ISTANBUL, 9 June 2006 — About 700 businessmen from Turkey and Arab countries gathered here yesterday for a two-day forum focusing on ways to increase economic cooperation. Turkish Prime Minister Recep Tayyip Erdogan and his Lebanese counterpart Fouad Siniora participated in the opening-session of the gathering which also has Arab League chief Amr Moussa and Iraqi Deputy Prime Minister Barham Saleh among the guests.
The forum will feature several round-table discussions on a wide variety of subjects, including how Turkey’s eventual membership of the European Union would affect the trade volume between Arab countries and Europe. “The more trade there is, the more prosperous and peaceful the world will be,” Erdogan said in his inaugural speech.
Mainly Muslim Turkey is very keen on luring Arab investment, especially from the Gulf countries, amid a spectacular economic recovery from two major financial crises in 1999 and 2001. Last year, Dubai International Properties, a leading property developer based in the United Arab Emirates, agreed to invest $3.9 billion in projects in Istanbul, a sprawling metropolis of 12 million people.
Rona Yircali, the head of Foreign Economic Relations Board (DEIK), an influential non-governmental economic organization, told the forum that the trade volume between Turkey and Arab countries had reached $17 billion in 2005. “Energy projects worth $130 billion which are planned to be undertaken in Turkey in the next 10 years create new opportunities for the Arab World,” he noted.
Meanwhile, Turkish shares and the currency tumbled yesterday despite a larger-than-expected hike in interest rates by the Turkish central bank as global financial woes hit investor sentiment. Economists greeted a central bank decision on Wednesday to raise its overnight borrowing rate by an aggressive 1.75 percentage points to 15 percent as a show of the bank’s resolve to fight inflation, the key element in a $10-million stand-by deal with the International Monetary Fund.
But the hike, the first in almost five years, failed to offset pressure from global market sell-offs, sparked by concerns that rising interest rates to head off inflation may hit growth, analysts said. The national index of the Istanbul stock exchange closed at its lowest level of 35,339 points this year, losing 3.7 percent.
The Turkish currency, which has already lost about 15 percent of its value since May, also fell after some gains early in the day. The lira traded at about 1.55 against the dollar Thursday afternoon despite surging to about 1.51 in early transactions. “The central bank decision was welcome but it was overshadowed by sell-offs abroad and the continuing perception of increasing risk at global markets,” Haluk Burumcekci, research head at Fortis Bank, said.
He added that uncertainties about Turkey’s European Union accession process had also started to worry investors. Ankara hopes to start actual membership negotiations next week, but the media have reported disagreements among EU members on the entry terms for Turkey. “It seems that the uncertainty will linger until the last minute and this is not good either,” Burumcekci said.
Central Bank Governor Durmus Yilmaz pledged that “fighting inflation is an objective that will not be sacrificed for any other priority,” in a speech in the western city of Izmir. He said it was “probable” that a year-end inflation target of 5.0 percent would be missed, but assured that the bank was taking measures to limit the damage and ensure that the 2007 target of 4.0 percent remained within reach.
