Magazine article Washington Report on Middle East Affairs

IMF-Backed Reforms Separate Economy from Politics, Face Opposition of Turkey's Ruling Elites

Magazine article Washington Report on Middle East Affairs

IMF-Backed Reforms Separate Economy from Politics, Face Opposition of Turkey's Ruling Elites

Article excerpt

IMF-Backed Reforms Separate Economy From Politics, Face Opposition of Turkey's Ruling Elites

Jon Gorvett is a free-lance journalist based in Istanbul.

With winter's stormy weather apparently over, the battered good ship Turkey has finally limped into the calmer waters of an Eastern Mediterranean summer. Despite the arrival of a new pilot, however, there is still a disturbing amount of angry shouting and arguing emanating from the captain's cabin.

With former World Bank chief Kemal Dervis brought in to sort out the mess left by years of mismanagement and corruption, culminating in November and February's financial crashes, international donors--and principally the IMF--finally were persuaded to release a total of some US$16 billion in credits to Ankara at their mid-May meeting. This figure includes the remnants of the previous IMF financial program for Turkey--the exchange rate peg plan that was so unceremoniously abandoned last February.

The markets, naturally, were overjoyed at the prospect of fresh money, but the politicians seemed to have more mixed feelings. Tied to the cash are a number of conditions, with Dervis having pushed hard for 15 new laws recommended by the IMF to be passed before the credit starts to flow. Among these "Dervis Laws" are a major reform of the banking sector and a bill to facilitate the majority-share privatization of Turk Telekom, the state telecommunications giant. There also are laws to liberalize other state-dominated markets and phase out government price subsidies, particularly in the agricultural sector.

Classic free market stuff, of course. It must be remembered, however, that Turkey is not really a free market economy. Some 50 percent of all the land belongs to the state, as does around 60 percent of all industry. The state also runs three banks, which help farmers and small businesses with large subsidized loans. While the foundation stones of the republic established by Kemal Ataturk and his followers back in 1923 were very much of a type fashionable across Europe at that time--a big state and a command economy--they long since have gone out of style, but linger on in Turkey.

This gives the "Dervis Laws" a much more radical character than first appears. What is being asked for is not simply better housekeeping, but a new type of house. The point has not been lost on Turkey's nationalists--nor on its Islamists, who are beginning to share much the same position on the economic reform program.

Devlet Bahceli, leader of the far-right National Action Party (MHP), the second largest group in the three-party coalition government, accused Dervis of acting in the interests of the U.S. and the IMF, rather than of Turkey, in pressing for the banking and Turk Telekom laws. Bahceli reportedly then walked out of the cabinet, only being persuaded back in by Prime Minister Bulent Ecevit himself.

The main objection to the Telekom privatization is that it may give foreign interests control over what the MHP--and the powerful Turkish military--see as a vital, strategic interest. This appears to have been overcome, however, by the issuing of a "golden share" to Turkey, meaning that in time of crisis or war, the state would be able to use the company's telecommunications satellites.

Meanwhile, the largest opposition group, the pro-Islamist Virtue Party (FP), also has been quick to condemn the new program. Virtue's view is more that the scheme plays into the hands of big capital and does nothing to encourage investment in the "real sector," the non-financial part of the economy that has been seriously cash-starved over the past decade. …

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