February 8, 2015

‘New Turkey’ placing free market and property rights under threat

Tuesday's raid on the headquarters of a publicly traded lender has sparked widespread reactions from a number of prominent experts, who have all voiced their concerns over the free market economy and property rights in the country -- dubbed the “New Turkey” -- since the authorities neither show respect for the interests of shareholders at home nor are they worried about the growing anxiety of foreign investors.

In the latest example of repressive maneuvers through which government figures and partisan media outlets try to intimidate dissident voices and any institutions affiliated with the perceived opponents, the Banking Regulation and Supervision Agency (BDDK) decided on Tuesday to hand over control of the country's largest Islamic bank, Bank Asya, to the state-run Savings Deposit Insurance Fund (TMSF), citing insufficient transparency in the managerial board of the bank. According to the legal pretext on which the banking watchdog based its midnight crackdown on the headquarters of the openly traded company, some of the founding partners had failed to submit certain identification documents to the BDDK which it had requested some one-and-a-half months ago in order to preserve investors' interests.

The government has long been using the phrase “New Turkey” on every occasion in order to describe the changes introduced during the 12-year rule of the Justice and Development Party (AK Party).

Nevertheless, the alleged pretext of the BDDK's recent decision appears to have been a misleading justification and has placed free market and property rights in the country under threat. The government had already been running a smear campaign against certain segments of society for over a year, asserting that it was defending state interests against so-called traitors. To this end, it dismissed thousands of police officers and relegated numerous prosecutors after they had carried out corruption investigations which implicate several then-cabinet members in 2013. The government even raided leading media outlets and arrested journalists who made publications critical of the ruling AK Party.

Supporters of the government had earlier rationalized previous actions taken against opponents on the grounds that the elected cabinet was using its executive function and was clearing itself from a purported parallel structure within the state. However, this time, the government has gone beyond the limits to abuse its power and has placed pressure on the earnings of people who invested in Bank Asya, a privately owned company.

Beyond the fact that the lender's importance is rooted in being a financial player in the Turkish banking industry, Bank Asya should also have been treated much more carefully since its shares are publicly traded in the country's stock exchange which is volatile to any negative or positive developments, as is the case for all firms on the exchange market. Instead, TMSF officials came to the headquarters of the bank escorted by busloads of police forces at night. The state-run Anadolu Agency and pro-government media outlets, meanwhile, aired the development as breaking news in which they claimed the BDDK had seized the whole bank when in fact the TMSF only took over management of the bank for a temporary period.

The planned target of the government, therefore, turned out to be creating a speculative movement in which depositors would rush to the bank's branches to withdraw their money and push the lender's capital adequacy ratio to lower levels requiring an actual seizure by the BDDK. The plan, however, backfired and resulted in large sums of money being deposited into the bank by customers in an effort to fight the politically motivated assault against the lender. The shares of private lenders trading on the Bourse İstanbul (BİST), however, were unable to escape the effects of the development and lost 3.92 percent in value, demonstrating how the conditions enabling free market economy and preserving property rights had been ruthlessly abused.

Speaking to Sunday's Zaman, economy professor İbrahim Öztürk described the intervention as terrifying as it will scare foreign investors from the country in the long run, adding that unlawful attacks against publicly traded companies will be costly for Turkey, where half of the shares that are currently being traded on the country's stock exchange are owned by foreigners.

In the midst of pressure on both the political sphere and the business world, Turkish firms have instead opted to increase their investments abroad rather than at home in recent years. Among leading business groups that have either shifted their investments from Turkey to overseas or expanded abroad instead of boosting their operations at home recently are Eczacıbaşı Group, İpek Holding, Koç Holding and Ülker Group.

Commenting on the issue, Kemal Kılıçdaroğlu, the leader of the main opposition Republican People's Party (CHP) said on Wednesday that people in Turkey should know they have no security of life and property, starting that the ruling AK Party has failed to implement the raison d'état of modern sovereign states.

Meanwhile Professor Mehmet Altan, an economist, journalist and author, said confidence and stability do not exist in a country where the market economy is being violated amid the lack of the rule of law. Turkey is headed toward political, economic, and social chaos since a single man is trying to shape market conditions and the rule of law by himself. If common sense and consciousness do not intervene in what is going on, the cost to the country will be huge, Altan noted.

In addition, veteran journalist and economist Süleyman Yaşar has also condemned the crackdown on Bank Asya, saying officials at the TMSF have wasted individuals' incomes and have unjustly seized properties. Yaşar maintained that such developments undoubtedly tarnish the reputation of Turkey in the eyes of investors as well as damages the whole business environment in the country. Yaşar stressed that there has already been some $5 billion flowing out of Turkey in recent months due to distrust in the government. After this development, outflows of money will considerably increase and existing investments in the country may even be scared off, Yaşar stated.

Professor Eser Karakaş, likewise, emphasized on the violation of property rights while assessing the crackdown on the lender, saying the decision should immediately be appealed with in court. If the perception that the interests of private individuals can be violated as easily as was demonstrated in the recent development prevails in the country, no one will dare to invest in Turkey and will instead invest in other countries. Karakaş also noted that investments coming into Turkey have already been on a downward trend in recent years due to failures to obeying the rule of law.

Barın Kayaoğlu, a freelance writer and reporter based in Washington, D.C., with extensive knowledge of the developments in Turkey as well as the Middle East, tweeted: “Not that I care for #BankAsya or #Gülen movement, but you're not really a free market economy when your president can just grab a bank. The bigger problem with Turkish govt's #BankAsya decision is that foreign investors will think twice about coming to Turkey.''

The takeover was even harshly condemned by Zekeriya Temizel, the first president of the BDDK, who told Today's Zaman that publicly traded companies should not be used in quarrels between individuals and politicians in liberal economies. Temizel further added that institutions are not involved in debates between individuals in a free market economy and if they are, it is hard to predict where the chaos arising from the debates might extend to, given that these institutions are key figures in the economy.

Published on Today's Zaman, 07 February 2015, Saturday