Turkey's Criz Case

1. Where in the Current Account would the imported telecommunications

equipment be listed? Would this correspond to the increase in magnitude and
timing of the Financial Account?
It would be recorded in the current account: imports of goods. since the
telecommunications sector were purchased by a commercial credit. This means that both
Motorola and Nokia companies were affected because Telsim was unable to make
payments on the equipment and repay their loans. There would be a direct
correspondence between the acquisition of Motorola and Nokia products and increased
financial capital. This explains the massive increase in the financial account or credit
inward investment, since by obtaining telecommunications equipment is considered an
investment in commercial credit for the balance of payments is considered in the financial
account
2. Why do you think that net direct investment declined from $573 million in 1998 to
$112 million in 2000?
The more general and precise reason which foreign direct investment declined, may be
due to other net investment subaccount increased due to the Turkish venture into the
telecommunications sector with the purchase of infrastructure and equipment from the
United States and Finland. TeleSim took on debt to finance the telecommunications
Project hence such an abrupt increase in the financial account rising from 1.1 billion in
1999 to 8.3 billion in 2000. So this investment is considered as a commercial credit not
reflected as foreign direct investment, but a loan amounting to "other" in the financial
account of the BOP for Turkey.
3. Why do you think that TelSim defaulted on its payments for equipment imports
from Nokia and Motorola?
Regardless that the company had a significant surplus in the capital and financial
accounts, most of that surplus were actually trade credits and debts. Turkish financial
account increased from 1998-2000, in the period between 1999-2000 the direct and
portfolio investments were declining in most other investments rose seven billion. These
two
look
intensified
the
problem.
1. Foreign investors withdrew from Turkey (1999 and 2000).
Other countries were not buying debt securities Turkey, nor were foreign investors to invest
in Turkish companies. Given that there was a cash inflow in the balance of payments of
Turkey.
2. External debt of Telsim was taking the form of telecommunications equipment in billions
of dollars. Thanks to the omission of Telsim in relation to lending commitments was one of
the factors that caused the trade deficit of Turkey, this brought the devaluation of its
currency devaluation that probably hampered the ability of Telsim to repay their
loans. Telsim would have to pay their obligations, making the dollar-lira as the lira was
devalued
would
be
more
difficult
to
make
payments
on
loans

According to a New York Times report, the Uzan family that controls Telsim--family in 2003
accused of fraud to this family "at least $ 1 billion [loan] it was diverted to other companies
controlled by the family for Spending on luxury items and for their personal accounts. " The
Uzan, however, argue that "all conflict reflects the unwillingness of suppliers to meet
losses arising from the global crisis in the telecommunications markets, recession in
Turkey and a large devaluation of the Turkish lira" (NYTimes, Feder).