did not begin until the late 19th century. Smith understood that while an efficient market would emerge from individual choices, those choices were framed by the political system in which they were made, just as the political system was shaped by economic realities. For classical economists, the political and economic systems were intertwined, each dependent on the other for its existence.

The current economic crisis is best understood as a crisis of political economy. Moreover, it has to be understood as a global crisis enveloping the United States, Europe and China that has different details but one overriding theme: the relationship between the political order and economic life. On a global scale, or at least for most of the world’s major economies, there is a crisis of political economy. Let’s consider how it evolved.

Origin of the Crisis

As we all know, the origin of the current financial crisis was the subprime mortgage meltdown in the United States. To be more precise, it originated in a financial system generating paper assets whose value depended on the price of housing. It assumed that the price of homes would always rise and, at the very least, if the price fluctuated the value of the paper could still be determined. Neither proved to be true. The price of housing declined and, worse, the value of the paper assets became indeterminate. This placed the entire American financial system in a state of gridlock and the crisis spilled over into Europe, where many financial institutions had purchased the paper as well.

From the standpoint of economics, this was essentially a financial crisis: who made or lost money and how much. From the standpoint of political economy it raised a different question: the legitimacy of the financial elite. Think of a national system as a series of subsystems — political, economic, military and so on. Then think of the economic system as being divisible into subsystems — various corporate verticals with their own elites, with one of the verticals being the financial system. Obviously, this oversimplifies the situation, but I’m doing that to make a point. One of the systems, the financial system, failed, and this failure was due to decisions made by the financial elite. This created a massive political problem centered not so much on confidence in any particular financial instrument but on the competence and honesty of the financial elite itself. A sense emerged that the financial elite was either stupid or dishonest or both. The idea was that the financial elite had violated all principles of fiduciary, social and moral responsibility in seeking its own personal gain at the expense of society as a whole.

Fair or not, this perception created a massive political crisis. This was the true systemic crisis, compared to which the crisis of the financial institutions was trivial. The question was whether the political system was capable not merely of fixing the crisis but also of holding the perpetrators responsible. Alternatively, if the financial crisis did not involve criminality, how could the political system not have created laws to render such actions criminal? Was the political elite in collusion with the financial elite?

There was a crisis of confidence in the financial system and a crisis of confidence in the political system. The U.S. government’s actions in September 2008 were designed first to deal with the failures of the financial system. Many expected this would be followed by dealing with the failures of the financial elite, but this is perceived not to have happened. Indeed, the perception is that having spent large sums of money to stabilize the financial system, the political elite allowed the financial elite to manage the system to its benefit.

This generated the second crisis — the crisis of the political elite. The Tea Party movement emerged in part as critics of the political elite, focusing on the measures taken to stabilize the system and arguing that it had created a new financial crisis, this time in excessive sovereign debt. The Tea Party’s perception was extreme, but the idea was that the political elite had solved the financial problem both by generating massive debt and by accumulating excessive state power. Its argument was that the political elite used the financial crisis to dramatically increase the power of the state (health care reform was the poster child for this) while mismanaging the financial system through excessive sovereign debt.

The Crisis in Europe

The sovereign debt question also created both a financial crisis and then a political crisis in Europe. While the American financial crisis certainly affected Europe, the European political crisis was deepened by the resulting recession. There had long been a minority in Europe who felt that the European Union had been constructed either to support the financial elite at the expense of the broader population or to strengthen Northern Europe, particularly France and Germany, at the expense of the periphery — or both. What had been a minority view was strengthened by the recession.

The European crisis paralleled the American crisis in that financial institutions were bailed out. But the deeper crisis was that Europe did not act as a single unit to deal with all European banks but instead worked on a national basis, with each nation focused on its own banks and the European Central Bank seeming to favor Northern Europe in general and Germany in particular. This became the theme particularly when the recession generated disproportionate crises in peripheral countries like Greece.

There are two narratives to the story. One is the German version, which has become the common explanation. It holds that Greece wound up in a sovereign debt crisis because of the irresponsibility of the Greek government in maintaining social welfare programs in excess of what it could fund, and now the Greeks were expecting others, particularly the Germans, to bail them out.

The Greek narrative, which is less noted, was that the Germans rigged the European Union in their favor. Germany is the world’s third-largest exporter, after China and the United States (and closing rapidly on the No. 2 spot). By forming a free trade zone, the Germans created captive markets for their goods. During the prosperity of the first 20 years or so, this was hidden beneath general growth. But once a crisis hit, the inability of Greece to devalue its money — which, as the euro, was controlled by the European Central Bank — and the ability of Germany to continue exporting without any ability of Greece to control those exports exacerbated Greece’s recession, leading to a sovereign debt crisis. Moreover, the regulations generated by Brussels so enhanced the German position that Greece was helpless.

Which narrative is true is not the point. The point is that Europe is facing two political crises generated by economics. One crisis is similar to the American one, which is the belief that Europe’s political elite protected the financial elite. The other is a distinctly European one, a regional crisis in which parts of Europe have come to distrust each other rather vocally. This could become an existential crisis for the European Union.

The Crisis in China

The American and European crises struck hard at China, which, as the world’s largest export economy, is a hostage to external demand, particularly from the United States and Europe. When the United States and Europe went into recession, the Chinese government faced an unemployment crisis. If factories closed, workers would be unemployed, and unemployment in China could lead to massive social instability. The Chinese government had two responses. The first was to keep factories going by encouraging price reductions to the point where profit margins on exports evaporated. The second was to provide unprecedented amounts of credit to enterprises facing default on debts in order to keep them in business.

The strategy worked, of course, but only at the cost of substantial inflation. This led to a second crisis, where workers faced the contraction of already small incomes. The response was to increase incomes, which in turn increased the cost of goods exported once again, making China’s wage rates less competitive, for example, than Mexico’s.

China had previously encouraged entrepreneurs. This was easy when Europe and the United States were booming. Now, the rational move by entrepreneurs was to go offshore or lay off workers, or both. The Chinese government couldn’t afford this, so it began to intrude more and more into the economy. The political elite sought to stabilize the situation — and their own positions — by increasing controls on the financial and other corporate elites.

In different ways, that is what happened in all three places — the United States, Europe and China — at least as first steps. In the United States, the first impulse was to regulate the financial sector, stimulate the economy and increase control over sectors of the economy. In Europe, where there were already substantial controls over the economy, the political elite started to parse how those controls would work and who would benefit more. In China, where the political elite always retained implicit power over the economy, that power was increased. In all three cases, the first impulse was to use political controls.

In all three, this generated resistance. In the United States, the Tea Party was simply the most active and effective manifestation of that resistance. It went beyond them. In Europe, the resistance came from anti-Europeanists (and anti-immigration forces that blamed the European Union’s open border policies for uncontrolled immigration). It also came from political elites of countries like Ireland who were confronting the political elites of other countries. In China, the resistance has come from those being hurt by inflation, both consumers and business interests whose exports are less competitive and profitable.

Not every significant economy is caught in this crisis. Russia went through this crisis years ago and had already tilted toward the political elite’s control over the economy. Brazil and India have not experienced the extremes of China, but then they haven’t had the extreme growth rates of China. But when the United States, Europe and China go into a crisis of this sort, it can reasonably be said that the center of gravity of the world’s economy and most of its military power is in crisis. It is not a trivial moment.

Crisis does not mean collapse. The United States has substantial political legitimacy to draw on. Europe has less but its constituent nations are strong. China’s Communist Party is a formidable entity but it is no longer dealing with a financial crisis. It is dealing with a political crisis over the manner in which the political elite has managed the financial crisis. It is this political crisis that is most dangerous, because as the political elite weakens it loses the ability to manage and control other elites.

It is vital to understand that this is not an ideological challenge. Left-wingers opposing globalization and right-wingers opposing immigration are engaged in the same process — challenging the legitimacy of the elites. Nor is it simply a class issue. The challenge emanates from many areas. The challengers are not yet the majority, but they are not so far away from it as to be discounted. The real problem is that, while the challenge to the elites goes on, the profound differences in the challengers make an alternative political elite difficult to imagine.

The Crisis of Legitimacy

This, then, is the third crisis that can emerge: that the elites become delegitimized and all that there is to replace them is a deeply divided and hostile force, united in hostility to the elites but without any coherent ideology of its own. In the United States this would lead to paralysis. In Europe it would lead to a devolution to the nation-state. In China it would lead to regional fragmentation and conflict.

These are all extreme outcomes and there are many arrestors. But we cannot understand what is going on without understanding two things. The first is that the political economic crisis, if not global, is at least widespread, and uprisings elsewhere have their own roots but are linked in some ways to this crisis. The second is that the crisis is an economic problem that has triggered a political problem, which in turn is making the economic problem worse.

The followers of Adam Smith may believe in an autonomous economic sphere disengaged from politics, but Adam Smith was far more subtle. That’s why he called his greatest book the Wealth of Nations. It was about wealth, but it was also about nations. It was a work of political economy that teaches us a great deal about the moment we are in.

 “Global  Economic Downturn: A Crisis of Political Economy is republished with  permission of STRATFOR.”

Turkey to raise arms expenses to historic high

By Umit Enginsoy

FNSS secured a $600 million contract with Malaysia this year to sell its 8X8 Pars vehicles, the largest export deal in Turkey’s history.

Turkey will spend close to $5 billion for defense procurement this year, the highest in the country’s history, a senior procurement official said on the weekend.

“Some major spending items have just started or are starting now, including those for the purchase of [around 100] Joint Strike Fighter jet aircraft [JFSs], submarines and utility helicopters,” said the official, who was speaking on condition of anonymity. “As a result, the arms spending is jumping, approaching $5 billion this year. Thank God, the general economic situation of the country is fine.”

In recent years Turkey has spent just over $4 billion a year on defense procurement.

Turkey’s ambitious military modernization program calls for the acquisition of the most sophisticated weaponry for the Land Forces, the Navy and the Air Force. In addition, the procurement office has made local acquisition a priority in meeting the military’s equipment demands.

Two large-scale programs are expected to begin this year; the first is Turkey’s national long-range air- and missile-defense project for which U.S., European, Russian and Chinese companies are vying to be selected as the main contractor. Turkey’s selection for the multi-billion-dollar contract is expected late this year or early next year.

Second, Turkey is preparing to soon select a Landing Platform Dock, which resembles a helicopter carrier and can carry a battalion-sized force of more than 1,000 troops overseas. Three Turkish shipyards and their foreign partners are eyeing the contract, which will be worth between $500 million and $1 billion. Turkey’s decision is expected next summer.

“There’s enough reason to think that the defense procurement budget will continue to increase gradually over the next few years to reach another saturation point,” the procurement official said.

Part of the rise in Turkey’s arms procurement budget is expected to be compensated by a parallel increase in the local defense industry’s export capabilities. The Turkish defense industry this year is expecting to garner between $1 billion and $1.5 billion from exports of defense-related equipment.

The largest sector in the Turkish defense industry’s exports business is armored vehicle makers. Among these companies, FNSS secured a $600 million contract with Malaysia this year to sell its 8X8 Pars vehicles, the largest export deal in Turkey’s history.

Also, under a new measure adopted by Turkey’s defense procurement agency, Ankara is slated to retain at least 70 percent of the money it spends for defense purchases from other countries. For past contracts, this figure was 50 percent.

In a directive released late April, the Undersecretariat for Defense Industries said foreign defense companies doing business with Turkey should agree that 70 percent of the contract’s value be returned through local industry content and offsets.

In other words, if a foreign company signs a defense contract worth $100 million with Turkey, it will agree to return $70 million of this money through its payments to its Turkish partners for their local work on the project or through offsets.

In defense industry contracts, an offset is an industrial compensation. It is a commitment provided by the selling country to the purchasing country to buy defense-related products manufactured by the buying country in return for the main sale.

“Financially speaking, I think we’re doing a good job by keeping the larger part of the contract money in the country, and in the meantime, obtaining knowhow,” said the procurement official.


Turkish govt pledges “permanent solution” over current account deficit

Turkish government has expressed resolve that it would make necessary structural reforms to find “a permanent solution” to the problem of current account deficit.

In a statement released Tuesday after a three and a half hour meeting headed by Prime Minister Recep Tayyip Erdogan and participated by a number cabinet members, the government said the meeting discussed latest negative developments in advanced economies of the world and their possible effects on Turkey’s economy.

“Recent developments are not expected to make long term, permanent negative impacts on Turkey’s economy and financial markets given our country’s strong political stability and resilient macro economic foundations,” the statement said.

The statement said all government authorities in charge of economy kept a close eye on economic developments with contingency scenarios in place.

The government also expressed commitment to maintain and strengthen fiscal discipline, to improve environment for investments, take measures to boost employment, to fight unregistered economy and reduce foreign dependency in energy.


Erdogan: Turkey is “strong” against any Europe financial crisis

Turkish Prime Minister Recep Tayyip Erdogan said Wednesday that Turkey was fully prepared against a financial crisis in Europe.

Speaking to reporters prior to his departure from Ankara’s Esenboga International Airport for Azerbaijan, Erdogan said that “there could be a crisis in the West. However, we are prepared against an economic crisis”.

“In the past, I had stated that the economic crisis in Europe would touch Turkey slightly. This time it seems like the crisis won’t even touch slightly. We are in a better position and are stronger compared to the past. You need not be concerned about Turkey’s economy,” Erdogan stressed.

Touching on efforts for a new Constitution in Turkey, Erdogan said that the Justice and Development (AK) Party officials began studies which would eventually lead to a new Constitution.


Turkish armored vehicle exports soar

Turkish exports of armored vehicles are expanding, including purchases by the United States for the first time.

Otokar's Cobra APC supports a large array of mission-specific modifications and has become a huge export success for Turkey.

A senior Turkish military procurement official involved with supporting Turkish arms exports, speaking on condition of anonymity, told Hurriyet that Turkish armored vehicle manufacturers are expanding beyond their traditional Middle Eastern markets.

“We are happy to see these companies now chasing deals in parts of the Far East they have not yet sold their products to, and there are initial signs of penetration into difficult markets like the U.S.,” he said “All of that is very encouraging.”

Turkey’s Defense Industry Manufacturers Association Secretary-General Kaya Yazgan told Hurriyet, “The making of armored vehicles is one of the strongest sectors in our defense industry.”

Istanbul’s Otokar, which is owned by Turkey’s top business conglomerate Koc Holding, produces seven armored vehicle variants and its 2010 sales to civilian and military clients topped $313 million.

In May Otokar displayed Turkey’s first indigenously built tank, the Altay, at the IDEF’11 international defense industry fair in Istanbul.

Head of Turkey’s Undersecretariat for Defense Industry Murad Bayar said Altay tanks would be entirely built in Turkey, with Turkish defense industry company Aselsan. It will build the Altay’s electronic systems, providing Identification Friend-or-Foe systems.

Otokar officials say that Altay tanks will be ready for sale by 2016.

Otokar exports products to the armed forces of nearly 20 countries.

Last December Otokar said that it had received its first order from a foreign military for its ARMA new armored combat vehicle, which comes as either a 6×6 or 8×8 wheeled armored vehicle.

The company added that the ARMA, a modular multi-wheel configuration wheeled armored vehicle, would be exported before making its debut in the Turkish military. The amphibian vehicle weighs 20 tons fully loaded for combat and has a crew consisting of a driver, a commander and eight personnel. ARMA is transportable by various means including C130 aircraft.

Otokar also builds the Cobra, a 4×4 vehicle, which comes in 10 models designed for different missions. Otokar has sold Cobras to more than 10 other countries and the vehicle has been utilized in a variety of both NATO and U.N. missions.

“There is increasing demand for the Cobra from an increasing number of countries,” Otokar said in a news release.

In 2009 Turkey’s total arms exports amounted to $832 million. Other leading Turkish arms manufacturing companies include Hiscar Automotive Industries, Ankara’s FNSS, which is 51 percent owned by Turkish business group Nurol and Izmir’s BMC, which is owned by the Cukurova Holding industrial conglomerate.


Turkish budget enjoys historic first half surplus

Turkey had a budget surplus of 2.9 billion Turkish Liras in the first half of this year, the largest nominal first-half surplus in the last 41 years, Finance Minister Mehmet Şimşek announced Friday.

The government’s performance was a “historic success,” Şimşek said at a press conference called to report on the budget performance in the January-June period, adding that robust economic growth had had a positive effect on tax revenues.

Debt reconstruction

In first half of last year, Turkey’s budget ran a deficit of 15.4 billion liras.

“We are talking about an upswing of more than 18 billion liras in six months,” the minister said.

In June alone, there was a budget surplus of 3.1 billion liras following a 5.4 billion-lira deficit in the same period last year. Budget receipts rose 44.7 percent to 26.7 billion liras in June 2011 while expenditure was down 1.2 percent to 23.6 billion liras.

“Recent debt restructuring had an extra contribution to the budget but we will continue to implement strict fiscal discipline in the way ahead,” Şimsek said. “[But] We will remain cautious due to global uncertainties and risks.”

Accordingly, budget expenses equaled 143.2 billion liras, while budget incomes reached 146.1 billion liras from January to June, representing a surplus of 2.9 billion liras.

In the first six months of 2011, tax revenues were around 122.73 billion liras. Turkey’s government has collected nearly 8 billion liras from taxpayers as part of a debt restructuring program in the first half of the year, the finance minister said.

“We expect it to rise significantly by the end of the year,” Şimşek said.

The government, however, would not use this money in current expenditures, he said.

Year end target

Turkey’s government plans to collect nearly 30 billion liras in taxes thanks to a law passed early this year. More than 4 million people have applied for a restructuring of outstanding taxes they owe the state after the new law.

Şimşek urged public institutions not to ask for supplementary appropriation. “We will take our stance considering Turkey’s long-term priorities,” the minister said.

The non-interest surplus in the first six months increased by 2.1 percent compared to the same term in 2010 and reached 25.3 billion liras, the Finance Ministry said.

In the first six months, personnel expenses have increased by 16.1 percent, reaching 36.8 billion liras.

The government’s payments to social security institutions as premiums totaled 6.3 billion liras, while the state bought 12.4 billion liras of goods and services. The current transfers stood at nearly 55 billion liras.

Health expanses increased by 4.5 percent compared with the same period a year earlier, exceeding 2.5 billion liras. At the same time, the sum of health, pensions and social aid expenses received a 27.1 billion share in the budget.

The agricultural subsidiary payments cost a little over 5.5 billion liras.

The economy and Erdogan’s 50 percent

by Murat Yetkin

Prime Minister Recep Tayyip Erdoğan was proud yesterday to underline that Turkey was the fastest growing economy of the world (with an 11 percent growth rate) in the first quarter of 2011.

This is especially important as Prime Minister George Papandreou of Turkey’s Aegean neighbor, Greece, was struggling in Parliament to pass a shocking austerity package in order to save his country from bankruptcy.

The growing Turkish economy may have played a vital role in Erdoğan’s 50 percent election victory on June 12. One can find a strategy behind the correlation between the election results for the last few elections and the economic performance of the Justice and Development Party, or AK Parti, governments.

The AK Parti took power in 2002 elections, following the biggest economic crisis in recent Turkish history in early 2001 during the reign of a three-party coalition led by the late Bülent Ecevit. The voters were in such anger that none of those three parties could surpass the 10 percent hurdle and were unable to enter Parliament. The only other party who could make it into the 2002 Parliament was the Republican People’s Party, or CHP, who had no role in the economic crisis either.

Erdoğan did not touch the economic and financial reforms launched by Kemal Derviş, a World Bank economist who was invited by Ecevit to take care of the Treasury. Ali Babacan, a young but intelligent economist, took good care of the Treasury (and economy in general) after Derviş. Steps waiting to be taken for decades in the fields of healthcare and transportation became possible within a few years’ time.

Thanks to the continuation of that ambitious IMF-backed reform program, the European Union harmonization reforms (in cooperation with the CHP) and a pinch of ideological antagonism over the presidential elections by the military gave Erdoğan an overwhelming 47 percent victory in the 2007 elections.

With a feeling of self-confidence, Erdoğan shifted Babacan to the Foreign Ministry after it was vacated by Abdullah Gül when he was elected president.

Turkey got caught in the global economic crisis of 2008 without proper economic coordination and suffered one of the most dramatic contractions (14.7 percent) in the world.

The result was dramatic for Erdoğan in the 2009 local elections; he received less than 39 percent of the votes cast.

Taking the lesson, he immediately brought Babacan back to the economy and promoted him to the position of deputy prime minister in charge of the coordination of all economic activities.

Babacan did not seek much publicity, unlike other ministers in the Cabinet, but did his work silently and stubbornly. The fruits of this work have made Turkey the fastest-growing economy in the world and allowed Erdoğan to score a magic 50 percent in the 2011 elections.

It was Bill Clinton who made the American political cliché “It’s the economy, stupid” by using it in his successful 1992 campaign. The phrase is proving to be correct in Turkey, too.