“A DISCUSSION

ON THE TURKISH ECONOMY AND FOREIGN POLICY ISSUES”

Distinguished Guests,

Ladies and Gentlemen,

After serving for the last five years as Minister of State in charge of the economy and as Turkey’s Chief Negotiator in our accession negotiations to the European Union for the last two years, it is a pleasure for me to address the American Turkish Society for the first time in my capacity as Minister of Foreign Affairs.

I would like to thank the ATS for giving me this opportunity to discuss with you Turkey’s economic progress and current foreign policy agenda.

Distinguished Guests,

As risks and challenges continue to rise in Turkey’s vicinity, the Turkish economy has been undergoing a radical and comprehensive reform process for the last five years, particularly in macro economic terms. Turkey’s financial sector has been restructured and a strict budgetary discipline has been achieved. The Turkish economy has performed incredibly well in this period.

Today, Turkey is the 17th largest economy in the world with an annual Gross Domestic Product exceeding 400 million USD in 2006. In recent years, our GDP rate has surpassed 7.5 %.

For the last five years, Turkey has recorded a total growth rate of 35 %. Last year alone, this figure was 6 %.

Accordingly, annual income per capita has risen to 5,500 USD in 2006. Our target is to raise this figure to 10,000 USD, by 2013.

We are determined to curb inflation, which was 6.9 % last year.

Our overall economic balances can absorb shocks due to floating exchange rates which we have started to employ.

We have initiated an investment advisory board and established an Investment Promotion and Support Agency with a view to assisting potential and current investors. Today, it takes only three steps and a couple of hours to fulfill the legal requirements to start a company in Turkey.

Thanks to the improving investment climate, we have attracted a total FDI of 20 billion USD last year. Turkey ranked seventh last year among the emerging countries in the world in terms of attracting FDI.

The total assets of our banks reached 350 billion USD, while the share of the international capital in this sector has jumped from 4 % in 2004 to 22 % in 2007.

As of February 2007, the reserves of our Central Bank amount to 70 billion USD.

By the end of 2006, our total trade volume reached 225 billion USD. Of this figure, our exports amount to 88 billion USD while the import figure is 140 billion USD. For the first seven months of this year, these figures are 58 and 92 billion USD respectively.

The total number of tourists visiting Turkey reached 20 million in 2006 and is expected to reach 23 million in 2007.

As a result of these achievements, international financial and credit rating institutions have started to refer to Turkey as a role model for developing economies.

Goldman Sachs now rates Turkey among the 11 emerging economies in the world, together with Brazil, Russia, India and China.

As for bilateral figures between Turkey and the United States, the share of American investments in Turkey amounts to 5 billion USD in 2006.

The total volume of trade between our two countries amounts to 11 billion USD in 2006.

Of this figure, Turkey’s exports to the U.S. amount to 5 billion USD, which is equal to 5.9 % of Turkey’s overall exports.

Similarly, our imports from the U.S. amount to 6 billion USD, which is equal to 4.3% of Turkey’s total imports.

However, these figures are far from reflecting the true potential of our two countries.

I believe that there is ample room for improvement, in particular for joint ventures in neighboring geographies to Turkey such as the Balkans, South Caucasus, Central Asia, Mediterranean, the Middle East and the Black Sea. We should work together to mobilize this potential to serve our common goals and interests.

Cooperation in the field of energy supply and security, as in the case of the Baku-Tblisi-Ceyhan oil pipeline, is also another fertile area of mutual beneficial returns.

Ladies and Gentlemen,

The Turkish-American relations developed mainly on security and defense aspects till the end of the Cold War. Since then, the changes in the nature of common risks and challenges we face have led us to deepen and also diversify our relations.

“The Shared Vision” document of July 2006 is the blueprint of our mutual commitment to this end.

Similarly, the “Action Plan” we adopted at the 3rd meeting of Turkish-American Economic Partnership Commission in February 2007 draws a road map for diversifying our relations in a number of areas. Accordingly, Turkish-American relations have now become more focused on:

- cooperation in the fields to economy, trade, investment, energy, science and

technology, academics,

- development of R&D programs, and

- human-to-human contacts.

Distinguished Guests,

The Shared Vision Document also outlines the many areas where we have common interest at stake in the pursuit of global peace and stability. Indeed, many of the compelling issues that presently preoccupy decision makers in Ankara and Washington, DC alike are one and the same. When I met with US Secretary of State Ms. Rice we discussed 7 top priority issues which were valid for both countries.

Our two countries not only share the same values and ideals, but also similar objectives of promoting peace, stability, democracy and prosperity across such regions as the Balkans, the Middle East, the Mediterranean, the Black Sea basin, the Caucasus, Central Asia as well as in Iraq and Afghanistan.

Our strategic cooperation to achieve these common goals has an important bearing on regional and global stability.

The bold new challenges that we confront around the world today render our strategic partnership all the more relevant, and our cooperation much more indispensable.

However, there are two issues of major contention that have the potential to hamper the future of our strategic cooperation.

The first one is the ongoing efforts by Armenian lobbies in this country to put the U.S. Congress in a position where it has to pronounce itself on events that transpired during the First World War.

Without prejudice to Congress’s decision-making autonomy, I want to just emphasize that it will be incredibly hard for us in Turkey to sit by idly while a third party plays judge and jury with regards to our history and takes sides on a genuine historic controversy in a way that is acutely offensive to the Turkish nation.

The Armenian allegations of genocide to this day have not been legally or historically substantiated. This is why the efforts to defame Turkey have always played out in the political arena.

We are not insensitive to the emotions that are involved. Therefore, we have extended an olive branch to Armenia with our proposal to establish a Joint Historical Commission to examine the events of 1915 in an objective manner.

This offer, which was made in 2005, has been left unanswered to this date.

We do hope that common sense will soon prevail and Congress will not become a party to this painful yet controversial episode of history.

This is an issue between Turks and Armenians and that is ultimately where it can be resolved by an open, sincere and result-oriented dialogue that aims to reconcile the competing narratives in a mutually acceptable manner.

The second potential problem that has the ability to hinder our bilateral relationship is the existence of the PKK terrorist organization in the north of Iraq and its continued incursions into Turkey. This poses a serious security threat for Turkey, and is an extremely uncomfortable thorn in our bilateral relations.

It is impossible for us to explain to the Turkish public how and why the PKK is able to mount attacks against targets in Turkey while it finds a safe haven and operates freely from Iraq.

To understand the magnitude of the problem, imagine if a terrorist organization in northern Mexico was perpetrating a campaign of terror on U.S. soil. Could inaction by the US government in such a case be acceptable to the American people?

This is why we urgently need the U.S. and the Iraqi Governments to take immediate and concrete measures to bring the PKK terrorists to justice.

We expect the United States to appreciate the gravity of this matter.

We expect Iraq to swiftly ratify and implement the security cooperation agreement concluded last week and end the presence of the PKK terrorist organization in its territory.

As for Iraq itself, the basic tenets of our policy are similar with those of the United States. The political unity and territorial integrity of Iraq must be preserved at all costs. Clearly, a consensus has emerged within the international community that the dismemberment of Iraq is not an option.

We have consistently supported an end to the sectarian violence and a return to normalcy in Iraq. The preservation of Iraq’s territorial integrity and political unity is of critical importance for Turkey, Iraq’s neighbors and the U.S.

We advocate national reconciliation through political dialogue among all groups. We played a widely acknowledged role in encouraging Sunni participation in the political process.

We initiated a platform for consultations among Iraq’s neighbors with a view to contributing to the restoration of security and stability in this country. This process has now been expanded at our proposal to also include the P5 and G8. We will host the next ministerial meeting under this format at the beginning of November.

In the wider context of the Middle East, another crucial area, efforts to break the perpetual cycle of violence, revive the peace process, ensure security for Israel, create a state for the Palestinians, and the promise of a lasting peace side by side for both are also all high priorities for Turkey.

We have repeatedly indicated our desire to support in every way possible the parties in the efforts to revive the peace process and to contribute to the prospective international meeting to be convened for this purpose.

Turkey’s participation in UNIFIL in Lebanon should also be interpreted in the light of its overall commitment to peace and stability in the region. We have close to 1,200 men and women in uniform are doing a great job.

The impasse in the ongoing search for a diplomatic solution to the question of Iran’s nuclear program is yet another factor further aggravating regional tensions. Here too, we seek to play a constructive role in engaging Iran in international cooperation to dispel the concerns of the international community. We are conveying the necessary messages to Iran to this effect in our bilateral contacts.

In Afghanistan, Turkey has led ISAF twice since its inception and at present has assumed the Regional Command in the capital Kabul.

Our commitment to the reconstruction effort in this country is visible in the development projects we have undertaken, primarily in the fields of health, education and agriculture. To this end, we have pledged 100 million Dollars. We have increased our participation to 1,200 soldiers. Numerous people are treated at medical centres operated by Turkey.

The Provincial Reconstruction Team (PRT) established by Turkey in the province of Wardak operating under dangerous security conditions is another dimension of this commitment.

Ladies and Gentlemen,

Membership in the leading organizations, interlia, such as NATO and the Council of Europe attest to Turkey’s inherent affiliation with the Western world.

The accession process to the European Union, once completed, will consolidate Turkey’s place and role within all the Western structures.

Turkey will not accept any arrangement other than full and equal membership in the Union.

We have always highly appreciated the strong and unwavering support of the United States at every critical turn for Turkey’s membership in the E.U.

Turkey’s accession process is first and foremost a monumental project of social transformation whereby the principle objective of the major reforms is to raise the standards of the Turkish people to the level of those of the Union.

Independent observers concede that the sweeping political reforms enacted in the span of less than five years are nothing less than a “silent revolution”. While we may have upgraded our democracy, this “revolution” is far from over.

We are determined to pursue our agenda of reform.

More importantly, the impact of this strategic project for global peace and reconciliation will have a ripple effect across the world.

Therefore, the landmark decision of the E.U. to commence accession negotiations with Turkey back in December 2004 and the actual launch of the process in October 2005 demonstrate to the world at large that universal values like democracy and the rule of law are neither solely the product of western culture nor exclusive to any one religion.

It is therefore no coincidence that our region and neighbors in particular are closely following our accession process.

Turkey’s E.U. membership will considerably increase its soft power and appeal in expanding civil and human rights in the Islamic world. By the same token, Turkey will become Europe’s gateway to a wider world and a portal for our common values and shared ideals that will have a more receptive audience in the Middle East and other bordering regions as they become neighbors to the E.U.

Turkey’s widely acknowledged role in facilitating cross-cultural and inter-faith dialogue at a strategic junction between the East and the West will also be enhanced with E.U. Membership.

Our desire to help build bridges of harmony is reflected in Turkey’s co-sponsorship of the “Alliance of Civilizations” initiative, an ambitious project under the auspices of the U.N. Secretary General to address and redress the growing polarization between the West and the Islamic World. Last Saturday we had a meeting with the Secretary General. 35 ministers and the UN emphasized the importance of concrete projects and what can be done. 70 countries presented a proposal. Mr. Sampario accepted this offer to address this crucial issue.

Now, I would like to turn another item in our agenda that is Cyprus. The Turkish Republic of Northern Cyprus and Turkey remain committed to starting a negotiations process under the auspices of the U.N. with a view to achieving a just, lasting and comprehensive solution to the problem under the established U.N. parameters. We find the Greek Cypriots in the EU whereas the Turkish Cypriots are still under economic embargo. We tried to find a way out. As the Prime Minister said, we will always a step ahead.

On the other hand, contrary to the promises made by the international community after the referenda in 2004, the unjust isolation of the Turkish Cypriots which has no legal or moral premise, still continue. In line with the recommendations of the former U.N. Secretary General, we expect the de-isolation of the Turkish Cypriot side. In this vein, while we acknowledge and appreciate the steps taken by the U.S., we expect the American business and investment circles to establish links with their Turkish Cypriot counterparts.

Ladies and Gentlemen,

As we approach the end of the first decade of the 21st Century, we see around us a changing world. In this period of transformation, Turkey is striving to make a difference for the better, not only for itself, but also for the larger neighborhood that it inhabits.

In this regard, we appreciated the contributions of our American friends, and expect American businessmen and investors to include Turkey among their priorities.

We believe that Turkish-American joint ventures in Turkey and in third countries would not only expand our common vision, but will also become an investment for the future of Turkish-American relations.

As Foreign Minister, I am ready to contribute to your efforts to this end.

Thank you.