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Transcript of TURKEY KRIZ (A).pptx
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TURKEY KRIZ (A)
Aguipo, James
Jarabelo, Kristelle
06 September 2013
A Mini-Case
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INTRODUCTION
Turkey(officially The Republic of Turkey) is a
transcontinental country located in both
Europe and Asia Capital City: Ankara
Currency: Lira
Currently, Turkey hasthe worlds 15th largestGDP PPP and the 17thlargest nominal GDP
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In February 2001, Turkeys rapidly
escalating economic kriz forced thedevaluationof the Turkish Lira.
Just as the economy was beginning to
boom, pressures on the countries
balance of payments and
currency rose.
This resulted in the economic
crisis of 2001
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PROBLEMSHow did the problems on Turkeys Balance of
Payments and currency affect the devaluation
of the Turkish Lira?
1. How did the imported telecommunication equipment
affect the countrys current accounts?
2. Why did the net direct investment declined from $573
million in 1998 to $112 million in 2000?3. Why did TelSim defaulted on its payments for equipment
imports from Nokia and Motorola?
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AREAS OF CONSIDERATION
Significant volatility in thebalance of the key
international accounts
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Turkeys Balance of PaymentsExhibi t 1
Turkeys current accoun thad been relatively volatile (generally in deficit), but had
taken a severe dive in 2000. The capital / financial accoun tbalance was in surplus
nearly throughout the period reflecting the massive international borrowing by Turkey.
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AREAS OF CONSIDERATION
The current account behaved
in a relatively inverse mannerto the financial account,
running deficits in most of theyears shown.
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Turkish Current AccountExh ibit 2 (In $M)
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Turkish Financial Account
Exhibi t 3
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AREAS OF CONSIDERATION
TelSims Default in
Payments to Suppliers suchas Motorola and Nokia
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ANALYSISHow did the imported telecommunication equipment
affect the countrys current accounts?
Imports of capital equipment accounted for
most of the increase in net other investment
and thus the large negative balance in theFinancial Account in the year 2000.
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Why did the net direct investment declined from$573 million in 1998 to $112 million in 2000?
TelSims purchase of infrastructure andequipment amounted to a trade credit in which
they took on debt to finance the project. This
investment is not reflected as a net directinvestment but a loan which is accounted for inthe BOP.
ANALYSIS
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Why did TelSim defaulted on its payments for
equipment imports from Nokia and Motorola?
The considerable time gap between the time a
network is created and its capacity is utilized by
revenue-paying customers was not realized.
ANALYSIS
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The balance of payments is a statistical statement
that systematically records all economic
transactions between a country and another.
CONCLUSION
When investigating potentialinvestments abroad, it isimportant to examine both
the companys financialstanding as well as thecountrys current economicsituation.
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Thank you!Aguipo and Jarabelo
Balance of Payments
A Mini Case Study