Turkish opposition challenges conglomerates that ‘exploit’ the economy

When Turkey’s main opposition leader pledged to nationalise the possessions of the “gang of five” this week, the reference was clear to TV viewers around the country.

Under President Recep Tayyip Erdogan, five conglomerates have benefited from multibillion-dollar contracts for infrastructure mega projects which may have characterised the 18-yr rule of his Justice and Development Party (AKP).

The preferential terms of the contracts and the companies’ close ties to the federal government have earned them a generic nickname that roughly means “supporter companies” due to the backing they offer to the ruling party.

In a funds speech in parliament this week, Kemal Kilicdaroglu, head of the Republican People’s Party (CHP), vowed to get rid of the “order of theft”, saying: “We’ll nationalise and seize all the investments of the gang of five which will exploit also our grandchildren.”

The five organizations - Limak, Cengiz, Kolin, Kalyon and Mapa - are heavily involved with construction but own interests that span the Turkish economy, including media ownership, luxury hotels and the energy sector.

They formed the IGA consortium that built and today operates Istanbul’s new airport, a €22 billion ($26.8bn) tender they won found in 2013, although Kolin transferred its stake to Kalyon this past year.

Like various such projects, such as ports, vitality stations, roads and hospitals, the airport deal took the sort of a build-operate-transfer (BOT) contract. This sees the contractor operate the project for a particular time frame - 25 years regarding Istanbul airport - before moving it to the state.

The airport contract also includes a government guarantee of income to IGA for a minimum number of passengers, a clause common to BOT schemes.

Although the operator said it had surpassed this figure in its first year, other BOT projects have didn't do so, at huge cost to the Turkish taxpayer.

The airport, based north-east of Istanbul nearby the Black Sea coast, is associated with Anatolia by a third Bosphorus crossing that opened in 2016. Yavuz Sultan Selim bridge is managed by an exclusive group under a deal which includes a government guarantee of toll income from 135,000 cars a evening.

According to reports, this past year the government paid out the operator 3 billion lira ($380,000) due to a shortfall in targeted traffic, leading Turks to joke that they were paying out the toll despite do not ever having employed the bridge.

These contracts tend to be priced in forex, adding further burden in the public purse as a result of falling lira, which includes lost one half its value since mid-2018.

A good 2018 World Bank study located Limak, Cengiz, Kolin and Kalyon in the global top 10 of public tender winners between 1990 and 2017, with Limak coming second after French strength giant Suez. While Suez won contracts all over the world, the Turkish tenders had been all domestic.

In September, the non-public relationship between your bosses of these organizations and Mr Erdogan were laid bare in a televised ceremony to open a section of the North Marmara highway, which utilises the Yavuz Sultan Selim bridge.

The owners of Cengiz, Limak and Kalyon stood in front of the guests because they were individually thanked by the president. “All because of you,” Kalyon’s chairman Cemel Kalyoncu replied.

Mr Kalyoncu, Cengiz’s Mehmet Cengiz, Nihat Ozdemir of Limak, Mapa chairman Nazif Gunal and Kolin’s Naci Kologlu most have long-position ties to Mr Erdogan. Several had been caught up in a corruption investigation seven years ago that targeted the president’s inner circle.

In line with the probe - labelled a coup attempt simply by Mr Erdogan, who was in that case prime minister and who quashed the allegations by removing a large number of police and prosecutors engaged - businessmen were required to acquire $450 million to acquire a newspaper and TV station to ensure their output remained supportive of the federal government.

Today, nearly all of Turkey’s media will be managed by companies that favour Mr Erdogan.

In exchange, the magnates allegedly obtain pick of the large construction contracts that have driven a lot of Turkey’s growth through the AKP era.

“The reward for supporting the federal government could possibly be business contracts, however the punishment for not supporting it is NOT ‘no contracts;’ it really is having tax fines and perhaps facing bankruptcy,” Mert Yildiz, a senior economist at the Burgan Bank Group, wrote in an individual blog shortly after the investigation collapsed.