Turkey's largest business groups issues a sternest warning ever to AKP government, demanding rule of law

In the strongest warning yet to the government from a business group, the Turkish Industrialists and Businessmen’s Association (TÜSİAD) president has said that foreign investment will not be made in a country where there is no respect for the rule of law, where legal codes conflict with European Union rules, public procurement laws have been amended dozens of times and companies are pressured through tax fines.
Speaking at the 44th TÜSİAD General Assembly in İstanbul, the association’s president, Muharrem Yılmaz, told members that Turkish businesspeople are uneasy about the controversial Supreme Board of Judges and Persecutors (HSYK) bill that will subordinate the judiciary to government control.

“We are very concerned about a proposed bill to restructure the HSYK,” he said, stressing that the real solution should focus on a constitutional amendment that will insure the judiciary’s independence and compliance with the EU’s Copenhagen criteria.

Yılmaz underlined that Turkey has been giving the impression of being a country where the rule of law cannot overcome corruption claims, dealing a blow to investors’ confidence.

The TÜSİAD president’s warning about the government’s mishandling of the ongoing corruption investigations, the third since a corruption scandal hit Turkey on Dec. 17, indicates a growing worry in Turkish business community over the prospect that the Turkish economy will be hurt by growing political uncertainty as the government tries to derail investigations with the reassignment of police and members of judiciary en masse, as well as changing the laws pertaining to the judiciary.

The business group earlier called on the government to avoid actions and statements that would overshadow the investigation and called for judicial independence and the protection of individual rights to be preserved.

On Dec. 17, İstanbul and Ankara police staged dawn raids and detained 52 people as part of a major investigation into claims of corruption and bribery. Among the detainees were bureaucrats, well-known businesspeople and the sons of three Cabinet ministers. On Dec. 25, another major corruption investigation, implicating the prime minister’s son, Bilal Erdoğan, as well as prominent businesspeople close to him, was stalled when the government ordered police to defy court orders.

As the conflict between the judiciary and the executive turns into a state crisis, Yılmaz warned that it cannot be resolved by increasing the powers of one branch over another. “We can only solve this with contemporary norms,” he said, referring to the European Union acquis as a guide for the implementation of further reforms in Turkey.

He also criticized the government practice of pressuring Turkish firms through tax fines and other administrative penalties. Last week, Turkey’s competition watchdog ruled that the Turkish Petroleum Refineries Corporation (TÜPRAŞ), one of Turkey’s largest oil distributors, must pay TL 412 million in fines for abusing its monopoly in its pricing.

Tüpraş is owned by TÜSİAD member Koç Holding, the largest conglomerate in Turkey. TÜPRAŞ previously faced a government crackdown over allegations of tax fraud. Last July, Turkish authorities launched sweeping raids on all oil-distributing companies including TÜPRAŞ for suspected private consumption tax (ÖTV) evasion.

Concerns over Internet restrictions

The business association head also repeated his criticism of a planned amendment to the Internet law, part of an omnibus bill that was approved by the parliamentary Planning and Budget Commission, saying that it could pave the way for an increase in Internet censorship.

“We believe this bill must be replaced with one that is on par with European Union standards that includes criteria defined by the right to freedom of expression in the European Convention on Human Rights (ECHR),” Yılmaz explained.

The amendment to Law no. 5651 on cybercrimes was recently introduced by ruling Justice and Development Party (AK Party) deputy Zeynep Karahan Uslu. According to the changes, which were included in the omnibus bill by the Ministry of Family and Social Policy, the transportation, maritime affairs and communications minister as well as the head of the Telecommunications Directorate (TİB) will be able to block websites without obtaining a court order.

The bill also includes a measure that allows for the recording of Internet users’ browsing history and saving it for up to two years. “In this way, the infrastructure for countrywide profiling of citizens will be established,” said Emrehan Halıcı, deputy chairman of the Republican People’s Party (CHP).

The move has raised concerns over the government’s increasing encroachment into people’s private lives as well as into the different mediums by which people can express their social and political opinions.

Worry over economic impacts of political crisis

The TÜSİAD head also expressed his concerns about the detrimental effects of political crisis on the economy, saying that political uncertainties and the possible impact of the upcoming elections on the economy must be addressed.

A written statement distributed ahead of Yılmaz’s speech mentioned that TÜSİAD forecasts that economic growth will be 3.4 percent in 2014, as opposed to the government projection of 4 percent, if price stability and macro-financial balance are present. The business group also predicts year-end inflation at 7.6 percent as opposed to government estimation of 5.3 percent and an unemployment figure of 10.7 percent for the year 2014.

Yılmaz also asked the government to drop the high national election threshold of 10 percent in elections and to expand rights and freedoms, including the right to freedom of assembly. He also urged the EU to open more chapters with Turkey.

Wrong choices in foreign policy

Erkut Yücaoğlu, president of the TÜSİAD High Advisory Council, said Turkey’s rise in 2013 was dealt big blows on four fronts, shaking the foundations of the building Turkey tried to establish. He said that first, damage was done in terms of foreign policy, with rhetoric on regional power sidelining realpolitik. “We set out on a path to achieve zero problems with neighbors, [but now] no neighbor we do not have problems with is left,” he said. Yücaoğlu accused the government of subjecting Turkey to more criticism because of its foreign policy choices.

On a second front, Yücaoğlu said Turkey’s democratic credentials were dealt a blow when the government reacted very strongly against protesters at the Gezi Park demonstrations who were just exercising their right to freedom of assembly in a peaceful way. “This changed the perception of democracy in Turkey that had been built step by step over years,” he lamented, adding that the Western alliance used very harsh language about Turkey regarding the Gezi protests. Yücaoğlu also underlined that the government had brushed aside damage control methods by abandoning the drafting of a new constitution and proposing an insufficient democratization package.

Thirdly, Yücaoğlu said the rule of law was harmed in Turkey when the government became locked in a feud with the judiciary. Claims that “a state within the state is staging a coup” and “corruption allegations are being covered-up” raised credibility questions about the judiciary and the country’s judicial system, he said, stressing that this situation has greatly damaged the separation of powers. This has negatively impa
cted foreign investors’ perspective of Turkey, Yücaoğlu added.

Finally, he said that damage was also done to the economy as a result of the combination of the other factors. He cited the decline in the value of the lira against foreign currency in recent weeks which led to a debt increase of 30 percent for borrowers who owe money in foreign currency and he noted that this problem will have an impact on all the target figures for 2014 including growth, production, investment and unemployment.

Gov’t believes negative impact is temporary

Responding to Yılmaz’s criticism, Minister of Development Cevdet Yılmaz said the current political debate will wither away and that Turkey’s success story will continue.

“There may be some temporary impact on the economy from the recent debate,” he said, “But I believe this will be over very soon.”

The development minister admitted that the first quarter’s results may reflect some adverse impact from ongoing debate in Turkey over the corruption scandals. He said how much impact there was on the Turkish economy will be seen clearly after the March 30, 2014 local elections.