Critics warn AKP has handed Turkish economic secrets to U.S. consultancy firm McKinsey

After presenting his “New Economic Programme” (YEP) to investors at the Turkey-U.S. Business Council’s conference in New York on Thursday, Turkish Treasury and Finance Minister Berat Albayrak provoked fierce criticism back home by announcing the programme would be overseen by the U.S. management consultancy firm McKinsey.

President Recep Tayyip Erdoğan and the ruling Justice and Development Party (AKP) have dished out sharp criticism to Western commentators and financial institutions this year for their pessimistic forecasts on Turkey’s economy.

Yet it was one of these institutions that Albayrak said would take its place in a newly created “Expenditure and Transformation Office” (MDO) alongside representatives of each of the 16 Turkish ministries and conduct comprehensive quarterly checks on the YEP’s achievement of its targets.

Turning over the much vaunted YEP, along with the management and oversight of state financial economic institutions to a private U.S. company has been condemned by academics, politicians and experienced bureaucrats from previous administrations as a risky false move that eschews transparency.

For Aziz Konukman, an economics professor from Gazi University in Turkey’s capital city of Ankara, the choice of McKinsey undermines the narrative laid out by the AKP about Turkey’s economy, blaming this year’s plummeting lira and high inflation on supposed economic attacks by foreign powers.

“Moody’s, S&P, Fitch, the Organisation for Economic Co-operation and Development, or the International Monetary Fund publish reports or issue warnings about the Turkish economy and (the AKP) accuse them of manipulation,” said Konukman.

“Yet McKinsey is, like (many of) these a private foreign investment and management consultancy firm. It trades in information and expertise,” he said.

For Konukman, by creating the MDO Albayrak has seriously ruptured the administrative system established by his father-in-law, Erdoğan, in his first presidential decree signed in July.

That system tied many of the country’s important institutions to the presidency, granting Erdoğan unparalleled control over the governance of Turkey’s economy.

The establishment of the MDO, however, has created a new and powerful body that also carries the authority to create policy, said Konukman.

“Under Albayrak’s new model, the MDO will transform and restructure the state - meaning this office will have executive powers. And it is McKinsey that will advise and direct it,” the professor said.

“Sixteen ministries and other associated institutions will follow the MDO’s instructions, and McKinsey will audit the entire state, giving orders and demanding data,” he said.

This decision amounts to a “complete submission” to the foreign firm, Konukman said, since besides granting it the auditing powers usually reserved for the Turkish parliament, it will also allow it access to classified information on everything from Turkey’s publicly owned banks to its national defence industry.

“They say they can keep secrets, but there is no guarantee they will not trade this information,” the professor said. “In the end McKinsey is not a charity. Its main concern isn’t to look out for Berat (Albayrak) or his father-in-law, but to make a profit.”

Moreover, the company’s track record, said Konukman, is far from shining. Its past scandals include being taken on as consultants by Enron, the energy firm which under McKinsey’s guidance fell into highly dubious practices and stock market manipulation before collapsing in 2002. The firm was also implicated in a corruption scandal after signing its biggest ever contract with the South African state energy company Eskom in 2015.

However, said Konukman, Erdoğan and Albayrak have already alarmed the market with a series of red flags of their own, having raised serious doubts about the Turkish central bank’s independence, and elicited concern that the country is being run arbitrarily and without transparency.

“They hope they can use McKinsey’s quarterly reports to convince foreign markets and investors and secure renewed trust and draw investment. They’re hoping McKinsey can help them. They’ve gone on and on about foreign powers targeting the Turkish economy, and now they’ve gone and handed it on a silver platter to McKinsey,” said the professor.

Aytun Çıray, the deputy chair of the nationalist opposition Good Party, expressed similar concerns.

“For all of the state’s economic secrets to be handed over to a foreign private firm is absolutely unacceptable,” Çıray told Ahval.

“What guarantee is there that McKinsey will safeguard Turkey’s economic secrets, if it would be in the interests of the (U.S.) company’s other clients or its own country to share them,” he said.

Above all, said Çıray, the fact that McKinsey’s Turkish branch office in Ankara is run by Ali Üstün, the son-in-law of former AKP minister Beşir Atalay, raises suspicions of shady business behind the agreement.

Faik Öztrak, the deputy chair of the leftist main opposition Republican People’s Party (CHP), said McKinsey’s position in the MDO amounted to a form of tutelage that he compared to the Public Debt Administration imposed on Ottoman Sultan Abdülhamit II by the empire’s Western creditors during its bankruptcy in the late 19th century.

Günay Kubilay, deputy co-chair of the pro-Kurdish Peoples’ Democratic Party (HDP), was one of several prominent politicians to dwell on the AKP leadership’s contradictory decision to employ the U.S. firm in such a crucial role after months of railing against the United States.

“Why this capitulation to a firm from the country they have presented to the public as a dark foreign force, even an enemy?” asked Kubilay.

“Does the AKP leadership have a connection to this company, and did any other consultancy firms compete for this role?” he queried.

Durmuş Yılmaz, a Good Party deputy and former governor of the Central Bank of Turkey, was likewise sceptical of the deal with McKinsey, which he called an attempt to implement an International Monetary Fund programme without the direct involvement of the IMF.

“Instead of quarterly audits by IMF officials, it seems they will be conducted by McKinsey. However, while the IMF also secures funding, that’s not the case with McKinsey. It’s not clear where the money will come from,” said Yılmaz.

“The government has still not understood the gravity of the economic situation. They are making mistake after mistake,” he said.

The storm of criticism has provoked a response from Albayrak’s Treasury and Finance Ministry, which accuses its detractors of maliciously seizing on the U.S. firm’s appointment to play cheap politics. Whether this is the case, or whether McKinsey’s Turkish adventure will end in similar scandal to its periods with Enron and in South Africa, remains to be seen.

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