All the president’s oligarchs

The public tender and the tax incentive blatantly given to Kalyon Construction last week is the product of a cartelization that has created its own oligarchs. Turkey’s regime is the product of this blend in which a particular class has effortlessly seized a significant portion of the nation’s reserves, its accumulation, and in fact, its wealth.

Kalyon Construction, a leading Turkish construction company, received tax incentives of 9,449,995,833 lira in addition to winning a bid to build the tracks for a rail line worth 9,990,632,770 lira: these two figures, which are almost identical to the penny, seem to have a meaning beyond just showing favoritism for a commercial group close to the government. That’s because we are experiencing a “new political state” that cannot be explained by only favoritism, corruption or waste.

The Kalyon story was in the news last week, but almost one month earlier, there was a peculiar ceremony held. It was an opening ceremony for a new section of the North Marmara Highway and was held on September 19. On the giant screen overlooking the podium, there was President Recep Tayyip Erdoğan. In front of the screen were the owners of the Cengiz, Limak and Kalyon consortium, all in line on the podium. Erdoğan told the men to point themselves out when their names were called. Whoever heard his name took a step forward, raised his right arm with the palm facing forward, then took his hand to his heart and saluted the giant screen. Cemal Kalyoncu expressed his gratitude, on behalf of his partners as well, saying “All thanks to you, highest authority.” 

While people are suffering due to the pandemic and economic crisis, at a time when state contracts worth billions of liras are given to the same addresses every other day, there is no meaning in inviting these construction company owners to the podium and thanking them one by one. It is as if there is a challenge to all the critics, while, in fact, these names are at the center of corruption claims. When it comes to public contracts given to Kalyon, Cengiz and Limak, I wonder if they increase the votes of the ruling party — do they help grow the economy, or perhaps lower the dollar exchange rate and interest rates?  

There should be a reason why the guaranteed payments of bridges and highways are paid without interruption while there is no money left in the state coffers to pay for medication. There should be a reason why the tempo and stability of state contracts are maintained no matter whether there is a crisis, a disaster or a virus.

This chart drawn from the World Bank's data regarding public tenders, demonstrates a situation we are all aware of. They compare different countries, taking into account the share of the top 10 companies that received public tenders. 

Out of the 127 countries surveyed, there is no other country in which public tenders are given to such a small number of private companies. In China, which has a 14-trillion-dollar economy, out of 1,507 projects, the company that has undertaken the most projects is China Everbright with 179 projects. The total value of their contracts is 11.8 billion dollars. In Turkey, on the other hand, Limak tops the list with 17 projects worth 48 billion dollars. Turkey, in other words, cannot be compared to any other country. 

There are other data supporting this situation. For instance, when the value of all public tenders are measured as a part of GDP for 2019, Turkey has 26 percent, while China has 0.3 percent, Russia 1.7 percent and Brazil 9.8 percent. In Turkey, every year there are public tenders worth over 100 million liras. About 300 companies bid for these tenders, but 50 percent of the projects are shared among 20 companies. 

Here we have a situation that differs from the construction-centric economy, which has been adopted as a practical way of rapid growth. When the end of year balance sheets of 2019 are examined, the 115,824 construction companies do not look as if they are doing a “productive” job. Ninety-four percent of companies are micro and small-scale ones anyway. Their share of the sales is around 35 percent. More than half of them are running a loss. Large-scale companies make up 1.1 percent of the sector and their share is 42 percent. Two-thirds of them are profiting.    

We also know that this way of doing business is not just limited to the construction sector. The same structure has been adapted in the energy sector also. More than half of the hydroelectric power plants called HES have been built by companies that have a construction sector background and have frequently won public tenders. The area of wind, solar and geothermal energy is considered to be the domain of smaller firms, but somehow these companies we are very familiar with from other sectors dominate in these areas as well. 

For instance, construction mogul Ali Ağaoğlu was not able to complete the construction of the Istanbul Finance Center. He and his partners had to hand over this business to the Turkish Wealth Fund for 1.6 billion dollars. However, the guaranteed payments for Ali Ağaoğlu’s wind plants continue. So are the payments for six geothermal power plants to YSE Yapı, known for its success in winning tenders for road projects and especially railroad tenders and affiliated with Çelikler Holding. In short, the maps for the construction and energy industries match up with one other. The map of Turkey’s mines is also shining with similar colors. 

As a matter of fact, the Wealth Fund has a say in nearly 100 industrial mines, including coal, uranium, zinc, iron, copper, gold and silver mines. The acceleration of public mine tenders should tell us something. Turkish Wealth Fund has a market share of 35 percent in finance, 27 percent in energy and 13 percent in transportation and logistics. It is preparing to invest in joint petrochemical plants with private companies in Ceyhan, in the southern city of Adana, and a thermal power plant in Afşin, central eastern Anatolia. Let us remind ourselves that only one signature is adequate to determine the status of public lands. Also, add to this that the activities of the fund are not subject to legal supervision. When the most recent bill passes in parliament, then payments to companies from the budget of the Fund will also be obscured.

What should we call this kind of a political and economic power? 

The public tender and the tax incentive blatantly given to Kalyon Construction last week is the product of a cartelization that has created its own oligarchs. What we see in front of our eyes is more than the bravery of a hack who thinks that taking the majority of the votes gives one the right to seize control of the bureaucracy mechanism. What we are seeing is the evolution of a mass political party into a giant cartelist structure, which grew through the use of public resources, and also which can only survive within the “public habitat.”     

In economic terms, a cartel can be defined as “a group of market participants who collude with each other in order to improve their profits and dominate the market.” In political science, it refers to a political party model that is integrated with the state and has monopolized national resources. 

Turkey’s regime is the product of this blend in which a particular class has effortlessly seized a significant portion of the nation’s reserves, its accumulation, and in fact, its wealth. These most destructive forms of capital components, which are also the most ambitious and the most retrogressive, instead of cooperating with the government, have become the regime itself, continuously increasing their share of resources. 

Indeed, the transformation is not running smoothly and peacefully. Turkey’s prestigious business association TÜSİAD has not been happy with the anti-competition aspect of the Wealth Fund. Financial fluctuations are always present. Communities, cults and foundations have been added, as neo-corporate subcontractors, to the cartelist system. There are social tensions triggered by them. On top of that, election results are a conundrum that does not comply with this political and economic monopoly system. 

Any possible solution to this conundrum seems to be beyond an election. It is a sharp choice between two opposite sides.

November 11, 2020 The captain’s imaginary wars