Politics, construction, media and corruption

 

Construction, politics and media ownership – all are interconnected in Turkey, as the graft probe exposed lately.

In private conversations with the FT, two leading Turkish businessmen said bribes were sometimes necessary to go ahead with big construction projects, although the government emphasises that Turkey has improved its standing in Transparency International’s Corruption Perceptions Index over the past decade to 53rd out of 177 countries this year.

Mr Erdogan plays a leading role in the sector: according to a notice published in the Official Gazette in June, all transfers of state companies’ real estate holdings have to be approved by the prime minister.

Turkey’s public housing administration, known as Toki, answers directly to the prime minister and has expanded enormously under his rule. Toki, which did not immediately respond to requests for comment, says it has $7bn worth of land in its portfolio.

“Toki is a black box,” says Aykut Erdogdu, an opposition member of parliament who has compiled a report on the institution. He draws particular attention to what he says is the lack of transparency over revenue-sharing deals between Toki’s commercial arm, Emlak Konut, and private contractors.

During the first phase of the corruption investigation, Murat Kurum, chief executive of Emlak Konut, and Ali Agaoglu, a construction mogul who works with the company on high-profile real estate projects, were detained for questioning, although both have now been released.

In what appeared to be transcripts of telephone calls leaked to the Turkish press, Mr Agaoglu was quoted as referring to Mr Erdogan as the “big boss”. Contacted by the Financial Times, Mr Agaoglu’s company said he did not want to comment on the attributed remarks.

At the heart of Mr Erdogan’s construction ambitions are plans to build a canal, west of Istanbul, from the Black Sea to the Sea of Marmara, bypassing the crowded Bosphorus strait, together with the third airport and a new bridge over the Bosphorus. The projects are connected, converging on the Black Sea coast to the north of Istanbul. Mr Erdogan has suggested that two new cities be built to accompany the canal.

But funding for the airport project – for which the winning consortium bid €22bn – and in particular for the canal may be a challenge. Some bankers and business executives say the business case for the canal is weak and the financial sector has limited capacity to finance such large projects. The reported inclusion of some of the companies involved in the airport tender in the corruption probe adds a further level of uncertainty.

Executives from construction groups involved in the airport, such as the Limak, Kolin and Cengiz groups, which work extensively with the government, say they have not been formally notified of any allegations by investigators.

The corruption probe reportedly looks at a high-speed train project involving the thee companies. Mehmet Cengiz, head of the Cengiz group, has labelled any suggestion of tender rigging as baseless, arguing that much of the work on the project was done at below market rates.

Mr Erdogan himself portrays the sheer scale of infrastructure work as proof that the claims of corruption are absurd. In a recent speech he emphasised the country’s GDP growth under a decade of his rule and the roads and airports built in that time. Then he posed the question that he perhaps hoped would end the argument: “My brothers, could a corrupt government do this?”

According to an analysis by S Informatics, an Istanbul-based consultancy, during the first six months of 2013 almost 60 per cent of decisions in the country’s Official Gazette concerned construction.

“The way the system works is that if Istanbul municipality says you can’t build in a place, Ankara can overrule it – so it makes a lot more sense if you’re a business to go to the central authority,” said Refet Gurkaynak, an economist at Bilkent University in Ankara.

Mr Gurkaynak said that in lieu of economic growth from deeper structural reform, the government has stoked up construction by boosting the number of building permits, contributing to a 51 per cent increase in construction-sector employment over the past five years, to about 1.9m.

 http://www.ft.com/cms/s/0/ef8b4e0e-72d5-11e3-b05b-00144feabdc0.html#ixzz2pE7cAayN 

 

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