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As A War Ebbs, Business Picks Up...But Peace Won't Come Cheap (Int'l Edition)


International -- Spotlight on Turkey

AS A WAR EBBS, BUSINESS PICKS UP...BUT PEACE WON'T COME CHEAP (int'l edition)

When Necmettin Akyil decided to build Diyarbakir's first textile mill 11 years ago, he couldn't talk anyone into financing it. "Most people, including banks, thought the project was too risky," explains Akyil's son and business partner, Osman. It's not hard to see why. For much of the past 13 years, this southeastern Turkish city has been a government bastion in a region thick with Kurdish rebels. To get his factory built, Necmettin ended up spending much of the money he'd saved while toiling as a cotton farmer and trader.

These days, the Akyils employ more than 2,000 workers at a sprawling factory complex outside Diyarbakir's ancient black basalt walls. And the family company, which grew steadily until 1995 without the benefit of outside capital, is now flush with investment credits. Banks are funding about 30% of a $180 million investment that will nearly triple capacity at the Akyil plant, which produces cotton T-shirts and other ready-to-wear items for export to Germany. Turkey's leading textile exporter, Izmir-based Ege Giyim Sanayii, has also formed a joint venture with the Akyils and a state-owned bank to build textile factories across the cotton-rich region.

Stories like this remain rare in most parts of the overwhelmingly Kurdish southeast, Turkey's most underdeveloped area even before the Kurdish Workers Party (PKK) took up arms against the Turkish state in 1984. But help could be on the way. Spurred by signs that southeastern cities have become secure enough to merit investments--PKK attacks now occur mainly in isolated mountainous areas--businesspeople in Istanbul and other cities in western Turkey are preparing to plow hundreds of millions of dollars into the region. "Creating jobs and jump-starting the economy is the key to solving the region's troubles," says Mehmet Yildirim, chairman of Istanbul-based Dogu Holding, whose membership includes many of Turkey's leading industrialists. The group plans to spend $250 million over the next five years to establish some 30 new businesses in eastern and southeastern Turkey. Four projects--including two poultry farms, a tree farm, and a greenhouse complex--have already been launched.

FREE LAND. Business circles have an interest in ending a conflict that has claimed at least 23,000 lives and strained Turkey's relations with Western allies. "We can't go on living forever with this war," which costs billions of dollars a year in state spending, says Muharrem Kayhan, chairman of the influential Turkish Industrialists' & Businessmen's Assn. Those costs have helped swell the country's budget deficit--which ballooned to 6.2% of gross domestic product in 1996, from 3% in 1995--and have helped boost annual inflation to 80%.

Politicians, too, are getting in on the act. The government of Prime Minister Mesut Yilmaz announced on Sept. 16 that it will offer incentives such as tax breaks, free land, and cheap electricity to encourage companies to invest in the southeast. The administration also aims, by the end of this year, to lift the martial law-like rule that was imposed on nine southeastern provinces 10 years ago.

Still, the Turkish Establishment will have to pony up real money to win the hearts and minds of skeptical southeasterners. "I stopped waiting for outside help a long time ago," says Kadir Karaboga, whose family used its own money to build flour and biscuit factories in Mardin, 100 kilometers south of Diyarbakir. "Governments have promised incentives many times before, but we've never seen any results."

Locals also say it will take more than economic development to end the war. Most say Ankara will have to boost democratization by permitting independent Kurdish media, allowing nationalist Kurds to engage in mainstream politics, and granting ethnic rights to the country's estimated 12 million Kurds, about a fifth of Turkey's population, before the PKK loses its appeal. Current laws are so restrictive that Kurdish-language TV programs are banned and Kurdish families are pressured to give their children Turkish names. But increased prosperity could take some of the wind out of the rebels' sails. History shows that militant groups have a much harder time recruiting among a populace that sees a brighter future.EDITED BY HARRY MAURER By John Doxey in DiyarbakirReturn to top


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