III. ECONOMIC TRENDS AND OUTLOOK MAJOR TRENDS AND OUTLOOK From establishment of the Republic until 1980, Turkey was an insulated, state-directed economy. In 1980, however, the country began an economic turnaround based on increased reliance on market forces, export-led development, lower taxes, integration with the world economy, and privatization. These reforms brought Turkey impressive benefits: its 1986, 1987, 1990, and 1992 growth rates were the highest of any OECD country. 1994 has been marked by a series of extraordinary economic events, including a plunge in the value of the Turkish Lira, skyrocketing interest rates, the announcement of an economic stability program, and a stand-by agreement with the International Monetary Fund. Although many observers had been expecting an economic "correction" for several years because of the Turkish Government's lax fiscal and monetary policies, most were caught by surprise when the correction actually began in mid-January. On April 5, Prime Minister Ciller announced an economic stabilization program based on price hikes, drastic reductions in government spending, tax reform and temporary increases in taxes, independence of the Central Bank, export- oriented growth, and privatization or closure of the state economic enterprises (SEE's). 1994 will be a difficult year for Turkey; 1995 remains a question mark. But whatever happens in the short term, the long-term prognosis for the economy remains favorable. The fundamentals that made Turkey the fastest-growing country in the OECD during the 1980's have not changed, and have even improved in many respects. Economic Growth. On average, Turkey's gross national product (GNP) has grown a strong 5 percent per year since 1981; however, there have been large swings around this mean. Following a growth recession in 1991 in the wake of the Gulf War, the economy picked up steam again in 1992, growing 6 percent. Growth accelerated in 1993 to 7.6 percent, due primarily to a high rate of consumption resulting from lax monetary and fiscal policies. 1993 GNP totaled $176 billion. Growth seems to have slowed down considerably with 1994's economic crisis, and as of June 1994 most analysts are expecting no growth or a recession for the year as a whole. Agriculture, which accounted for 14.6 percent of GNP in 1993, saw a 3.6 percent real decline in output, compared with 4.3 percent real growth in 1992. Industry, responsible for 27.1 percent of GNP, was up 8.2 percent for the year, based primarily on strong growth in the manufacturing sector; mining output declined by 6.4 percent. Services, including construction, trade, and transport & communications, accounting for 47 percent of GNP, were up 8.6 percent, led by 11 percent growth in wholesale and retail trade. Consumption and Investment. Private final consumption, which accounted for 71 percent of gross domestic product (GDP) in 1993, was up 8% in real terms for the year, led by 24 percent growth in the consumption of durable goods and 11 percent growth in the energy-transportation-communications sector. Government final consumption, accounting for 8 percent of GDP, was up a more modest 5 percent, although government purchase of goods and services grew 10 percent. Gross fixed capital formation, which accounts for nearly 30 percent of GDP, grew a spectacular 21 percent in 1993. Of this, private sector investment, which accounted for nearly three- quarters of total investment, was up 31 percent, based primarily on 53 percent growth in purchases of machinery and equipment. Public sector investment actually declined in real terms in 1993 by 2 percent overall; while public sector purchases of machinery and equipment grew by 4 percent, construction declined by some 5 percent. As of early June 1994, no official figures for 1994 are available, but the recent real decline in imports, plus considerable anecdotal evidence of slowdowns in trade, production, and investment, implies that both consumption and investment will decline for the year as a whole. Inflation, Wages, and Monetary Policy. Turkey's principal economic problem is inflation, fueled primarily by high and growing public sector deficits. Annual consumer price index (CPI) inflation has averaged 68 percent since prices began to escalate in 1988; wholesale price index (WPI) inflation has averaged 60 percent. In 1993, the CPI was up 71 percent, compared with a 66 percent rise in 1992; the WPI was up 60 percent in 1993, down slightly from 1992's 61 percent rise. The inflation story opened a whole new chapter with 1994's economic crisis, however, when prices began to skyrocket as the value of the Turkish Lira plummeted. The CPI was up 60 percent in the first five months of 1994 alone; for the twelve months through May 1994, the CPI climbed 118 percent. Comparable WPI increases were 82 percent from January through May, and 139 percent for the year through May. The private sector manufacturing component of WPI, which the Central Bank regards as the best single indicator of underlying inflationary pressures, was up 92 percent in the first five months of 1994, and 150 percent for the year through May. The Turkish Government has indicated that following very high inflation in the month of April 1994, it expects the rate to decline throughout the rest of the year as its economic package begins to restore balance to the economy. May 1994 inflation figures were in fact substantially less than those for April, as the government predicted. Throughout most of the 1980s wages failed to keep pace with inflation, resulting in real declines in income for workers. Beginning in 1989, however, real wages began to increase substantially. This trend continued in 1993, with nominal wages for laborers, clerical, and mechanical workers all rising by about 100 percent in nominal terms, a real increase of some 30 percent. The Central Bank's ability to design and implement a coherent monetary policy has been severely constrained by its role in financing the government's perennial budget deficits through money creation. While unable to control the money supply under these circumstances, the Bank has attempted to "smooth out" changes in domestic interest rates and the foreign exchange rate of the Turkish Lira. This policy was relatively successful until the currency crisis of mid-January 1994 forced it to change course. Following the release of the government's economic reform package in April 1994, the Bank shifted to a policy of trying to control the devaluation of the Lira using overnight interest rates as a tool. PRINCIPAL GROWTH SECTORS Energy, telecommunications, health, environment and transport are the principal growth sectors in Turkey. Energy. Electrical energy demand in Turkey is growing by approximately eight percent a year. Electrical energy demand in 1993 was 73 billion Kwh; in 1995, it is expected to expand to 87 billion Kwh; in 2000, 126-130 billion kWh; and in 2010, 270-300 billion kWh. Even if all the current hydroelectric potential (120 billion kwh) can be used, total output will be far from sufficient to meet anticipated requirements by the year 2000. Telecommunications. The Turkish PTT (TPTT) currently has a telephone exchange main line capacity of approximately 12.7 million. The telephone subscriber density (number of lines per hundred person) is currently 21. According to the telecommunications master plan, $12 billion will be spent for telecommunications infrastructure investments during the period 1993-2002. The bulk of this amount will be used to implement a digitalization program for the network and to increase telephone line density to 25 per 100 persons by year 2002. The same Master Plan envisages that telephone subscriber line capacity is estimated to reach 20 million (subscriber number estimate: 18 million) and digitalization ratio is scheduled to be approximately 80 percent by year 2002. Health. A World Bank credit has been provided to the Ministry of Health to strengthen public health services and to assist in the introduction of health reform. The majority of medical services are provided by government hospitals, university hospitals and Social Security Organization (SSK)'s hospitals. A growing number of private sector hospitals also provide medical services. Although services provided by government hospitals cost much less, those who can afford it prefer private hospital services due to better quality. The trend toward private health insurance systems will increase demand for private hospital services and new investments in equipment. Environment. With the establishment of a Ministry of Environment in 1991, environmental issues have won increased prominence. An Environmental Impact Assessment (EIA) regulation issued in 1993 requires each new industrial investor to prepare an EIA report and to include pollution control and treatment facilities. New regulations regarding sewage, medical waste and power plant emissions, among others, will add to the growth of this sector. Transport. The Turkish Government gives a special priority to the major infrastructure projects especially in the transport sector. Plans and tenders are being made for airport terminals, ports and highways. The new BOT law permits the private sector to operate such facilities. Since finance is an important issue for the Turkish Government, most of these projects will be implemented on BOT basis. Other principal growth sectors in Turkey are tourism, automobile industry, electronics and telecommunications services. GOVERNMENT ROLE IN THE ECONOMY A serious imbalance between government revenues and government spending is the root cause of Turkey's inflation problem. 1993 saw no progress in resolving this problem: the public sector borrowing requirement (PSBR) reached nearly 12 percent of GNP, the highest level on record. A major factor contributing to Turkey's budget deficits is widespread tax evasion; the OECD has reported that tax collections in Turkey are a smaller percentage of GNP than in any other OECD country. Losses of Turkey's inefficient parastatal companies, the state economic enterprises (SEE's), continued to mount in 1993, although at a slower rate than in 1992. The government has been pursuing a privatization program for many years and has sold off several SEE's, but the program has proceeded slowly; 1993 privatization revenues amounted to $445 million, higher than in any previous year. Despite the government's pledge to rapidly speed up privatizations as part of its 1994 economic reform package, it is likely to take quite a few more years to remove the SEEs, and their negative impact on the public sector deficit, from the economic scene. BALANCE OF PAYMENTS AND TRADE Turkey's external account picture deteriorated dramatically in 1993, as the current account deficit topped $6 billion, more than six times higher than 1992's $943 million figure. The main culprit behind the deficit was 1993's $14 billion trade deficit, nearly $6 billion higher than 1992's figure. Imports exploded in 1993 due to an extremely high rate of domestic consumption, together with the Central Bank's "strong lira" policy that made imports progressively cheaper as the lira appreciated in real terms vis a vis foreign currencies. 1993 exports grew by only 4 percent, due primarily to continued low economic growth in Turkey's key European export markets. In 1993, investment goods accounted for 32.5 percent of total imports, consumer goods 14 percent, and raw materials 53.5 percent. 84 percent of Turkey's imports are industrial products; 10 percent are mining and mineral products, and 6 percent agricultural goods. The most important import sectors were machinery, iron & steel, electrical equipment, crude oil, and motor vehicles. Turkey's largest source of imports was Germany, which accounted for 15 percent of total imports, followed by the United States ($3.4 billion in imports, accounting for 11 percent of the total), Italy (9 percent), France (7 percent), and Japan (6 percent). Industrial products made up 82.9 percent of Turkey's exports in 1993, followed by agricultural products with 15.5 percent, and mining and minerals with 1.6 percent. 17 percent of exports were investment goods, 56 percent consumer goods, and 27 percent raw materials. The largest single export sector is apparel, accounting for 25 percent of total exports, followed by iron & steel, with 13 percent, and other textile products, with 12 percent. Turkey's main export markets were Germany, taking 24 percent, the United States, taking $986 million in exports that accounted for 6 percent of the total, the United Kingdom (5 percent), France (5 percent), and Italy (5 percent). The decline in economic activity experienced in the first part of 1994, together with early trade figures, implies that Turkey will import significantly less this year than in 1993. Imports in February and March were 9% below the 1993 level. Exports, on the other hand, appear to be rising; February and March export figures were 5% higher than the same months last year. Foreign Debt: At the end of 1993, Turkey's total outstanding external debt amounted to $67.4 billion, up 23 percent from 1992's figure. Of this total, about 25 percent is short-term debt, and the remainder is medium- and long-term debt. Debt service payments for the medium- and long-term debt amounted to $7.6 billion in 1993. Turkey has not recently had difficulty in servicing its foreign debt. Foreign Exchange Policy and Foreign Investment: The Turkish Lira (TL) has been fully convertible since 1990. Currency exchange rates are determined by the market, although the Central Bank often intervenes to dampen short-term fluctuations. In 1993 the U.S. dollar depreciated about 2 percent vis a vis the TL in real terms, when adjusted for inflation using the CPI; in 1992 the dollar appreciated by about the same amount. This year's economic turmoil has led to a substantial real appreciation of the dollar, which as of the end of May was up 120 percent, compared with CPI inflation of 60 percent. The Turkish Government has pledged to halt the slide of the TL. Net foreign direct investment (FDI) in 1993 amounted to $622 million, down significantly from 1992's $779 million. Inflows were $797 million, and outflows $175 million. The $779 million gross FDI figure represented only one-third of the total $2.3 billion in capital that the government authorized to enter for the year. Through April 30, 1994, the United States accounted for an estimated cumulative total of 12 percent of the FDI in Turkey, making it the third largest investor after France and the Netherlands. More than 150 U.S. firms have invested capital in Turkey. But these figures underestimate the real involvement of U.S. investors in Turkey, because they do not capture investments made by foreign subsidiaries of U.S. firms. A bilateral investment treaty implemented by Turkey and the United States in May 1990 facilitates mutual investments. The treaty guarantees that Turkish investors in the United States and American investors in Turkey will receive national treatment. It provides for access to all of the laws and regulations that affect investments, the unrestricted right to repatriate capital, profits, and dividends, and international arbitration of disputes. International Economic Relations: Turkey has been an Associate Member of the European Union (EU) since 1964. Industrial exports from Turkey enter the EU duty free; industrial products from the EU and the European Free Trade Association (EFTA -- Austria, Finland, Iceland, Norway, Sweden, and Switzerland) enjoy lower customs tariff rates than those from other countries, including the United States, as Turkey and the EU work toward completing a customs union by 1995. In 1991 Turkey signed a free trade agreement with EFTA; it is negotiating agreements with Hungary, Poland, the Czech Republic, Slovakia, and Israel. In 1992 Turkey and ten other regional nations formed the Black Sea Economic Cooperation organization; it is not yet clear what effect this organization will have on trade and business. Due to proximity and linguistic and ethnic ties, the Turkish Government and business people have continued to develop links to many of the Central Asian and Caucasian republics of the former Soviet Union. The Turkish government has stated that it would like to see the establishment of joint ventures between Turkish and foreign firms to further tap the potential of the emerging Central Asian markets. Regular flights now operate between Istanbul and the capital cities of most of these new countries. TRADE AND INVESTMENT BARRIERS Intellectual Property Rights (IPR). Inadequate patent protection as well as lack of adequate copyright protection for motion picture films, videotapes and books is an ongoing concern of U.S. firms. Turkey is on the "Priority Watch List" for IPR violations. Government Procurement/Contract/Payment Procedures. Turkey normally follows competitive bidding procedures for domestic, international and multilateral development bank-assisted tenders. U.S. companies occasionally become frustrated over the lengthy and often complicated bidding/negotiating process. Some tenders, especially large projects involving coproduction and those based on the BOT model, are frequently opened, closed, revised and opened again. Repeated "best and final offers" are sometimes requested. In several cases, years have passed without a contractor being selected. Furthermore, signing a contract does not mean that a firm can relax--contractual disputes and payment delays are common for large government-financed projects. Taxation of U.S. Engineering and Services. The GOT withholds for taxes 15 percent from the total amount of the soft portion (including any work performed in the U.S.) of government contracts. Lacking a bilateral tax treaty with Turkey, this can significantly add to the cost of U.S. bids, sometimes making them non-competitive. Difficulties Related To Investment Approvals. Although Turkey's foreign investment law is liberal, and is generally liberally applied, in some cases (especially for Build-Operate-Transfer, revenue-sharing projects, privatization cases and joint ventures involving the GOT) American investors have been forced to submit to protracted negotiations with the GOT. The GOT's position in these negotiations can be ill-defined, leading to the sense that the decision process is non-transparent. Lack of GOT Support for Investors. A frequent concern voiced by U.S. investors is that the GOT is anxious to attract their investment but, once established in Turkey, provides little support to assist in investment-related difficulties. While the GOT states that all companies (both Turkish and foreign) are treated equally, they fail to take into account that foreign firms are not as free to operate in the local political/economic context as are Turkish companies. (For example, although Turkish tax rates are relatively high, the incidence of tax evasion is probably higher still.) LABOR FORCE According to the Turkish State Institute of Statistics (SIS), the civilian labor force (age 15 and up, excluding active duty military personnel) totalled 20,080,000 workers in April 1993 -- down 1.2 percent from 20,319,000 in October 1992. The labor force participation rate was approximately 34.2 percent. Women made up about 29.5 percent of the civilian labor force as of April 1993. According to the SIS, the official unemployment rate was 7.6 percent in October 1993, compared to 7.8 percent in October 1992. The April 1993 SIS household survey indicated that unemployment was much higher in urban areas (11.2 percent) than in rural localities (4.1 percent). Since close to half the labor force is still engaged in agriculture, with whole families working full or part time in the fields, it is difficult to measure unemployment or underemployment in that sector with any degree of precision. It is also difficult to compare Turkish unemployment statistics with those in Western Europe or the United States. Unofficial unemployment estimates are much higher, however, ranging up to 25 percent. Economists estimate that GNP should grow by at least 5 percent annually merely to keep unemployment in check -- that is, to accommodate the new entrants into the labor market every year. Anecdotal evidence indicates that unemployment is increasing with the economic downturn. INFRASTRUCTURE SITUATION RE: GOODS/SERVICE DISTRIBUTION No major infrastructure bottlenecks have been encountered for the import and export of goods. The following facilities/services are available. Airports. Major international gateway cities are Istanbul, Izmir and Ankara. There are 22 public airports, including five international ones. In 1992, Turkish airports handled over 230,000 landings and take-offs. Turkish Airlines (THY) and several private firms operate extensively on domestic lines. Major international airlines serving Turkey include THY, Delta, Lufthansa, Air France, Swissair and British Airways. Ports. Turkey currently has 21 international ports, which in 1992 were capable of handling an estimated 100 million tons of cargo and some 400,000 containers. Major cargo ports are Istanbul, Izmir and Mersin. Railways. Turkey has about 8,400 kms of railway running from its most western point to its eastern borders. Turkish Railways (TCDD) operates a medium-speed, freight railway system used primarily to transport minerals and bulk commodities. Highways. The highway transport system is predominant in both internal and external transport in Turkey. Asphalt highways comprise approx 60,000 km of which approx 1000 km are motorways-- the rest are two-lane highways. There is a major toll motorway, largely completed, between Ankara and Istanbul. Other motorways are under construction. In Turkey, approx 85 percent of freight and 94 percent of passenger traffic is carried by road. 50 percent of motor vehicles travelling on Turkish highways are classified as trucks. There are numerous private transport firms. Courier Services. Major international courier firms operating in Turkey include DHL, Federal Express (TNT), UPS and Air Express International. MAJOR LOCAL & THIRD-COUNTRY COMPETITORS IN SPECIFIC SECTORS Industrial Chemicals. Local companies and joint-venture foreign companies are the main producers of industrial chemicals, except for petrochemicals where the state-owned PETKIM dominates. Currently, Petkim is under the privatization program. Major domestic chemical producers are Ansa, Akkimya, Alemdar Kimya, Atabay, Baser Kimya, Belgin Madeni Yaglar, Cukurova Kimya, Deteks, Dofa, DYO, Eczacibasi, Er-Kim, Fako, Fer-Kim, Fursan, Gemsan, Hursan, Ishakoglu, Kimetsan, Kimpas, Kimyanil-Bayer, Kocak Kimya, Komili, Koruma Tarim, Lever-Is, Mekinsan, Merkim, Milen, Mintax, Organik Kimya, Oron Kimya, Petkim, Pfizer, Polikimya, Polisan, Procter and Gamble, Roche, Santral Kimya, Sifar, Tepar, Turk Henkel, Turkish Sugar Industries, Unilever, Yuksel Boya and Yurtkim. Major foreign competitors are British ICI, Basildon, Dutch Shell, German Henkel, Swiss La Roche and Austrian Chemie Linz. Several other firms are active from Italy, France, Netherlands and Spain. Defense Industry Equipment. The total number of industrial establishments which can produce military equipment is around 800. Local production facilities include: MKEK (Machinery and Chemical Industries) for weapons, ammunition, explosives, machinery and military vehicles; TAI (U.S. joint-venture producing F-16 planes) for aircraft; TEI (U.S. joint-venture producing engines for F-16 planes) for aircraft engines; and FNSS (U.S. joint-venture company, producing armored fighting vehicles) for armored vehicles. At present, the main domestic military electronics producer is ASELSAN, which works largely with imported components. Other producers are ASPILSAN for batteries and MIKES (U.S. joint-venture) for electronic countermeasures systems for F-16 aircraft. French (Giat, Aerospatiale), German (MBB), Italian, British (British Aerospace, Marconi) and Spanish (CASA) companies are also active in this field. Electrical Power Systems. When turnkey projects are considered, Turkish firms are very experienced in construction works for dams and power plants. Most of the steel structure of these plants can be supplied domestically by Turkish firms such as Alarko, Dogus, Enka, Entes, Gama, Guris, Kutlutas, STFA, Tekfen, Tokar, Yuksel Insaat, etc. Hydraulic type small to medium size turbines are produced domestically by a state economic enterprise, TEMSAN. It started production under a license from French Neyrpick in its plant in Diyarbakir. TEMSAN had also started production of hydro- generators at 1-20 MVA power under French Jeumont Schneider license about 10 years ago. TEMSAN is an affiliate company of TEK. ISBIR under Austrian company Hitzinger's license, and Aksa, Demas, Altersan, Tuncmatik, EAS and Elsan companies are producing generators and diesel motors. Transformers are produced by Turkish companies Best (under German Elektro-Bau License), Etitas and ABB Esas. Third Country Competitors. German, Swedish, Swiss, Japanese, Polish, Hungarian, Czech, Slovakian, French, Romanian and Italian firms have been very competitive in the power projects in the past. However, former eastern bloc countries like Poland, Hungary, Czech Republic, Slovakia and Romania will not be as competitive as they used to be due to lack of financing and outdated technologies. Foreign firms which have been active in electric generating equipment supplies and turnkey power projects in Turkey are: ABB (mainly from Germany), Siemens (Germany), Steinmuller (Germany), Noell KRC (Germany), Mitsubishi (Japan), Elektrim (Poland), Transelektro (Hungary), Skodaexport (Czech Republic), Comsip Enterprise (France), Societe Hamon (France), Romenerg (Romania), J.M. Voith (Austria), Enel (Italy), GIE (Italy), and Aquater (Italy). Telecommunications. There are three major switching equipment producers in Turkey: Netas (Northern Telecom's subsidiary); Teletas (Alcatel's subsidiary); and Simko (Siemens' affiliate). Other major telecommunications equipment producers are as follows. Wireless equipment is locally produced by ASELSAN, Teknim, Elsa, Telsan, and Turk Marconi produce VHF, UHF and HF radio communications equipment. ASELSAN and Marconi's products are mainly for military use. Fiber optic transmission equipment is produced by Netas, Teletas and Simko in Turkey. Domestic fiber optic cable producers are HES Kablo, Hontel Kablo, Kavel, Turk Siemens and Turkkablo. In cellular phones and systems Nokia, Ericsson, Alcatel, Benefon, Dancall, SCI, Panasonic, C-Com, and Bosch are the major third country competitors. With respect to paging, NEC Corporation, OOI, Multitone and Philips are active. Particularly in in-house paging systems set up in hotels, hospitals, industrial sites, thermal power stations, etc., Multitone and Datacall companies (British) are predominant. Currently, the satellite communications ground station market is dominated by Japanese, U.S., French, and German firms. PTT's current Eutelsat, Intelsat (Indian Ocean Region), and Inmarsat satellite earth stations have been supplied and installed by NEC Corporation. Turkey's first national satellite is being supplied by the French Aerospatiale. In the satellite field, the other key competitor is British Aerospace. Computer and Peripherals. Several Turkish companies are engaged in the assembly of PCs. The most important of these are Karel Elektronik, IST Bilgi San. and Atak Company. Other computer related domestic producers are ART, Access Bilgisayar, Bilgi Elektronik, Bimsan, Data-Link, Ermes, Forlink, Ozer Elektronik, Sara and Teda. The main third country competitors in mini and main frame computers are Siemens-Nixdorf (Germany), Olivetti and Bull (Italy), and Hitachi (Japan). In PCs, the main competitors are Acer (Taiwan), IPC and Wearness (Singapore) and Epson (Germany). In computer peripherals, third country competitors are Sony, Fujitech, Seikoska, Oseka, Panasonic, Seiko and Toshiba (Japan); Acom, Basf, Tandon, Commodore, Triumph-Adler, Aquarius and AEC Olympia (Germany); Line, Sintrex, and Armstrad (U.K.); Olivetti and Bull (Italy); G&B Computers and Tulip (Denmark). MAJOR INFRASTRUCTURE PROJECTS UNDERWAY Over the past dozen years, Turkey has provided an important market for major projects. U.S. firms are currently involved with government-financed projects ranging from the construction of highways to the production of armored combat vehicles. The Government continues to emphasize megaprojects as the way to develop Turkey's infrastructure: power plants, water and sewerage systems, new ports and airports, urban transportation projects, and continuation of the $30 billion-plus Southeast Anatolia Project (GAP). You name it, the government is trying to do it-- and mostly on a Build-Operate-Transfer basis or through the revenue-sharing model; thereby, in effect, transferring much of the financial and operating risk to the foreign supplier. The key point: companies who come with an attractive finance package are far more likely to get the job. Turkey's current economic crisis has frozen action/decisions on many new projects and has slowed "non-essential" work on ongoing projects. That said, Turkey's infrastructure needs are tremendous and Turkey will continue to offer a hot market for U.S. goods and services. The following is a run-down of projects currently underway. GAP. The largest ongoing project in Turkey (and one of the largest in the world) is the Southeast Anatolia Regional Development Project (GAP) worth an estimated $30 billion. To date more than $10 billion has already been spent on the GAP primarily to build dams to be used for irrigation and power generation. This integrated regional development project envisages the construction of a complete infrastructure including power, irrigation systems, roads, airports, agro-industry, schools, training centers and hospitals. Motorways. Motorway construction including the TransEuropean Motorway from Istanbul to the Syrian border. The section between Istanbul and Ankara is largely finished, while most of the work from Ankara to the Syrian border, with the exception of a patch already completed near Adana in the south, is in the design stage and has not yet been tendered. Motorways are planned and underway in other parts of the country but have not received the same priority. Bridge and tunnel crossings, which lend themselves to revenue-sharing, are in the planning stage for Izmit Bay (bridge) and the Bosphorous (tube tunnel). Airports. Contractor selection process is near completion for modernization and expansion of the Istanbul and Antalya Airports on a BOT basis. A new international airport terminal is scheduled to be tendered for Ankara Esenboga Airport. For this terminal, project drawings and planning are complete. The U.S. Trade and Development Agency (TDA) has provided a $720,000 grant for design engineering work and project analysis associated with the development of a new international airport near Sanliurfa in the Southeastern Anatolia (GAP) Region of Turkey. GAP administration has evaluated the bids and selected a consortium. This project is expected to be realized medium-to-long term depending on the availability of financing and development of the region where large agricultural and agro-industry projects are underway. Ports. Plans are underway for the Izmir Port Dredging Project (a World Bank credit was previously provided but was later cancelled due to potential environmental problems in Cesme where the mud would have been dumped), the Izmir Port Expansion Project, Candarli Port Project (construction of a new port near Izmir), and the Filyos Port Project (near Zonguldak on the Black Sea Coast). Telecommunications. Aerospatiale is building Turkey's first communications satellite, while Ericsson and Alcatel won the bid to establish a GSM telephone system nationwide. Defense. Lockheed is building the F-16 in a Turkish joint venture using FMS and national funds; Loral is making the electronic countermeasures system for the F-16, and GE the engines; FMC has a contract to manufacture 1698 armored infantry vehicles (AIV); Texas Instruments has a contract through ASELSAN to produce the optical sights for the AIV; Alison Transmission and Detroit Diesel are building the power plant; Cadillac Gage the cupola; and GIAT (French) the turret and gun. Other projects include C-3, light transport aircraft and utility helicopters. NATO. U.S. exporters, including engineering and technical consulting services firms, should also note that Turkey is a major beneficiary of the NATO infrastructure development program. Spending on NATO projects, which runs the gamut from harbor development projects to satellite communications networks, is expected to continue at the recent level of about $350 million/yr. U.S. firms wishing to compete for these projects must possess a NATO security clearance, and must be certified by the Office of International Major Projects of the U.S. Department of Commerce as financially and technically qualified.