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Turkey fails to abolish surprise

It all looked propitious for FDI. The World Bank/IFC was touting it, reforms favouring foreign investment had been put in place and the opening of talks for EU accession seemed assured. Enter the element of destabilizing surprise that Turkey specializes in.

TURKEY WAS JUST beginning to look like a neglected and potentially fruitful target for foreign direct investment. But a government skirmish with the military, the slow pace of reform and recent investor flight from emerging markets have taken it back towards the bottom of the FDI hit list.

A headline-grabbing showdown between the moderately Islamist government and the secularist military and establishment over religious education is casting a long shadow.

As recently as March, Turkey played host to a team of influential executives, the Investment Advisory Council, including Citigroup's Michael Klein and Mitsui's Norio Shoji, and led by World Bank president James D Wolfensohn. All of them claimed that Turkey was on the verge of transformation, amid new stability, near single digit inflation and the looming embrace of the EU. "Turkey can be a magnet for FDI, the country has huge potential," Wolfensohn said, wrapping up the first meeting of the council, which has been set up by the International Finance Corporation/World Bank's Foreign Investment Advisory Service to improve Turkey's investment climate.

Such talk is music to the ears of business and political leaders.

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