VZCZCXRO2747
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DE RUEHAK #0757/01 0930946
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R 030946Z APR 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 1556
INFO RUEHIT/AMCONSUL ISTANBUL 2442
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UNCLAS SECTION 01 OF 02 ANKARA 000757
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PASS EXIM BANK FOR CRAIG O'CONNOR
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TAGS: ETRD ECON BEXP KTEX TU
SUBJECT: DENIZLI: TEXTILES REIGN SUPREME NEAR TURKEY'S "COTTON
CASTLE"
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accordingly.
1. (SBU) Summary: Turkey's Denizli province, located just east of
the Port of Izmir, is yet another example of how Turkey's economic
recovery is trickling down to its diverse regions. One of Turkey's
largest textile producing regions, companies who previously lost
U.S. business at the end of the WTO Multi-Fiber Agreement have
"moved up the value chain" and been able to reacquire lost customers
because U.S. consumers are willing to pay more for Turkish quality
and reputation. In addition to textiles, the region produces iron,
steel and copper products, exports the largest amount of Turkish
travertine and marble of any region, and is developing vineyards and
greenhouse facilities. Even though this economic boom has brought
above-average growth, Denizli's unemployment rate still rests at
around 5%. The city's leadership must be mindful, however, that
growth brings problems of its own and plan accordingly for the
future. End summary.
2. (SBU) During a recent regional outreach meeting with business and
political leaders in Denizli, officials painted a positive image of
the city's growth and export potential. Turkey's 16th largest
regional economy and one of its fastest growing industrial areas,
Denizli's share of Turkish exports amounted to $2 billion in 2006,
70% of which were textile exports. Located in the southwestern
region just east of the port of Izmir, Denizli province also
contains the thermal springs tourist destination of Pamukkale, which
translates to "Cotton Castle."
Textiles Still King
-------------------
3. (SBU) Surprisingly, Denizli textile producers provided a very
different story about their business potential than their
counterparts from other regions. During a meeting with the Denizli
Chamber of Industry, representatives from companies currently
producing home textiles and towels for such well-known U.S.
companies as Pottery Barn, Williams-Sonoma, Restoration Hardware and
T.J. Maxx told us that they experienced significant losses after the
end of the WTO Multi-Fiber Agreement, when U.S. companies shifted
orders to China and other low-cost suppliers. The U.S. companies
have, however, subsequently returned to the Denizli producers
because of the quality of their products and reliability of their
services. One business representative told us that Williams-Sonoma
had returned to his company exclusively for the production of its
kitchen textiles because U.S. consumers will pay more for products
"Made in Turkey" than those "Made in India," even though he conceded
that the Indian quality is catching up to Turkish. The sector did
experience significant losses in the production of low cost high
volume ready-made apparel. One company previously produced large
quantities of garments for Victoria's Secret but lost the business
to China.
Expanding Export Potential
--------------------------
4. (SBU) Textiles are not the only sector flourishing in Denizli.
According to the Denizli Chamber of Commerce, the area is also
Turkey's largest exporter of marble and travertine (the region
boasts Turkey's third largest reserves) and also produces iron,
steel and copper products, including copper cables that are used by
NASA. Vineyards in the region are trying to distinguish Denizli as
a wine-producing region, and entrepreneurs are also trying to tap
into the natural energy of the area's hot springs and develop
geothermal greenhouses to grow tomatoes and possibly flowers.
According to Denizli's Mayor, Nihat Zeybekci, Denizli's thermal
springs provide a continuous energy source that could provide free
energy to greenhouses throughout the year. He added that about 25%
of the cost of operating greenhouses in Turkey's Antalya province is
for energy production.
Dealing With Growth
-------------------
5. (SBU) Denizli's city center population is about 700,000, while
the population for the province is approximately 1.5 million. Due
to the city's vibrant economy, it has attracted many workers from
Turkey's smaller villages, leading to an average 3% growth rate
(Turkey's average is about 1.7%). Its current rate of unemployment
is one of the lowest in the country, between 4.5 - 5%, well below
Turkey's overall 10% rate, and the Chamber of Industry told us that
there are about 170,000 registered workers. While city officials
tell us that Denizli can handle the influx of migrant workers, they
do have concerns about the strain on its ageing infrastructure. As
with other developing cities in Turkey, its waste water treatment
system needs renovation. The Mayor told us that the current system
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loses about 50% of the water it transports, but the city has
received a 70 million euro grant from the World Bank for water
pipes.
Anatolian Tigers Moving West
----------------------------
6. (SBU) Comment: Denizli is yet another example of how Turkey's
strong economic growth is driving the growth of new regional
business centers. Its businesspeople have shown the strategic
thinking needed for Turkey to remain a significant producer in the
world textile market. Its vibrant business community works well
with the city's business-minded administration (the Mayor also owns
a successful textile manufacturing company), and the results show.
With growth, however, comes new problems, and leaders must continue
to plan well into the future to ensure that Denizli's population
growth does not overwhelm its infrastructure.
Wilson