Erdoğan achieves his dream to run Turkey as a corporation

“Would you not like to see this country managed like a business? You know what I say? However a corporation is run, that is how Turkey should be run ... That way this country will stay on course,” President Recep Tayyip Erdoğan told a business awards ceremony in the western Turkish city of Balıkesir in March 2015.

With a presidential decree on Wednesday, Erdoğan has taken a great stride toward realising that dream.

The decree places the president at the helm of the country’s Sovereign Wealth Fund (TVF), and his son-in-law, Treasury and Finance Minister Berat Albayrak, as his deputy. It makes Erdoğan the sole and unbridled authority in managing the operations of a fund that owns or has large stakes in some of Turkey’s largest public assets worth $60 billion, including Turkish Airlines, public banks and petroleum companies.

Economists in Turkey have watched with dismay a move they say has turned the TVF into a family business. This is a fund that, shortly after it took over a host of publicly owned firms in February last year, economics scholar Yalçın Karatepe described as possessing a structure that made it completely unaccountable.

Erdoğan’s Sept. 12 decrees make him simultaneously the president of the country, the chairman of a political party, and the chairman of a wealth fund that operates as a corporation – possibly the world’s first example of such a combination of responsibilities.

The TVF was established through a bill presented to the Turkish parliament while the country was still reeling from the shock of the July 2016 coup attempt, and officially came into operation on Aug. 19 that year. At that time it was attached to the prime ministry, but with the abolition of that office under the executive presidential system implemented this year, it has come under the presidency’s purview.

It has remained largely inactive in the two years since, except for a change in leadership from Privatisation Board of Turkey chairman Mehmet Bostan to Istanbul Stock Exchange chief Himmet Karadağ last year.

Karadağ has made way for Erdoğan in a new board whose most prominent places are taken by Albayrak, the deputy chair, and Zafer Sönmez, a businessman heading a Malaysian government investment vehicle who has been appointed as the TVF’s general manager.

Two noteworthy additions to the board from the private sector are Rifat Hisarcıklıoğlu, chairman of the Union of Chambers and Commodity Exchanges of Turkey (TOBB), and Fuat Tosyalı, the chairman of the board at Tosyalı Holding.

Hisarcıklıoğlu made TOBB a partner of the president’s favoured project to produce a Turkish-built automobile and approved the transfer of resources from the union, which has a membership of 1.5 million, to the project.

Tosyalı Holding, a family company established in 1988, is known for its swift rise in fortunes under the Erdogan’s rule. In 2008, Tosyalı became Turkey’s first private manufacturer of flat steel with an investment worth $1 billion. Having extended his company’s operations to Africa and the Balkans, with new facilities in Montenegro and Algeria and partnerships with Japanese firms, Tosyalı has made his way onto Forbes’ richest person's list.

Another name from the new board that is drawing attention is that of Erişah Arıcan, an academic at Kadir Has University in Istanbul and the only woman on the list. Arıcan was Albayrak’s supervisor for his doctoral thesis on financing renewable energy resources. That thesis became the subject of intense controversy in 2016 when a hacking group released emails from Albayrak’s account suggesting that Arıcan and a ruling party member of parliament, Mehmet Muş, had written a significant portion of the thesis. Turkey’s main opposition party has called for Albayrak to be stripped of his doctorate.

As for Arıcan, she will continue serving as an independent board member for the Istanbul Stock Exchange, to which she was appointed in April 2016, after supervising Albayrak’s thesis, as well as carrying out her responsibilities on the TVF board. 

The legal framework around the TVF is even more striking than the names from its board. The fund is exempt from oversight by the Treasury, parliament or the court of public accounts, it is exempt from income, corporation and property tax, from public tender and public employment laws.

The expenses, salaries and operations carried out by the board’s members are classified as confidential information. None of them will be held criminally, financially or administratively accountable for any of the decisions made by the board, even if these cause public harm.

The only oversight from an independent auditor that is foreseen for the TVF is a report that will be sent to the Presidency – Erdoğan’s own office – and the parliament as an “information notice.”

The fund’s administration has complete authority to use public property, cash and shares under the TVF portfolio exactly as it sees fit, and can buy, sell, extend credit or take out loans, and turn over public services or projects to companies without the slightest check or balance.

The vast resources of the TVF’s portfolio include a 51 per cent stake in Halkbank, one of Turkey’s largest state-run banks, Turkish energy companies, the Turkish postal service, mining and chemical giant Eti Mine Works, Türksat satellite services, the Istanbul stock exchange and the national lottery among others.

Huge swathes of public land amounting to around 2 million square metres, including prime coastal locations in Turkey’s touristic regions, are also under TVF control. When they were turned over to the fund, the shares and real estate handed to the TVF were valued at $60 billion.

When Qatari Emir Tamim bin Hamad al Thani visited Ankara last month, he spent three-and-a-half hours in private discussion with Erdoğan and Albayrak, after which $15 billion of direct investment from Qatar was announced.

The announcement was most timely for Turkey, which struggling to prevent the lira from plummeting out of control. The word around economic circles in Turkey, however, is that the majority of that direct investment will be spent purchasing public property and stocks turned over to the TVF.

With the new adjustments to the TVF, Erdoğan and Albayrak are now free, if they wish to do so, to sell the Qatari emir whichever public property he desires at the price of their choosing decided after private negotiations, and with no oversight whatsoever.

It is already well known that Qatari investors have long had their sights on Turkish tea manufacturer Çaykur, and have been looking to purchase public land for summer and winter tourism projects.

On the other hand, there are numerous businesses and construction firms badly hit by this year’s economic downturn that are close to the government. With the TVF firmly in his grasp, Erdoğan is now free to bring these firms aboard as partners, buy shares in them to add to the TVF’s portfolio, extend credit to them, and act as guarantors to their debt.

Rumour has it that the TVF may go into partnership with the project to construct Istanbul’s third airport. The airport is due to go into operation this year, but construction will continue for several years. The lira value of a 5.7-billion euro loan taken out in 2015 for the project has more than doubled since then.

According to a story doing the rounds in the German press, Erdoğan wants to make a deal to turn over Turkish State Railways to the German conglomerate Siemens.

The news has not been verified, but at the helm of the TVF, Erdoğan and Albayrak have the authority to turn over Turkish State Railways to any local or international firm without any oversight, without putting it to tender, and without even having to make a statement. Any public properties in the fund’s portfolio can be handed over in return for new sources of credit.

In the end, it is what the president said he wanted to do three years ago in Balıkesir and he has made his dream come true. The country can now be run just like a family business.


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