TURKEY KRIZ (A).pptx

7/27/2019 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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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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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

Documents

TURKEY KRIZ (A).pptx