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Opinion
March 17, 2017 www.intellinews.com I Page 19
Turkey’s silent economic revolution and the new sovereign wealth fund
Cagdas Cataltas of Control Risks
All eyes are on Turkey’s controversial referendum where President Recep Tayyip Erdogan will ask the people on April 16 for his powers to be extend- ed to make him an “executive president”. However, little attention has been paid to the silent econom- ic revolution that is playing out in the background.
Four days after last year’s failed coup of July 15 the Justice and Development Party (AKP) declared a state of emergency, which has been renewed three times since then. This state of emergency gives the government sweeping powers to rule the country by executive decree, bypassing the normal parlia- mentary process, and AKP has made use of them.
The decrees are supposed to alleviate problems linked to the coup. Fifteen decrees have been is- sued as at the time of writing, covering a range of issues but several have nothing to do with the coup at all.
One such decree, passed in August 2016, launched the Sovereign Wealth Fund of Turkey (SWFT). In early February, several state owned companies were transferred to the fund, including: the National Lot- tery Administration, the Turkish Petroleum Corpo- ration (TPAO), Ziraat Bank, Turkish Post (PTT), the Satellite Communications and Cable TV Operations Company (Turksat), Eti Mine Works, the General Directorate of Tea Enterprises (Caykur), horserace operator the Turkish Jockey Club (TJK), the Izmir port, parts of the Istanbul Stock Exchange (BIST), Turkish Airlines (THY), Halkbank, Turkish Telecom, as well as 46 pieces of valuable land, most of which are in Antalya, a popular tourist destination.
Turkish Airlines is one of the state-owned companies put under the new sovereign wealth fund holding.
Shifting economic policy
The SWFT and its collection of valuable assets mark a significant shift in AKP’s economic policy. Part of the party’s economic success (which has been increasingly questioned in the last few years) has been due to privatisations, amounting to well over $70bn since 2002. The government also made use of both the Build-Operate-Transfer model and Public Private Partnerships to realise its infra- structure projects, such as highways, bridges and city hospitals. Indeed, the Turkish privatisation authority announced on August 5 that the National Lottery Administration would be privatised – an announcement still available on the authority’s website. Instead it is now a part of SWFT.
This begs the question what the new fund will do. The aims are listed in the executive decree that es- tablished it and include: Supporting strategic sectors and companies, via investment in strategic sectors and companies; financing mega projects includ- ing highways, the third Bosphorus bridge, Istanbul’s third airport, Canal Istanbul (which aims to create an artificial canal parallel to the Bosphorus) and a nu- clear plant; and stabilising capital markets, paving the way for the government to invest abroad, thus creat- ing employment and encouraging Islamic finance.
What is not clear, however, is how the fund will achieve these somewhat contradictory goals. One thing that is evident is that the SWFT has little oversight: it will neither be regulated by the financial regulator, the Capital Markets Board, nor audited by the Treasury or the Court of Auditors, and it is not subject to public procurement or competition laws.