The Turkish economy has put up some glittering numbers in the past few years. GDP growth has averaged 4.5% from 2002 – 2009 and is expected to exceed 6% in 2010. Per capita income has risen to about $10,000. The US Dollar index of the Istanbul Stock Exchange rose a healthy 20% in 2010. Foreign trade is booming. The banks avoided the toxic asset crisis that hit so much of the United States and Europe and now enjoy healthy capital adequacy ratios. On Jan. 14 spreads on Turkish 5-year Credit Default Swaps were only 143 basis points compared with 1,005 bp for Venezuela, 965 bp for Greece or 541 bp for Argentina. All in all an enviable performance.
But, behind all that a glitter there are major structural weaknesses that could slow down or even de-rail this strong performance. Turkey has been one of the main beneficiaries of a benign environment for emerging markets, and the rush of volatile money into the country over the past few years has literally papered over the weaknesses. Fund managers desperate for decent returns have fled the near-zero interest rate environment of the American and European markets for higher interest rates available in emerging markets like Turkey.
The major crack in the structure is Turkey’s gaping current account deficit, basically the country imports far more than it exports. Exports have shown impressive growth from $36 billion in 2002 to an estimated $112 billion in March 2010. Unfortunately, import growth has been even more impressive from $51 billion to $180 billion in the same time. The size of the gap by itself is worrying, but manageable. The real problem is that this deficit has become a permanent and growing feature of the Turkish economy while the methods of financing it are deteriorating. Essentially, Turkey depends upon short term, very volatile inflows to finance this long term and growing deficit.
The problem is not just that Turkish citizens have suddenly developed a taste for fancy European cars, Cuban cigars, or Hermès scarves. They have, but consumer items are still a small percentage of total imports. The deeper and more serious nature of the Turkish current deficit is exhaustively covered in a paper prepared by the staff of the Central Bank in March 2010. Unfortunately this paper is available only in Turkish, and it did not get the exposure it deserves.
The main conclusion of the paper is that since the 1980s the structure of the Turkish economy has changed rapidly from one based on agriculture, textiles, leather goods, and a few raw materials to one where foreign trade and manufacturing play a much larger role. Today the growth engines of the Turkish economy are major industries like automotive, home appliances, televisions, steel, and processed foods. And each of these relies heavily on imported raw materials and equipment.
Another major problem for Turkey is that it imports just about all the oil and natural gas it uses. That bill alone amounted to about $30 billion in 2009. It only gets worse as the economy grows and uses more oil and gas. Turkey has also benefitted from relatively depressed gas prices and moderate oil prices of the past few years. This situation could change for the worse at any minute as energy demand increases sharply with improving economies in Europe and the United States and prices begin to escalate.
Even excluding oil and gas imports, the authors of the Central Bank study did a survey of major Turkish companies that revealed imported raw materials and equipment averaged 67% of total manufacturing expenses in 2007. Sample import percentages were 87% in petroleum/chemicals, 83% in electronics, 65% in electric equipment, 58% in transport, and only 25% in furniture. Turkey does have large forests to provide plenty of wood for furniture.
According to the study, it is precisely those sectors with heavy import content that have fuelled the sharp increase in Turkish exports. Since 1996, for example, the share of textiles and clothing in Turkish exports has fallen from about 15% to less than 8% in 2008. The share of agricultural product exports fell from just under 10% to about 3% in the same time. Meanwhile the share of automotive exports has risen from 4% to 14%. Exports of other major industries that were small or non-existent in the 1980s, i.e. home appliances and televisions, have also surged in the last 10 years. These industries also have high import content.
One of the factors aggravating this situation, according to the report, is that the supply chain in Turkey is underdeveloped. Manufacturers are forced to look outside for inputs. A couple of examples highlight this dilemma. A friend of mine brought a group of colleagues from Silicon Valley to Istanbul to establish a company producing high quality internet and VOIP products. All the engineering work is done in Istanbul, but he has to have the manufacturing done in Taiwan. Turkey simply does not have companies capable of supplying the required high quality work. Another friend has a company producing very good cotton shirt fabric for export mainly to Europe. Despite the fact that the company is located less than five miles from one of Turkey’s largest cotton fields he imports every gram of cotton from the United States and Egypt. He said domestic cotton is more expensive and much lower quality. Even the best weaving machines have to be imported.
The government is trying to address these problems by working to improve the technological component of domestic companies as well as encouraging home grown technology companies. This is admirable, but the results will not show for a very long time long time. And time is a luxury Turkey does not have.
Turkey has to continue on a high growth path to address its serious unemployment issue. The official unemployment rate in 2009 was 14%, and was even higher in the urban areas. The relatively young and growing population is only going to put more pressure on these employment statistics. The conundrum is that the faster it grows the larger the deficit becomes.
Further complicating the issue are the national elections scheduled in about six months. It is unreasonable to expect any government to exercise restraint in the pre-election period. Deputy Prime Minister and Economy Minister Ali Babacan and his colleagues in the Treasury have done a very good job up to now controlling the economy and managing the country’s debt. Their skills will be sorely tested in the next few months.
Again, the problem is not so much the size of the current account deficit itself as the deteriorating means of financing it. Ideally one would match the long-term built-in nature of the current account deficit with long term funding that comes with foreign direct investing. This number, unfortunately, is dropping sharply in Turkey. For years it was an insignificant amount, and then took off in 2005 when it reached $10 billion. The peak was 2007 when FDI amounted to $22 billion. By 2009 it had fallen to $8.4 billion, and will be even less in 2010. The result of this decline is that Turkey has to rely even more heavily on debt and portfolio flows to cover the gap. The conditions for the past few years have been ideal for doing for doing just this. Even though Turkey has not yet been given an Investment Grade rating by the rating agencies, its superior debt management has resulted in moderate interest rates for its debt. In addition, the herd of portfolio managers seeking higher returns has been flocking to emerging markets.
So far so good, but this beneficial environment can change overnight with moves by central banks in the United States and Europe to end quantitative easing programs and tighten their monetary programs. Sooner or later this will happen. But only the very brave, or foolish, are willing to predict exactly when. However, as we have seen so many times in the past, when this happens there will be a stampede into the ‘new’ opportunities leaving countries like Turkey somewhat in the lurch. Turkish officials have done a good job managing the economy through the global crisis, but the real challenge could lie in the future when global investment trends that are completely out of their control change suddenly leaving a very large hole in their accounts.
Friday, 14 January 2011
Tuesday, 11 January 2011
Deals Before Ideals
A few readers have noted that it might be useful to describe exactly what I mean by the terms Levant and Levantine. It may seem clear to anyone who has lived in the region, but others may find the reference a bit obscure. This post discusses just two of the cities in this broad region.
The Levant is as much a state of mind as it is geography. The geography is the loosely defined arc that stretches from Thessaloniki in northern Greece, down the Aegean coast to Turkey, around the corner to the eastern Mediterranean coasts of modern Syria, Lebanon, Israel and Egypt. Holy men and armies have marched across these dry deserts, fertile valleys and wide rivers for thousands of years before Christ. Odysseus, Darius, Alexander, Belasarius, Saladin, Richard the Lionheart, and Selim would recognize all too well the bloody conflicts still raging in the region. Moses, Jesus and Mohammed would most likely shake their heads in sadness at the follies committed in their names.
The ‘state of mind’ is a bit more complex. In his masterful new book Levant Philip Mansel says “The Levant was also a mentality. It put deals before ideals.” He goes on to say that diversity and flexibility were the essence of Levantine cities. At its best the Levant was, and in some cases still is, a rich, dynamic, intoxicating mixture of peoples, languages and religions common to many port or frontier cities. At its worst it was a cauldron of seething ethnic and religious tensions that frequently erupted in violence and bloodshed as one group or other took out its perceived injustices on another group. The region was never the proverbial melting pot of romantic fiction. It was rather like a lumpy stew where the bits and pieces never quite coalesced into a unified whole.
Modern Turkish politicians often refer to the Ottoman era as an example of how different races and religions in the empire lived side-by-side in harmony. Not quite. They may have lived side-by-side, but the alleged harmony was often mere resignation to a political and military situation the groups couldn’t change. This illusion of ethnic amity was often shattered by cynical governments seeking to exploit the differences or by one of the groups who saw an opportunity to gain from a perceived shift in status quo.
A book written by a Greek and published in Turkish and French gives fascinating detail of the Levantine complexity of the port city of Thessaloniki in the latter years of rule by the Ottoman Turks. Relying on Ottoman documents, Meropi Anastassiadou gives an indication of the complexity of the city as shown by the 1905-1906 population. There were 44,331 Jews, 24,950 Moslems, 10,594 Greeks, and a few hundred assorted Armenians, Bulgarians, and Catholics. The founder of the modern Turkish Republic, Ataturk, was born there in 1881. Many of the Turks left when the Ottoman Empire retreated in 1913 and the Greeks took control of the city for the first time in more than 400 years. Today, after more than 100 years of wars, fires, Nazi genocide, population transfers, the Jewish population has been all but erased and only a few traces of the Ottomans remain. Despite all the changes you can get a sense of the old days by walking up the hill past Ataturk’s house into what is still called the Turkish neighbourhood with its narrow streets and overhanging balconies. Close your eyes, exercise your imagination, and you can still hear the echoes of bygone days with its colourful babble of different languages and dress.
The best work in English on the poignant and turbulent evolution of the city from 1430 to 1950 is Mark Mazower’s Salonica, City of Ghosts. Readers who would like a fuller treatment of the Jewish community in Greece should turn to K.E. Fleming’s Greece, A Jewish History.
The modern Turkish city of Izmir, formerly Smyrna, was known as the Paris of the Levant. It was a rich, vibrant multi-national city that attracted adventuresome businessmen from almost every country in Europe. Families like Giraud, Whittal, Aliotti, d’Andria and many others played key roles in the business life of Smyrna. A fascinating glimpse of how the true Levantines operated in constantly changing economic, political and social conditions can be found in the wonderful privately published Three Camels to Smyrna by Antony Wynn. This is the story of how the Oriental Carpet Manufacturing Company, established by a few European families, came to dominate carpet manufacturing throughout Turkey and Iran and distribution into Europe in the late 19th and early 20th centuries.
The indigenous Turks were not all pleased with the cosmopolitan nature of Smyrna which they caustically referred to as Gavur Izmir, Infidel Izmir. From time to time in the 18th and 19th centuries this displeasure would break out into bloody riots. The end of cosmopolitan Smyrna came with dramatic suddenness in 1922 with the total defeat of the Greek forces that had disastrously invaded Turkey in 1919 hoping to expand Hellenistic culture into the ancient heartland of Asia Minor. Much of the Greek population was literally driven into the sea, and many others suffered in the ensuing massacres and fire that all but destroyed the once beautiful city.
The capstone on 2,000 years of Greek history in Asia Minor was the exchange of populations that saw more than a million Greeks from Turkey resettled in an impoverished Greece, and several hundred thousand Turks return from Greece. Bruce Clark in Twice a Stranger, and Renee Hirschon in Crossing the Aegean give clear pictures of the personal as well as the national tragedies involved in the expulsion of entire cultures from one piece of geography to another. At the time it was seen as the best, perhaps the only, way to maintain peace. But now, one wonders. Both Greece and Turkey seem somehow poorer for the mutual disappearance of these communities from each country.
Izmir’s independent and entrepreneurial character has not been completely eradicated, however. The city remains a defiant beacon of the secular, socially liberal nature of the Turkish Republic as it consistently votes against the conservative, Islamic tendencies of the ruling Justice and Development Party, many of whose members still use the term Gavur Izmir to describe the city. It is one of Turkey’s thriving economic centres, and most of the country’s foreign trade goes through the port of Izmir. One can only hope that with the gradual defrosting of Greek/Turkish relations the peoples of both countries will realize they have much to gain by recreating some of those ties that have been lost over the years.
The Levant is as much a state of mind as it is geography. The geography is the loosely defined arc that stretches from Thessaloniki in northern Greece, down the Aegean coast to Turkey, around the corner to the eastern Mediterranean coasts of modern Syria, Lebanon, Israel and Egypt. Holy men and armies have marched across these dry deserts, fertile valleys and wide rivers for thousands of years before Christ. Odysseus, Darius, Alexander, Belasarius, Saladin, Richard the Lionheart, and Selim would recognize all too well the bloody conflicts still raging in the region. Moses, Jesus and Mohammed would most likely shake their heads in sadness at the follies committed in their names.
The ‘state of mind’ is a bit more complex. In his masterful new book Levant Philip Mansel says “The Levant was also a mentality. It put deals before ideals.” He goes on to say that diversity and flexibility were the essence of Levantine cities. At its best the Levant was, and in some cases still is, a rich, dynamic, intoxicating mixture of peoples, languages and religions common to many port or frontier cities. At its worst it was a cauldron of seething ethnic and religious tensions that frequently erupted in violence and bloodshed as one group or other took out its perceived injustices on another group. The region was never the proverbial melting pot of romantic fiction. It was rather like a lumpy stew where the bits and pieces never quite coalesced into a unified whole.
Modern Turkish politicians often refer to the Ottoman era as an example of how different races and religions in the empire lived side-by-side in harmony. Not quite. They may have lived side-by-side, but the alleged harmony was often mere resignation to a political and military situation the groups couldn’t change. This illusion of ethnic amity was often shattered by cynical governments seeking to exploit the differences or by one of the groups who saw an opportunity to gain from a perceived shift in status quo.
A book written by a Greek and published in Turkish and French gives fascinating detail of the Levantine complexity of the port city of Thessaloniki in the latter years of rule by the Ottoman Turks. Relying on Ottoman documents, Meropi Anastassiadou gives an indication of the complexity of the city as shown by the 1905-1906 population. There were 44,331 Jews, 24,950 Moslems, 10,594 Greeks, and a few hundred assorted Armenians, Bulgarians, and Catholics. The founder of the modern Turkish Republic, Ataturk, was born there in 1881. Many of the Turks left when the Ottoman Empire retreated in 1913 and the Greeks took control of the city for the first time in more than 400 years. Today, after more than 100 years of wars, fires, Nazi genocide, population transfers, the Jewish population has been all but erased and only a few traces of the Ottomans remain. Despite all the changes you can get a sense of the old days by walking up the hill past Ataturk’s house into what is still called the Turkish neighbourhood with its narrow streets and overhanging balconies. Close your eyes, exercise your imagination, and you can still hear the echoes of bygone days with its colourful babble of different languages and dress.
The best work in English on the poignant and turbulent evolution of the city from 1430 to 1950 is Mark Mazower’s Salonica, City of Ghosts. Readers who would like a fuller treatment of the Jewish community in Greece should turn to K.E. Fleming’s Greece, A Jewish History.
The modern Turkish city of Izmir, formerly Smyrna, was known as the Paris of the Levant. It was a rich, vibrant multi-national city that attracted adventuresome businessmen from almost every country in Europe. Families like Giraud, Whittal, Aliotti, d’Andria and many others played key roles in the business life of Smyrna. A fascinating glimpse of how the true Levantines operated in constantly changing economic, political and social conditions can be found in the wonderful privately published Three Camels to Smyrna by Antony Wynn. This is the story of how the Oriental Carpet Manufacturing Company, established by a few European families, came to dominate carpet manufacturing throughout Turkey and Iran and distribution into Europe in the late 19th and early 20th centuries.
The indigenous Turks were not all pleased with the cosmopolitan nature of Smyrna which they caustically referred to as Gavur Izmir, Infidel Izmir. From time to time in the 18th and 19th centuries this displeasure would break out into bloody riots. The end of cosmopolitan Smyrna came with dramatic suddenness in 1922 with the total defeat of the Greek forces that had disastrously invaded Turkey in 1919 hoping to expand Hellenistic culture into the ancient heartland of Asia Minor. Much of the Greek population was literally driven into the sea, and many others suffered in the ensuing massacres and fire that all but destroyed the once beautiful city.
The capstone on 2,000 years of Greek history in Asia Minor was the exchange of populations that saw more than a million Greeks from Turkey resettled in an impoverished Greece, and several hundred thousand Turks return from Greece. Bruce Clark in Twice a Stranger, and Renee Hirschon in Crossing the Aegean give clear pictures of the personal as well as the national tragedies involved in the expulsion of entire cultures from one piece of geography to another. At the time it was seen as the best, perhaps the only, way to maintain peace. But now, one wonders. Both Greece and Turkey seem somehow poorer for the mutual disappearance of these communities from each country.
Izmir’s independent and entrepreneurial character has not been completely eradicated, however. The city remains a defiant beacon of the secular, socially liberal nature of the Turkish Republic as it consistently votes against the conservative, Islamic tendencies of the ruling Justice and Development Party, many of whose members still use the term Gavur Izmir to describe the city. It is one of Turkey’s thriving economic centres, and most of the country’s foreign trade goes through the port of Izmir. One can only hope that with the gradual defrosting of Greek/Turkish relations the peoples of both countries will realize they have much to gain by recreating some of those ties that have been lost over the years.
Friday, 7 January 2011
Vous N’Avez Pas La Priorité
My wife and I were walking around a small village on a Greek island when we came across an elderly lady dressed in the customary full black dress sitting on her doorstep contentedly preparing vegetables for lunch. My wife, who is Greek, started chatting with the woman who asked the inevitable questions: are you married, how many children do you have, where are you from, etc., etc. When told that the husband, me, was a xeno – foreigner – the old lady clucked her tongue. A look of infinite compassion and sorrow crossed her deeply lined face, and she gently patted my wife’s arm. “That’s all right, dear, someone has to do it.”
It didn’t matter if the ‘foreigner’ was from another island, the mainland or, God forbid, another country. You’re still foreign. My wife didn’t dare mention that I was not even Orthodox. The old lady probably would have demanded that the priest perform an instant baptism to sort out that little problem.
My favorite French traffic sign sums up the position of foreigners in any country;
Until you move overseas you never really appreciate the meaning, the power, of the official stamp. Bureaucrats often have four or more of these treasures on their desks and act like the praetorian guard protecting them from abuse. You stand timidly in front of the guards’ desk holding your breath while they examine your meagre offerings hoping against hope that they meet with approval. You don’t dare breathe and you’re starting to turn blue as they slowly pick up one of the stamps and ponderously adjust the date before slamming it down with all the authority of a petty dictator – which they are. You start to exhale, but you’re not out of the woods yet. He now turns your document over, reads it word for word, and reaches for yet another stamp. The motion of slamming the second stamp on the back side of the document dislodges the five inches of ash on the end of his cigarette and he spends the next few minutes wiping the ash off his shirt and your document before producing the third and final stamp. Then you resume breathing normally.
In addition to the bureaucratic hurdles there are the countless cultural differences to deal with. Some of these have their humorous side. In Greece, for example, a husband is required to sign his wife’s tax return. This has led to some interesting discussions with my wife who happens to be one of the few Greeks who actually files a return. “Let’s see now,” I intone as I scan the return line by line, “this is an interesting item. How did this get here?” These comments are met with a low growl and testy questions about just how I want my dinner served.
Signing her tax returns actually has a happy consequence. Because of this signature I now have a Greek tax number – without which I would never have a bank account or an ATM card. In order for me to buy a car my wife had to prove she owns property in Greece and then produce our marriage certificate – which happens to be in Turkish because we were married in Turkey – to prove we’re married. Given the expression on the salesman’s face when confronted with a Turkish wedding certificate it was an act of mercy to say we really didn’t need the car after all.
Changing the name on a telephone line can also upset the gods. The phone line in question was in the name of my wife’s grandmother. No problem, says the phone company official. Just have her sign the form and we can change it immediately. We say that might be a problem. The grandmother has been dead for more than 20 years. Ah. Now we’re talking about producing death certificates, proof of relationships, etc. etc. Sometimes the official in question sees the humour in all this, starts to laugh with you, and, by magic, the all powerful stamp appears and is thumped down on the document.
A career outside your home country can be fascinating, seldom dull, and a life-long education. Or it can be a bureaucratic and cultural nightmare that sends you screaming for the first plane home. It doesn’t matter what nationality you are or what country you’re living in. You will face the same issues. Waiting in countless dingy government offices for one form or another I have seen Frenchmen, Germans, Japanese, Italians get red in the face, stamp their feet and bellow at some hapless official about seemingly idiotic regulations. Fortunately for them, no could understand a word they were saying. The key to survival is to forget the word ‘should’. ‘They should do this, they should do that’ simply do not apply. They will do it at their own speed and in their own time. I once saw a French women sit by a traffic official’s desk for more than hour, never raising her voice, making her point over and over again. Finally she got what she wanted. I couldn’t help asking her what the secret was. She smiled knowingly, ‘Patience, mon brave, patience and persistence.’
It didn’t matter if the ‘foreigner’ was from another island, the mainland or, God forbid, another country. You’re still foreign. My wife didn’t dare mention that I was not even Orthodox. The old lady probably would have demanded that the priest perform an instant baptism to sort out that little problem.
My favorite French traffic sign sums up the position of foreigners in any country;
Vous N’Avez Pas La Priorité. And indeed you do not have priority. Among other obstacles there are countless forms, forms whose ultimate purpose will forever remain unknown, that you have to fill out just to find any place at all in the line. You want something simple like a home telephone? Well now, you have to get Form A to prove you have the right to be in that particular home in the first place. And then Form A requires three signatures from Form B that you have to get before you can even think about Form A. Oh, and by the way, you do have your birth certificate, marriage certificate, high school and college diplomas – all translated into the appropriate language– don’t you?
Until you move overseas you never really appreciate the meaning, the power, of the official stamp. Bureaucrats often have four or more of these treasures on their desks and act like the praetorian guard protecting them from abuse. You stand timidly in front of the guards’ desk holding your breath while they examine your meagre offerings hoping against hope that they meet with approval. You don’t dare breathe and you’re starting to turn blue as they slowly pick up one of the stamps and ponderously adjust the date before slamming it down with all the authority of a petty dictator – which they are. You start to exhale, but you’re not out of the woods yet. He now turns your document over, reads it word for word, and reaches for yet another stamp. The motion of slamming the second stamp on the back side of the document dislodges the five inches of ash on the end of his cigarette and he spends the next few minutes wiping the ash off his shirt and your document before producing the third and final stamp. Then you resume breathing normally.
In addition to the bureaucratic hurdles there are the countless cultural differences to deal with. Some of these have their humorous side. In Greece, for example, a husband is required to sign his wife’s tax return. This has led to some interesting discussions with my wife who happens to be one of the few Greeks who actually files a return. “Let’s see now,” I intone as I scan the return line by line, “this is an interesting item. How did this get here?” These comments are met with a low growl and testy questions about just how I want my dinner served.
Signing her tax returns actually has a happy consequence. Because of this signature I now have a Greek tax number – without which I would never have a bank account or an ATM card. In order for me to buy a car my wife had to prove she owns property in Greece and then produce our marriage certificate – which happens to be in Turkish because we were married in Turkey – to prove we’re married. Given the expression on the salesman’s face when confronted with a Turkish wedding certificate it was an act of mercy to say we really didn’t need the car after all.
Changing the name on a telephone line can also upset the gods. The phone line in question was in the name of my wife’s grandmother. No problem, says the phone company official. Just have her sign the form and we can change it immediately. We say that might be a problem. The grandmother has been dead for more than 20 years. Ah. Now we’re talking about producing death certificates, proof of relationships, etc. etc. Sometimes the official in question sees the humour in all this, starts to laugh with you, and, by magic, the all powerful stamp appears and is thumped down on the document.
A career outside your home country can be fascinating, seldom dull, and a life-long education. Or it can be a bureaucratic and cultural nightmare that sends you screaming for the first plane home. It doesn’t matter what nationality you are or what country you’re living in. You will face the same issues. Waiting in countless dingy government offices for one form or another I have seen Frenchmen, Germans, Japanese, Italians get red in the face, stamp their feet and bellow at some hapless official about seemingly idiotic regulations. Fortunately for them, no could understand a word they were saying. The key to survival is to forget the word ‘should’. ‘They should do this, they should do that’ simply do not apply. They will do it at their own speed and in their own time. I once saw a French women sit by a traffic official’s desk for more than hour, never raising her voice, making her point over and over again. Finally she got what she wanted. I couldn’t help asking her what the secret was. She smiled knowingly, ‘Patience, mon brave, patience and persistence.’
Wednesday, 29 December 2010
A Very Tangled Web
No country better illustrates the tangled web of political and economic relations in the Middle East than the Republic of Cyprus. This divided island about 40 miles off the southern coast of Turkey has managed to maintain useful relationships with the Arabs and Israel while simultaneously poking a finger in the eye of its large, implacable foe – Turkey.
The current issue involves the large deposits of natural gas and oil that have been discovered in the waters of the eastern Mediterranean. Rather than create a deadly free-for-all about who owns what Cyprus has negotiated what it calls Exclusive Economic Zones carefully delineating areas of economic interest with Israel, Lebanon, and Egypt. No agreement with Syria has been reached yet, but Syrian president Bashar al-Assad recently paid a two-day visit to Cyprus to discuss areas of economic cooperation. Given Syria’s close ties to Turkey, this visit has to be counted a major success for Cyprus.
The latest economic zone agreement with Israel annoyed the Turks who went so far as to call in the Israeli ambassador to express their displeasure and note that this agreement interferes with efforts to re-unite the island. As Turkish journalist Burak Bekdil notes, the Israeli ambassador could well have asked why similar concerns were not expressed with Lebanese or Egyptian agreements. Semih Idiz noted in another column that the waters of eastern Mediterranean are heating up with the hydro-carbon discoveries.
Turkey also maintains that these agreements infringe upon the rights of the self-proclaimed statelet of the Turkish Republic of Northern Cyprus and make any reunification of the island more difficult. The only problem is that no country other than Turkey recognizes the TRNC. For the rest of the world the Republic of Cyprus is the only legitimate government of the island.
The island of Cyprus has been divided since 1974 when Turkey landed troops and occupied about 30% of the island. In the Turkish version the landing was necessary to protect the Turkish minority from ethnic cleansing by gangs of Greek thugs. In the Greek Cypriot version the Turkish military landing was an invasion pure and simple. The Turks established something called the Turkish Republic of Northern Cyprus that is officially recognized only by its patron Turkey. The Republic of Cyprus, meanwhile, is the internationally recognized government of the island and is a member of the European Union.
There have been half-hearted attempts to re-unite the island, but, given their strong international position and thriving economy, it is hard to see why the Greek Cypriots would be interested in a deal. Turkey, on the other hand, would love to see a settlement for at least two reasons. Its refusal to recognize the Republic of Cyprus as the legitimate government of the island is a major block to its EU pretensions. Second, maintaining the Turkish Republic of Northern Cyprus, costs the Turkish treasury $400 million a year – money that could be better spent in Turkey itself. In addition, Turkey continues to station about 30,000 troops in the northern part of the island. The economic gulf separating the two sides of the island is only widening as the 800,000 Greek Cypriots enjoy a per capita income of $28,000 while the per capita income of the 256,000 Turkish Cypriots is less than half that amount.
The Republic of Cyprus also benefits from its 10% corporate tax rate for onshore and offshore companies. It is interesting to note that the European Union is demanding that Ireland increase its similarly low tax rate, but no one says anything about Cyprus. Banks in the Republic of Cyprus have also made themselves useful to Russians looking for somewhere to keep their piles of cash. The TRNC meanwhile has no international trade (other than with Turkey) to speak of, and relies heavily on casinos that attract the high rollers from Turkey where casinos have been banned for several years because of their connection to organized crime.
Despite Turkey’s push to improve ties with the Arab world, no Arab country has reciprocated by daring to recognize the Turkish part of the island. Even Turkey’s cousins in Azerbaijan and close Moslem brothers in Pakistan have refused recognition. Their ties with the Republic of Cyprus, and by extension Greece and the entire European Union, are too valuable. One small example is that when visiting many Arab countries I often recall commenting on the quality of various products imported from Cyprus. This comment would be greeted with hoots of laughter, and I would be told that the product was actually manufactured in Israel. It would be sent to Cyprus, have the labels switched and then sent to countries that officially boycott goods from Israel.
Among other things these agreements clarify Israel’s right to explore and produce gas and oil from offshore fields. The stakes for Israel are very high as the latest discovery indicates reserves of 16 trillion cubic feet of gas at the Leviathan structure, about twice the amount discovered at the nearby Tamar site. These major discoveries could turn Israel into a gas exporter, and could finally contradict the old joke that Moses led the Jews around the Middle East for 40 years and finally put them on the only piece of land that didn’t have oil. Moses said nothing about offshore riches.
The oil and gas discoveries in the eastern Mediterranean are a potential economic ‘game changer’ for the region, and one can only hope that these new economic zone agreements can avoid turning this positive development into yet another reason for conflict.
The current issue involves the large deposits of natural gas and oil that have been discovered in the waters of the eastern Mediterranean. Rather than create a deadly free-for-all about who owns what Cyprus has negotiated what it calls Exclusive Economic Zones carefully delineating areas of economic interest with Israel, Lebanon, and Egypt. No agreement with Syria has been reached yet, but Syrian president Bashar al-Assad recently paid a two-day visit to Cyprus to discuss areas of economic cooperation. Given Syria’s close ties to Turkey, this visit has to be counted a major success for Cyprus.
The latest economic zone agreement with Israel annoyed the Turks who went so far as to call in the Israeli ambassador to express their displeasure and note that this agreement interferes with efforts to re-unite the island. As Turkish journalist Burak Bekdil notes, the Israeli ambassador could well have asked why similar concerns were not expressed with Lebanese or Egyptian agreements. Semih Idiz noted in another column that the waters of eastern Mediterranean are heating up with the hydro-carbon discoveries.
Turkey also maintains that these agreements infringe upon the rights of the self-proclaimed statelet of the Turkish Republic of Northern Cyprus and make any reunification of the island more difficult. The only problem is that no country other than Turkey recognizes the TRNC. For the rest of the world the Republic of Cyprus is the only legitimate government of the island.
The island of Cyprus has been divided since 1974 when Turkey landed troops and occupied about 30% of the island. In the Turkish version the landing was necessary to protect the Turkish minority from ethnic cleansing by gangs of Greek thugs. In the Greek Cypriot version the Turkish military landing was an invasion pure and simple. The Turks established something called the Turkish Republic of Northern Cyprus that is officially recognized only by its patron Turkey. The Republic of Cyprus, meanwhile, is the internationally recognized government of the island and is a member of the European Union.
There have been half-hearted attempts to re-unite the island, but, given their strong international position and thriving economy, it is hard to see why the Greek Cypriots would be interested in a deal. Turkey, on the other hand, would love to see a settlement for at least two reasons. Its refusal to recognize the Republic of Cyprus as the legitimate government of the island is a major block to its EU pretensions. Second, maintaining the Turkish Republic of Northern Cyprus, costs the Turkish treasury $400 million a year – money that could be better spent in Turkey itself. In addition, Turkey continues to station about 30,000 troops in the northern part of the island. The economic gulf separating the two sides of the island is only widening as the 800,000 Greek Cypriots enjoy a per capita income of $28,000 while the per capita income of the 256,000 Turkish Cypriots is less than half that amount.
The Republic of Cyprus also benefits from its 10% corporate tax rate for onshore and offshore companies. It is interesting to note that the European Union is demanding that Ireland increase its similarly low tax rate, but no one says anything about Cyprus. Banks in the Republic of Cyprus have also made themselves useful to Russians looking for somewhere to keep their piles of cash. The TRNC meanwhile has no international trade (other than with Turkey) to speak of, and relies heavily on casinos that attract the high rollers from Turkey where casinos have been banned for several years because of their connection to organized crime.
Despite Turkey’s push to improve ties with the Arab world, no Arab country has reciprocated by daring to recognize the Turkish part of the island. Even Turkey’s cousins in Azerbaijan and close Moslem brothers in Pakistan have refused recognition. Their ties with the Republic of Cyprus, and by extension Greece and the entire European Union, are too valuable. One small example is that when visiting many Arab countries I often recall commenting on the quality of various products imported from Cyprus. This comment would be greeted with hoots of laughter, and I would be told that the product was actually manufactured in Israel. It would be sent to Cyprus, have the labels switched and then sent to countries that officially boycott goods from Israel.
Among other things these agreements clarify Israel’s right to explore and produce gas and oil from offshore fields. The stakes for Israel are very high as the latest discovery indicates reserves of 16 trillion cubic feet of gas at the Leviathan structure, about twice the amount discovered at the nearby Tamar site. These major discoveries could turn Israel into a gas exporter, and could finally contradict the old joke that Moses led the Jews around the Middle East for 40 years and finally put them on the only piece of land that didn’t have oil. Moses said nothing about offshore riches.
The oil and gas discoveries in the eastern Mediterranean are a potential economic ‘game changer’ for the region, and one can only hope that these new economic zone agreements can avoid turning this positive development into yet another reason for conflict.
Wednesday, 22 December 2010
A City to Experience in December
There are cities best experienced in the warm spring and summer months, and there are cities that shine brightest when snow starts to fall. Paris and Rome are famous for their sidewalk cafes filled with people watching other people – most of whom are scantily clad wearing very expensive thin bits of leather on their feet. Very nice in May; very cold, wet and miserable in December. Parisians and Romans don't do puffy down parkas and sensible shoes. The trouble is you can not even warm up by going inside, where you are often greeted with the incredulous attitude ‘This is Paris. You want central heating too?’
Then there is Vienna. This old imperial city is pleasant in the summer but doesn’t really display all its finery until December. The Christmas markets, the concerts, the decorations down Karntner Strasse, and, perhaps most of all, the welcoming, warm coffee houses where you can fill the long hours between breakfast and lunch by indulging in rich coffee topped with thick cream and a few of the ever-so-delicate pastries. You are welcome to stay as long as you want, and most coffee houses provide newspapers to pass the time while you sample the Sachertorte or perhaps the Esterhazy Torte.
Unlike Londoners, the Viennese do not go wobbly in the knees at the first hint of snow. Streets and sidewalks are cleared faster than ladies can get their fur coats out. One of the best views of the ornate, imperial architecture decorating Vienna like an operatic stage set is from the inside of a warm tram as it rattles gently around the elegant Ring in a light snow fall.
But most of all, December in Vienna is a peak of the music season. Vienna is a city that takes music very seriously, indeed, and it’s best to book tickets at least two months in advance. One December we forgot which venue had our particular concert. When we asked at the main concert hall, the Muzikverein, the clerk put on a sympathetic smile and reminded us that there were concerts in 40 different locations that evening.
One wants to be very careful in Viennese Advent concerts where there is the possibility of audience participation. We were at such a concert looking forward to joining in a rousing rendition of Silent Night when the father of the family of four next to us pulled out a pitch pipe and made sure everyone was in tune and prepared to sing in harmony. Right. We decided it might be best if we just listened.
Vienna is one of the few cities we have visited where the churches are packed on Sunday morning. The ancient Gothic masterpieces may lack any heating, but this does not stop the well wrapped crowds from getting there at least half an hour early. While the Catholic liturgy undoubtedly draws a good many parishioners another attraction is the full orchestra and chorus and enormous organ performing any one of the great masses of Mozart, Bach, Haydn, Handel, Beethoven – just to name a few. These churches are wise enough to put the schedule of masses on their web sites.
It is easy to forget that not that long ago Vienna was the intellectual and musical capital of Europe. The musical legacy of Vienna speaks for itself, and a brief walk around the courtyard of the university filled with busts of famous scientists reminds us of the intellectual power of a city where Sigmund Freud attended concerts directed by Gustav Mahler. The 20th century was not kind to Vienna. The tottering Hapsburg Empire collapsed after World War I leaving Vienna with the architectural accoutrements of an empire and the political power of New Jersey. The rise of the Austrian Nazis revealed the darker underside of the society, and haunting walks through the Jewish district of the city bring home the horror of those atrocities. While there are some who would like to pretend those events never happened (Beethoven, of course was Austrian while Hitler was German), modern Vienna has become a vibrant melange of cultures that were once a grudging part of the political empire.
Even the Turks, who twice besieged the city, have become an integral part of the city in many different ways. Those people who miss the lazy lunches alongside the Bosphorus need go no further than the Kervanseray restaurant in the middle of the city to get the same quality seafood and service. After a few days of Central European meat and potatoes – however disguised – it’s nice to taste the fresh vegetables and green salad more common to the Mediterranean than the Danube.
Vienna might be a member in good standing of the European Union, but at least one part of the city is a very reluctant member of the 21st century. Enjoying good cigars is as much of the city’s life today as it was in Freud’s time. Bars that in the rest of Europe would ban smokers to frigid gardens offer a welcome haven to cigar smokers.
Somehow, in Vienna this fits. It is not California with its brash, thrusting modernity and cadres of self -righteous politically correct zealots roaming the streets stamping out any deviations like red meat and cigars. This is Vienna, a city that has seen it all, lived through it all and has found a way to combine the best of the past with the reality of the present.
Then there is Vienna. This old imperial city is pleasant in the summer but doesn’t really display all its finery until December. The Christmas markets, the concerts, the decorations down Karntner Strasse, and, perhaps most of all, the welcoming, warm coffee houses where you can fill the long hours between breakfast and lunch by indulging in rich coffee topped with thick cream and a few of the ever-so-delicate pastries. You are welcome to stay as long as you want, and most coffee houses provide newspapers to pass the time while you sample the Sachertorte or perhaps the Esterhazy Torte.
Unlike Londoners, the Viennese do not go wobbly in the knees at the first hint of snow. Streets and sidewalks are cleared faster than ladies can get their fur coats out. One of the best views of the ornate, imperial architecture decorating Vienna like an operatic stage set is from the inside of a warm tram as it rattles gently around the elegant Ring in a light snow fall.
But most of all, December in Vienna is a peak of the music season. Vienna is a city that takes music very seriously, indeed, and it’s best to book tickets at least two months in advance. One December we forgot which venue had our particular concert. When we asked at the main concert hall, the Muzikverein, the clerk put on a sympathetic smile and reminded us that there were concerts in 40 different locations that evening.
One wants to be very careful in Viennese Advent concerts where there is the possibility of audience participation. We were at such a concert looking forward to joining in a rousing rendition of Silent Night when the father of the family of four next to us pulled out a pitch pipe and made sure everyone was in tune and prepared to sing in harmony. Right. We decided it might be best if we just listened.
Vienna is one of the few cities we have visited where the churches are packed on Sunday morning. The ancient Gothic masterpieces may lack any heating, but this does not stop the well wrapped crowds from getting there at least half an hour early. While the Catholic liturgy undoubtedly draws a good many parishioners another attraction is the full orchestra and chorus and enormous organ performing any one of the great masses of Mozart, Bach, Haydn, Handel, Beethoven – just to name a few. These churches are wise enough to put the schedule of masses on their web sites.
It is easy to forget that not that long ago Vienna was the intellectual and musical capital of Europe. The musical legacy of Vienna speaks for itself, and a brief walk around the courtyard of the university filled with busts of famous scientists reminds us of the intellectual power of a city where Sigmund Freud attended concerts directed by Gustav Mahler. The 20th century was not kind to Vienna. The tottering Hapsburg Empire collapsed after World War I leaving Vienna with the architectural accoutrements of an empire and the political power of New Jersey. The rise of the Austrian Nazis revealed the darker underside of the society, and haunting walks through the Jewish district of the city bring home the horror of those atrocities. While there are some who would like to pretend those events never happened (Beethoven, of course was Austrian while Hitler was German), modern Vienna has become a vibrant melange of cultures that were once a grudging part of the political empire.
Even the Turks, who twice besieged the city, have become an integral part of the city in many different ways. Those people who miss the lazy lunches alongside the Bosphorus need go no further than the Kervanseray restaurant in the middle of the city to get the same quality seafood and service. After a few days of Central European meat and potatoes – however disguised – it’s nice to taste the fresh vegetables and green salad more common to the Mediterranean than the Danube.
Vienna might be a member in good standing of the European Union, but at least one part of the city is a very reluctant member of the 21st century. Enjoying good cigars is as much of the city’s life today as it was in Freud’s time. Bars that in the rest of Europe would ban smokers to frigid gardens offer a welcome haven to cigar smokers.
Somehow, in Vienna this fits. It is not California with its brash, thrusting modernity and cadres of self -righteous politically correct zealots roaming the streets stamping out any deviations like red meat and cigars. This is Vienna, a city that has seen it all, lived through it all and has found a way to combine the best of the past with the reality of the present.
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