In the wake of the financial crisis, governments have been considering ways to bolster foreign investment and shore up the financial system. Turkey hit on the idea of an ‘asset amnesty’ to attract deposits from wealthy expatriates and return money to the banking sector. 

Starting last November, the scheme was extended in June, and looks like it will be extended again in September when the current deadline ends. The scheme may be novel, but it has proved controversial.

“The Turkish government has instituted a policy for Turks to bring back their money no questions asked — a few million dollars to come home, they say no problem, we’ll take 2 to 3 percent tax,” said an investment banker in Istanbul who wanted to remain anonymous. “It has not been completely welcomed around the world, as dirty money is going to be cleaned in Turkey, but for Ankara it’s a stop-gap method to boost foreign direct investment.”

Economists are skeptical about how successful the amnesty has been in attracting capital, arguing it can only be a temporary measure and that the amnesty’s attraction has been eroded by the first amnesty period being sold as a ‘one off chance,’ only for it then to be extended. Ankara’s extension of the amnesty has also sent a clear message to the International Monetary Fund that Turkey is not keen on implementing a $25 billion loan agreement with the fund to stabilize its $700 billion economy, which is expected to contract 5.9 percent this year, according to the Organization of Economic Cooperation and Development (OECD).

Additionally, the asset amnesty has been met with displeasure by the European Union, which wants Turkey to tighten financial regulations in line with EU accession requirements, as well as curb money laundering and the flow of narcotics into Europe. The OECD’s Financial Action Task Force (FATF), a Brussels-based body set up to combat money laundering and terrorist financing globally, has also voiced its concerns, coming at a time when FATF has been exceedingly critical of Ankara’s efforts to rein in anti-money laundering and counter terrorist financing.

Boosting foreign direct investment?

On paper, the asset amnesty has boosted assets, with the declared amount of the first amnesty amounting to 14.8 billion Turkish Lira ($9.6 billion), but the reported inflow has been limited to $3.9 billion, according to research firm YF Securities. According to an economist who was not authorized to speak with the media at an Istanbul brokerage house, the amnesty has not been as successful as the government hoped.

“The amount declared may be much less,” he said. “The government said there was to be only one asset amnesty in November, but [that] turned out not to be the case, and people remember these things, so it is not good for fiscal quality. If you are going to do it, do it only once.” 

“It is not a sustainable financing source, for any economy, not just Turkey,” he added.

The economist said the government wants to see if the asset amnesty extension will bring more deposits.  He said the “government wants to keep this card in its hands, as the new decree gave them the possibility to extend it for three months beyond September.”

Economists have pointed out that the people most likely to utilize the amnesty would have done so in the first few months, making the extension unnecessary, and that the amount raised from the second asset amnesty round will be significantly less than the first. And while the money that has flowed in has bolstered banks’ assets, allowing for more credit, inflows are not expected to enter the stock market or other asset classes.

“Most of the people that wanted to benefit have already reported their holdings abroad, and the government intends to [make] additional legal arrangements to make it more attractive,” the economist said. “I am not too optimistic on that due to macroeconomic fundamentals. The good thing is that the current account deficit is in decline due to falling oil prices, but Turkey needs external sources to finance the capital account deficit, as the rollover of the private and public sector for foreign borrowing is up to just below 100 percent.”

Turkey’s public debt is projected to reach $50 billion this year, and the continuation of the amnesty has thrown doubt on Ankara’s ongoing talks with the IMF for a loan between $25 billion to $40 billion. If inked in September, the IMF would require structural reforms and stricter controls on government spending.

“The [amnesty] extension being introduced in such a manner is another signal that the IMF is not part of the government’s game plan, as the fund would have a say on amnesties, at least in the way they are implemented,” the economist said.

Dirty laundry

It’s unknown how much of the declared $9.6 billion repatriated during the asset amnesty is dirty money. But the amnesty has not put Ankara in the OECD’s Financial Action Task Force good books, with Turkey, positioned as it is as a crossroads between the East and West, serving as a transit hub for narcotics trafficking and organized crime.

In 2007, Turkey was heavily criticized by the FATF for failing to enact 33 out of the task force’s 40 recommendations on anti-money laundering and combating terrorist financing. Criticism included the lack of a precise definition in the law on money laundering, and the low number of suspicious transaction reports.

A 130-page report submitted by Turkey’s financial intelligence unit, ‘Mali Suclari Arastirma Kurulue’, or MASAK, to the task force’s general assembly in February, stated that since 2007, Turkey had adopted a bill on the prevention of money laundering that required financial institutions to issue suspicious transactions reports and have compliance units. According to MASAK, there has been a huge rise in suspicious transaction reports year-on-year, from 180 in 2003 to 4,318 in 2008.

But while the report highlighted Turkey’s more active role in curbing money laundering, MASAK noted there has been a dramatic rise in proceeds from the illicit drug trade within Turkey, which it estimated at $5 billion a year. Reports related to fraud and fraudulent bankruptcies had also increased significantly, attributed to the financial crisis in late 2008.

Tight financial regulations on market trades have also boosted money laundering, with Turks seeking to evade a 10 percent capital gains tax paid out to play the markets, resulting in the use of intermediaries to get around taxation.

“We’d have ‘mustachioed [disguised] Turks’  to get money out to say Geneva, or get a prime brokerage account with a big London firm to do the trading,” said the former investment banker. “As this is technically illegal in Turkey, it is always being looked out for and is very tightly regulated.”

Providing further regulatory challenges to the Turkish authorities is the country’s low banking penetration rate, estimated at just 40 percent of the population.

“Turkish people have huge under-the-mattress savings; penetration of the banking system is not like Western economies,” said the economist. “People tend to keep foreign currency or gold.”

Penetration rates are, however, likely to increase this year following the introduction of a new finance ministry regulation requiring rent to be paid via bank accounts. The asset amnesty could also help.

The European Union connection

While the EU is critical of the asset amnesty and Turkey’s anti-money laundering and combating terrorist financing regime, counter terrorism experts say that the EU is not doing enough to assist Ankara in combating the narcotics trade and groups like the Kurdistan Workers Party (PKK).

“Despite the PKK being a banned organization by the EU, many member states are ambivalent about cracking down on its sophisticated networks and infrastructure within the Kurdish diaspora communities around Europe,” said John Solomon, global head of terrorism research at World-Check, a British company that maintains a database on high risk individuals and entities. “This lack of political will has afforded the PKK a safe haven to raise funds, plan attacks and disseminate propaganda.”

A Turkish study has claimed that the PKK has controlled an estimated 80 percent of the European narcotics trade on and off for decades, with the group earning an estimated $140 million a year. According to Interpol, at one time nearly 200 PKK front organizations in Europe were suspected of involvement in the narcotics trade.

“Due to the surge in poppy production in Afghanistan post-2001, and Turkey’s strategic position relative to lucrative western markets for refined heroin in Europe, it is quite possible that the PKK’s involvement in the trade has intensified,” Solomon said.

Some of that drug money could have been cleaned since the November asset amnesty, and the extension would give ample opportunity to clean further funds. In order to boost deposits, Turkey has shown a willingness to take in the good as well as the bad.

Abdullatif Kalafani, an 81- year-old Palestinian exile living in Lebanon, is the owner of house number 15 on al Burj Street, now renamed Liberation street, in Haifa. Kalafani is one of many Palestinians who still owns property in Israel, but maybe not for long. House number 15 has been put up for sale in one of the public auctions that developing municipalities are running in different urban areas like Haifa, Acre and Jerusalem.

Since 2007, the Israel Land Administration (ILA) has been issuing tenders for auctioning properties that belong to some 800,000 refugees who were forced out of Israel in 1948 and 1967. So far, 282 tenders were issued in 2007, 106 in 2008, and 80 in the first six months of 2009.

Adalah, a legal center for Arab Minority Rights in Israel, is trying to stop the issuance of these tenders, saying that selling these properties is illegal under both Israeli and international humanitarian law.

In May this year, Adalah sent a letter to the Israeli attorney general, the ILA attorney general, the general director of the Israeli government-owned housing company Amida and to the Custodian of Absentee Property, demanding cancelation of the tenders.

“So far we have not received a reply from the attorney general, except that it is being dealt with and as soon as they finish, they will get back to us,” says Suhad Beshara, a lawyer from Adalah. “Most probably they will reply. In any case, we probably will be filing a petition to the Supreme Court.”

Breaking their own law

Many Israeli laws issued in the 1950s restrict the sale of refugees’ property, unless the owner chooses to sell. According to Adalah, the Absentees’ Property Law issued in 1950 stipulates that property belonging to absentees — Palestinians who fled during the war of 1948 — were handed to the Custodian of Absentee Property for guardianship until a solution regarding Palestinian refugees was reached. Since these properties were acquired, many were leased, but not sold, until the auctions began to take place in 2007.

Moustafa Assir, a lawyer at Alem Associates in Lebanon, goes back even further to 1947, and says that law 194 issued by the United Nations during that year stipulates that refugees have the right to go back to their land, unless they are considered the “enemy.”

“Lebanese people are considered Israel’s enemy, but Palestinians aren’t,” he said.

Moreover, Beshara says the tenders also violate the Israel land law of 1960, which says that all land  owned by the state of Israel and therefore include the Palestinian real estate controlled by the development authority, cannot be sold.

In a reply to Adala’s accusations, the ILA told Al Jazeera TV that after the 1960 law was issued, there was a follow up bill which was passed in the same year. It included seven exemptions. One of them allows the sale of absentee property located in an urban area that is under 20,000 hectares (200 million square meters).

Adalah also thinks Israel is breaking international humanitarian law, which requires the respect of private properties and prohibits its expropriation following the termination of warfare.

A possible reason

Adalah’s Beshara told Al Jazeera the auctions might be done for political reasons. Israel may be auctioning the properties to create a situation “that would eternally frustrate any potential attempt in the future to fairly and justly resolve the issue of Palestinian refugees.”

Once sold, Palestinian refugees will not be able to claim their property back, since it would already belong to another owner. 

Kalafani, who lived his first 20 years in Haifa, is worried about losing his home. He told Al Jazeera that even though there is little chance he could go back due to his old age, he believes that there is a chance his descendants will. 

Firas Yazbeck and Naomi Arends arrived to the municipality building in Larnaca, Cyprus on a Monday morning. In just a few minutes, the Lebanese-Dutch couple had filled out their marriage documents as they waited in the queue to take their vows. In the waiting room, a promotional video of Larnaca — and all the activities visitors can do in one day — played on a TV.

Like many Middle Eastern couples, including those from Lebanon, Yazbeck and his new bride chose to marry in Cyprus, and spend their 10-day honeymoon on the island as well. Marriage in Cyprus is simple, it’s easy, and it’s one way to get around Middle Eastern marriage laws that don’t allow people from different religions to marry.

“It’s so close to Lebanon,” notes Yazbeck, a 27-year-old Maronite Christian. “It’s a good place for a civil marriage and a vacation.”

Still, he hopes his home country will allow civil marriage, which he thinks would be good opportunity for reconciliation between Lebanon’s different religious communities.

That sticky sectarianism

As modern and western-leaning as Lebanon is, the country does not allow civil marriage. For years, activists have advocated for the introduction of civil marriage in the Middle East, particularly Lebanon.

Last February saw a number of small victories for advocates of civil marriage in the region. In Lebanon, Interior Minister Ziad Baroud signed an order allowing citizens to remove their religious affiliation from government papers. Around the same time, activists held an inter-faith group marriage on Valentine’s Day. On Facebook, members of various Lebanese pro-civil marriage groups total more than 20,000 — compared with 13 on the social networking site that is against it.

But major obstacles still remain before the Lebanese are willing to legalize civil marriage. The act is no easy feat in a nation where the legal foundation is based on sectarianism. In 1997, the late President Elias Hrawi suggested implementing civil marriage in Lebanon, but was met with opposition from both Muslim and Christian leaders. For now, Lebanese who do wish to have civil ceremonies can do so outside the country and then register their marriage in Lebanon, which the state then recognizes as a legal marriage.

It takes around a half hour to make the short flight to Cyprus from Beirut, marginally longer from Damascus, and marriage is big business. Ever since the British mandate in 1923, the small island has been performing civil marriage ceremonies for locals and foreigners alike. Until the 1980s, citizens of the United Kingdom comprised the majority of marriage tourists to Cyprus. But over the past 30 years, most of the couples getting married in Cyprus have come from the Middle East.

Eager to capitalize on the pre-existing demand for civil marriage services, over the past several years travel agencies, embassies and municipalities in Lebanon and Cyprus have been coordinating to offer couples tourism and marriage packages, including everything from plane tickets and hotel rooms, to marriage paperwork and ceremony arrangements.

Hrach Kalsahakian, sales and marketing manager at the Cyprus Tourism Organization, says the Cypriot wedding business sector is only growing.

According to the Cypriot embassy in Beirut, there were 400 Lebanese couples who wed in Cyprus in 2007, compared with 278 in 2000.

“This sector is expected to grow because more and more people are discovering this side of the island and, on the other hand, more professional and sophisticated companies are providing wedding services,” he says. “The growth however is gradual and not excessive.”

Could other countries in the region, seeing Cyprus’ success in the marriage and tourism business, try to emulate the island country’s example? Not likely, believes Kalsahakian. He says, “Civil marriage is generally allowed wherever the role of state and religion is separate. This is difficult to achieve in most Middle Eastern countries and it is not expected to become a reality in the near future.”

Marry away but celebrate at home

Marwa Rizk Jaber, CEO of Beirut-based travel agency U Travel Middle East, whose Cyprus package tours include five to 10 couples traveling to marry every year, doesn’t see any economic loss to Lebanon due to many of its citizens having to go to Cyprus to get married.

“If someone is planning to do a big wedding in Lebanon, he will do a civil marriage in Cyprus and then do a big wedding in Lebanon,” she said. “It would be good to allow it in Lebanon, for the simple reason  that Lebanon has always been an open country although it’s based on religious confessions.”

Rola Badran, a Shiite Muslim, and Rami Khattar, a Druze, got married in December 2008 in a civil ceremony in Paphos, Cyprus, because their different faiths meant they couldn’t have such a ceremony in their home country of Lebanon.

“Civil marriage should be legislated in Lebanon as soon as possible,” says Badran. “It’s a unique country where Muslims, Christians, Druze and a variety of religions live all together and share their social, economical and political affairs. Civil marriage will give freedom to the young citizens and even older ones to unite under one umbrella.”

Some people believe that lobbying by Lebanese citizens and civil society groups will put pressure on the country’s politicians to change some of the sectarian laws, including the legalization of civil marriage.

“The idea is to have enough citizens who will remove their religions from their ID cards. This creates enough citizens not registered with any courts,” says Paul Salem, director of the Carnegie Middle East Center in Beirut. That way, he says, “the government doesn’t have a legal way to link people to religious communities. If you have 20,000 people, then there’s enough pressure on parliament. That’s one of the approaches to force the issue of civil marriage.”

Wedding packages to Cyprus:

There are a variety of wedding travel packages to Cyprus. Some include just the basics, while others handle every detail down to the champagne and the confetti.

• U Travel, an agency based in Beirut, offers basic packages starting at $300 per person, depending on airfare and hotel category.
• Nadia Travel in Beirut has a two-day package for $1,900 that includes transportation, hotel stay, marriage and document fees and administration.
• The Beirut-based Aeolos offers packages for $1,800, which include transportation to Cyprus, hotel, all travel, marriage and visa fees.
• Skarvelis Weddings in Cyprus offers some of the most comprehensive wedding packages. All include wedding documentation administration and a wedding coordinator, a decorated Mercedes, flowers, a wedding cake and champagne. The packages start at $1,200. Their most high-end package, for $5,400, includes 44 photos, Rolls Royce for the bride, white Mercedes for the groom, floral arrangements, hair and make-up for the bride and spa treatment. The packages all include a planning and coordination fee of $567 but not the town hall fees – these are an additional $400.

Alternatively, if couples do not want a package they can just pay the $600 planning and coordination fee and the $400 town hall fee and then choose additional extra items such as a cake, flowers, etc.