Cheap Politics of favoritism in public procurement in turkey: reconfigurations of dependency network
Politics of Favoritism in Public
Procurement in Turkey: Reconfigurations of Dependency Networks in the AKP Era 1st Edition
Esra Çeviker Gürakar (Auth.)
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Damages in EU Public Procurement Law 1st Edition Hanna Schebesta
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P REF ACE
On November 1, 2015, the day of my submission of this manuscript to the Publisher, Palgrave McMillan, the Justice and Development Party (AKP), once again, achieved a landslide victory by getting almost half of the votes, despite the corruption scandals, rising authoritarianism, decrease in civil liberties, intimidation of the free press, and so on.
Everyone was surprised by the outcome. How could this have happened? Was it religion? Was it nationalism? Was it ignorance of the voters? What was it? How should the durability of the AKP government have been rationalized?
In this book, you will find some insights about AKP’s uninterrupted success in elections. AKP’s durability can, to a large extent, be explained by its success in establishing, maintaining, and developing a set of extensive networks of privileges and dependency networks over the last thirteen years. Through these networks, AKP maintains its ties with the voters using new methods of redistribution.
Public procurement appears as one of the most influential tools used by the AKP majority government both to touch upon the very lives of the voters through for instance social housing projects and municipal services, and at the same time to create a business elite through procuring these construction work projects and municipal services from the “politically connected” private sector firms. AKP also uses public procurement as a means to finance politics. This is inherent in the characteristics of the polit-
ically connected firms (PCFs), many of which have owners/shareholders actively working as AKP cadres, as provincial party leaders or municipal council members.
I ˙ stanbul Esra Çeviker Gürakar November, 2015
A CKNOWLEDGMENTS
I thank Hadi Salehi Esfahani, Sohrab Behdat, and Erik Meyersson for reading the previous drafts of the book and for their constructive suggestions. I thank Sander Renes for sharing his thoughts about procuring institutions’ behavioral patterns and to Kıvanç Ulusoy for our discussions about Turkey’s EU accession process. For helpful comments, I also thank the members of the I ˙ nşaat Grubu, participants of the 6th DEP Workshop at Marmara University, Networks of Dependency Workshop at PhilippsUniversity Marburg, and the ERF Workshop at Oxford University.
Tuba Bircan has supported me with substantial help at different stages of writing this book. I thank her for the support she provided. I am also thankful to Hakan I ˙ ldiri for his help during the data mining process.
The public procurement data set that is used in the book is provided by the Public Procurement Authority (PPA). I thank the PPA officials for their help. I also thank the Ministry for EU Affairs for providing me information about the EU accession negotiation chapter on Public Procurement. I am grateful to the CHP MP Aykut Erdoğdu, the founding president of the Public Procurement Authority Şener Akkaynak, the Court of Accounts official Ali Gülbahar, and TGNA official Burak Deste who provided me valuable information about the procurement processes, specific procurements, and particular procurement methods.
The very preliminary draft of this work, which I started to write when I was a research fellow at Harvard University, has been supported by TÜBI ˙ TAK. I thank TÜBI ˙ TAK for the financial support. I also thank
James Robinson, Daron Acemoğlu, Ishac Diwan, and Izak Atiyas for their contributions during our early talks on the project.
Finally, I would like to thank Tolga, who encouraged me at every stage of this project.
L IST OF A BBREVIATIONS
AKP Justice and Development Party
ASKON Anatolian Tigers Businessmen Association
CHP Republican People’s Party
EC European Commission
EU European Union
GDP Gross Domestic Product
GPA The Plurilateral Agreement on Government Procurement
GSIs Global Standard Institutions
IFIs International Financial Institutions
IMF International Monetary Fund
I ˙ NTES Turkish Employers’ Association of Construction Industries
INTOSAI International Organization of Supreme Audit Institutions
IRAs Independent Regulatory Agencies
ISKI Istanbul Waterworks Administration
KI ˙ TDER Association of Public Sector Pharmaceutical Suppliers
MHP The Nationalist Movement Party
MoE Ministry of Education
MoF Ministry of Finance
MPWS Ministry of Public Works and Settlements
MÜSIAD Independent Industrialists and Businessmen’s Association
ÖSYM Student Selection and Placement Center
PCFs Politically Connected Firms
PFPSAL Programmatic Financial and Public Sector Adjustment Loan
PPA Public Procurement Authority
PPL Public Procurement Law
SMEs Small and Medium Enterprises
SPL State Procurement Law
SPO State Planning Organization
SSK Social Security Institution
TGNA The Grand National Assembly of Turkey
TMB Turkish Constructors Association
TMMOB The Union of Chambers of Turkish Engineers and Architects
TOBB Union of Chambers and Commodity Exchanges of Turkey
TOKI ˙ Mass Housing Administration
TUSKON Turkish Confederation of Businessmen and Industrialists
UN United Nations
UNCAC United Convention Against Corruption
UNCITRAL UN Commission on International Trade Law
WTO World Trade Organization
L IST OF F IGURES
Fig. 4.1 Total amount and total number of public procurement contracts
Fig. 4.2 Share of different contract value groups in total number and total value of procurements
Fig. 4.3 Share of different procurement types in total value of all procurements
73
74
75
Fig. 4.4 Share of different types of firms in total public procurement 84
Fig. 4.5 Distribution of contracts among different types of firms (contract value categories)
Fig. 4.6 Distribution of contracts among different types of firms (contract number categories)
Fig. 4.7 Share of different types of firms in different types of procurement
Fig. 4.8 Share of different types of firms in procurement contracts (by procurement method)
Fig. 4.9 Rise in the restricted procedure (number and value of contracts)
Fig. 4.10 Share of the cAKP and PAF from the contracts awarded through the restricted procedure
Fig. 4.11 Open auctions conducted with one or two bidders
Fig. 4.12 Invalid bids ratio for single bidder contracts
Fig. 4.13 Share of different types of firms in TOKI ˙ projects (number and value)
Fig. 4.14 Share of different types of firms in Directorate General of Highways’ procurements
Fig. 4.15 Share of different types of firms in municipal procurements
Fig. 4.16 Performance of different types of firms in procurements of the “Tiger” municipalities (share in the total value)
85
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91
91
91
94
95
97
98
100
101
Fig. 4.17 Performance of different types of firms in procurements of the three biggest Metropolitan Municipalities (share in the total value)
Fig. 4.18 The relation between the number of bidders and the final contract price
101
103
L IST OF T ABLES
Table 4.1 Share of different types of firms in public procurement (by contract value categories)
Table 4.2 Sectoral distribution of procurements according to contract value groups
Table 4.3 Average rebate for different types of firms (by procurement type)
85
88
104
CHAPTER 1
Introduction and Overview
Abstract Public procurement, which comprises substantial part of governments’ spending and countries’ GDPs, has long been used as a means to support Small and Medium Enterprise (SME) development and to generate sustainable growth. Yet, as one of the most important areas where the government officials and the private sector interact extensively, public procurement processes are open to favoritism and corruption. In Turkey, the new Public Procurement Law (PPL), which was drafted with the pull of the European Union (EU)–International Monetary Fund (IMF)–World Bank (WB) nexus and enacted in 2003, has been amended more than 150 times by the AKP majority government over the last decade. All in all, these legal changes have increased discretion in awarding contracts and heightened doubts on the upsurge in favoritism in contract award processes in particular and rise in crony capitalism in general.
Public Procurement is a term that is used to refer to governments’ purchasing activities of goods, services, and construction of public works. The construction of highways, public buildings, social housing; the provision
of various types of services such as energy supply or municipal services such as waste management; and of various types of goods such as medical equipment for state hospitals are just a few examples of public investments that involve procurement. Public procurement comprises large shares of government budgets and Gross Domestic Products (GDPs) in the majority of the countries in the world. For instance, the total expenditure in public procurement activities in the European Union (EU) member countries amounts to almost 20 % of EU’s GDP (European Parliament, Directorate General for Internal Policies Policy Department D: Budgetary Affairs 2013).
Public procurement has long been used as a means to support Small and Medium Enterprise (SME) development, stimulate industrial advancement, and to generate sustainable growth. Yet, as one of the most important areas where the state and the private sector interact extensively, public procurement processes are open to the use of public resources for different interests other than the public good. Public procurement process thus may well involve corrupt transfers between the state officials and the private sector firms for reasons ranging from personal interests to finance of party politics. As it is put forward by a 2005 International Monetary Fund (IMF) Report, “corruption in public procurement is the most severe type of corruption” (IMF, Chapter III, Building Institutions, p. 143). Similarly, a World Trade Organization (WTO) report states that, corruption in government procurement is “a barrier to development and a scourge on the welfare of citizens in developing and developed countries alike” (Arrowsmith and Anderson 2011 p. 685). Yet, it is also underlined in almost all reports published by international organizations that transparency as the main tool to avoid corrupt practices is lacking mainly in the developing states.
Apart from the economic costs associated with public loss, corruption in public procurement, many times results in social costs when poorly constructed public buildings collapse, or when substandard or counterfeit medicines put public health under risk due to the lack of detailed technical prerequisites in procurement processes. For example, “the high death tolls as a result of the devastating earthquakes in China (2008), Haiti (2010), India (2001) and Turkey (1999) were partly blamed on alleged corruption in the construction of public buildings, including schools and hospitals” (Transparency International 2010).
Thus, in global policy circles, it is an unchallenged view that improving procurement systems through fostering transparency, competition, non-discrimination, and efficiency is vital for ensuring that the tax pay-
ers’ money spent on public procurement delivers good quality services with minimum social costs and at reasonable economic cost (Transparency International 2012). OECD (2007) report for instance defines transparent procurement regimes as the ones in which (1) participants and potential participants are aware of the applicable rules of procedures; (2) the discretion of procurement officers is subject to formal rules; (3) compliance with the applicable rules is verifiable; and (4) mechanisms exist for scrutinizing decisions to ensure compliance with legal norms. Therefore, numerous international organizations and international financial institutions—including the WB, IMF, OECD, WTO—as well as the EU emphasize the need to increase transparency and control corruption in public procurement.
1.2 PUBLIC PROCUREMENT IN TURKEY: THE ELUSIVE QUEST FOR COMPETITIVENESS
The world has seen an important change in the institutional framework that governs and regulates the public procurement systems in the last three decades. Many countries have undertaken extensive reform attempts in their national procurement systems with an aim to establish a legal framework in order to enhance transparency, accountability, and competitiveness. Regulatory reforms, within which independent regulatory agencies (IRAs) have emerged as key actors, have also been vital as a result of accelerated globalization and market reforms that transformed the role of the state. Turkey, which initiated the reform process only after the financial crisis of 2001 under the supervision of the World Bank (WB) and IMF, is a latecomer.
In Turkey, contracting out of the public services to the private sector via public procurement has been a major tool in supporting the SMEs. It has also been considered as more efficient and cheaper compared with the provision of those services by public institutions. Accordingly, public procurement comprises a substantial part of government spending. One fourth of annual public spending goes to public procurement. The share of public procurement in GDP is around 8.5 %. Every year more than hundred thousand public procurement contracts are awarded to mainly SMEs. Yet, public procurement, where government officials and private sector firms engage in transactions that involve transfers of large sums of money, is also open to favoritism and corruption. Indeed when public procurement
was regulated under the State Procurement Law (SPL, Law No: 2886) between 1983 and 2003, the procurement processes were politicized from within and were not carried out within a transparent framework. As a result, many irregular and illegal practices and major corruption scandals emerged in the procurement process (Doğaner 1999; Baran 2000).
The major corruption scandals coupled with the recurrent economic crises that brought the economy to the edge of collapse forced Turkey’s politicians to take steps in institutional development to achieve a healthier economic and political environment (Esfahani and Gürakar 2013). The improving prospects for joining the EU and the approval of a three-year stand-by agreement by the IMF in 1999 initiated institutional reform from above as loan/aid and candidacy/accession conditionalities. The EU membership negotiation process required meeting the conditions required by the Copenhagen declaration that entailed adopting the EU legal and the institutional framework. The IMF funds, which Turkey desperately needed to revolve its massive debt, were linked to a series of conditionality written into the stand-by agreements. These included both further liberalization of the economy as well as a series of institutional reforms aimed at limiting, if not ending, rent seeking in the public sector and patronage-based dispersion of public funds. In addition, the WB approved the provision of Programmatic Financial and Public Sector Adjustment Loan conditional on public sector reform.
One major area of institutional reform was about the public procurement policy. Turkey was required to draft a new Public Procurement Law (PPL) to replace the State Procurement Law (SPL). The new law was to be discussed and agreed with the EU and the WB on the basis of the essential standards of transparency, accountability, and competitiveness set by the UN Commission on International Trade Law (UNCITRAL Model Law), which would also formulate a path toward increasing harmonization with the EU Procurement Directives that is itself bounded by the WTO’s Plurilateral Agreement on Government Procurement. The policy makers accepted to reform the public procurement system in line with the framework required by the international financial institutions (IFIs) and the EU nexus. This would in turn help them to meet the extensive set of economic criteria required by the Copenhagen declaration, because they generally overlapped with the IFIs loan/aid conditionalities.
Consequently, Turkey’s new PPL (Law No. 4734) was passed on January 4, 2002, to be enacted in January 2003. The new law included several important changes in administration of public procurements; substantially
extended the scope of the law via making the procurements of the majority of the state institutions subject to the law; introduced explicit rules of qualification for participation; and rearranged the threshold values in a way that tender participation of international firms has become easier. An independent regulatory agency, the Public Procurement Authority (PPA), has also been established and regulation of public procurement process was taken from the Ministry of Public Works and Settlements and the Ministry of Finance (MoF) to be given to the PPA with an aim to foster transparency and depoliticize the public procurement processes.
The main rationale for drafting a new PPL and establishing an autonomous body to regulate and monitor the public procurement processes was making public spending more efficient and transparent and depoliticizing the procurement process. However, the practice proved somewhat challenging particularly after a totally new political party, Justice and Development Party (AKP), won the majority of the seats in the parliament in November, 2002 and formed the majority government for the first time since 1987. Since then, the public procurement reform has remained as one of the most contentious areas. As observed by the European Commission’s (EC’s) Regular Reports on Turkey’s Progress toward Accession, there has been little headway, if not a retrogression, in the public procurement reform process.
AKP’s success was a by-product of the collective action among the business spheres of Anatolia who was unhappy about the previous unequal distribution of rents during the 1980s and 1990s. However, those business groups whose mental models had been shaped within the existing institutional structure, perceived themselves as the new insiders or the new privileged clientele. Hence, they expected AKP to speak this time to their interests. Regarding the public procurement policy, these business people strongly opposed the new law and demanded to be outside of its scope. As a result, the AKP government who initially enthusiastically followed the EU-initiated reform process in selective areas, such as the civil–military relations and the judicial institutions, has not preferred to follow through with the public procurement related reforms. On the contrary, the government has made numerous controversial changes to the PPL that diverted the public procurement system from the acquis. Indeed, under the AKP majority government more than 30 different laws and decrees in the force of law that made more than 150 amendments to the PPL were passed in the parliament. With these amendments procurements of several public institutions have been exempted from the law. Moreover, some
exceptional provisions about certain procurements have been inserted into the Law (e.g. some procurements shall be made via “restricted procedure” rather than “open tender”).
All in all these legal changes have increased discretion in awarding contracts, raising doubts on the upsurge in crony capitalism. Overall, both the number and the value-share of public procurement contracts that fall outside transparent public procurement process (open auctions) increased substantially during the period between 2005 and 2014. While the number of contracts awarded via open auctions fell from 100,820 (in 2005 to 65,016 in 2014), the number of contracts awarded through less competitive and less transparent methods and those covered by exceptions rose from 41,157 to 58,680. In terms of the share in total number of contracts awarded, these numbers indicate a fall for open auctions from 71 % to 52.5 %, while a rise for the other tender procedures and the ones covered under exceptions from 29 % to 47.5 % (PPA, Procurement Statistics).
As a result, as argued by the EC, the public procurement system has rather deviated from the Acquis, rather than getting more aligned with it. The European Council continuously criticizes the public procurement processes in Turkey as non-transparent and discriminatory on the grounds that (1) a large number of procuring entities are exempted from the scope of the Law; (2) amendments to the PPL have entailed restrictions in competition and full transparency; (3) public procurement grant qualification procedures are complicated and thus hinder competitiveness; and (4) there is no coherent legal framework for concessions awards and public–private partnerships (EC Turkey Progress Report 2011).
Indeed Turkey’s major graft investigation/crisis of December 17 and December 25—even though dealing only with the tip of the iceberg—has revealed the essentials of the extensive state–business interactions and how they have become sources of insider influence and corruption that distort politics, regulation, and judicial functioning. The court cases initiated against the corrupt practices have also underlined the need for developing a more refined account of the mechanisms that are used to privilege the “insiders.”
1.3 OUTLINE OF THE BOOK
This book provides a qualitative and quantitative analyses of Turkey’s public procurement system during the AKP era. The qualitative part mainly investigates the changes and continuities in the institutional framework
governing the public procurement process and the state–business relations in Turkey. The quantitative analysis of a unique public procurement data set that includes all (49,355) high value (above TL 1 million) public procurement contracts awarded between 2004 and 2011 however provides systematic evidence on favoritism in public procurement in Turkey.
Theoretically, the literature on Accession Europeanization and a broader set of theories within the Institutional Economics literature considers third party enforcement from an institutionally developed country as one of the factors that trigger institutional reform in countries with relatively less developed institutions (e.g. Schimmelfennig and Sedelmeier 2004; North et al. 2010). Yet, the developments in the legal and institutional framework governing the public procurement in Turkey are in contrast with these projections. The public procurement policy is a negotiation chapter, but as will be demonstrated in Chaps. 3 and 4, reform in line with the EU policy framework in this specific area has remained rather limited, if not went in the opposite direction. Indeed, the institutions that regulate government procurement have been strategically redesigned in order to create some “opportunity spaces” for the “privileged” business actors.
Given that institutional evolution is a path dependent process with a lot of infighting among the existing power holders, who and whose interests are products of prior political and economic institutions, the following chapter will accordingly elucidate the changes and continuities in the dynamics of state–business relations in Turkey. How do the institutional legacies (constitutive role of institutions) and changes in the regional and global economic relations shape the expectations of business people and the attitudes of policy makers in developing a framework for regulating the public procurement market? The chapter thus further elucidates how a new phenomenon, the Islamic business associations (MÜSİAD, TUSKON, ASKON, and TÜMSİAD) that use Islam as a network basis started to thrive first in the beginning of the 1990s and then in mid-2000s. It further explicates the nature of the relationship of these associations with the ruling AKP, including how they have been further empowered with the seats given to their members as MPs in the Parliament. In Turkey, organized interest groups in the form of business associations are not the sole channels of interaction between the business people and the state. The chapter thus gives further details on the other ways and means used by the firms to form direct connections with the majority government such as through joining national- or local-level politics from AKP cadres.
Chapter 3 analyzes the ebbs and flows of the reform in legal framework governing the public procurement processes in Turkey. It first explicates how the public procurement system was politicized from within in the pre-AKP period when the public procurement market was regulated by the SPL (Law No. 2886). For that, the deficiencies of the old procurement system that paved the way for irregular and illegal practices and corrupt transfers are enlisted. Next, the domestic and the international environment within which Turkey’s policy makers were forced to reform the public procurement system is portrayed. Subsequently, it exhibits the extent that the new PPL Law No. 4734) improved the public procurement system in terms of increased transparency, competitiveness, and accountability and depoliticized the procurement processes. Finally, through analyzing the numerous legal amendments that AKP government made to the new PPL, the chapter demonstrates how Turkey’s public procurement system has been re-politicized during the AKP period.
Chapter 4 provides a quantitative analysis of the state–business relations in Turkey during the AKP era. Using a unique public procurement data set of 49,355 high value public procurement contracts awarded between 2004 and 2011; a manually constructed data set on contract-awarded firms’ political connections; and member lists of four national business associations and two business confederations representing around 400 other local and sectoral business associations, it scrutinizes whether politically connected/affiliated firms obtain rents in the form of preferential procurement. The chapter also provides concrete evidence on how the mechanisms that have created restrictions for certain types of public procurements are used to provide privileges for particular firms. Analysis of the use of legal changes proves particularly instrumental to explore the dynamics in political affiliation and auction-winning as well as to investigate whether there has been a shift favoring certain groups of businesses. Thus, the chapter explores what the legal amendments made to the PPL imply in terms of re-politicization of public procurement processes and change and continuity in patronage politics in Turkey. The chapter, through a rebate analysis, also elaborates on the public loss associated with the preferential procurement in the form of rents provided to the politically connected firms.
Finally, the last chapter concludes with a discussion on the nature and the extent of the impact of favoritism in public procurement in Turkey.
1.4
INFORMATION ON THE DATA
Chapter 4 of the book provides evidence on the politicization of tender processes in Turkey through investigating whether the ruling AKP has a tendency to distribute state resources to its business constituencies. For that, the contract-awarded firms are classified according to their political connections and the procurement contracts are scrutinized to find out whether the politically connected firms obtain rents in the form of preferential procurement. To do so, a unique public procurement data set of 49,355 high value (above TL 1 million) public procurement contracts that has been provided by the Public Procurement Authority of Turkey is matched with member lists of the four national business associations and two business confederations representing around 400 other local and sectoral business associations as well as with a Politically Connected Firms (PCFs) data set that is manually constructed through identifying the shareholders and the board members of around 12,000 contract-awarded firms using the Turkish Trade Registry Gazette.
The public procurement data set has detailed information on all procuring institutions (e.g. Ministries, Municipalities, etc.), firm names that are awarded with a public procurement contract, auction types (goods, services, construction), auction methods (open tender, negotiated procedure, restricted procedure, procurements made under exceptions), as well as the economic details of procurements (e.g. estimated cost, lowest bid, highest bid, winning bid, the contract price). The data set also contains legal changes and how these legislations increased the range of contracts that fall outside the more transparent public procurement process. The threshold of TL 1 million is chosen confidently because the aggregate value of all contracts above this threshold forms almost three fourth of the total value of all procurement contracts awarded.
The newly constructed “PCFs” data set includes firms with direct and indirect political connections. Firms in Turkey form direct connections with the majority government through joining national- or local-level politics from AKP cadres. The relatives of the AKP officials are also active in the public procurement market. As Buğra and Savaşkan (2014) argues “it was especially during the AKP government that government-business relations mediated by family networks became more visible, and it became more common to see close relatives of politicians taking a direct role in business life.” Finally, ideological kinship (e.g. membership to Islamic
Associations and Tariqats) appears as another component of formation of political connections.
Accordingly, following Faccio’s (2006) definition, a firm is classified as “connected to AKP” (cAKP) if one or more of its shareholders is/are: (1) a Member of the Parliament from the ruling AKP; (2) an AKP official at the local level such as a provincial head or a member of the provincial party organization; and (3) first degree relative of the ruling party officials indicated in (1) and (2). Firm shareholders who appear in the media as close fellow townsmen of the top AKP officials and firms whose shareholders have political connections with AKP through ideological kinship (e.g. board members of politically connected media channels, Islamic Charities and Foundations) are also labeled as cAKP.
The firms with connections to the opposition parties such as CHP or MHP are categorized as firms “connected to the opposition” (cOpp). Although AKP enjoyed parliamentary majority and the full control over the central government apparatus during the analysis period, opposition parties governed some municipalities such as the coastal cities as Izmir or South Eastern Kurdish provinces as Diyarbakir. Thus, AKP had to share at least some power with other parties that are also represented in municipal councils and have some influence on the local decision-making processes.
Yet, political connections in Turkey are rather complex that cannot be analyzed solely by such direct measures. Thus, indirect measures to further detect the political affiliations are also developed. For that, the contractawarded firms are classified into groups based on their memberships in different business associations that explicitly state their support for the governing party during the analysis period of this study. In exchange of political support, certain business associations and confederations (e.g. MÜSİAD, ASKON, TÜMSİAD, and TUSKON) enjoyed the mediator role of the government in international business relations, preferential access to state resources and privileges in privatization processes (Hoşgör 2011). Accordingly, the members of these associations, indirectly benefited from the connections of their associations with the government, are labeled as “politically affiliated firms” (PAFs). The members of other business associations and confederations (TÜSİAD and TÜRKONFED) that went through several conflicts with the AKP government are also coded in the data in order to put the results on the performances of the PAFs on a comparative basis. Finally, the contract-awarded foreign firms are also identified in data in order to show the degree of openness of the procurement market to the foreign firms.
As a result of the investigation of the firms’ political connections, around 1200 cAKP firms, 1300 PAFs, 321 cOpp firms, 373 TÜSİAD and TÜRKONFED members, and 475 foreign firms are detected in the public procurement data set. There are some overlaps among PAFs and cAKP firms as well as among the TÜSİAD/TÜRKONFED, PAFs and the cAKP firms. Overlaps between PAFs and cAKP are due to a number of AKP MPs/officials who are also members or leaders of these four business associations. The overlaps between TÜSİAD and PAFs stem from the double-memberships of the established, competitive firms of Anatolia, known as the “Anatolian Tigers.” There are four firms with one shareholder politically active in AKP while the other in MHP.
While I was investigating the contract-awarded firms’ political connections, I observed that (1) firms participating in procurement auctions, particularly the cAKP firms, frequently change the names of their firms especially when the opposition media discovers that the firm is politically connected; and (2) firm shareholders, particularly the politically connected ones, establish more than one, usually at least three firms. The underlying reasons for this tendency are diverse, ranging from participating in tenders with more firms in order to increase their chances of winning the auction to having a spare firm for not to lose their chance of participating in tenders in case of any possible ban from the auctions. Therefore, for those with changing names, the most up to date firm name is used, while the firms with the same owner are assembled under one name that includes all the names of other firms. Finally, the firms, which belong to a certain group of companies are classified under the name of the holding company.
CHAPTER 2
Politics of Government–Business Relations
in Turkey: Deep-Rooted Structures and New
Tensions
Abstract With the rise of political Islam, Turkey has undergone a staggering systemic transformation in all fronts of social, cultural, political, and economic relations. State–business relations have also changed with the Islamist and conservative elements dominating the interactions among particular government and private sector actors. When religion has become an important component of forming “connections” with the government, the nascent devout business entrepreneurs have prospered through the opportunity spaces created by the ruling AKP. Islamic civil society organizations (CSOs) and business associations were one of the utmost actors of this process. When the AKP government empowered them by giving them seats in the parliament, in local governmental bodies, and at other state institutions, Turkey’s business environment, particularly the associational environment, has been polarized more than ever.
Keywords Islam • Justice and Development Party (AKP) • devout bourgeoisie • Islamic business associations • pork-barrel politics
2.1 THE RISE OF A NEW CONSERVATIVE BOURGEOISIE AND THE ISLAMIC BUSINESS ASSOCIATIONS AS POLITICAL ACTORS
Turkey experiences a mind-blowing social, political, economic and systemic transformation. Islamisation and the surge of conservatism are easily detected in the transformation of business-state relations in Turkey. The transformation also includes the transfer of wealth and power from an established, West centric, urban elite to an emergent, devout and conservative bourgeoisie. (İlhan 2014: 10)
Politically supported capital accumulation was a significant characteristic of private sector development in twentieth-century Turkey. Party competition, particularly in the late 1980s and early 1990s, led the economic policies to take a more populist character. Populist pressures emerged from the nature of distributional conflicts. Various governments tried to mediate these conflicts by distributing the state rents to their respective constituencies. As the income inequality and regional discrepancy persisted, the tendency for rent distribution got stronger and became a norm in the 1980s and the1990s (Eder 2003). Yet, the clientelist elements and the politicized and corrupt practices that served as major tools for rapid capital accumulation for particular business groups, indeed proved to be a threat rather than an opportunity both for the economy and the societal balance. “The presence of a ‘strong’ and centralized state, with a continued ability to distribute certain economic resources and political patronage” (Önis and Türem 2001) led the establishment and development of “robber coalitions” (İlhan 2014) consisting of politicians, bureaucrats, business people, and other interest groups. This in turn impeded the formulation of the most of the socially beneficial, welfare-enhancing policies.
In Turkey’s corporatist structure, the associational landscape was not developed either. From 1971 to 1990, Turkey’s voluntary business association arena was dominated by the Istanbul-based TÜSİAD—a very powerful business association consisting of the top capital groups of Turkey and was even sometimes referred to as the “association that toppled the government” (Arat 1991: 135). TÜSİAD while it remained faithful to the corporatist and clientelist institutional structure, valued and protected its status as higher ranking, culturally superior, elitist capitalist club and remained both non-inclusive to new-comers and non-responsive to democratization of the associational landscape (İlhan 2014).
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“That is most surely my Lucky Ring,” said he. “Where did you find it?”
“In the sand at the bottom of the river,” answered Nibbles, and he told the Prince how nearly drowned he had been, and about Mr. Scratchetty-Claw.
“My old friend, the Alligator,” laughed the Prince. “Oh, I know him well, the lazy scamp, for he eats up all my best trout.”
Then he took the ring carefully from Nibbles’s neck, and put it on his own finger.
“You have given me back what I prize most in the world,” he said, “and your reward shall be in
proportion. Every year, as long as you live, you shall receive a bag of gold.”
Nibbles was almost too happy to speak, but he thanked the Prince and kissed his hand. A page was sent to bring the gold, and a few minutes later, Nibbles and Teenie Weenie, carrying the precious bag between them, were hurrying back to the raft.
They found Mr. Scratchetty-Claw fast asleep, but Nibbles, dancing with joy, woke him up to hear the great news.
“Good enough!” said the Alligator. “It’s a lucky thing for you that I tipped you into the river.”
“It certainly was,” said Nibbles, “for now my mother will never have to work any more. Let us hurry home to her as fast as we can, Teenie Weenie.”
“I’ll take you part of the way,” yawned Mr. Scratchetty-Claw, “although I am fearfully sleepy.”
Chapter VIII
Nibbles’ Return
A they sailed towards home, as happy as two little mice could be.
Mr. Scratchetty-Claw towed them for a long way, until he became so sleepy that he had to stop and take a nap. He shed tears when he said good-bye to Nibbles and Teenie Weenie, but he soon settled himself comfortably on a mud bank in a shady spot, and in two minutes was snoring so loudly that you could have heard him half a mile away.
Nibbles and Teenie hoisted their sail, and, as they floated along, Teenie Weenie sang this song:
“Two little mice sailed down the stream
One lovely summer day.
The sky was blue, the banks were green, The birds in the tree tops sang unseen, As they merrily sailed away.
“Their silken flag was red and white, Their sail a butterfly’s wing; With a firefly their pilot light, They went to seek their fortune bright, And found it in a ring.
“Deep buried in the golden sand, Beneath the water blue, Far away in a distant land The little mice went hand in hand, And sought the token true.”
For more than a week they sailed up the pretty river, but at last, one afternoon at sunset, they reached home. Quietly they stole up to the cottage and peeped in at the window.
There was Mrs. Poppelty-Poppett cooking supper, while Sniffy and Snuffy were peeling potatoes, and Gobble was eating an apple behind the door.
Nibbles tapped gently on the window-pane, and Mrs. Poppelty-Poppett turned quickly around. With a
squeak of perfect delight, she cried: “Oh, here is Nibbles!” and ran to the door, upsetting the soupkettle right into the fire in her haste. Of course, Sniffy and Snuffy, Gobble and the baby, all ran out, too, and then they all talked together so fast that no one knew what any one else was saying. Pretty soon they quieted down, and Nibbles told them of his wonderful adventures, and of the finding of the Lucky Ring. When he gave his mother the bag of gold, poor little Mrs. Poppelty-Poppett did not know whether to laugh or cry with happiness, so she did both. She had worked hard for her children, and now there would be comfort and plenty for the rest of her life.
After a little while she dried her eyes, and thought of supper. It was all in the fire and burned up!
“Never mind,” said Nibbles. “Teenie Weenie and I would far rather have some of your nice corn cake and toasted cheese than soup.”
“Indeed we would,” said Teenie Weenie.
So they all helped, and in a few minutes everything was ready; and how good the supper tasted!
When at last they went to bed, they all dreamed of bags of Lucky Rings, and rivers of gold, guarded by Alligators, who ate nothing but toasted cheese and corn bread.
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