TURKISH BANKS MAKE HUGE LOANS TO FRIEND OF ERDOGAN

On April 22, it was announced that two Turkish state-owned banks had stepped in to provide $750 million in loans to Calik Holding, which is owned by a close friend of Prime Minister RecepTayyip Erdogan, in order to enable it to purchase the second largest media group in Turkey.

On December 5, 2007, the Turkuaz Media Group, which is owned by Calik Holding, successfully bid $1.1 billion for the Sabah-ATV media group. Sabah-ATV had originally been owned by Dinc Bilgin, who had been one of Turkey’s leading press barons in the 1990s. Together with several others of Bilgin’s assets, his media companies had been seized by the authorities when the collapse of a bank he owned left him in heavily in debt to the Turkish state.

The Calik Group is owned by Ahmet Calik, a long-time close associate of Erdogan. The group’s assets have more than quadrupled since the Justice and Development Party (AKP) first came to power in November 2002 and are currently estimated at around $2.5 billion. In March 2007, Calik appointed Berat Albayrak, Erdogan’s 26 year-old son-in-law, as the holding’s general manager.

The Calik Group is mostly active in construction, energy and bidding for state contracts. The Sabah-ATV media group consists of one national TV channel (ATV), one radio station, five newspapers (including Sabah, one of Turkey’s leading dailies) and eight magazines. In the heavily politicized Turkish media, the Sabah-ATV group had traditionally been on the liberal, center-left and a frequent critic of the AKP and other religiously-oriented political parties.

When it became clear that the state was going to sell the Sabah-ATV group, a number of companies, including foreign investors, were interested in buying it. As early as September 2007, however, leading members of the AKP confided privately that the government had already decided to sell the group to Calik. As a result, when the group was eventually put up for auction on December 5, 2007, Calik was the sole bidder.

There have always been doubts about whether Calik had the money. The sale was formally approved by the Turkish regulatory authorities on February 21, 2008. Calik was given until April 25 to transfer the money to the Turkish state. No domestic or foreign bank was prepared to finance the deal. On April 22, just three days before the deadline, Calik announced that Halkbank and Vakifbank had agreed to provide loans of $375 million each. The rest of the money would come from a previously unknown company in Qatar called the Al Wasaeel International Media Company.

Both Halkbank and Vakifbank are not only owned by the state but their high level management consists of political appointees nominated by the government. The Turkish media subsequently reported that Al Wasaeel had been established by the Qatari authorities to channel oil revenues into foreign investments. Over the last six months, eight AKP ministers have visited Qatar–two of them twice–to try to encourage the Qataris to investment more in Turkey. Erdogan himself was in Qatar in March.

The loans provided by Halkbank and Vakifbank are the largest either bank has ever provided to a single customer and come at a time when both Turkish and international markets are facing a severe credit squeeze. In statements released on April 23, both banks defended their actions, claiming that they had been motivated purely by commercial considerations. Few will be convinced. For many Turks, the size and timing of such huge loans to one of Erdogan’s friends all look like more than just a coincidence.

When it was first founded in August 2001, the AKP vigorously campaigned on what it claimed was its honesty and transparency. In Turkish ak means “white”. At one time, Erdogan even ordered journalists to begin referring to the AKP simply as Ak in order to symbolize how clean it was of the corruption and nepotism that had characterized the political parties that had ruled Turkey during the 1990s.

There is little doubt that when the AKP first took office, there was a dramatic reduction in the practice of paying cash bribes to secure government contracts. Any hopes that corruption would become a thing of the past, however, proved short-lived.

Almost as soon as it took power, the AKP announced an amnesty for those who had failed to pay their taxes. At the time he was elected to parliament, Finance Minister Kemal Unakitan, the main architect of the tax amnesty, was facing charges of tax fraud for falsifying invoices. The AKP also fiercely resisted pressure from the IMF and World Bank to make the awarding of state and municipal contracts more transparent, insisting that only large-scale projects should be subject to scrutiny. In addition, the AKP quietly dropped a pre-election promise to restrict parliamentary immunity to allow parliamentary deputies suspected of corruption to face criminal charges.

Although it has not yet returned to the levels of the 1990s, there is no doubt that corruption is once again becoming endemic. Companies that bid for state contracts now say that even if they no longer have to budget for cash bribes, they need to have a good relationship with someone in the AKP to ensure that their bid is will be successful. At the local level, municipalities avoid close scrutiny by breaking up large contracts into a number of smaller ones. Another common practice is for local administrators to establish a company in the name of a friend or relative and then award it a contract.

The AKP can claim, with considerable justification, that whenever they have been in power, whether at local or national level, other political parties have been at least as bad, and often considerably worse. But, for the long-suffering Turkish people, the recent revelations about Calik’s purchase of Sabah-ATV are likely to further erode any lingering hopes that the AKP would put an end to corruption and nepotism (Radikal, Hurriyet, Vatan, Milliyet, Sabah, Zaman, April 23-24).