[Intl-tobacco] Important: Turkish Min Refuses To Sign IMF-Pledged Law; Markets Sink

[Robert Weissman]

Here is the specter of the IMF forcing Turkey to privatize its tobacco
industry, explicitly against the will of the privatization minister, who
has now resigned over the issue (see next post). There are strong reasons
to believe that privatizing the tobacco industry will have deleterious
health consequences, and no evidence that the IMF has given this dictate
to Turkey a public interest review -- although public health advocates and
Members of the U.S. Congress have previously raised the issue with the
Fund.

-- 
Robert Weissman	<rob@essential.org>
Essential Information
P.O. Box 19405, Washington, DC 20036, USA
Tel: 1-202-387-8030
Fax: 1-202-234-5176
www.essential.org

Turkish Min Refuses To Sign IMF-Pledged Law; Markets Sink

by Selim Atalay / Dow Jones Newswires; 90212 2313355;
selim.atalay@dowjones.com

TURKEY; Source: The Wall Street Journal Interactive Edition, Thursday,
5/31/01

ISTANBUL -- Yuksel Yalova, state minister in charge of privatization, said
Thursday that he won't sign a draft law liberalizing the tobacco market,
roiling Turkey's already crisis-ridden markets.

The government had promised the International Monetary Fund that it would
pass the law, and the law is one of the conditions for the IMF board to
approve the new $1.5 billion loan tranche for June.

ANAP party member Yalova's objection may mean the law won't pass in time
and may prevent the IMF endorsing the loan tranche. In general, the
statement adds to the growing market belief that the three-party coalition
government, made up of the DSP, MHP and ANAP parties, isn't willing to
implement the two-week-old $17 billion IMF-backed program.

"I can't accept a de facto under the pretext of the IMF program," Yalova
told reporters after visiting the Turkish Chambers of Agriculture. "We
can't hurry a law just because it was pledged (to the IMF) for May."

"Whoever has signed that IMF letter of intent, he should shoulder the
responsibility (of any delay)," Yalova said.

The letter of intent - the list of Turkey's program commitments to the IMF
- was signed by Economy Minister Kemal Dervis and central bank Governor
Sureyya Serdengecti. The document, as an exceptional measure, also bears a
cover letter signed by the coalition leaders, to ensure full political
support.

Market fears about the future of the IMF program sent the lira down
against the dollar, with the dollar trading at TRL1,290,000, up from
TRL1,180,000 earlier in the session.

Bond yields surged above an annual 100%, up from 92% early Thursday.

The IMKB-100 share index ended morning trading down 5.1% at 10139.37
points.

Later Thursday, an IMF team is scheduled to review Turkey's progress with
the program.

Meanwhile, Dervis, the main director of the IMF program, left early
Thursday for a two-day visit to Italy. He told reporters he will brief the
country's government officials on Turkey's economic program. Italy will
host the July summit of the Group of Seven leading industrial nations.

Minister Yalova is a deputy of the Aydin region, a key tobacco-producing
area.  Until now, he was known as a market-friendly minister who supported
privatization.

Later on CNBC television, Yalova said a compromise was needed between his
ministry and other governmental departments on the draft tobacco law. Such
a compromise could be submitted to the cabinet when it meets next week, he
added.  He claimed that some delay to the legislation wouldn't hurt the
IMF program.

Markets responded to Yalova's comments, with bond yields declining to 98%
from the 100% peak reached earlier in the session. Dollar offers at the
interbank market are at TRL1,250,000, down from TRL1,290,000 earlier.

Nonetheless, market participants still believe Turkey has made an
unconvincing start to the IMF program.

-By Selim Atalay, Dow Jones Newswires; 90212 2313355;
selim.atalay@dowjones.com

-0- 31/05/01 11-18G

In an attempt to contain the damage, Prime Minister Bulent Ecevit told
reporters that Yalova's statement doesn't reflect the government's views
and "contradicts the coalition government's harmony."

Ecevit said Yalova's immediate boss, ANAP party leader and Deputy Prime
Minister Mesut Yilmaz, doesn't condone the statement. However, Ecevit's
words don't mean Yalova will be reprimanded or will resign. Ecevit added
that the coalition leaders should meet and decide on the draft tobacco
law.

The coalition's third leader, Deputy Prime Minister and MHP party leader
Devlet Bahceli, early Thursday left for a private trip to Germany and
France and is scheduled to return Tuesday.

Meanwhile, despite Ecevit's statement, markets are far from convinced, as
bond yields are back to 100%, from the 92% before Yalova's statement, and
dollar offers are at TRL1,280,000, from TRL1,170,000.



URL for this Article:
http://interactive.wsj.com/archive/retrieve.cgi?id=DI-CO-20010531-002226.djm