Turkey on deck for G-20 chair as graft allegations persist

The government’s reaction to a graft probe that went public on Dec. 17 has raised concerns that Turkey may fail to fulfill its obligations as stipulated in the G-20 global economic agenda.

Turkey is set to become the G-20 chair country in 2015. The G-20, a group consisting of the world’s 20 most developed economies, cites fighting corruption as a priority of its 2014 agenda. The group envisages measures to minimize the negative impacts of corruption on a country’s economic performance and market activities. Increased cases of graft have become a burden on conducting business in developing countries and it costs these countries billions of dollars each year to fight corruption, observers argue.

The G-20 emphasizes the importance of a range of issues including judicial integrity, foreign bribery and transparency of legal structures in determining its anti-corruption measures. “Corruption increases costs for businesses and deprives developing countries of up to $40 billion each year. We encourage G-20 countries to ratify the UN Convention Against Corruption and to participate in the convention’s peer-review mechanism,” said Ian Biggs, the Australian Ambassador to Turkey, in a meeting held in Istanbul on Dec. 20, 2013. The G-20, considered the premier international economic policy coordination forum, brings together the world’s systemically important rich economies with emerging markets. Together they account for 85 percent of global output.

Director of the BahCeSehir University Center for Economic and Social Research (BETAM) Seyfettin Gursel told Sunday’s Zaman that addressing corruption at the G-20 meeting would be “paradoxical” under Turkey’s 2015 chairmanship, as the ruling Justice and Development Party (AK Party) has been trying to dismiss large-scale corruption allegations.

On the morning of Dec. 17, Turkey woke up to a bribery and corruption operation in which simultaneous operations were launched in Istanbul and Ankara after an investigation that included allegations of illegal zoning, bribery and money laundering. The operations were carried out upon the orders of the Istanbul Public Prosecutor’s Office and resulted in the arrests of 49 people, including: BarıS Guler, the son of former Interior Minister Muammer Guler; Salih Kaan Caglayan, the son of former Economy Ministry Zafer Caglayan; Abdullah Oguz Bayraktar, the son of former Environment and Urban Planning Minister Erdogan Bayraktar; businessman Ali Agaoglu; Iranian businessman Reza Zarrab; Halkbank General Director Suleyman Aslan; and Fatih Municipality Mayor Mustafa Demir.

In addition, the Finance Ministry’s Financial Crimes Investigation Board (MASAK) sent a report to the Istanbul Police Department regarding suspicious money transfers.

The Turkish government has intensified its efforts to stall the investigations since the operation on Dec. 17, and thousands of public officials — mostly in the police department and the judiciary — have been removed or reassigned from their posts. Later, a controversial bill on the Supreme Board of Judges and Prosecutors (HSYK), which would subordinate the entire judiciary to the government if enacted, came onto the agenda.

Commenting on a recent regulation stipulating that the Treasury will guarantee big construction projects as well as the dozens of changes made to the Public Procurement Authority (KIK) since its adoption in 2002, Gursel said these pieces of legislation mark a regression in the reforms Turkey had undergone in the past decade.

According to a regulation prepared by the Undersecretary of the Treasury and published in the Official Gazette on April 19, debts stemming from carrying out build-operate-transfer (BOT) projects over a minimum investment amount of $1 billion and projects of the Ministries of Health and Education with a minimum investment amount of $500 million will enjoy protection from the Treasury.

That is to say, if tender-winning companies or consortiums become insolvent and hand over their projects to the relevant state administrations, the Treasury will take over all their liabilities, even if the construction projects have not broken ground.

Eighty-five percent of loans associated with the project will be covered by the Treasury if a project fails or is suspended due to a fault on the part of the company, while 100 percent of the costs will be covered if there are problems or shortcomings for which the relevant company is not responsible.

Seeing as the Treasury’s money is the people’s money at the end of the day, citizens — who will not have a share in the profits of a private company that successfully completes a project — will be compensating for the faults of that company.

“The recent Treasury regulation will create a problem of ethics for construction companies, as the burden of their failures will be put on the Treasury’s shoulders,” added Gursel.

Despite a few weak voices in support of the new regulation, which seeks to support colossal infrastructure investments, numerous experts have adopted a critical stance against it, warning that this regulation may be a harbinger of retrogression to the ominous pre-2001 economic crisis era of lost fiscal discipline and crony capitalism. Similarly, with a number of changes in the laws, public procurement has become the most problematic area in Turkey’s public sector as far as transparency is concerned.

According to the 2013 report titled “Overview of Corruption in Turkey” prepared by the Turkey chapter of Transparency International (TI), government accountability continues to be low and problems with public procurement have increased in the last decade. The same report said the number of “exceptional procurements” made by public offices has increased by 24 percent since 2001, which is much higher than the international average.

“Turkey may fail to use this opportunity to take leadership as G-20 chair in 2015, as its image in the fields of economy, democracy and the rule of law has been tarnished by recent developments,” said Ramazan TaS, head of the economics department at Turgut Ozal University, to Sunday’s Zaman.

Stressing that G-20 leadership is a unique chance for countries to emerge onto the international arena, TaS also said that Turkey seems to be failing in creating public awareness and establishing a positive agenda so far.


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