Turkish resilience in face of violence

By bne IntelliNews June 24, 2010

Justin Vela in Istanbul -

The recent upsurge in violence from Kurdish rebels in Turkey is a reminder of the instability in this part of the world, though few expect it to have much of an effect on the country's resilient economy.

Turkish Prime Minister Recep Tayyip Erdogan has rejected calls from the opposition to declare a state of emergency after the June 22 bombing of a bus carrying military personnel and their families. Five people were killed and 12 wounded when a remote control bomb was detonated next to the bus that was leaving a Turkish military lodging facility. The second such attack on security forces in Turkey's largest city in the past month, it comes at a time when the Kurdish Worker's Party (PKK) has called off a 14-month ceasefire and the military has launched a large-scale operation along the country's southern border with Iraq. "Calling for a statement of emergency is tantamount to bowing down to the language of terrorism," Erdogan thundered.

Timothy Ash, an analyst with Royal Bank of Scotland, doesn't believe the spike in violence will have much of an impact on investor confidence. "Obviously it's a regular occurrence. Every spring and summer this has been a tendency the past few years. People are well prepared for this, so I don't see a huge impact on the economy or investor sentiment."

Reforms to the economy taken by the ruling Islamist-rooted Justice and Development Party (AKP) have meant the country is currently outperforming most of the surrounding countries with growth forecast at 5.5% for 2010 and 3.4% in 2011, largely on the back of domestic demand. Even an election next year and possible tension between AKP and the secular military and judiciary aren't expected to do much to upset the current growth. "The economy has proven pretty durable through the crisis - it has proven itself," Ash says. "Vulnerabilities remain in the external financing front; financing requirements are still a key risk. There are also the domestic politics. Elections are a year away now. Secular/AKP divisions, no one quite knows what they will produce. Investors aren't worried yet though - they have seen this before from Turkey."

Indeed, the upsurge in violence stems from the failure of another Turkish initiative to deal with Kurdish problem, which was meant to end the 25-year civil war by building infrastructure in the country's southeast and granting greater rights and civil liberties to Kurds. The Kurdish language was allowed on television and de facto amnesty was given to PKK fighters who wanted to lay down their arms and return to their villages.

However, the plan backfired following a massive outcry from the public when PKK fighters crossed back over the border with Iraq and were given a hero's welcome by their fellow Kurds. Turks felt humiliated and the AKP, seeing its popularity drop, put the plan on freeze and renewed what many regard as repressive tactics, arbitary arrests and so forth, in that part of Turkey. The failing of the that initiative, while perhaps not unexpected as the AKP refused to negotiate directly with Kurdish politicians, sees another page turned in a struggle that has left at least 40,000 people dead since 1984.

Across the border

Thus, the AKP continues to follow a line that puts business first and human rights second. Coupling their desire to expand Turkey's markets with the need to pacify the Kurds, the AKP has been encouraging Turkish investment in northern Iraq. The president of the Iraqi Kurdistan Region, Massoud Barzani, visited Turkey for the first time in six years earlier in June, arriving in Ankara to meet Erdogan with Iraqi Kurdish businessmen to discuss trade and better relations. Turkey does about $10bn in trade with northern Iraq every year and about 80% of the goods sold there are Turkish. Turkish exports to Iraq were $829m in 2003, but by 2009 were worth some $5.1bn, according to a report by the Foreign Economic Relations Board of Turkey. Imports from Iraq were $952m in 2009.

Iraqi Kurds do not view Turks in the same way as Turkish Kurds do and Turkey has become northern Iraq's biggest foreign trade partner. "It was a very positive move by the Turks," says Turkish expert Henri Barkey of the Carnegie Endowment for International Peace. "They changed policy in northern Iraq for two reasons. Making friends with Iraqi Kurds helps them in Baghdad. Because Iraqi Kurds are so dependant on Turkey, they will almost do Turkey's bidding. The glow of that relation helps the Turkish government with its relations with Kurds in Turkey."

Barkey and a number of commentators in the Turkish media have predicted that the Turkish government will lean on Barzani to put pressure on the PKK to stop their attacks. Turkish Foreign Minister Ahmet Davutoğlu said in June: "We will separate those who stand in solidarity against terrorism and those who fail to fulfill their responsibilities in this regard. But there is solidarity on the part of Iraq on this matter."

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