Turks Struggle to Cope With Economic Jolts From Quake

The Goodyear tire factory here made it nearly intact through last week’s earthquake, but the people who work inside its steel walls were not so fortunate.

Some of the workers died in their homes. Some lost spouses and children. Nearly all of the 500 employees are living in tents. Most of them returned to work this week, still in shock. No one knows how long they’ll stay.

“There’s a lot of uncertainty,” said Can Kurtulus, the factory manager. “Most of the workers are here today, but maybe they won’t be here tomorrow.”

The magnitude 7.4 quake hit workers harder than workplaces--with a blow that will severely test Turkey’s ability to rebound economically from one of its worst natural disasters. Whole towns in the industrial heartland east of Istanbul have collapsed. Tens of thousands of homes, 9 of every 10 uninsured, are gone.

While damage to the region’s big factories does not appear as severe as first feared, the human and financial costs of the quake threaten to pull Turkey deeper into recession.

In a display of unease over the economic aftershocks to come, Istanbul’s stock exchange plunged 10% in a furious sell-off Thursday, the first day of trading since the Aug. 17 quake.

And the government got a new jolt when citizens, after a nationwide outpouring of private aid to quake victims, revolted with an Internet campaign against the regime’s plans to impose $1.5 billion in taxes on them for reconstruction.

Turkey’s U.S.-allied government, a secularist coalition facing opposition from Islamic parties and battling a Kurdish separatist insurgency, shows no sign of collapsing under the strain. Nor did it appear to be abandoning Western-oriented economic reforms aimed at drawing foreign investment.

But the setback is frustrating for Turkey’s 64 million people, whose consumer-driven economy roared through the ‘90s, chalking up 7% to 8% growth most years, and brought living standards that approached those of some countries in southern Europe.

Damage Estimate Lowered to $17 Billion

While the government has yet to offer an official estimate of quake damage, the country’s leading business association, Tusiad, this week lowered its initial calculation from $40 billion to about $17 billion.

According to that updated report, Turkey suffered $10 billion in damaged roads, utilities and buildings--most of those tall, shoddily built apartment complexes that collapsed in seconds. It will lose $5 billion in production until stricken industries recover, Tusiad predicts, and spend $2 billion on emergency relief.

“This doesn’t have to add up to a major setback,” said Erkut Yucaoglu, Tusiad’s board chairman. Turkey’s $210 billion gross national product, he added, “should be big enough to absorb the loss and bounce back sometime early next year.”

But an early recovery, he and other business leaders warned, depends on timely foreign assistance and the government’s ability to collect new taxes. Turkey was already struggling with a recession, touched off by last summer’s Russian financial crisis and a spate of terrorist attacks that scared away tourists several months ago.

Most experts have been insisting that Turkey’s economy is sound and should continue to grow. But after the earthquake, no one is certain.

“The economy was already in bad shape,” Prime Minister Bulent Ecevit said this week. “Now it’s even worse.”

The Organization for Economic Cooperation and Development reported Thursday that Turkey’s economy, which had been projected to grow 1.4% this year, will now shrink 1.5% or more.

The quake-stricken area of northwestern Turkey is home to petrochemical complexes, car assembly lines, cement and steel plants, and other heavy industry that accounts for 10% of the national product.

Suppliers to those industries throughout Turkey will be hit by the slowdown and forced to lay off workers. Restaurants and nightclubs outside the quake zone have shut down and lost business during a government-decreed period of mourning.

In the biggest single blow to the economy, the quake set off a six-day fire at Turkey’s largest oil refinery, destroying four fuel storage tanks, a crude oil distillery and a warehouse. The refinery, which earned $4 billion in annual revenue, suffered $100 million in damage and will remain shut for four months, according to Tupras, its Turkish owner.

U.N. specialists said the fire polluted the air, land and sea around the Gulf of Izmit, contaminating crops and posing other long-term hazards to human health.

Also devastated were more than 1,000 workshops such as the one where Guven Kostik, 28, earned $75 a week making fiberboard chairs and tables here in Izmit. Unlike the big factories, whose construction was supervised by their own architects, the smaller shops were often as flimsy as the region’s apartment blocks where so many died.

Kostik pulled three dead relatives from the rubble of his home and later found his workshop in ruins. Now camped in a tent city here, he and his wife are looking for someplace else to go. “I can’t make any money in this town,” he said.

In some ways, the stricken region is coming back to life. Railways are running again, roads have reopened and electricity is back on.

But factories with large work forces are only beginning to take stock and restart production. Some are having to rig solutions for cracked gas, chemical and steam pipes. Workers also must overcome their fear of entering buildings. And they are distracted by worries beyond the factory gate.

“The real damage to industry is the loss of so many lives,” said Esen Bolak, general director of Kirlangic Oil. “Those who survived cannot be expected to work unless they have peace of mind.”

The quake could make it harder for Turkey to carry out free-market reforms that Ecevit, heading a government elected in April, was pushing more decisively than any prime minister since the 1980s.

The World Bank and International Monetary Fund, which are underwriting the reforms, have pledged more than $500 million in credits and disaster aid since the quake to help keep the government’s anti-inflation program on track. The European Union, which has snubbed Turkey’s membership bid for years, also is promising relief. But all those offers make up a small fraction of Turkey’s recovery needs.

Tax Hikes Proposed for Emergency Fund

To raise its own emergency funds without printing money, the government Wednesday sent a bill to parliament that would double real estate and vehicle taxes, boost income taxes on people earning more than $34,000 a year and place a $112 levy on all cellular phones.

That set off one of Turkey’s most spirited tax protests in recent memory as citizens flooded government offices with e-mail saying they would refuse to pay.

Newspapers and opposition lawmakers joined the revolt. They said the tax would further depress the economy, undercut a successful campaign by volunteer donors to help quake victims and raise revenue for the same government-favored contractors who built the fatally flawed apartment blocks that tumbled in the quake.

The protest was the latest sign of popular outrage at the government’s sluggish rescue and relief efforts in the disaster zone.

“The government, which was late with the relief effort, acted too early with the tax,” said former Prime Minister Tansu Ciller, leader of the opposition True Path Party. “They should first await the results of the voluntary aid campaign.”

Ecevit, in an apologetic tone, said people were right to complain but the quake victims needed the money. He offered to modify the bill, and later the government changed the phone levy to a 25% surcharge on the cost of cellular calls. The bill was expected to pass.

In a revolt of a different kind, investors dealt Turkish stocks their most serious one-day loss since last November, ending an eight-month stretch of profitability rivaled only by rebounding markets in Russia and Indonesia.