TODAY’S – Turkey in int’l hot seat amid graft cover-up efforts

Turkey in int’l hot seat amid graft cover-up effortsThe year 2014 marked a series of corruption incidents within the Turkish government while global monitoring institutions and rating agencies turned up the heat on the countryand#39s ruling party amid efforts to cover up widespread bribery and graft.A Turkish court recently dropped all charges in two separate corruption probes implicating President Recep Tayyip ErdoIan, his close family, friends and government ministers.

ErdoIan, backed by a host of loyal media outlets and the judiciary, has done his best so far to downplay the corruption allegations at home. Reactions from the global arena so far indicate that the more the president tried to bury the allegations, the more the global awareness on graft has increased.

The countryand#39s agenda was occupied by the corruption allegations through 2014, and this was reflected in global institutionsand#39 assessments. On Dec.

3 Transparency International (TI) said Turkeyand#39s perceived corruption level has worsened the most out of 175 countries in their global perceived corruption index in 2014. TI added that Turkey is perceived as increasingly corrupt, despite strong economic growth in recent years.

This was a major setback regarding the perception of Turkey in global markets.In October a serious warning regarding graft in Turkey came from the Organization for Economic Cooperation and Development (OECD) and the EU.

The OECD directly mentioned Turkeyand#39s corruption investigations, referring to controversial decisions to reassign a large number of police officers and members of the judiciary and the passage of a piece of legislation that increased the powers of the executive branch over the judiciary. Earlier in May, the OECD slashed its 2014 growth forecast for Turkey, recommending that the government improve fiscal transparency and accountability in public finance.

Also in October, the EUand#39s draft progress report on Turkey for 2014 expressed deep concern over the corruption scandal, the executive branchand#39s intervention in the judiciary, violations of the rule of law and limitations on press freedomRating agencies highlight graft in TurkeyThe extensive graft investigation that led to the resignation of three Cabinet ministers was followed with a purge of dozens of police officers and prosecutors. This stirred political instability in Turkey, thus unnerving investors.

The first strong reaction to the corruption allegations from a leading rating agency came from Fitch. On Jan.

7 Fitch warned that a corruption scandal shaking the government would have the ability to weaken the countryand#39s creditworthiness. In April Moodyand#39s cut the outlook on Turkeyand#39s sovereign rating to negative, citing political turbulence, increased external financing pressure and weaker growth prospects, triggering fears of a possible credit downgrade in the months to follow.

The warning came amid comments that political risks did not end with Turkeyand#39s local elections in March.Turkeyand#39s policy environment has become less predictable, another rating agency Standard and Poorand#39s (SP) also said in April, citing downward risks on Turkeyand#39s sovereign credit rating.

A month later, the SP warned the government once again, saying the continued erosion of institutional checks and balances poses risks to business confidence and economic stability.Moodyand#39s had upgraded Turkeyand#39s credit rating to BBB-, or investment grade, in May 2013, a move that followed a similar upgrade by Fitch in November 2012.

SP, which rates Turkey at BB+ with a negative outlook, is the only one of the three major rating firms that does not class Turkey as investment grade.ErdoIanand#39s discontent with international global rating agencies backed by threats that Turkey may break ties with them if their assessments are not in favor of the country — the latest of such coming in September of this year — has drawn criticism from analysts.

Experts have said such rebukes would inflict damage on the economy, rather than the agencies.Global monitors were also following alleged money-laundering in the graft probes.

In September the New York branch of Turkeyand#39s state-run Ziraat BankasI had to end its retail banking operations, a month after the US Federal Reserve announced strict inspections of Ziraat due to accusations of illegal money transfers by the government-controlled bank.

SOURCE: Today’s Zaman