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Turkey: Decrease In 'Suitcase Trading' Plays Part In Economic Slump

By Gokalp Bayramli

Traditionally, the practice of so-called "suitcase trading" has been an important way of injecting foreign currency into Turkey. The trade volume through suitcase trading has in the past represented a significant percentage of the Turkish economy. But as our correspondent in Istanbul, Gokalp Bayramli, reports, Turkey's own economic downturn, combined with Russia's financial collapse last year, has severely impacted the suitcase trade.

Istanbul, 23 July 1999 (RFE/RL) -- Turkish Prime Minister Bulent Ecevit yesterday announced his government's program to jump-start the country's economy. Turkey also named a new economy minister to carry out vital economic reforms.

At a press conference in Ankara, Ecevit said the government is taking steps to "enliven the economy quickly." The financial measures include a capital injection of $1.3 billion for the state-owned export-import bank, to be financed from the budget, the central bank and foreign sources.

The other measures announced were mainly of a temporary nature to help firms hurt by the economic slowdown Turkey has experienced in the last two years. The government's program also includes help for those merchants involved in business with countries of the former Soviet Union.

One of the main centers for this business is the area of Laleli in Istanbul's historic city center. Here most of the "suitcase trade" takes place.

Following the collapse of the Soviet Union in 1991, large numbers of Russians, Ukrainians and other citizens from the CIS traveled to Istanbul. They bought garments of all kinds in Laleli -- from jeans to fur coats -- and resold them at markets in their home countries.

Between 1992 and 1997, the trade volume in Laleli increased dramatically. New shops were opened, and a serious proportion of the Turkish garment industry started to rely on Laleli's "suitcase trade."

The importance of the Laleli market for the Turkish economy was significant. It was also important for the Russian economy. It is estimated that about 30 million Russians were involved in the suitcase trade with Turkey.

The economic downturn that began in Turkey in 1997 was exacerbated by Russia's financial crisis last summer. The Russian government effectively devalued the ruble. Traders that had bought goods in Turkey to sell in Russia lost a lot of money. Laleli was hit hard. Fewer customers came, and prices started to drop quickly.

Ayhan Karahan is chairman of LASIAD, an association of business people in Laleli. Karahan said that during the peak of the suitcase trade, it contributed about $10 billion to Turkey's trade volume each year. He compares the current economic situation, however, with the filling of a swimming pool:

"If you build a pool for 100 tons of water, you can pour 100 tons of water inside without any problem. You can pour as fast as you like. But after that, you can just fill in water after it has been consumed. You can just fill in the amount that has been consumed. This is what the markets are facing right now. There is no demand for products on the markets due to oversupply and decline in purchasing power."

Laleli is struggling to recover. The streets and alleys are quiet. Shopkeepers sit in front of their stores, drinking tea or chatting with colleagues. Only a few tourists can be found shopping in Laleli now.

In a small store selling leather jackets, a young Laleli shopkeeper evaluates the current economic situation:

"From 1992 to 1997, (it was very good). Even last year, some $5 or $6 billion have been earned here. This year is very bad. 1999 is very bad. Compared to earlier times for sure. Anyway, all markets are connected to here. All other markets are blocked because there is no business in Laleli. Building sector, textiles and automotive -- all are standing still."

In a shop selling fur coats, a Bulgarian shopkeeper is calm. His shop belongs to one of the few enterprises that has the financial foundation to survive the economic crisis. Asked about the fate of his fellow shopkeepers, he says that nearly 70 percent of them are going bankrupt and are closing their shops. But, he adds, the situation in the home countries of many customers is difficult, too.

"The customers became less, of course. And they became bankrupt, too. The shopkeepers here, but also the customers there went bankrupt. We had some very old customers. I am asking about them, whether they have earned enough money or have turned to other businesses. But the answer I get is: Bankrupt."

The short-term credits provided in the Turkish government's new economic program may help ease the immediate financial needs of Laleli traders, but it is clear that the boom time of "suitcase trading" between 1992 and 1997 is over.