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Proceedings of the Standing Senate Committee on 
Foreign Affairs and International Trade

Issue 24 - Evidence - Meeting of April 17, 2013


OTTAWA, Wednesday, April 17, 2013

The Standing Senate Committee on Foreign Affairs and International Trade met this day, at 4:22 p.m., to study economic and political developments in the Republic of Turkey, their regional and global influences, the implications for Canadian interests and opportunities, and other related matters.

Senator A. Raynell Andreychuk (Chair) in the chair.

[English]

The Chair: Honourable senators, today the Standing Senate Committee on Foreign Affairs and International Trade is continuing its examination of economic and political developments in the Republic of Turkey, their regional and global influences, the implications for Canadian interests and opportunities and other related matters.

In this session, we are very pleased to welcome two witnesses. First, joining us by video conference, from Washington, D.C., is Dr. Gönül Tol, Founding Director of the Center for Turkish Studies at the Middle East Institute, who will speak to various foreign policy issues. He will be followed by Mr. Murat Özdemir, Country Advisor in Canada for the Investment Support and Promotion Agency of Turkey, who will speak to investment issues and, perhaps, other issues if he wishes. After we hear from the witnesses, whose interventions will, I think, be to the point, we hope there will be time for questions and answers.

Dr. Tol, the floor is yours. Welcome to the committee via video conference.

Gönül Tol, Founding Director, Center for Turkish Studies, Middle East Institute: Thank you very much, Madam Chair. Honourable senators, ladies and gentlemen, I am delighted to be here today to speak with you about Turkey. Today, I will talk about recent developments in Turkish politics and Turkey's Middle East policy. Domestically, the most important development that will impact not only Turkey's democratic consolidation but also its Middle East policy is the ongoing talks between the Turkish government and the imprisoned PKK leader, Abdullah Öcalan. In December 2012, the Turkish Prime Minister announced that the Turkish intelligence organization MIT had been talk holding talks with the PKK leader, who has been serving a life sentence in prison. The roadmap drawn up between the PKK leader and the MIT is said to include a declaration of a ceasefire by the PKK, a release of Turkish hostages held by the PKK and withdrawal into Northern Iraq in August, after laying down arms. In return, the Turkish government is expected to craft legislation to overhaul the current definition of terrorism, which would pave the way for the release of hundreds of imprisoned Kurdish activists. The Turkish government is also expected to adopt constitutional reforms removing obstacles to Kurdish language education, which is the most important Kurdish demand. The PKK leader called for a ceasefire and withdrawal last month, during the Kurdish New Year, and the PKK released eight captives it has been holding for years.

The Turkish Prime Minister last week asked the PKK members to withdraw into northern Iraq, leaving their weapons behind, which created controversy among the pro-Kurdish BDP, and also the PKK members in Europe and in northern Iraq. We are expecting Erdogan to clarify this point within the next few days.

The current initiative is not the first government effort to negotiate with the PKK. There have been past efforts, but this time the talks are being carried out publicly, and I think there are reasons to be optimistic. They have the backing of the main Turkish opposition party, the CHP, the pro-Kurdish party, BDP, civil society organizations, the mainstream Turkish media, a majority of the Turkish public and also the PKK in Europe and in northern Iraq. However, I think risks abound, and past experiences counsel against premature optimism. I can talk about the risks during the Q and A session.

The eventual success of the initiative will have major domestic and regional implications. Domestically, a peaceful resolution of the Kurdish issue would remove one of the most important stumbling blocks to democratic conservation in Turkey. It could also boost Prime Minister Erdogan's image in the run-up to the 2014 presidential elections, sealing his place in history as the leader who ended the country's nearly 30 years of conflict with the PKK.

A settlement with Turkey's own Kurds would also have regional implications. Turkey's Middle East policy has been held hostage by the Kurdish problem for the past decades. A resolution would remove a major stumbling block to Turkey's aspirations to be the regional superpower.

Now I would now like to talk about Turkey's Middle East policy, and it is connected to Turkey's recent government initiative as well as Turkey's Kurdish minority.

The Arab Spring caught everyone off guard, but it has posed a particular challenge for Turkey's Middle East policy. Before the uprising started, Turkey cultivated close ties to the Syrian regime, held joint cabinet meetings, lifted visa requirements and invested heavily in Syria. Similarly, there are more than 800 Turkish companies operating in northern Iraq. Turkey also cultivated close relations with Iran, leading to arguments by some in Washington, D.C., that the West has lost Turkey and Turkey has turned its back on its Western allies, and that Turkey would be the next Iran in the region with its Islamic-rooted government.

In 2010 Turkey vetoed UN sanctions against Iran and cooperated closely with Iran against the PKK; so Turkey, before the uprisings, was a status quo power, but the Arab Spring disrupted the status quo and reshuffled the strategic cards in the region. Confronted with a high state crisis in Syria and having invested in the country, Turkey initially remained cautious when the uprising in Syria started in 2011, asking Bashar Assad to carry out reforms instead of asking him to step down. Turkey hoped to have leverage over the Syrian regime but was disappointed when, in August 2011, the Turkish foreign minister had a meeting with Bashar Assad when Assad did not seem to listen to Turkey's advice. Foreign Minister Davutoglu went back to Ankara and that is finally when Turkey joined the anti-Assad camp. Since then, Turkey has been supporting the Syrian opposition actively, hosting the Free Syrian Army and over 200,000 Syrian refugees. In retaliation, Assad allowed the leader of the PYD, which is the PKK's Syrian offshoot, to return to Syria, so now PYD controls the northern part of the country along Turkey's Syrian border. Turkey shares a 900- kilometre border with Syria.

Due to the diverging stances over Syria, the Turkey-Iran relationship has been strained. Turkish media reports that some of the PKK attacks in 2012 were carried using Iranian military posts. Another blow to Turkey-Iran bilateral relations came when Turkey decided to host the NATO radar systems on its soil, which Iran declared a move to protect Israel from Iran.

Relations with Baghdad are also problematic. The Maliki government accused Turkey of signing energy deals with Kurdistan regional government without the approval of Baghdad, and Turkey is accusing Maliki of being authoritarian and pursuing a sectarian policy and discriminating against civilians in Iraq.

Within this geopolitical context, ironically, the Kurdistan regional government, which Turkey refused to recognize until a few years ago, has become the only Turkish ally in the region. It has become the backbone of Turkey's Middle East policy. It is a win-win situation because Turkey offers a gate to European markets for Kurdish oil and in return Barzani can serve several functions. Considering the fact that the Maliki and Erdogan governments are not on good terms at the moment, Barzani can provide access for Turkey into Iraqi policies, and also, according to Turkey's calculations, Barzani can be useful for Turkey in Syria among the Syrian-Kurdish population because Turkey has no leverage over Syrian Kurds. One third of the PKK members are of Syrian-Kurdish origin, so whatever happens within the Syrian-Kurdish community has a direct political and security impact on Turkey. Turkey is planning to use Barzani's influence over the Syrian Kurds and to have a say in future Syrian politics.

Kurdish oil can also help Turkey become an energy hub in the region. The Turkey-KRG relationship has been transformed over the last years and now Turkey seems to worry less about an independent Kurdistan on its southern border as long as the KRG is dependent on Turkey economically. If the recent government initiative with the PKK succeeds and Turkey finally solves its Kurdish problem, it might change regional dynamics and it might impact the course of the Kurdish political movement in Iraq, in Syria and even in Iran.

I will end there. I will be happy to answer your questions.

The Chair: Thank you, Dr. Tol. That is very helpful. We visited Turkey when the announcement of the possible peace settlement was placed before the Turkish people. Thank you for the update.

We will now turn to Mr. Murat Özdemir, who will talk about investment issues.

Welcome to the committee.

Murat Özdemir, Country Advisor in Canada, Investment Support and Promotion Agency of Turkey: Thank you, Madam Chair.

Honourable senators, Dr. Tol, ladies and gentlemen, on behalf of the Investment Support and Promotion Agency of Turkey, also known as ISPAT, I would like to thank you for providing me the opportunity to appear before your committee today. I have a short introduction and then I will answer your questions during the Q and A session. I have already been informed of your earlier committee sessions and your recent trip to Turkey, so I will try to minimize repetitive information to better utilize our time today.

Honourable senators, let me start with some key facts about the agency I am working for. The Republic of Turkey Prime Ministry Investment Support and Promotion Agency, ISPAT, is the official organization for promoting Turkey's investment opportunities to the global business community and providing, free of charge, assistance services to investors before, during and after their entry into Turkey.

Founded in 2007 under the auspices of the Prime Ministry, ISPAT has two local offices in Ankara and Istanbul, employing project directors, sector experts and researchers. With a network of local representatives in 15 countries, ISPAT helps investors successfully develop their operations in Turkey.

Working on a fully confidential basis, as well as combining the private sector approach, with the backing of all governmental bodies, ISPAT's free-of-charge services include, but are not limited to, market information and analysis, industry overviews and comprehensive sector reports, assessing conditions for investment, site selection, finding companies for potential partnerships and joint ventures, negotiations with relevant governmental institutions, facilitating legal procedures and legislation issues.

Honourable senators, currently there are more than 180 investment promotion agencies around the world, and ISPAT is one of them. As you know, the Canadian counterpart is Invest In Canada, operating under the Department of Foreign Affairs and International Trade.

As one of the youngest national investment agencies operating on the global scale, ISPAT differentiates itself from the competition in two ways.

The first is organizational distinction. ISPAT is the only investment agency attached directly to the Prime Ministry and that reports to the Prime Minister, the most senior executive in the government. Obviously, this brings operational freedom and flexibility, which is a key competitive advantage.

The second is related to its mandate. In addition to promotional activities, ISPAT renders support services with its dedicated team of project directors, having hands-on investment experience and private sector background. The project director, assigned to a specific investment project, actively serves on the investor's team throughout the development of the project. In that sense, ISPAT functions as a catalyst, accelerating the investment development processes and minimizing the critical path of the project so as to accomplish win-win situations, both for the private investor and for the Turkish economy.

Honourable senators, after a series of sessions held here in Ottawa and your recent visit to Ankara and Istanbul, I believe you all know how big the Turkish economy is, its unprecedented growth rate and strongly positive projections of the upcoming decade. I am sure you have learned a lot about the domestic market, demographics, international trade and geopolitical significance. I do not want to repeat all those numbers; rather, I would like to brief you on the transformation process of the Turkish economy from an investment point of view.

As you know, Turkey has been undergoing a profound transformation process over the past decade. Having been elected for three consecutive terms since 2002, a single-party government is ruling the country, with a proven dedication to political and economic reforms to escalate Turkey within the league of G20.

In order to better understand what actually happened to Turkey's investment climate in the last decade, we should take a look at the regulatory reforms that have been put in place by the government since 2002.

First and foremost, Turkey enacted a new foreign direct investment law in 2003, which provides foreign investors with legal guarantees by treating them equally with local investors. The message is that there is freedom to invest and no discrimination among international or domestic investors in Turkey. Turkey recognized international arbitration, facilitated investors' access to real estate and appointment of expats. It has taken measures for free transfer of funds and protection against expropriation.

The corporate tax rate was decreased from 33 per cent to 20 per cent for all companies. Today, Turkey provides international investors with specific measures and solutions for doing business in a timely manner, easily and effectively.

Honourable senators, I am an engineer by background, so I would like to verify this transformation process with some numbers as well.

Turkey has attracted US$123 billion of foreign direct investment since 2003, in the last 10 years, while it attracted only US$15 of FDI in the preceding eight decades before 2003. In the same period, in the last 10 years, the number of foreign capital companies rose from 5,600 to over 33,000. Increasing confidence in the Turkish economy has also been recognized internationally. According to the OECD, the reform process has yielded significant results, making Turkey the second biggest reformer of its restrictions on FDI among the OECD countries.

Honourable senators, I would also like to mention the three most recent and fundamental regulations, which are expected to trigger high-quality investment flows into Turkey. First is the new R & D and innovation law, next is the new Turkish Commercial Code, and the last one is the new investment incentives regime.

Entered into force in 2008, the R & D and innovation law brought various financial supports and tax exemptions to companies establishing new R & D centres or initiating innovation projects within their existing operations. Essentially, R & D centres and their personnel are exempted from income taxes, and R & D expenditures are fully tax deductible. Also, the government allocates dramatically increasing budgets for research grants through TUBITAK, which is the national science foundation or NSERC equivalent in Turkey, and other support mechanisms for innovation projects. Turkey's target is spending 3 per cent of the GDP on R & D. It was doubled in the past decade, but it is still below 1 per cent. As of July 2012, last year, Turkey has a brand new commercial code, which brings international auditing and accounting standards for all companies. Hence, a transparent, accurate and compatible financial reporting system in line with IFRS for each and every registered enterprise in Turkey is in place. While conducting financial due diligence processes for acquisitions or partnerships in Turkey, the investors will be confident and rely on credible statements, even from small to medium-sized enterprises.

The Turkish government released a comprehensive incentive package last year as well. The incentive package contains customs duty and VAT exemptions, corporate tax reductions, as well as support for insurance premiums, interest payments and land allocations. Under the new system, the government intends to balance the levels of local development, particularly focusing on investment in the least developed areas.

I do not want to go into the details of the components of the new regime, but I will give you a ballpark estimate of the financial contributions of the government through the new incentives.

Government support may accumulate up to 160 per cent of the capital investment made by the investor. Put differently, in some cases a dollar of investment will be backed by the government's financial contribution of $1.60.

Honourable senators, with this unique land, capturing 1.5 billion people, $25 trillion of GDP, $8.2 trillion of trade, which is 45 per cent of the global trade, Turkey is still an untapped complementary destination for Canadian companies seeking global outreach and exploring a sustainable growth strategy in many sectors, including mining, automotive, ICT, aerospace, energy, agriculture.

As you know, the OECD predicts Turkey to be the fastest-growing economy in the next decade, and Goldman Sachs projects Turkey to be the ninth largest economy in the world, and third in Europe, by 2050.

In order to match this economic growth, Turkey is expected to implement a diversified portfolio of infrastructure investments, including numerous transportation, energy, and health care projects through private initiatives or public- private partnership models. For the next decade, the infrastructure portfolio itself will result in over US$400 billion of investments. Canadian companies with a significant track record in this area would be involved as an equity investor, financier, owner, operator or facilitator in most of those projects.

This is the end of my brief. With your permission, I will be more than happy to receive your questions. Thanks a lot.

The Chair: Thank you. I do have some questioners.

[Translation]

Senator Fortin-Duplessis: Thank you, Madam Chair. My first question is for Director Tol. What role can countries such as Canada play to support the efforts made by Turkey regarding the situation with journalists, the negotiation process with the Kurds, and preparations for a new constitution?

[English]

Ms. Tol: The European Union membership process has become an important dynamic that pushes Turkey's democratization. Turkey has been going through a transformation for the last decade. There are domestic drivers of Turkish democratization, so there are internal dynamics at play here. Both European countries as well as Turkey's Western allies can support Turkey's democratization process. However, the key to democratic consolidation in Turkey lies in the hands of domestic actors.

In that regard, the Turkish government has a huge role to play, as do other Turkish civil society organizations, the Turkish opposition party, and the media. Especially the Kurdish issue has been the most important problem in Turkey's democratic consolidation for decades. We have a historic opportunity, and everyone has to play a constructive role in this process.

The Syrian refugee crisis has become a major challenge for Turkey. There is cooperation between Canada and Turkey, and between Turkey and the United States. Turkey has reached its limit in terms of infrastructure as well with the refugee camps. It is increasingly difficult for Turkey to absorb more refugees. In that regard, Turkey could use financial help from its Western allies. As well, democratic consolidation involves solving the Kurdish issue, as well as free speech, which has encountered problems in recent years. There are Turkish journalists in jail. That has been a problem. All those issues must be resolved domestically.

Senator Lang: I would like to pursue a question with Mr. Özdemir. I appreciated the presentation and I am pleased that Turkey is doing as well as it is. Obviously, over the past 10 years it has moved ahead in trade and commerce. This is reflected in the standard of living for the people of Turkey.

Could you elaborate on Canada's role in trade with Turkey and the amount of trade we do? What further steps can Canada take to promote trade with Turkey? What more would you expect from Canadian businesses?

You gave a general observation of areas where trade from Canada could be encouraged. Do you have any specifics? Do those areas include aerospace or agriculture? Could this committee recommend specific areas for trade in its report and how they should be promoted? This would help to promote trade and negotiations in Turkey.

Mr. Özdemir: I am not a trade commissioner, so I do not have much experience in foreign trade. I come from an investment agency, so I have much more experience in investment issues. However, I would like to respond to your question to the best of my knowledge.

Canadian trade with Turkey is about $2.5 billion. It is low when compared with our trade volume with Brazil, which is $16 billion. I do not even compare with many other countries. Brazil is far away from us and we do not have any historical relationship or strong ties with Brazil; but we are doing great in the area of trade.

This is important for further cooperation between countries. Right now, Turkey and Brazil are cooperating in different areas, such as joint investments in different countries and joint political actions in different areas of the world. There is potential for sure. It is an important milestone to exploit this potential foreign trade agreement between two countries, which will be comprehensive and include mutual protection and promotion of the investments. This will trigger the flow of trade both ways and will increase the foreign trade for both Canada and Turkey.

For Canadian companies regarding the sectors that I have mentioned in my brief, Canada is very strong in many sectors. There are also some niches like biomedical companies that develop novel products in Canada, which might be a good match for further development in Turkey or other countries. We do not limit ourselves to sectors; we focus on companies. We have three basic criteria. As an agency, we look after investments that create employment in Turkey; reduce the current account deficit in turkey, which is export-based investments; and, maybe the most important, the transfer of technology.

If an investment satisfies two of these three criteria, it will be a target company for us. We support them closely and work with them on a day-to-day basis. For instance, a technology development company with five people might be a small company at first sight. When they come to Turkey, they open an office and provide jobs to three or four guys. If they are developing a really novel product, the multiplier effect of that investment will be huge for the country; and that is why we may go into that as well. We do not limit ourselves to specific sectors. We look at niche companies to create company-specific success stories that we can use as a promotional tool for our later efforts.

Senator Downe: You are an investment support and promotion agency of Turkey. Is that a department or agency of the government?

Mr. Özdemir: Yes.

Senator Downe: Do they fund your operation?

Mr. Özdemir: Yes.

Senator Downe: Are you part of the embassy in Canada?

Mr. Özdemir: No. We are directly attached to the office of the prime minister of Turkey. Embassies are part of foreign affairs. We have two local offices in Ankara and Istanbul. The agency reports directly to the Prime Minister, the Honourable Recep Tayyip Erdogan. We also have country representatives or advisers spread around the world to developed countries, where we can attract investment in Turkey. I am the one for Canada, and we have a few colleagues in the United States, China, Japan, India, Korea and many in Europe. In most developed countries, we have a network of representatives. We are attached directly to the office of the Prime Minister.

Senator Downe: You are here as a citizen of Turkey.

Mr. Özdemir: Yes.

Senator Downe: You work for this agency funded by your Prime Minister's office, and you report directly to your Prime Minister's office.

Mr. Özdemir: That is right.

Senator Downe: Do you have any interaction with the embassy?

Mr. Özdemir: Of course.

Senator Downe: I am curious to know how it works. The embassy promotes a range of issues, including investment.

Mr. Özdemir: That is right.

Senator Downe: You identify some opportunities for Canadians to invest in Turkey. You report directly to your Prime Minister's office, but you also advise the embassy of what you are doing.

Mr. Özdemir: Yes. Our local reps report directly to our managers in Turkey, and they report to the Prime Minister. While promoting Turkey's investment opportunities to businesses in Canada, we collaborate with our trade commissioners here and all Turkish diplomatic missions here. If they organize an event we help, we support them.

If we organize something, they help us. We have joint meetings with the business people. We are working on an arm's length relationship here in Canada and everywhere in the world. They are our ambassadors, consul generals, or our trade commissioners. We have really good relationships and close ties, but in terms of organizational structure we do not have any formal kind of engagement.

Senator Downe: You are totally funded by the government and you do not have any investment in the business community; is that correct?

Mr. Özdemir: No, we are fully funded by the government.

Senator Downe: Therefore you would have a diplomatic passport from the Government of Turkey.

Mr. Özdemir: No, I am actually a permanent resident of Canada. That is why I do not need that. We do not have any diplomatic passports. Most of our reps all around the world do not have that.

Senator Downe: Do you interact with any Canadian government agencies, such as the Export Development Corporation or the Business Development Bank?

Mr. Özdemir: Thank you for that question. It is really a good question. Actually we exchange information with Export Development Canada because they are receiving some inquiries from companies that would like to expand their business into Turkey. We are also exchanging information with trade commissioners of Canada, both in Ankara and Istanbul and here even on the provincial basis.

Also, we have not worked closely with Business Development Canada but with Export Development Canada we are organizing a webinar for June this year. They are organizing the webinar and we are contributing to it. We will provide a presentation for the Turkish investment climate for their webinar to attract business people to Turkey.

Senator D. Smith: My question is for Ms. Tol. I appreciated your candid remarks on human rights issues and I might point out that when we were in Istanbul we heard from three witnesses, all of whom were women, who all spoke on human rights issues, and most of it related to women's issues.

One of the things about which they were criticizing us a bit was for the use of this phrase ``Turkish democracy'' because they said they thought those two words were incompatible and sort of an oxymoron and then realized it is not us who are using those words, it is the Americans. I could not resist asking them about that subject.

The Chair: Senator Smith, you said ``Turkish democracy.'' Previously you were talking about ``Muslim democracy.''

Senator D. Smith: Right, Muslim democracy. I apologize. Turkey was a good example of a Muslim democracy. Thank you for correcting me on that.

I then said that I could not resist asking if it was still more or less impossible to be able to build a church in Turkey, I really should have said not just a church or a synagogue but a Buddhist or Hindu temple, and they both said it was very difficult and more or less impossible and they kind of regretted that.

This is a little litmus paper test. Is there much prospect for genuine freedom of religion in Turkey in the near future do you think?

Ms. Tol: Thank you for that question.

Regarding the concept of Muslim democracy, there is the argument that you cannot really bring those two words together and it does not really make sense. That would be misreading the region and it would be an orientalist approach.

With regard to Turkish democracy, I think democracy is a process and Turkish democracy currently is in a much better place than it was in the 1990s. In the 1990s we could not meet. The official line was denying minorities in Turkey. For decades the Turkish state denied even the existence of the Kurdish minority, but now here we are talking about decentralization, democratic autonomy and we are in a better place in that sense but of course Turkish democracy is far from being complete.

Because of the Arab Spring, more and more people are talking about Turkish democracy because Turkey is considered a model in the Arab world. I think that would be dangerous because, again, we still have an ethnic definition of Turkish citizenship. We still have a constitution that was crafted by the military. We are a democracy but Turkish democracy is far from being perfect.

I mentioned previously that the European Union has become one of the main drivers of Turkish democratization and it has played an important and constructive role. If you look at the 1990s, for instance, Turkey carried out major reforms at the end of the 1990s and the beginning of the 21st century because of the EU reform packages. In 2003, for instance, Turkey adopted the EU reform package and curbed the military's role in politics and this is a very important development.

Right now there are problems on the EU front and I am concerned about that, not because the European Union itself is an end in itself but because the EU has been really good for Turkish democracy. Currently, we have to focus on the domestic dynamics and we have a lot of problems. Women are discriminated against in the workforce. There are journalists in jail for expressing sentiments against or criticizing the government. There are major problems so that is why we have to avoid presenting Turkish democracy as a model to the rest of the region.

In the 1990s the Turkish military was a very important actor in politics. Now we do not have that and there is an improvement. However, on the other hand, we never had a free or impartial judiciary and now we are taking steps to achieve that but there are still many things that need to get done. That is why, whenever I give a talk on Turkish domestic politics, I always first talk about the Kurdish issue because I think the way we solve the Kurdish problem is going to have a huge impact on Turkish democracy.

Senator D. Smith: These women who spoke about human rights were lamenting the fact that Kemal Ataturk set out to secularize Turkey and they felt that in recent years there had been some slippage there. I am going back to a simple litmus paper question: Do you think there will be freedom of religion and that churches or synagogues or a Buddhist temple would be allowed to be built because they are not now? Do you think there will be freedom of religion in the near future?

Ms. Tol: If you asked me five or six years ago whether we would be able to recognize the existence of Kurds, I would not have been optimistic but now we are talking about that. The main reason we are now trying to get used to that democratic language, while the regional dynamics are the main driver, is the fact that now we are trying to solve the Kurdish problem because of the situation in Syria. No one expected that two or three years ago.

With regard to your question about freedom of religion, institutions are a matter for democratization but the culture of democracy is more important. We still have a lot to do in our political culture because it does not matter if it is the ATP or the CHP in power, there is something in our political culture that is prone to authoritarianism. I think the main reason for that, and it goes back to the Ottoman Empire of the 16th century, is we have that notion of strong state. In the Western world the state was created in order to serve society. It was the state's duty to protect society, but in the Turkish culture and in the Ottoman culture it was the other way around. The main duty of society was to protect the state and the state was the most important institution. Because of that culture we never had strong civil society organizations and we never developed a healthy relationship between state and society, which is crucial for democracy.

Senator D. Smith: I do not think I am getting an answer. Here is my last question. Three years ago, I went to a church in Istanbul one Sunday morning. It was an old Dutch church that had been built in the 1840s, and they let it continue.

Do you think they will allow churches to be built again in the near future? That is a simple question.

Ms. Tol: My answer is that I cannot tell you that. Again, if you asked me if we would be experiencing these developments on the Kurdish front a few years ago, I would have said no, but the regional and domestic contexts made it urgent.

With regard to religious freedom, I am not sure we will be able to solve it in a democratic manner in the near future.

Senator D. Smith: Thank you.

The Chair: I take it that it is evolving, and you are not quite sure in which direction yet.

Senator Wallace: Mr. Özdemir, your agency, the way you described it, is obviously focused on encouraging investment in Turkey.

Do you also try to develop and expand trade opportunities between countries, in particular between Canada and Turkey, or is it primarily focused on attracting investment dollars to Turkey?

Mr. Özdemir: The primary focus is attracting investment dollars to Turkey, but increasing trade between countries is a first step to increasing investment flow. We receive most of our investment from Europe, more than 50 per cent. Europe is traditionally the most common trade partner.

If you do not have any trade relationship with a country, you probably do not expect any investment, so we would also like to see increasing trade volumes between different countries. Canada is obviously one of them.

Senator Wallace: You mentioned that part of your focus is on small and medium-sized companies. I am wondering if you have had any success in attracting small and medium-sized investments to Turkey? If so, how do you do that in Canada? How do you make it known that you even exist? How do you promote yourself?

Mr. Özdemir: Maybe I am wrong. We do not have any focus on small to medium-sized enterprises, but we do not discriminate. If the investment satisfies two of the three criteria that I mentioned earlier — employment, deficit reduction and technology transfer — we might focus on that investment and try to attract it. We do not look at the number of people if there is strong technology behind it.

On the other hand, we are mostly working with large-scale investment projects in Turkey, and most of the projects that we attract to Turkey are in the range of hundreds of millions of dollars.

Maybe I was wrong in expressing that target.

In promoting ourselves in Canada, as I mentioned earlier, we have really close ties with our embassy, our trade commissioners, Canadian trade commissioners in Turkey and Canadian trade commissioners servicing different provinces. We also have a close relationship with EDC, and we are attending different, relevant sector events, such as the one big mining organization, PDAC, held last March in Toronto. We had a country presentation session for a day. We sort of attend and organize such events and kind of promote ourselves.

On the other hand, we have some specific sectors to focus on in Canada. Mining is one. Aerospace is another. Infrastructure is another one. We have a long list of companies for each sector, and we sort of knock on their doors and try to organize one-on-one meetings. Our meetings are mostly focused on a business case. We are not going to a company and telling them that Turkey is that big, that the region is that big, et cetera. We try to go to them with a business case, as we would to an investment bank. We provide them with the rationale behind the investment for their industry-specific sector in Turkey.

Senator Wallace: As you were saying, your country is aggressive in attempting to attract foreign investment, with financial incentives that are 1.6 times the initial investor amount. That is considerable.

You also mentioned that public-private partnerships are a major focal point of your investment efforts. Can you indicate fields in which those opportunities might exist and, in particular, with the knowledge you have of Canadian companies, what opportunities there might be for Canadian companies?

Mr. Özdemir: The Turkish history of public-private partnerships is not too long. We started public-private partnership models in 1968. At that time, we had only a $5 million project budget. At the end of 2011, the total value of 133 public-private partnership, P3, implementations is about $35 billion U.S. Probably, right now, the figure is higher over the total volume. Among these projects, 37 per cent are airports; 4 per cent are harbours, container terminals, et cetera; 30 per cent was in electricity generation in the past. Right now, there are no active electricity generation P3 projects in the portfolio. Continuing, 3 per cent was in urban infrastructure development. 23 per cent, which is an important per cent, is in highways.

The upcoming portfolio is also in similar sectors. We expect an increasing number of transportation projects in Turkey. The government would like to double the total portfolio of toll roads in Turkey. Right now, we have approximately 3,000 kilometres of toll roads, and, in the portfolio, there are more than 5,000 kilometres of toll roads.

Another important element is rail networks. The government started reaching 10,000 kilometres of high-speed rail, and there are currently 13 P3 projects for railroads, a total of 5,000-kilometres of length. Another one is container handling and ports. An important one is airports. Maybe you heard that Istanbul Airport will be the world's largest airport. It will be a P3 project.

There are also two or three big projects going on. One is the Eurasia Tunnel, a double decker car tunnel passing underneath the Bosphorus. Another big one is, as I mentioned, Istanbul Airport. There is also a Channel Istanbul project. Maybe you heard about that. It is a manmade channel, passing parallel to the Bosphorus, to sort of shift the tanker traffic from the Black Sea to the Marmara or the other way around.

There is a really big P3 project portfolio. I think one of the most important ones, which Canadian companies might also like to be involved in, that is the health care campuses. Currently, there are 36 projects in the portfolio, one under construction, four at contract phase and five at final bidding phase. The total portfolio has more than 41,000 beds, so it is a really impressive health campus portfolio. All of them will be integrated health care centres in different provinces of Turkey.

There are many others I could brief you on, but I will stop there.

Senator Wallace: That was very helpful. Thank you.

The Chair: I have two questioners, Senator De Bané and Senator Wells. We have run over a bit, but we started a bit later. I will ask for your indulgence to put very pointed questions. The answers, I am sure, will be in kind.

Senator De Bané: Thank you, Madam Chair.

Mr. Özdemir:, I was much impressed with what I saw and heard when I was in your country.

We were told a lot about the different reforms that have been brought to the Turkish commercial code, a strengthened banking sector and a transparent regulatory environment. However, many witnesses said that it is necessary to ``bring greater business stability and predictability to the market to attract foreign investment and to ensure that the country is competitive in a G-20 context.''

You are an engineer. You like figures, so I will give you one. The World Bank rated recently how easy it is to do business in different countries. Turkey is ranked No. 71, so there are 70 countries with whom it is easier to do business. For instance, Mexico is No. 48 and South Africa is No. 39. I am trying to see why it is that difficult or cumbersome, and you are ranked by the World Bank at No. 71.

Again, I was very much impressed with what I have seen in your country, but maybe you can explain to me why it is so complex or complicated.

Mr. Özdemir: Thank you for this excellent question. We believe, and I think every research institute, agency — or even the World Bank — believe, that improvement is a process that cannot be done in 10 or 20 years. I will give another figure. According to the Global Competitiveness Report, Turkey was ranked No. 66 in 2004, and Turkey's percentile was 63 per cent in terms of competitiveness. In 2012, we ranked No. 43 and our percentile rank was 29 per cent. From 63, we came up to 29 in eight years.

This is a process, and with the implementation of the structural reforms, we believe that this process will continue.

I would like to give you another figure. I would like to mention how Turkey proceeded in terms of rankings in the last 10 years. This is a good signal for further improvements. According to the International Institute of Management Development in Lausanne, Switzerland, and the Global Competitiveness Report — a prestigious index and study — Turkey's competitiveness improved the most out of 59 countries in the period of 2002 to 2012, rising by 241 per cent in terms of ranking.

Senator De Bané: My time is short, and there is no doubt about what you say. When I looked at the exports of your country, they have gone up tremendously.

I was referring to a table of the World Bank about how easy it is to invest in your country. Regardless, I agree with those tables you have.

I have a quick question to Dr. Tol. When the Prime Minister of Turkey was in Egypt and he addressed the people of Egypt a few months ago, he said to the Muslim Brotherhood: Stop putting religion in politics; make a separation between the Muslim religion, et cetera.

Am I right in saying that was the gist of what he said there?

Ms. Tol: His Arab Spring tour was in the fall of 2011 and he went to Egypt. He asked the people of Egypt to adopt secularism in their constitution, which created a backlash from the Muslim Brotherhood. Then the government stopped talking about Turkey as a model, not to alienate its newly-emerged allies in North Africa.

Senator De Bané: How do we reconcile a secular government and the restriction that Senator D. Smith emphasized?

Ms. Tol: I could not hear you well. Would you please repeat the question?

Senator De Bané: He tells them that you should strive to have a secular government and disassociate with each person's religion. Then I asked you how do you reconcile what he said with the restrictions that were referred to by my colleague Senator D. Smith about the importance of Islam in Turkey?

Ms. Tol: That has become a Turkish dilemma. Constitutionally, Turkey is a secular system in the French sense, so it is laïcité and not Anglo-Saxon secularism. Recently, religion has been on the rise in Turkey, and I think Turkey is not an exemption; it is a global phenomenon and it has something to do with globalization. I agree that Turkish society has become more conservative in that regard.

However, what he was referring to in Egypt was secularism as a constitutional system. Again, we have to go back to, I think the current government revised laïcité, because the Turkish Republic was founded based on the French understanding of secularism where religion is pushed out of the public sphere. However, with this current government, I think religion is back in the public sphere, so it is closer to an Anglo-Saxon model of secularism.

In that regard, when he talked about secularism in Egypt, I think he was talking about a constitutional system. However, when the senator asked about religious freedom, I think it is more a cultural factor.

The Chair: Thank you. We have run out of time. Please be quick.

Senator Wells: I will be brief, and I assume the answer will be, as well.

This is a question about stability and the refugees that have come from Syria. The data we have looked at suggest that there will be in excess of 500,000 refugees from Syria before the end of this year. How do you see that impacting the Kurdish question in southeastern Turkey with respect to the stability of the country? There is an impact and a cost; I would like your answer to reflect that.

Ms. Tol: There have been some incidents in the refugee camps. Crime has been on the rise, and Turkey is increasingly concerned about that.

However, what is more important and will have a long-lasting impact is the issue of the Syrians who are not in the refugee camps but scattered around the country. That will affect the societal dynamic. To give an example, a town on the Mediterranean called Mersin. It is a mixed town with Arabs, Kurds and Turkomans. There has been tension between Kurds and Turkomans about the resources of the town. Now Syrians are in the equation, which makes things worse for Kurds.

Now that we have Syrian refugees in big towns like Istanbul, Ankara and Mersin, I think ethnic tensions might rise. That might have an impact on the Kurdish issue, because we are now debating how we can be constitutionally neutral and how we can be more pluralistic with minorities. I think there is a very constructive political atmosphere in Ankara right now. However, if we see more Syrians going to Turkey and settling in these big towns where ethnic tensions are already high, that might make it difficult for the government to complete this initiative.

The Chair: Dr. Tol and Mr. Özdemir, you can tell from the questions asked that you have engaged the senators on the very fundamental issues that we will be addressing in our report. Thank you for this exchange; it has been extremely helpful in concluding our sessions. I think some of the unanswered questions here display our wish to have an in-depth report that will reflect a modern-day Turkey and the possibilities, opportunities and issues that Canada needs to address.

Thank you, Dr. Tol and Mr. Özdemir for being with us today.

Honourable senators, the meeting is adjourned.

(The committee adjourned.)