Textile company places rare bet on Turkey's Kurdish southeast

In Turkey's mainly Kurdish southeast, deeply scarred by conflict between state forces and militants, a textile firm that supplies companies across Europe plans three new factories - a rare bet the government can deliver on a vow to regenerate the region.

The government announced a $2.8 billion investment scheme for the area in September, hoping to win over the population with the prospect of economic revival before a referendum later this month on expanding President Tayyip Erdogan's powers.

The Iskur group, a supplier to fashion brands including Zara, Adidas and Nike, sees its $100 million investment as showing the way for other companies from western Turkey to take advantage of government incentives and lower wages in the east.

Undaunted by the militant Kurdistan Workers Party's (PKK) decades-old insurgency, it has been operating a $30 million cotton thread plant outside the region's biggest city Diyarbakir since 2014 but few others have followed its lead.

"We have opened a door in Diyarbakir, creating an example for other investors in the west," plant manager Ekrem Kul told Reuters as workers tended to rows of machines spinning thread.

Iskur halted expansion plans in 2015 with the outbreak of some of the worst fighting since the PKK took up arms in 1984, but Kul said it revived them after the government initiative. It aims to employ more than 2,000 people in the new Diyarbakir plants, up from just 330 now.

Its optimism is rare in a region where, according to the United Nations, the upsurge in violence between July 2015 and December 2016 killed around 2,000 people, devastated whole neighbourhoods and drove half a million people from their homes.

The ruling AK Party, founded by Erdogan, owed much of its early success to its stewardship of the economy after coming to power in 2002, improving roads, building bridges and hospitals.

The pro-Kurdish HDP says the government has, however, failed to solve the problems of the southeast, where more than 40,000 people have been killed in three decades of conflict.

The government counters it has boosted per capita income in the area to $5,000 from $800 with extensive state investment.

Prime Minister Binali Yildirim promised new factories, housing, hospitals and sports stadiums under the investment plan. Urbanisation Minister Mehmet Ozhaseki told reporters on Saturday state investments have so far focused on reconstruction of buildings damaged in the conflict. Alican Ebedinoglu, president of one Diyarbakir trade association, is sceptical private investment will follow.

"Every new government has made fresh legislation to provide incentives for investment in the region. But without peace and calm, these incentive packages don't mean much. If there is peace, the region hardly needs any incentives," Ebedinoglu said.

Erdogan won support among Kurds for spearheading a peace process in 2013, the first time Kurdish political demands had been addressed, and for easing some restrictions on them.

But after a ceasefire with the militants collapsed in July 2015 he has ruled out a return to negotiations, saying security forces will "annihilate" the PKK, which is considered a terrorist organisation by Turkey, the United States and Europe.

In events echoed in other towns in the southeast, armed youths dug trenches and laid explosives in Diyarbakir's ancient Sur district that is encircled by towering, Roman-era walls. Security forces fought back with tanks.

Security operations ended in Sur a year ago, but there are checkpoints all across the city and concrete blocks placed in front of buildings deemed vulnerable to the sporadic bombing attacks on security forces that have taken place since.

Ebedinoglu said the fighting caused 500 businesses to shut down completely, while shopkeepers were forced to close their stores for weeks or months at a time when the violence surged, meaning they fell behind on rent and debt payments.