Economy minister hopes for IMF agreement within 10 days

Kemal Derviş, Turkey's new economy minister, yesterday out­lined key structural reforms in a radical rescue package intended to haul the economy out of crisis.

The former World Bank econo­mist also said additional finan­cial assistance from the interna­tional community was necessary to help bring down "sky-high interest rates" that he identified as the main threat to Turkey's fragile financial system.

Mr Derviş was appointed two weeks ago to salvage ambitious economic reforms following the collapse of an earlier programme that was backed by the Interna­tional Monetary Fund.

Turkey was forced to abandon a pegged exchange rate and allow a 25 per cent devaluation of the Turkish lira after financial tur­moil triggered by a political dis­pute between the president and prime minister.

Mr Derviş said he hoped a com­plete revised reform plan -including a new inflation target and other macroeconomic indica­tors - could be agreed with the IMF within 10 days.

Mr Derviş conceded that the IMF was unlikely to increase the overall amount of money -$11.4bn - that has already been pledged to Turkey, though he expected greater flexibility in the way a remaining $7bn still out­standing could be spent.

He said Ankara was looking for increased "bilateral assistance" from individual countries, as well as "the support of the markets and both domestic and interna­tional banks".

A key element of the package -which has the full backing of the coalition government - was the rationalisation of three loss-mak­ing state-owned banks under a single supervisory board.

Mr Derviş announced that Ziraat, Halk and Emlak banks -the three main state-owned banks - would be restructured to operate "on the basis of market rules and profitability". This would include the merger of Emlak with Ziraat, branch clo­sures and staff cuts.

The government would issue " marketable domestic debt instruments " to the equivalent of $16bn to help cover losses of more than $20bn accumulated by the three banks. The restructur­ing will be overseen by a com­mon board of directors staffed by independent bankers.

Other measures included legis­lation to make the central bank fully independent and aid liquida­tion of insolvent banks. There were also moves to sell off 51 per cent of Turk Telecom and accel­erate privatisation of Turkish Airlines, as well as the alcohol, tobacco and sugar monopolies.

Ankara also filled the impor­tant posts of treasury chief and head of the banking watchdog by respectively appointing Engin Akcakoca and Faik Oztrak, both respected technocrats.

VOCABULARY:

abandon a pegged exchange rate – отказаться от привязки национальной валюты к доллару

inflation target – целевой ориентир уровня инфляции

marketable domestic debt instruments – легкореализуемые внутренние долговые инструменты

banking watchdog (supervisory board) – банковский наблюдательный совет

VOCABULARY CHECK

1) Компания, неспособная платить по своим долговым обязательствам, является неплатежеспособной.

2) В Великобритании неплатежеспособность отдельных индивидуумов может привести к банкротству, а в случае несостоятельности компаний - к ликвидации.

3) Когда компания испытывает финансовые трудности, для выправления дел судом может быть назначен администратор или конкурсный управляющий.

4) Если невозможно сохранить компанию как функционирующее предприятие, администратор продаст собственность компании, чтобы хотя бы частично выполнить обязательства перед основными кредиторами.

5) Компании, которые испытывают финансовые проблемы, часто называют «хромыми утками».

6) Антикризисные управляющие помогают компании выйти из кризиса. Если им это удается, то речь идет о серьёзном благоприятном повороте положения компании.

CASE STUDY:

Europe's Enron

The Ahold financial scandal should shock Europe into accounting and corporate governance reform, just as the Enron scandal did in the USA.

"It may seem an exaggeration to describe the scandal overwhelming Royal Ahold as "Europe's Enron" - but in many ways it is true enough. Certainly, the world's third-biggest food retailer, after Wal-Mart and Carrefour, presents none of the financial risks ofEnron, which was both deeply in debt and the world's largest electricity giant. That apart, the similarities between the former Texan powerhouse and the Dutch retailer are striking, from the very bad corporate governance, aggressive earnings management and accounting "irregularities" to auditors whose role must be called into question.

Now, at least, Europeans should stop believing that corporate wrong-doing is a US problem that cannot occur in the old continent. Instead, they should fix their own corporate governance and accounting problems.

On 24 February 2003 Ahold announced the resignation of its chief executive and finance director after find­ing that it had overstated its profits by more than 463m ($500m). Its market value plunged by 63 per cent that day, to 33bn. In late 2001, it exceeded 30bn. Ahold is now under investigation by vari­ous authorities, including the Securities and Exchange Commission (SEC) in the USA

Rather like Kenneth Lay at Enron, and Dennis Kozlowski at Tyco, another scan­dal-hit US firm, Ahold's now-departing boss, Cees van der Hoeven, won a huge reputation from turning a dull company into a growth machine. Investors applauded long after they should have started asking hard questions. When eventually they did ask them, his anger and pride became quickly apparent and he refused to answer.

The 463m overstatement is due pri­marily to Ahold's US Foodservice unit, which supplies food to schools, hospi­tals and restaurants, although there are also issues over its Disco subsidiary in Argentina and several other units. This has led some observers to say that this is less a European problem than yet anoth­er US accounting failure. Such a claim absolves Ahold's bosses of responsibility for their acquisitions and dishonesty and ignores the persistent, firm-wide tendency to test the limits of acceptable accounting.

Most firms that buy in bulk - includ­ing such admired retailers as Wal-Mart and Tesco - get discounts from suppli­ers if they meet sales targets. The issue is how those rebates are accounted for. The accepted practice is to wait until the tar­gets are met. Failing firms, such as now-bankrupt Kmart, food distributor Fleming, and now Ahold appear to have booked these rebate payments before they were earned.

What of Ahold's auditor? Although the problems were uncovered, it should have done so much earlier, says Lynn Turner, a former chief accountant at the SEC.

VOCABULARY:

bad corporate governance – неэффективное корпоративное управление

Securities and Exchange Commission (SEC) - Комиссия по ценным бумагам и биржам

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