Erdoğan's economic scheme raises spectre of favouritism
The securing of investment incentives for a $4-billion power plant in Turkey by Metcap Energy Investment and a mysterious Qatari partner is raising questions about favouritism in economic policy as President Recep Tayyip Erdoğan's government seeks to stimulate growth.
Metcap Energy Invesment of Turkey and Doha-based Fusion Partners won the investment incentives for a chemicals plant from Erdoğan this week. But Metcap has virtually no assets and its Qatari partner is little-known.
Metcap, which is chaired by Celal Metin, the former chief executive officer of Sabanci Holding, one of Turkey’s largest industrial groups, received the incentives from Erdoğan to build the plant in western Turkey along with 18 other firms at a ceremony at the presidential palace in Ankara on Monday. Other recipients included businessmen known to have close connections to the president.
The award of the financial perks to Metcap and Fusion Dynamics was part of 135 billion liras ($33 billion) of incentives handed out by Erdoğan’s government to help boost economic growth and narrow the current account deficit. Erdoğan is seeking to drive growth through such stimuli ahead of elections next year, but the measures are raising concern among investors that his government is overheating the economy.
The windfall for the firms includes 10 years of corporate tax breaks of double the investment and exemptions from sales taxes, customs duties and social security payments for employees. Erdogan has awarded the incentives for 23 projects in total.
Metcap’s website, updated just two weeks ago, shows the company had developed four wind farm power plant projects – Bandirma, Briza, Bali and Bora, with a total capacity of 207.5 megawatts. But it had sold all of the assets at project stage by 2013, including the Bali plant to close Erdoğan business ally Kazim Turker.
Metcap also offloaded a 860MW gas-fired power plant project in Samsun, named Turkish Borasco Elektrik Uretim, to Austrian energy company OMV in 2008, again before the facility was built. Many Turkish businessman use their government connections to acquire licenses to build such projects before attempting to sell them on to investors at big profits.
No one was available to answer calls at Metcap's offices in Istanbul's Beşiktaş district on Wednesday. On Thursday, the number was connected to a fax machine.
Metcap and Fusion Dynamics, run by Qatari businessman Mohammed al-Hajri, will also complete natural gas combined-cycle power plants of 550 megawatts for $1.2 billion, the companies agreed in a protocol this week. Construction of the facilities in Turkey's Kırklareli and Karaman regions will meet about 5 percent of Turkey's electricity production needs, the companies say.
Fusion Dynamics is little known and has no website. Its postal address is PO Box 947, Doha and its phone number 444 10003, according to qataroilandgasdirectory.com. The company shares its phone number with firms Al Resale Mode and People Dynamics.
Prior to this week's announcement of the investment incentives, company chairman al-Hajri's has kept a low public profile. He once appeared in a 2014 advertorial entitled Gulf 2020 CEO report in 2014.
Under Erdoğan, Turkey has obtained billions of dollars in investment and other funding from Qatar since his governing Justice and Development Party (AKP) won power in a general election in 2002. The two countries have also partnered in projects such as sponsorship of Islamic rebel groups in Syria and in economic and political projects in Africa.
Erdoğan was heavily involved in picking which firms would receive the investment incentives, personally approving each one, Economy Minister Nihat Zeybekçi said.
Other Erdoğan business allies to benefit from the investment incentives included Fuat Tosyali, chairman of Tosyali Holding, Ahmet Zorlu, chairman of Zorlu Holding, and Ibrahim Erdemoğlu, chairman of SASA, a polyester company, who received 28 billion liras each. Businessman Ethem Sancak, also close to Erdoğan, received incentives for a project worth 1.9 billion liras.
Metcap and Fusion Dynamics will complete the two investments by 2023, when Erdogan plans to celebrate Turkey’s centenary year with a wealth of achievements covering employment, growth, mega-projects such as the new Istanbul airport and hospital construction.
Metcap had previously attempted to develop the power station project in Karaman by 2016, but construction never began after coal reserves were discovered below the site. The company says it aims to meet 35 percent of Turkey's petrochemical needs through the $4 billion investment in the petrochemicals plant, state-run Anadolu agency reported on Tuesday.
French car maker Renault SA was the only other foreign company to win investment incentives from the Turkish government this week, obtaining perks for a car motor project worth about $120 million in partnership with the Turkish Armed Services Retirement Fund, Oyak.