FACTBOX-FIVE RISKS TO WATCH IN TURKEY
By Ibon Villelabeitia
Reuters
08 Oct 2009 16:41:07 GMT
ANKARA, Oct 8 (Reuters) – European Union applicant Turkey has achieved
unprecedented political and economic stability under the AK Party
government, but remains a volatile investment destination that offers
several risks.
Following is a summary of key Turkey risks to watch and the Reuters
stories related to them.
EARLY ELECTIONS IN 2O10?
* Concern over Turkey’s recession-hit economy is fuelling speculation
that Prime Minister Tayyip Erdogan might call early elections in
2010, ahead of a scheduled vote the following year. [ID:nL67473]
The key question for investors would be whether the AK Party, in
power since it shot to single-party government in 2002, can garner
enough support to allow Erdogan to push his reformist drive without a
ruling partner. Coalition governments have a history of infighting in
Turkey, and fiscal discipline and reforms may fall prey to political
point-scoring. Erdogan has not publicly discussed the possibility
of an early vote. Analysts say a snap election will depend on the
pace of recovery from a deep recession. The International Monetary
Fund expects Turkish GDP to shrink 6.5 percent this year, and return
to growth at 3.7 percent next year. A fall in revenue is putting
pressure on Ankara to tighten fiscal policy and rein in spending;
unpopular measures that may cost voters’ support.
The hostility of mainstream opposition parties to government plans
to expand minority Kurdish rights and help end a 25-year conflict and
to other EU-inspired measures such as a new constitution are seen as
factors which could lead the government toward an early vote to open
the way for the reforms.
MEDIA ROW WITH GOVERNMENT
* A $3.3 billion tax fine on the country’s largest media group Dogan
Yayin <DYHOL.IS> has ignited concerns about press freedom and the
investment climate in Turkey. Critics say the fine for unpaid taxes,
which has shocked the business elite in Istanbul for its size and
drawn criticism from the EU, is Ankara’s latest assault on Dogan
for its hostile coverage of the AK Party government, including
graft allegations. [ID:nLP67336] The government denies the fine is
politically motivated. The row has also raised issues of transparency
in the country’s ambiguous tax laws and of political influence over the
corporate sector. [ID:nLE614238] Foreign investors have downplayed the
fine’s significance for now as an isolated event stemming from a feud
between Erdogan and billionaire media mogul Aydin Dogan, who has been
accused of using his media empire to curry political favour and advance
his business interests. However, analysts say it would be worrying if
the stance was indicative of a wider trend. The pro-business AK Party,
in power since 2002, has been careful of treating foreign investors
fairly, but the fine could cast a new light on the business climate.
ARMENIA
* Turkey expects to sign historic accords on Saturday to
normalise ties with Armenia in a step towards ending a century
of hostility.[ID:nL7593552] Such a deal would bolster Turkey’s
credentials as a moderniser in the West and highlight its clout in
the South Caucasus, a key transit corridor for oil and gas supplies
to the West. But hanging over the thaw is the decades-long dispute
between Turkey’s ally Azerbaijan and Christian Armenia.
[ID:nL8199985] Even if Ankara and Yerevan ink the protocols, it is
far from certain the accords will be implemented and their joint
border opened soon.
Once the protocols are signed they must be approved by the respective
parliaments. There is strong nationalist opposition in Turkey to making
concessions to Armenia, which has no diplomatic ties with Turkey and
a history of hostility stemming from the mass killings of Armenians
by Ottoman Turks during World War One. Analysts say Turkey is keen
to see progress on Karabakh to move forward on normalising ties with
Armenia in order not to be seen losing face by appearing to bow to
international pressure.
ROAD TO EU
* Predominantly Muslim Turkey started EU entry talks in 2005, but
negotiations have stalled, partly over Ankara’s refusal to normalise
relations with EU member Cyprus and the slow pace of reforms. The EU
accession drive is an anchor for political and financial reform in
a country prone to instability, and investors and financial markets
are sensitive to any signs that Turkey’s chances of joining the EU
may be receding.
On Thursday, a draft report by the bloc’s executive arm showed Turkey
should step up reforms in a number of areas, including freedom of
expression, freedom of the press, freedom of religion, civilian
oversight of the military and women’s rights. Complicating things
further, there is little appetite for further enlargement among EU
member states during the economic crisis and following the bloc’s
costly expansion to take in 12 new states since 2004. The French
government opposes Turkey’s full membership and Germany has doubts.
TURKEY’S MILITARY
* Tension between the government and the staunchly secular military
is undermining stability in Turkey. Turkey’s Constitutional Court will
rule in the coming months on a new law that gives civilian courts the
power to prosecute military personnel during peacetime for the first
time, a bill dubbed by many a "civilian revolution". Ties between the
AK Party and the military are also under strain over an investigation
into a shadowy, right-wing network in which retired and active officers
have been detained.
In the long term, the AK Party government has the upper hand, as
EU-inspired reforms have cut the influence of the once-formidable
army. [ID:nLT265498] Overall, risks of a military coup are very small
given the AK Party has public opinion behind it and the military,
traditionally one of Turkey’s most respected institutions, has seen
its reputation hurt as critics see the coup trial as evidence of
the military’s involvement in undemocratic actions. Nevertheless,
any escalation could still damage markets. (Editing by Jon Hemming)
From: Emil Lazarian | Ararat NewsPress