Yaşar Yakış
Oct 11 2018

Turkey in search of financial advice

Turkish Treasury and Finance Minister Berat Albayrak said last month a new office would be established in Turkey for cutting costs and increasing income. Representatives from all 16 ministries would sit in this office and check at the end of every quarter where Turkey stands in the implementation of targets set in the yearly programmes. He added that U.S. consultancy firm McKinsey would provide advisory services to this new office.

This company has had an office in Istanbul since 1995 and has provided consultative support to many Turkish private and public offices to help the country’s EU accession efforts, privatisation programme and many other smaller scale projects.

The company is known as the godfather of the consultancy world. The New York Times wrote: “The McKinsey shapes everything from education, transportation, energy and medical care to the restructuring of economies and the fighting of wars”.

It was involved in legal action in 2015, when it signed a $700-million contract with the state-owned power company, Gupta, in South Africa, which was on the verge of insolvency. The contract turned out to be in violation of South African law, with some payment channelled to a corrupt associate of the power company.

The Turkish government is in dire need of foreign capital. A recovery programme to be financed by the International Monetary Fund (IMF) could help Ankara overcome several problems it is facing at present, but this has become a highly sensitive issue in Turkey: The ruling Justice and Development Party (AKP) used to pride itself for years for having paid off Turkey’s debts to the IMF in 2013 and refused to sign another agreement with it, thus liberating Turkey from a straitjacket.

When the deal reached with McKinsey was announced, many columnists in Turkey focused their analyses on the contradiction between the harsh rhetoric used by the Turkish leaders against the United States on the one hand, and turning again towards a consultancy company from that country to seek advice on financial matters, on the other. Unbiased observers pointed out that there was nothing wrong in this. Turkey needed foreign capital and it was only natural to seek professional advice. Therefore, in case Turkey needed the support of foreign companies or states, McKinsey could help secure it.

Opposition political parties bombarded the government with criticism calling this move a second “cosmic room incident” reminiscent the 2009 incident when a public prosecutor went into the office where Turkish army’s secret archives were kept.

Many pro-government columnists wrote that IMF recipes are designed in such a way to make a country more dependent on foreign aid. They listed the names of countries that refused IMF programmes and that managed, despite this, to navigate their country’s economy to stability. So, there was an atmosphere of general mobilisation in Turkey to prepare the public for the idea of refusing categorically IMF support and turning, instead, to an international management consultancy company.

However, a sudden sea change took place last week. President Recep Tayyip Erdoğan said that he had “informed all his ministers not to receive consultancy services of any foreign company”.

This was a big shock, because Turkish public opinion was led to believe that, in his capacity as the president’s son-in-law, Albayrak was the mouthpiece of the president. It is difficult to guess what exactly happened behind closed doors. However, we may presume that Albayrak would not dare take a decision without getting a green light from his father-in-law. It is more logical to assume, therefore, that the president might have given his blessing to the move, but after seeing the negative reaction of public opinion, decided to reverse the decision.

The pro-government media is now mobilised to explain why hiring a foreign company is not a good policy. An important part of the public who are pre-disposed to believe anything that comes from Erdoğan, will have no difficulty in believing in this second truth, but the other group will question this discrepancy and approach more cautiously what the “the son-in-law” says in the future.

 

The opinions expressed in this column are those of the author and do not necessarily reflect those of Ahval.