Discontent in Turkish business world over Erdogan’s COVID-19 response

An unusual atmosphere of discontent is spreading through Turkey’s corporate world, unheard of since President Recep Tayyip Erdoğan’s governing party came to power 18 years ago.

The heads of Turkey’ largest business groups, who have generally refrained from challenging the often-dogmatic Erdoğan on his economic policies, are now raising their voices as the fallout from the spread of the coronavirus rips through their bottom lines.

Criticism of Erdoğan’s response to the COVID-19 outbreak, which is based largely on voluntary stay-at-home measures and keeping the wheels of the economy turning with a package of financial measures worth 100 billion liras ($15 billion), began late last month.

TÜSİAD, which represents Turkey’s biggest companies, urged the government to take stronger measures to help businesses and provide more guidance on how long the economy would be operating under a slowdown, according to a report by Bloomberg on March 27, which cited a letter sent to Erdoğan. Its board of directors discussed a full lockdown of the population for a pre-determined period so that the firms could plan ahead, Bloomberg said citing an unidentified source.

TÜSİAD is dominated by secular-minded billionaires who earned most of their vast fortunes in the pre-Erdoğan era. So its criticisms may not have surprised some observers of Turkey.

But on Tuesday, Rifat Hisarcıklıoğlu, a long-time Erdoğan ally and head of the Ankara-based TOBB, Turkey’s biggest business association, issued a written statement criticising the country’s banks for rejecting emergency loan applications from its members.

Hisarcıklıoğlu’s statement prompted a swift rebuke from Turkey’s state-run lenders, two of which are controlled directly by Erdoğan through his chairmanship of the Turkey Wealth Fund. In a joint statement, they said Hisarcıklıoğlu’s assertions failed to reflect the reality on the ground.  

COVID-19 cases in Turkey have spiralled since the government announced the first infection on March 11. On Wednesday, it confirmed 87 new deaths, bringing the toll to 812. A total of 4,117 people tested positive for the virus, bringing infections to 38,226, Health Minister Fahrettin Koca said.

This week also saw two major groups of exporters call on the government to do more to help them cope with the financial impact of COVID-19.

Turkish clothing makers, who exported $19 billion of goods last year, warned that sales abroad could slump by as much as 80 percent in April or May after global brands such as H&M, Marks & Spencer and Primark started to withhold payments for existing orders and failed to make new ones.

Mustafa Gültepe, head of the Istanbul Apparel Exporters’ Association, said hundreds of billions of dollars of clothing were now in storage awaiting shipment and manufacturers were working at an average of 30 percent capacity compared with 85 percent three months ago.

Gültepe warned there was no sign of the situation improving over the next three months and called on the government to extend its so-called short-term employment allowance, whereby the state covers some of the wages of employees who would otherwise have been laid off, to five months from three months.

The authorities should also ensure that social security payments, taxes and bank loan payments are delayed for a year, and that financial assistance is provided to cover the cost of unsold stock, Gültepe said.

Car manufacturers, the biggest contributors to Turkey’s exports, also requested more financial aid from the government, saying the authorities needed to account for the longer-term impact of the coronavirus on business activity.

Exports of motor vehicles fell by an annual 29 percent to $2.1 billion in March and the decline is expected to accelerate dramatically in April, said Baran Çelik, head of the Uludağ Automotive Industry Exporters' Association.

Çelik echoed the recommendations of Gültepe, asking the government to extend the short-term employment allowance to as long as six months from three months.

“It is just not possible to see the crisis totally ending in three months’ time,” Çelik said. “Even if the virus is defeated completely, its effects on the market will persist.”

Carmakers were also experiencing financial stress due to a build-up in unsold stock, Çelik said. The authorities should provide firms with compensation and more help with financing ongoing operations, he said.

Erdoğan’s governing Justice and Development Party, concerned about a surge in unemployment, is now planning to bar companies from laying off staff for three months, Turkish media reported late on Wednesday. Erdoğan could extend the measure for as long as six months, they said.

Putting workers on unpaid leave will still be permitted under the draft law and workers will be paid compensation of 39 liras ($5.8) a day, according to the reports.

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