Turkey’s $200 Billion Wealth Fund Paralyzed by Internal StrifeBy , , and
Erdogan’s old ally emerges as another pillar of Turkish power
Prime minister calls claims of one-man rule a ‘complete lie’
Days after last year’s failed coup, Turkish President Recep Tayyip Erdogan and his allies set to work creating a wealth fund to safeguard what is now about $200 billion of assets, including cash, property and shares.
Since then, officials have been trumpeting the formation of such a large pool of capital outside the budget as a kind of cure-all, piquing investor interest with pledges to use it for everything from defending the lira and buoying the stock market to recapitalizing banks and cutting borrowing costs.
But the main thing the fund has done so far is trigger a power struggle between two rival camps, one based around Erdogan and the other around an increasingly assertive prime minister, Binali Yildirim, who was installed as a caretaker last year to oversee the transition to a vastly expanded presidency.
Infighting over how to deploy the assets has led to paralysis, seven people connected to the fund said on condition of anonymity. The divisions are so deep, four of these people said, that the team around Yildirim, a co-founder with Erdogan of the ruling AK Party, is exerting its authority and looking to replace the fund’s chief, Mehmet Bostan, who’s backed by the president and his family.
While there’s no doubt Erdogan reigns supreme, the emergence of a second pillar of AKP power shows his rule isn’t as absolute as it may appear, according to Etyen Mahcupyan, a former adviser to Yildirim’s predecessor, Ahmet Davutoglu, who disagreed with the president over the premier’s role and quit after 21 months, in May 2016. Party loyalists will do whatever it takes to retain their fiefdoms in the new system of government, he said.
“It’s not like there’s a system of sharing -- the man at the top takes it all and then distributes it,” Mahcupyan said, referring to Turkish power and its spoils. “Yıldırım is very powerful within the bureaucracy and has a lot of loyal followers, so he may be thinking about the period after Erdogan.”
Spokespeople for Erdogan and Yildirim both declined to comment on the outlook for the fund, as did Bostan, the chief executive officer.
Some people familiar with the matter say they’re concerned the fund will be misused for political purposes or to enrich well-connected companies at the expense of others. Its holdings include controlling stakes in two major state banks, TC Ziraat Bankasi AS and Turkiye Halk Bankasi AS, along with Turkish Airlines, Turk Telekom, the stock exchange and the national lottery.
The referendum that voters narrowly passed in April mandates that ballots for president and parliament be held by November 2019, after which the job of prime minister will be abolished and most of its powers transferred to the presidency. Erdogan, whose approval rating is hovering around 50 percent, can call elections early, though in 15 years in power his party never has.
Yildirim, 61, is used to having a lot of money to work with. As transportation minister under Erdogan for a dozen years, he oversaw about $100 billion of the public works that have transformed Turkey while winning AKP votes, with an estimated $325 billion more in the pipeline. As premier, he’s helped oversee a post-putsch crackdown that has led to the jailing or sacking of more than 150,000 people and the seizure of more than $10 billion in private assets.
As far as the fund goes, Yildirim has been sitting on the development plan Bostan submitted five months ago. The 46-year-old CEO, a former banker, wants to focus on managing the risks of existing holdings while looking for start-ups to back abroad and partnerships with foreign sovereign funds and investors.
A column in the pro-government Sabah newspaper this week called for control of the fund to be transferred to the presidency, removing it from Yildirim’s portfolio before the prime minister’s office is formally abolished in 2019.
While some board members have lobbied for the fund to start intervening in the stock and currency markets, Yildirim favors what he knows best: big-ticket infrastructure projects, which is a tougher sell for seasoned investors. At least three bankers who’ve been approached about taking management positions have rejected the offer, three people with knowledge of the overtures said.
“The point of the fund seems to be removing the companies from public oversight,” said Abdullatif Sener, a former finance minister under Erdogan who’s become a critic of his former party. “It seems geared more toward monetizing state assets than solving Turkey’s structural problems.”
Bostan, who is also the fund’s chairman, is a longtime supporter of the president and an ally of Erdogan’s son-in-law, Energy Minister Berat Albayrak. The fund’s other four board members, all approved by Yildirim, are stock exchange Chairman Himmet Karadag, presidential adviser Yigit Bulut and two academics specializing in finance, Kerem Alkin and Oral Erdogan.
People familiar with the board’s work say its members rarely agree on anything at meetings, which, when they do happen, are often acrimonious.
Karadag has shown up carrying firearms and wearing a bulletproof vest. Bulut, a former journalist, is an unabashed propagandist who’s claimed Erdogan’s opponents have tried to kill the president with telekinesis. Both Bostan and the board have made it clear that the other needs to go.
One of the few initiatives the fund has made progress on is a tentative accord with Singapore’s leading urban-planner, Surbana Jurong, to create an industrial hub in southeastern Turkey. But a final agreement has been delayed at least twice by Yildirim’s office amid uncertainty over who should physically sign it and thus get the credit, people familiar with the matter said.
Yildirim’s position became clearer two weeks ago, when he led a Turkish delegation to a business forum in Singapore, where Bostan was conspicuously absent. The prime minister used the opportunity to let perspective partners in Asia know that Erdogan isn’t the only Turk with power back home.
“They say the country’s headed for a dictatorship, one-man rule,” Yildirim told delegates at the Turkey-Singapore Business Forum. “That’s a complete lie.”