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Turkey: Earthquake Caused Untold Damage To Economy

As damage from Turkey's earthquake continues to be assessed, analysts are calling the disaster a severe blow to the economic prospects of both Turkey and its regional trading partners. RFE/RL's correspondent Charles Recknagel looks at the earthquake's aftermath.

Prague, 26 August 1999 (RFE/RL) -- The earthquake which struck northwestern Turkey last week hit the country's industrial heartland, an area which -- including Istanbul -- generates some one-third of Turkey's Gross National Product (GNP).

Analysts say that the region is home to so much of Turkey's economic activity because of its relatively good infrastructure and its easy accessibility by sea for oil tankers. The tankers deliver their oil to energy-poor Turkey's biggest refinery on the outskirts of Izmit and the refinery's products power some of the country's biggest industrial facilities. Those include the factories of three major international vehicle makers supplying most of Turkey's domestic market and one of the world's largest manufacturers of acrylic and textile fibers.

The northwest's infrastructure was hard hit by the earthquake, which set the refinery ablaze for days and damaged scores of factories and workshops. At the same time, many of the 12,500 people so far counted dead were members of the country's technical elite whose skills now will be sorely missed.

Bulent Aliriza, director of Turkish studies at the Center for Strategic and International Studies in Washington, D.C., tells RFE/RL that it is still too early to know the full damage wrought by the earthquake. But the economic losses certainly will be in the thousands of millions of dollars. Bulent Aliriza spoke with RFE/RL by telephone.

"The governor of the Central Bank came up with a figure of between $5 to $7 [billion]. But then the Turkish Employers' Federation came up with a figure of $20 to $25 [billion]. I think it is too early to come up with an accurate figure but nonetheless it is quite clear that it is going to be very, very heavy and we may be talking about 10 percent of Turkey's GNP."

Analysts say such losses are certain to further slow Turkey's currently sluggish economic growth rate. The country's growth already has been hard hit in the past year by the economic crisis in Russia -- a major trading partner. It was also slowed by a drop in Western tourism due to fears of violence following Ankara's capture of rebel Turkish-Kurd leader Abdullah Ocalan.

Last month, the Paris-based Organization for Economic Cooperation and Development (OECD) forecast that growth in Turkey's GNP would fall to 1.4 percent for 1999, then climb to 3.9 percent in 2000. But after last week's earthquake, those projections could prove overly optimistic.

One reason that the earthquake will almost certainly depress growth is that funds which Turkey had been counting on to stimulate its economy now must go instead to rebuilding what has been lost. Ankara has been seeking foreign loans to make major capital investments in new infrastructure such as power plants but those now will have to be put on hold. Aliriza said:

"Instead of looking to the international financial world for money for an economic leap forward ... we are almost certainly looking at a situation in which Turkey will be looking to the rest of the world for money to get it back to where it was prior to the earthquake."

The economic impact of the earthquake also could be accompanied by political fallout which may lead to a period of instability and frighten away some new foreign investment. That political fallout is only now beginning to make itself felt as earthquake victims and many leading newspapers voice increasing outrage at Ankara's handling of the earthquake crisis.

Much of the outrage centers on charges that governmental negligence of building safety codes, as well as official corruption, significantly contributed to the death toll from the trembler. The anger has been compounded by frustration with the slow and chaotic nature of official Turkish relief efforts.

The highly public criticism of the government -- something rare in Turkey -- this week grew to include media calls for the dismissal of the country's ultranationalist health minister, Osman Durmus. The minister stunned earthquake victims by publicly turning away all aid from Armenia and some from Greece due to Ankara's bad political relations with both countries.

Analysts say it is too early to predict where the wave of popular anger against the government will end. But increasingly both Prime Minister Bulent Ecevit and President Suleyman Demirel are also being targeted and whether the government's three-party coalition will be shaken is increasingly in question.

The earthquake's impact on Turkey's economy is likely to have a ripple effect throughout the region. Turkey has become a regional economic motor in recent decades and many former Soviet republics look to strong trade with Ankara to help boost their own economies.

But Aliriza says that recovering from the earthquake now may absorb so much of Turkey's short-term attention that its ability to take a key role in regional development plans, including a planned pipeline for Caspian energy, could be interrupted.

"As Turkey undergoes this great internal disaster, its ability to do what it has been doing so successfully since the break up of the Soviet Union may be interrupted somewhat. What we need to think about is Turkey's ability to play [its] projected major role in the transportation of Caspian oil and gas to market -- and that situation was unclear even before this crisis -- and the ability of the Turkish state to make things happen on this front may be stalled somewhat."

Turkey has taken a lead role in pushing for a pipeline to carry oil and gas from Caspian Basin and Central Asian states to its Mediterranean port of Ceyhan, where it would enter the world market. But the pipeline, estimated to cost some $4 billion, has yet to receive the backing of international private investors.

Many analysts have said that private investors are not likely to become interested in building the pipeline unless Turkey is willing to subsidize its costs by generously discounting the tariffs Ankara would normally collect on oil and gas moving through it. Whether Turkey is now in any financial position to contemplate such measures remains to be seen.