Turkish President Ahmet Necdet Sezer vetoed Adnan Buyukdeniz's candidacy for new governor of the central bank. Buyukdeniz is the general manager of Al Baraka Turk, the interest-free bank which operates according to Islamic rules. The Presidential veto was disclosed on March 25th and it is likely to unnerve the financial markets today. The President also rejected the government's proposed appointment of Mehmet Simsek and Birol Aydemir as the deputy governors to the bank. The office of the Prime Minister, Recep Tayyip Erdogan, announced that the President vetoed the proposal regarding Buyukdeniz arguing that he was "inappropriate" for the position. The daily newspaper Milliyet reported that the reason for the veto was that Buyukdeniz has specialised in interest-free banking, according to Islamic rules, and so was not a good choice to have responsibility for setting interest rates. Erdogan said that they would decide on a new nominee after consultation in the cabinet.
Sureyya Serdengecti, the well-respected governor of the central bank until his retirement on March 14th, was a favurtie with the markets because of his successful disinflation policies. Deputy Governor Erdem Basci is is serving as acting governor. Before Buyukdeniz's nomination, it was widely expected that Basci would be appointed as full-time governor, triggering a debate over his wife, who wears a headscarf.
The failure of the government to secure a new governor is the latest in a series of disagreements between the ruling Islamic AKP and the fiercely secular President Ahmet Necdet Sezer.
Rodrigo Rato, IMF managing director has warned Turkey that it may risk losing its macroeconomic credibility. According to Rato, Turkey should stick to its economic programme as the debt-ridden economy remains fragile. He added that cutting taxes is not an appropriate way to lower the public sector debt.The government recently decided to cut VAT on textile products to help the ailing textile sector and also gave a pay rise to some 1.4 million civil servants. The IMF reportedly criticised both measures.
Economy minister Ali Babacan acknowledged that the IMF was disturbed by the VAT rate cut for textile products and the pay rise for civil servants. He said that Turkish officials discussed the moves with the IMF and submitted impact assessments to IMF officials.
Deputy Prime Minister Abdullatif Sener said that the pay rise for civil servants would bring a 2 billion Turkish lire burden on the budget and that 1.3 billion Turkish lire of this was foreseen in the 2006 budget. The remaining 700 million Turkish lire will be met through reserve appropriations and would not, therefore, affect the budget.
The Czech Republic's contract with South Korean car producer Hyundai, for an investment worth some 1 billion euro, will probably be signed this week, industry ministry spokesman Ivo Mravinac stated, adding that Hyundai's lawyers were in the Czech Republic finalising the memorandum on the investment.
If signed, the memorandum will have to be approved by the Czech government and the Moravskoslezsky kraj regional authorities. Hyundai experts group are expected to remain in the Czech Republic for the whole week, and Hyundai vice-chairman Kim Dong-Jin will reportedly arrive in Pragueto sign the contract with minister Milan Urban.
The plant, to be built in Nosovice in Moravskoslezsky region in northern Moravia , is expected to produce around 300,000 cars annually from 2008 and employ some 3,000 people, while a further 10,000 jobs would be created with subcontractors. Details about the costs of the project for the Czech government will be disclosed only after the memorandum is signed. However it is known that Hyundai was been offered tax relief and subsidies worth 3.5 billion Czech koruna, while the government will reportedly spend another 2.5 billion koruna to extend the road leading to Slovakia, where Hyundai subsidiary KIA is also building a plant. Hyundai's investment, one of the largest in the country, is estimated to speed up Czech economic growth by more than 1% a year. If Hyundai eventually builds its car plant in the country, the Czech Republic will become the second largest car producer in the European Union.
News from Euromoney Group sources