Whatever you may think of him, Mr. Erdogan knows how to boost and consolidate his power.
Transformation of the country’s regime from a parliamentary democracy to an executive presidency has reached top speed since the failed 15th July coup attempt and under the emergency rule since then.
Radical interventions are not limited to politics and the judiciary. The country’s economy is also facing a major shake-up.
A couple of days after the International Monetary Fund warned of risks threatening the Turkish economy, including rising inflation and below-potential growth, the government has transferred massive amounts of publicly owned shares to a sovereign wealth fund, quietly set up last year.
The fund, approved by the parliament in August, is now in control of stakes in Turkey’s top public companies, including The Istanbul Stock Exchange, Turkish Airlines, Turkish Petroleum Corporation (TPAO), the Petroleum Pipeline Corporation (BOTAŞ), Eti Mining, satellite network TÜRKSAT, the postal service PTT, Ziraat Bank ,Halk Bank, and the state tea producer, Caykur .
As well as treasury stakes in large public enterprises, the wealth fund has been given several prime pieces of real estate in touristic regions of Mugla, Aydin, Izmir and Antalya. Turkey’s Defence Industry Support Fund would be lending 3 billion Turkish Liras ($810 million) to the wealth fund for a period of three months.
The sovereign wealth fund will be exempt from income and corporate taxes.
The Fund can sell assets or purchase shares, make all types of market transactions. It is not answerable to the Turkish Court of Accounts (Sayistay), and will only be subject to an independent audit.
The government says the Fund will boost economic growth, by financing big infrastructure projects and securing credit abroad to implement big projects.
The main opposition Republican People’s Party disagrees. Selin Sayek Böke, party spokesperson and vice-chair responsible for economic policy, calls it a “palace coup” to create a “parallel” treasury. She likens it to a “prodigal son”, ending up selling off the family silver.
This is not the first wealth fund being established in Turkey. Neither is it something that happened overnight.
The Law on the Establishment of Turkish Wealth Fund was published in Official Gazette on 26 August 2016.
Even though there was little reaction from the opposition and almost no public debate about it, one of Turkey’s most respected economists, Mahfi Egilmez expressed his concerns in detail at the time.
Sovereign wealth funds are government-controlled pools of assets, primarily to use excess and idle funds in strategic investments for the future.
They are state-owned investment vehicles, generally set up by countries with large natural resources, to make sure future generations benefit from today’s big bonanza.
In recent years, Arab and Central Asian governments have also used sovereign wealth funds to invest abroad and broaden their capital base.
Norway has, by far, the world’s biggest sovereign-wealth fund.
Resource-rich Gulf countries, or export-driven economies, such as China, with large trade surpluses manage their national savings for the purposes of investment in industries that they consider relevant for the development and diversification of their national economies.
Turkey is not a resource-rich country. Turkey’s trade deficit hit $5.6bn in December. Its economy suffered a sharp contraction. Turkey’s sovereign borrower rating is cut down to junk. Internationally, its currency is the worst performer of the year so far – not an ideal candidate among emerging economies to set up a sovereign wealth fund.
Sovereign wealth funds and their international portfolios are managed by highly competent and sophisticated managers. As for Turkey’s appointed fund managers, the names that make up the chairman and the board members of the fund, do not inspire confidence.
The director general and board chairman of the Turkish Sovereign Wealth Fund, Mehmet Bostan is a former head of the pension fund subsidiary of Vakifbank, a finance sector executive.
Himmet Karadağ is the Chairman of the Board and the Executive Committee.
Kerem Alkin is an economist and columnist in pro-government daily Sabah.
Oral Erdogan , Rector of Piri Reis University, is an academic specializing in maritime engineering. He was a board member for Turksat and Aselsan.
The most controversial member of the board, by far, is President Erdogan’s special advisor Yigit Bulut.
A later convert to Justice and Development Party, nevertheless, Mr. Bulut is one of the most dedicated to the cause. “Nobody can touch the president of this country before I am killed … I have two licensed pistols and I have collected hundreds of bullets over the years thanks to my legal rights. Before I die, until I am shot or hanged, nobody can touch the elected president of this country” he once said.
He is also on the record saying “with President Recep Tayyip Erdoğan at the helm in Turkey, there’s no need for anyone else in the country to engage in politics”.
I am not sure how qualified he is to contribute to the Turkish economy’s diversification via a wealth fund, but his interests are very diverse, indeed.
He is well-known for his comments about telekinetic attacks by dark forces targeting Mr. Erdogan.
His latest contribution to Turkey’s culture of paranoia was about the danger posed by foreign chefs on Turkish television.
If the aim of this latest move is to reassure and calm investors, neither the timing nor the implementation inspire much confidence.
It is clearly designed to strengthen President Erdogan’s hand in the upcoming referendum.
Reuters News Agency quoted Wolfango Piccoli of Teneo Intelligence, an advisory firm, saying that “The wealth fund is an example of the ‘Erdoganization’ of the economy”.
It will do nothing for Turkey’s already tarnished reputation for transparency.
This post is also available in: Turkish