Annual Conference March 2003 Toronto

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Annual ConferenceMarch 2003Toronto
Canadian-Turkish Business Council (Conseil
daffaires Canada-Turquie) Turkish-Canadian
Business Council Joint Conference
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Ontario Investment Services

• William Saunderson
• Chairman, Ontario Exports Inc.

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• It is indeed an honour to be your hosts at the
  first joint annual conference of the
  Canadian-Turkish and Turkish-Canadian Business
  Councils
• Dr. Arguden, on behalf of the government and the
  people of Ontario, I welcome you and your
  delegation to our province. And to our visitors
  from Ottawa, His Excellency, Ambassador Erman,
  and Secretary of State Gar Knutson, a special
  welcome to Toronto.
• As the provinces export development agency,
  Ontario Exports Inc. has ah history of
  cooperation with DEIK, CME and Business Councils.
  Cathy Boynton of Ontario Exports had the
  privilege of leading a trade mission that OEI
  organized to Turkey a couple of years ago. I like
  to think that this mission was part of the
  genesis of this Canadian Turkish Business
  Council.
• Personnally, I am planning a trip to Turkey in
  the near future. Last November, OEI co-sponsored
  a roundtable meeting on Canada-Turkey Relations
  with DFAIT and Export Development Canada. This
  was well attended by the business community and
  we look forward to further discussion today.

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• There is a good reason for this activity Turkey
  is a promising and expanding market for us. It
  plays an increasingly important role as a link to
  the EU. Also, Turkey has a growing role as a
  gateway to the emerging markets and natural
  resources of Central Asia.
• Turkey offers potential for Ontario companies in
  many sectors, including transportation, mining,
  construction, environment, communications
  technoolgies, consulting engineering and
  infrastructure. There are many Canadian companies
  with major interests in Turkey Bombardier,
  SNC-Lavalin, Inmet Mining Corporations, and of
  course, Oz Optics, in fibre optics sector.
• Today, we will hear more about these and other
  founding sponsors of the Canadian-Turkish
  Business Council. Companies such as Acres Intl.,
  Marshall Macklin Monaghan Ltd., and ABCO
  Engineering, all have on-going projects in
  Turkey. These are diverse projects, but they
  share an emphasis on infrastructure development,
  an export sector in which Ontario excels.
• Ontario Exports Inc. has a long history of
  assisting with infrastructure development, all
  over the world.
• As chairman of OEI its particularly gratifying
  for me to see this interest in developing new
  trading relationships.

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• We know that as Turkey moves toward membership in
  the European Union, it offers tremendous
  opportunities for cooperation, including projects
  in other markets.
• Much of the credit for this growing relationship
  must go to everyone involved in the
  Canadian-Turkish Business Council. Your
  experience in Turkey will prove to be very
  valuable to Ontario exporters.
• It is conferences like this one that can help
  make new contacts and develop our relationship to
  its full potential. We now have a solid base to
  build upon.
• During your time here, you will discover that
  Ontario companies have the products,
  technologies, and expertise that can help you
  meet your business needs.
• I know your discussions today will be extremely
  interesting and will lead to new friendships and
  business possibilities.
• Thank you.

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PRIVATIZATION IN TURKEY

• Prepared for
• Canadian-Turkish Business Council Meeting
• Toronto, March 20, 2003
• Atilla Bastirmaci
• Deputy Economic Councillor
• Turkish Embassy Ottawa
• All figures in US Dollars

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AN OVERVIEW

• A KEY ELEMENT OF ECONOMIC LIBERALIZATION SINCE
  1980s
• AIMS TO
• Minimize the state involvement
• Accelerate the establishment of market mechanisms
• Confine the role of state to areas like
  investment in infrastructure
• Enhance competition
• Decrease financial burden on national budget
• Broaden and deepen the existing capital market
• Provide efficient allocation of resources

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INSTUTITIONAL STRUCTURE

• LEGAL FRAMEWORK COMPLETED IN 1994
• PRIVATIZATION ADMININSTARION IS EXECUTIVE AGENCY
• PRIVATIZATION HIGH COUNCIL IS UPPER DECISION
  MAKING BODY

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WHAT HAS BEEN ACHIEVED SO FAR?

• Total sale value of the privatization
  implementations has been about US 8 billion
  since 1985.
• Total income reached to US 10 billion in the
  1985 2001 period.
• Total expenses were US 9.7 billion.
• The 97 of expenditures is the financing in
  provided to the companies in the privatization
  portfolio

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Privatization Implements 1985-2002
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AN ASSESTMENT

• Privatization process had started earlier than in
  most developing countries.
• Its achievements measured in terms of the size of
  divestiture have been limited compared with South
  American and Eastern European cases.
• Privatization of large-scale public enterprises
  has not become effective until the year 2000.
• The Turkish privatization program has mainly
  involved the divestiture of relatively small and
  medium-scale public enterprises.
• Focal point of the program was the privatization
  of public enterprises in tradable goods sectors,
  notably the cement industry.

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LESSONS FROM THE PAST

• Lack of Political Stability Coalition
  Governments
• Lack of consensus in public opinion on its
  necessity
• Deficiencies in the legal framework
• Changing objectives assigned to the PA
• Capital market (the ISE) was in its infancy
• Ambiguities in legal framwork and alleged lack of
  transparency in operational steps

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WHAT HAS CHANGED ?

• Process accelerated in the late 1990s.
• Economic crises and international context
  become main forces behind the program.
• Raising fiscal revenues and mobilization of
  support from the international economic agencies
  could only be feasible through a rigorous
  implementation of the privatization program.
• Without a restructuring in SEEs, it will not be
  possible to transform the Turkish economy.
• As a result, in 2000, Parliament created
  constitutional basis of privatization.

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WHAT IS AWATING US IN THE FUTURE?

• Single Party Government Political Stability
• Today, accelerating the privatization program is
  a top priority.
• The 2003 program aims to raise 4bn in 2003 by
  privatization.
• Currently there are 34 companies and some real
  estates in the PAs portfolio
• The government is also opting to sell off assets
  in full rather than limited public offerings
  and/or offering minority block shares.
• Many of Turkey's biggest public companies are to
  be privatized.
• Some new targets are also on the agenda
  National Lottery, Istanbul Stock Exchange,
  Istanbul Gold Exchange.

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PRIVATIZATION PROGRAM

• Major Companies on the Agenda
• Company Share Industry
• Turk Telecom Telecom
• Turkish Airlines 98.17 Airline
• PETKIM 88.66 Petrochemicals
• TUPRAS 65.76 Oil refining
• TUGSAS 100.00 Fertilizer
• TEKEL 100.00 Alcohol/Tobacco
• SEKER 100.00 Sugar
• ERDEMIR Steel mill

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PRIVATIZATION AGENDA

• INDUSTRY ENERGY SECTOR
• Transfer of state-owned thermal electricity
  generation and electricity distribution assets
  under the scope of the PA
• Two natural gas distribution subsidiaries of
  BOTAS (Eskisehir and Bursa) in the PA portfolio
  set for privatization.

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PRIVATIZATION PROGRAM

• INDUSTRY PETRO-CHEMICAL
• PETKIM (88,66 -Block Sale) Turkeys only
  petrochemical plant. Tender is announced. Offers
  are expected by April 1, 2003.
• TUPRAS (65,76 -Block Sale) Turkey's state owned
  oil importer and refiner. It has three large
  refineries. 34 of shares are already traded on
  the Istanbul Stock Exchange.

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PRIVATIZATION PROGRAM

• INDUSTRY FOOD PROCESSING
• TEKEL (alcohol, tobacco and salt monopoly). It
  is scheduled to be broken up, with its alcohol
  and cigarette factories due to be sold off via
  asset sale.
• SEKER (the sugar company) The road map for
  privatization of SEKER envisages that 5
  inefficient sugar factories will be closed and 7
  factories converted into corporations by the end
  of 2002.

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PRIVATIZATION PROGRAM

• TELECOM
• The telecom market will be liberalized at the end
  of this year.
• On May 15, 2001, a sweeping reform law mandated
  the complete privatization of the state-held
  monopoly Türk Telekom with the government
  retaining a single golden share.
• A forty-five percent block of Türk Telekom will
  be sold to a strategic investor with the
  remaining shares sold to Turkish investors.

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PRIVATIZATION PROGRAM

• OTHERS
• National Lottery, Istanbul Stock Exchange,
  Istanbul Gold Exchange
• Highways and Bosphorus Bridges
• VakifBank, Halk Bank
• Turk Telekom

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2003 PRIVATIZATION PROGRAM
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CONCLUSION

• A very ambitious agenda
• Possible war in Iraq poses certain challenges for
  2003
• A crucial barometer of the progress for economic
  restructuring
• Strategic opportunities for access into the
  Turkish market.
• Opportunity to operate in an almost monopolistic
  market in certain sectors.
• To conclude, privatization constitutes an
  important venue for reaching out to the Turkish
  market.
• Through partnerships with Turkish businesses,
  Canadian firms can capitalize on the
  opportunities in the market.

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The Last Thirty Years
1970-1979
1980-1989
1990-2002
GDP
Mean
4.8
4.0
3.5
St. Deviation
3.2
3.5
5.7
CPI
Mean
24.1
49.6
71.4
St. Deviation
15.7
26.7
23.8
CA/GDP
Mean
-1.8
-1.7
-0.9
St. Deviation
2.0
1.9
2.1
Budget Balance/GDP
Mean
-1.3
-2.7
-7.9
St. Deviation
1.4
0.9
3.8
1
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Political Setting

• The landslide victory of AKP in November 3
  election, resulting in the first majority
  government in 15 years.
• AKP has 363 of the total 550 seats available in
  Parliament
• Despite its Islamist roots, the party looks
  determined to carry Turkey to the EU and to stick
  to the IMF-supported economic program.
• Such a strong majority should lead to a political
  stability, but we have already seen many examples
  of incohesion within the party.
• The AKP government seems more pragmatic towards
  solving deep-rooted problems like Cyprus, but
  lacks the support of the civil and military
  bureaucracy.

5
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Political Setting

• Lack of experience in public administration is a
  crucial weakness of AKP.
• Similar to the previous Islamist parties, AKP
  refrains from confronting with both the
  establishment and the markets.
• Erdogans prime ministry might create new impetus
  for the party.
• Erdogan seems to be a more pragmatic personality
  but lacks expertise especially in economy.
• Thus, although Erdogan will try to keep the IMF
  relations on track, we might see accidents on the
  way.

5
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FINANCE IN TURKEY

• J. P. MORGAN
• By Koray Akin

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The Last Thirty Years
1970-1979
1980-1989
1990-2002
GDP
Mean
4.8
4.0
3.5
St. Deviation
3.2
3.5
5.7
CPI
Mean
24.1
49.6
71.4
St. Deviation
15.7
26.7
23.8
CA/GDP
Mean
-1.8
-1.7
-0.9
St. Deviation
2.0
1.9
2.1
Budget Balance/GDP
Mean
-1.3
-2.7
-7.9
St. Deviation
1.4
0.9
3.8
1
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Political Setting

• The landslide victory of AKP in November 3
  election, resulting in the first majority
  government in 15 years.
• AKP has 363 of the total 550 seats available in
  Parliament
• Despite its Islamist roots, the party looks
  determined to carry Turkey to the EU and to stick
  to the IMF-supported economic program.
• Such a strong majority should lead to a political
  stability, but we have already seen many examples
  of incohesion within the party.
• The AKP government seems more pragmatic towards
  solving deep-rooted problems like Cyprus, but
  lacks the support of the civil and military
  bureaucracy.

5
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Political Setting

• Lack of experience in public administration is a
  crucial weakness of AKP.
• Similar to the previous Islamist parties, AKP
  refrains from confronting with both the
  establishment and the markets.
• Erdogans prime ministry might create new impetus
  for the party.
• Erdogan seems to be a more pragmatic personality
  but lacks expertise especially in economy.
• Thus, although Erdogan will try to keep the IMF
  relations on track, we might see accidents on the
  way.

5
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Macroeconomic Fundamentals

• AKP is in a fortunate starting position because
• fundamentals are stronger
• pick up in economic activity reduces the
  political pressure on the government
• an economic program is already in place
• many structural reforms already implemented and
  the previous government has been punished for the
  unpopular measures

6
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Growth

• GDP growth reached 7.9 in Q3, furnishing a
  cumulative growth of 6.5 in the first three
  quarters.
• Inventory build-up was the main contributor to
  this growth
• It was also encouraging to see a rapid increase
  in exports in H2, while domestic demand remains
  benign.
• Output growth remained high in the industrial
  sector in Q4
• Investment demand also seemed to have bottomed
  out.
• Due to Iraq-related uncertainties, consumption
  and investment demand stalled in 2003Q1.
• The year-end growth target of 6.5 is easily
  within reach.
• The 2003 target of 5 looks overly aggressive

6
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Inflation

• The year-end inflation (CPI) of 29.7 was well
  below the target of 35. WPI inflation of 30.8
  also stayed below the official target of 31.
• 29.7 is the lowest inflation rate on record.
• Benign domestic demand plus a slow pace of lira
  depreciation were the main factors for such an
  improvement.
• The government targets an inflation (CPI) of 20
  in 2003, but surge in oil prices and probable
  increases in administrative prices might put this
  in jeopardy.
• It is encouraging to note a decline in inflation
  inertia market consensus of 25 is only
  marginally higher than the target

6
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Balance of payments

• Despite the weakness in export markets, export
  performance remain very strong. Unofficial
  figures indicate export growth of 34 oya in the
  first two months
• Euro appreciation is very positive.
• Recovery in domestic demand is putting an upward
  pressure on imports.
• Although tourist arrivals were up 14 in the
  first two months, Iraqi war should have a
  negative impact.
• Current account is expected to post a deficit of
  US 1.8 billion (0.9 of GDP) in 2002 and a
  deficit of US 3.7 billion (1.8 of GDP)
• Thus, there should be no physical FX demand.

6
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Fiscal performance

• The primary surplus target of 6.5 of GDP was
  missed by a margin in 2002 for three reasons
• Pre-election spending
• Structural problems in the social security system
• Higher exports leading to high tax rebates
• Populist activities like pension and wage rises
  put this years target (also 6.5) in jeopardy.
• The new package disclosed by PM Gul is very
  strong and is based on rational assumptions.
• We expect central government primary surplus to
  be 5.1 of GDP (official target 5.5) due to
  probable implementation risks

6
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Going Forward - Positives

• Geopolitical importance
• Prospects of a new support package
• The presence of a majority government
• Public awareness of the economic problems
• Impact of policy errors on the exchange rate
  serves as a warning signal
• The practice of duty losses and off-budget
  spending has ended
• Legal infrastructure of the reform program is
  nearly complete
• Persisting external pressure on the government
• Inflation expectations have been declining
  rapidly.

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Negatives

• Lack of full confidence on the program
• High level of currency substitution
• Hard to satisfy the preconditions of inflation
  targeting
• Will to reform declines when things get better
• The impact of the crises on the asset quality of
  the banks
• Risk of more internal resistance
• IRAQ

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Structural reform agenda

• Administrative reforms in the social security
  system
• Reform in the direct tax system
• Privatization of state banks
• Completion of corporate debt restructuring (the
  so-called Istanbul approach)
• Civil service reform
• Elimination of redundant posts in the public
  sector.
• Improving governance structures in state economic
  enterprises
• Reforming the Bankruptcy Law

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ELECTRONICS INDUSTRY
www.ozoptics.com Presented by Zahide
SezermanVice President, Founder Director
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Photonics has applications in many industries

• Telecommunications
• Biophotonics Pharmaceutical, Medical
• Military and Aerospace
• Industrial and Educational
• Laser Cameras
• Image Processing
• CATV

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Polarization Maintaining Fiber Components
Attenuator Products

• Connectors and Patchcords

• Faraday Rotators / Mirrors

• In Line Variable Attenuators

• PM Fiber Pigtailed Laser Diodes

• Plug Type Fixed Attenuators

• Polarization Rotators and Analyzers

• Reflective Style Attenuators

• Fiber Polarizers

• Digital Variable Attenuators

• Circulators

• Fiber Optic Shutters

• Polarization Controllers

• Electrically Controlled
• Variable Attenuators

• Polarization Combiners

• Couplers / Splitters

• Loopback Attenuators

• Polarization Measurement
• Systems

• Fiber Optic Terminators

• Polarized Sources

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Laser Laser Diode to FiberDelivery Components
Fiber Optic Test Equipment

• Laser to Fiber Couplers with Adjustable Focus
• Laser Diode to Fiber Couplers
• Fiber Pigtailed Photodiodes
• U-Brackets with Removable Optics
• Laser to Fiber Delivery Systems for
• Flow Visualization
• Laser Diode Collimators/Power Combiners
• Laser to Fiber Delivery Systems for
• Flow Visualization
• Fiber Optic Vacuum Feedthroughs
• Low / High Power Fiber Patchcords
• Universal Connectors
• Hybrid Patchcords
• Bulkhead Receptacles / Sleeve Through Adaptors

• Polarization Extinction Ratio Meters
• Optical Power Meters with Smart Detector Heads
• Pocket or Pen Size Fault Locators
• Stable Sources
• Digital Variable Attenuators
• Backreflection Meters
• Digital Tunable Filters
• Digital Variable Reflectors
• Variable Optical Delay Lines
• Polarization Controllers / Rotators / Analyzers

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VisorTM Based Palm Size Test Equipment
Fiber Optic Components for Optoelectronic
Packaging
PocketPowerTM Meters

• Metalized Fibers

Dual Laser Diode Sources

• Hermetically Sealable Patchcords
• with Glass or Metal Solder

• Fiber Pigtailed V-Groove Arrays

Visible Fault Locator Test Sets

• Tapered / Lensed Fibers

• Fiber Collimators/Focusers

Optical Loss Test Sets
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Geographic Distribution
OZ Optics has resellers and distributors in 30
Countries including
France
Italy
Australia
South Korea
Austria
Germany
Japan
Spain
Benelux Countries
Greece
Norway
Switzerland
Brazil
Sweden
Hong Kong
PRC - China
Canada
India
United Kingdom
ROC - Taiwan
Czech Republic
Ireland
Portugal
United States
Denmark
Israel
Singapore
sold to over 6000 customers globally! and OZ
exports 96 of its Canadian Production!!
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Facilities North America

• Head Office
• Manufacturing and RD 60,000 sq. ft.
• Sales, GA and common space 14,000 sq. ft.
• Training, short term accommodation and fitness
  facility 15,000 sq. ft.

• Sales offices in NJ CA

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Accomplishment in Turkey

• Incorporated OZ Optics AS
• Important presence in the Optics/Photonics
  Industry
• Free Trade Zone
• Cost Effective Manufacturing
• Acquired a 33,000 sq. ft. manufacturing facility
• Hired 33 Full Time Employees
• Starting developing business within Turkey and
  overseas
• Founding member of the Canadian Turkish Business
  Council

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Market Opportunity in Turkey

• Early stages of fiber optic infrastructure
• Fiber optic components are critical
• Reform Deregulation of Telecom Services by 2005
• 18 million telephone lines
• Need to install 2-2.5 million additional lines
  per year to meet demand
• Value of telecom market at 1.77 billion (2001)
• US telecom equipment exports 32.6 million in
  2001
• Turkish Government launched investment of 12
  billion in Telecom