Turkish Experience with Divestiture between 2010 and 2019: A Comparative Historical Evaluation

Abstract

Turkey has pursued a policy of divestiture over the past four decades. Yet, it seems that the scholarly research has largely neglected a full account of the recent divestitures. To fill the gap in the literature, this article employs a Marxian analytical framework to explain divestitures in Turkey in the 2010s. The article argues that the most recent era for divestiture is significantly different from the previous ones in terms of its scope, economic and political implications, and the capital groups benefiting from divestitures. First, divestitures had become narrower and more limited in terms of sectoral scope. Second, they had been geared towards earning revenues for the state and creating new financial resources to address the immediate needs of construction-oriented capital accumulation, instead of enhancing export competitiveness. Third, they had been dominated by Islamic-influenced Anatolian companies that have close relations with the AKP government. This interpretation demonstrates that “short-termism” and “favouritism/particularism” have become more important objectives than enhancing “competitiveness” and “transparency” in the recent conjuncture of Turkish political economy. Yet, unlike most of the existing literature, this does not prevent one from interpreting divestiture as a class-based policy that accelerates capital accumulation and systematically privileges the interests of “capital in general.”

Main article text

Turkey pursued a policy of privatization both in the form of divestiture and public–private partnerships (PPP) over the past four decades. Although the recent decade from 2010 to 2019 has been characterized by the rise of PPPs as the dominant form of privatization, the country has continued to undertake divestitures, albeit with a rather narrow focus. Divestiture, known as classical privatization, occurs when all or some assets of a state in a state-owned enterprise (SOE) are transferred (or leased for long-term) to the private sector either through block sale or through public offering and capital markets (McDonald and Ruiters 2006). Most of the divestitures in Turkey in the recent decade relate to block sales of electricity generation and electricity distribution companies. Several seaport companies, sugar production factories and state lands were also divested in the same period (OECD [Organisation for Economic Co-operation and Development] 2018, 13). ¹ The total proceeds from these divestitures are estimated to be close to $30 billion. ²

A growing body of research has reviewed and evaluated privatization (both in the form of divestiture and PPPs) in Turkey since its inception in 1984. For that purpose, the existing literature can be categorized into three groups. One group of scholars analyzed Turkey’s experience with privatization boom in the 2000s in the aftermath of a prolonged phase of slow privatization during the 1990s (see Atiyas 2009; Şahin 2010; Oniş 2011; Angın and Bedirhanoğlu 2012; Zaifer 2018). As such, these scholars focused on the divestiture of major and large-scale state-owned enterprises such as Tüpraş (petroleum refining), Petkim (petrochemical), Tekel (alcohol and tobacco products), Türk Telekom (telecommunication), Erdemir (iron and steel) in the 2000s. The second group of scholars was clearly influenced by the rise of PPP implementations in the 2010s for the delivery of infrastructure services and shifted their focus to evaluating privatization from the PPP perspective (see Emek 2015; Gurgun and Touran 2014; Okudan and Budayan 2021; Açıkgöz 2020). The main thrust of these scholars was an attempt to evaluate Turkey’s experience with PPPs, thereby reviewing the development of legislations, limitations, challenges, opportunities, and success criteria of the PPP projects in Turkey. The third group of scholars also evaluated privatization from a PPP perspective (in the 2010s) but preferred to have a limited sectoral focus (see Acartürk and Keskin 2012; Emek 2017; Özcan 2018; Sonğur and Top 2018). For example, while Emek (2017) critically evaluated PPP implementations in the Turkish healthcare sector, Özcan (2018) analyzed the positives and the negatives of the PPPs in the road transportation sector. In sum, the existing literature focused mostly on the divestitures in the 2000s and PPPs in the 2010s.

Yet, it seems that the scholarly research in Turkey has largely neglected a full account of divestitures in the 2010s. To fill the gap in the literature, this paper is intended to evaluate divestiture implementations in Turkey during the 2010s, particularly in four sectors: electricity, port management, state lands, and sugar production. Employing a Marxian analytical framework, this article argues that, unlike the earlier divestiture stage, which was an important part of the broader goal of enhancing international competitiveness and productivity of the Turkish economy, divestitures during the latter stage (i.e. the 2010s) were geared towards earning revenues for the state, which was instrumental in temporarily postponing crisis dynamics and maintaining political domination. Moreover, while major divestiture deals of the earlier stage demonstrated a significant foreign and TÜSİAD-based ³ capital presence, most of the deals won by the domestic Islamic/Anatolian capital groups that have close relations with the AKP (Justice and Development Party) during the latter stage.

The article proceeds as follows: the article first sets out my Marxian-inspired analytical framework and explains the dynamics that lie behind the implementation of divestitures (and more broadly privatization) in Turkey. In the second section, the article provides the necessary history of my interpretation of the divestitures in Turkey in the 2010s by briefly narrating Turkey’s earlier divestiture phases from 1984 to 2009. In the third section, the article presents a detailed examination of divestitures in the 2010s in four sectors, electricity, port management, state lands, and sugar production, to provide concrete and specific details. This is followed by a brief conclusion.

An Analytical Framework for Understanding the Divestiture (or Privatization) Processes in Turkey

Divestiture processes are variegated and geographically uneven. There are therefore many domestic and national variations and temporalities within a contemporary capitalism context to be accounted for. However, the explanation of these variations should not be limited to one or other single factor given the complexity of divestiture. More spadework must be done to investigate how different plural factors interact with one another and together provide the momentum for divestiture. To be able to do this, this article formulated an analytical framework based around four interrelated categories. These include: 1) contemporary capitalism, 2) state, 3) power bloc, and 4) domestic capital accumulation.

Contemporary Capitalism Is the Context that Brought Divestiture Policy to the Fore

Contemporary capitalism (or neoliberalism) is the current phase, stage, or mode of existence of capitalism. It is characterized by such competitive imperatives as the internalization of production and capital, financialization, and labour market flexibility that give structural context to privatization and divestiture in general. To put it differently, these competitive imperatives of contemporary capitalism spread and universally favour divestiture across the world market.

For example, the rise in financialization over the past 40 years resulted in the excessive expansion and proliferation of flows of financial capital that had to make itself busy with the pursuit of divestiture (Bayliss and Fine 2008, 14–17). Between 1980 and 2010, private financial flows to emerging and developing countries have grown from about $15 billion to over $600 billion. The real issue was to find profitable uses for all that financial capital, and the divestiture of state assets represented a massive frontier for investment and profit in water, energy, manufacturing, telecommunication, transport systems, health, and so on. The World Bank, the IMF (International Monetary Fund), and USAID (United States Agency for International Development), often with the backing of domestic capitalists and neoliberal state elites, supported this process and promoted divestiture in emerging and developing countries through structural adjustment programmes, often as necessary conditions for loans (Harvey 2011, 28).

The State Is an Integral Element of Divestiture Processes

The state is the heart of the exercise of political power. This means that the state apparatus, in relation to the conjunctural dynamics of class struggle and capital accumulation, is often involved in the formation not only of economic policies but also of the divestiture policy specifically (Poulantzas 1978, 166–173). However, the state does not come automatically equipped with administrative, regulatory, and materially supportive units (i.e. an institutional-legal framework) for divestiture. The advocates of divestiture within each state and society actively pursue changes that lead to the restructuring and strengthening of the state’s capacity to implement divestiture—that is, transforming the state’s institutional materiality suitable for divestiture (Brand and Heigl 2011, 255).

This is, however, not always a smooth process. It is subject to intra-state contradictions because divestiture is a heavily contested issue. First, diverse fractions of capital could have different and conflicting interests over divestiture. Second, although the dominant classes by and large structurally and strategically dominate the state, the popular classes also exist in the state apparatus (e.g. parliaments, the judiciary, the police, and the armed forces) essentially in the form of centres of opposition to divestiture efforts of dominant classes (Brand and Heigl 2011, 248). Third, there is the constitutive role of the state itself. The state is not reducible to a relationship of forces; state/government authorities may exhibit a relative autonomy and interest of their own, albeit within limits (Poulantzas 1978, 130–142). The relative autonomy of the state/government authorities from the classes and fractions increases under exceptional state forms—absolutism, Bonapartism, military dictatorship, and fascism (Poulantzas 1970, 59). The appearance and rise of these exceptional state forms often correspond to the political crises in the society: the sharpening of the internal contradictions between dominant classes, and/or the deepening contradictions between the dominant classes and the dominated classes (Poulantzas 1970, 16, 71–86). Therefore, the various state policies (e.g. privatization and divestiture) under exceptional state form correspond to the increasing revenue need of the state to address those contradictions and re-stabilize political domination.

A Power Bloc Is the Key Class Agent behind Divestiture

Inter-relations between the dominant classes, as related to the institutions of the capitalist state, happen within a specific political unity of the power bloc. A power bloc is composed of sometimes competing, often interrelated, bourgeoisie class fractions (for the bourgeoisie is divided into class fractions) but organized within the state to create an unstable alliance of unity and compromises generally under the hegemony or leadership of one fraction—the fraction whose specific interests are prioritized by the policies of the state to the detriment of the interests of other segments. It is through the power bloc that fractions of capital, which have formal and informal representation within the state apparatus, are organized to rule (Poulantzas 1978, 126–127).

In the particular context of Turkey, the composition of power bloc fractions can be specifically classified as such: big capital (holdings), which is an early participant in the accumulation process, brought together the industrial, banking and commercial functions of capital, concentrated around Istanbul, has secularist orientation, and represented by TÜSİAD; Islamic-influenced capital (varying in terms of size), which is a late participant in the accumulation process, geographically diffused, often organized around Muslim business principles, and represented by different business associations such as MÜSİAD (Independent Industrialists and Businessmen’s Association) and TUSKON (Confederation of Businessmen and Industrialists); and foreign capital (mostly European and Middle Eastern), which is constituting partnerships with local capital groups, and represented by YASED (International Investors Association of Turkey) (Marois 2012; Bekmen 2013). The leadership of the power bloc in Turkey has historically come from TÜSİAD-based big capital (although seemed increasingly unable to impose its leadership after the global crisis of 2008), which is known to have important connections with foreign capital.

The inter-relations and class compromises between the fractions of capital within the power bloc are important material forces in shaping divestiture processes. Two questions are crucial in investigating this phenomenon. First, how willing are fractions of the power bloc to integrate divestiture into state policy as a priority? The limited extent of divestiture may result from the unwillingness of the power bloc to make divestiture the priority option for a variety of economic and political reasons. Second, are different fractions able to combine their interests and achieve a contradictory unity of compromises when it comes to divestiture policy? The creation of a consensus on divestiture within the power bloc is often problematic because there may be conflicts between the different fractions of domestic capital or between domestic and foreign capital.

Divestiture Is a Constitutive Element of Domestic Accumulation Strategies

The totality of the capital accumulation process has three constituent dimensions—production (including the extraction of surplus value), realization (the transformation of commodities into money by an act of exchange), and revalorization (the allocation of surplus value to new production) (Ercan and Oğuz 2015, 115). Domestic accumulation strategies characterize the totality of the capital accumulation process within a specific geography and within a certain period of time (Saad-Filho 2003, 7). The logic and strategies of domestic capital accumulation thus mediate agents’ choices over divestiture. In other words, the prevailing dynamics of domestic capital accumulation act back on the power bloc fractions and state authorities and decrease (or increase) their support for divestiture.

In many core countries where domestic capital accumulation regimes gained outward orientation after the 1980s in the wake of revalorization problems, power bloc fractions supported divestiture so as to seize on new economic fields, sectors, land, or natural resources (Harvey 2003, 147). By contrast, when a domestic accumulation regime was still inward-oriented and enabled domestic private corporations to enjoy a comfortable relationship with the state-owned enterprises, as happened in South Africa and Turkey in the 1990s, power bloc fractions were unwilling to support divestiture (Fine 1997, 403). These demonstrate the significance of divestiture for the functioning of domestic accumulation strategies—a significance far greater than the intra-capital struggle over the buying and selling of state assets.

Historical Background: Turkey’s Divestiture History From 1984 to 2009

This section sketches Turkey’s earlier divestiture history from 1984 to 2009 to illustrate the specific outcomes and fundamental characteristics that would pave the ground for putting the latter divestiture process (i.e. the 2010s) in a succinct comparative framework so as to identify differences and similarities. For comparative perspective, this article divides Turkey’s earlier divestiture history into two phases: (i) 1984–2001, and (ii) 2002–2009. Let’s look at the details.

The First Phase: 1984–2001

Turkey was among the first developing countries to announce a comprehensive divestiture programme, but the implementation largely failed to materialize between 1984 and 2001. In this period, Turkey generated only around $7 billion of revenue from the process. ⁴ About half of this came from sales of SOE participations in private companies, or from the sale of minority shares in large-scale SOEs. The full divestiture (over 51 per cent) was realized only in a few sectors such as cement and banking, where the divested SOEs were small- and medium-sized (Ercan and Oniş 2001, 110).

The ANAP (Motherland Party) administration started the SOE privatization programme in 1984. The first major SOE sell-off came in 1988 with the sale of Teletas, a telephone firm, to a foreign company. In 1989, foreign companies acquired five state-owned cement plants (see Table 1). The authorities then announced a shortlist of major SOEs (including Tüpraş and Erdemir) for divestiture, with foreign investors emerging as the principal candidates for takeover (Kjellstrom 1990, 28–30).

Table 1

Selected Divestitures from 1984 to 2001

Notes: *USAŞ stands for Uçak Servisleri Anonim Şirketi [Airport Services Corporation];

D stands for domestic; F stands for foreign.

Source: Privatization Authority Website (www.oib.gov.tr)

At the time, the Turkish power bloc faced an immediate dilemma: either to compete with foreign capital to bid for shortlisted SOEs, and ultimately, sacrifice the comfortable relationship enjoyed with those SOEs, or to freeze divestiture plans until a more favourable context emerged that would prevent foreign investors from acquiring SOEs in the short term. A review of the newspapers at the time reveals that fractions of the power bloc opted for the second option and organized a major “foreignization” campaign to impose a freeze on the divestiture plans (Patton 1992, 116). The campaign by the power bloc was successful in generating popular opposition to divestiture plans, and led many people, particularly the labour unions and SOE workers wishing to protect their secure jobs, to equate divestiture with foreignization. Popular opposition prompted the opposition parties to start legal proceedings to block the process. After a number of legal challenges, in 1990, the courts ruled that the sale of SOEs to foreign investors via block sales were void (Kjellstrom 1990, 31–33).

In 1994, an economic crisis hit Turkey. Post-1994 crisis management gave rise to an IMF-crafted austerity programme in which divestiture of SOEs occupied an important place within it (Oguz 2008, 115). The then Prime Minister, Tansu Ciller, signalled that the government was strongly committed to accelerate divestiture. However, any progress in the divestitures would have to face serious obstacles.

The reluctance of the TÜSİAD-based holding group fraction to fully support divestiture constituted one of the biggest obstacles. Holdings tended to be very selective about divestiture, pressuring state officials to concentrate on particular sectors (e.g. banking) but not on the others (Yalman 2009, 329). The special interests of the holdings in bank privatizations were related to the fact that, during the 1990s, bank ownership provided prime opportunities for lucrative profit-making through state debt financing (Gültekin-Karakaş 2009, 97).

Intra-capital conflicts acted as another significant obstacle to divestiture. One concrete example helps to elaborate on this point. In 1997, MÜSİAD, which represents Islamic-influenced Anatolian capital, encouraged its members to bid for TEDAS (Turkish Electricity Distribution Company) ( Milliyet 1997). The unexpected competition emanating from MÜSİAD posed a threat to the interests of the TÜSİAD-based holding groups, which had been hoping to acquire TEDAS themselves ( Hürriyet Daily News 1997). The discomfort of the holding groups found expression in a Turkish National Security Council briefing, which emphasized that the government should not give priority to MÜSİAD-based Anatolian companies in the divestiture tenders (Silverman 2014, 140–141). These interventions limited Anatolian capital’s chance of winning divestiture tenders. Feeling excluded from divestiture deals, Anatolian capital, MÜSİAD, and their representatives on the political scene (i.e. RP [The Welfare Party]) thus increasingly opposed Turkish divestiture efforts. For example, two MÜSİAD members stated in personal interviews: “Because the TÜSİAD-based holding groups attempted to prevent us from participating in privatization tenders, we fought hard to slow down Turkey’s privatization programme.” ⁵

The third obstacle was the resistance of the popular classes (e.g. academics, labour unions, and statist politicians) within the state apparatus. Under the leadership of the SHP (Social Democratic Populist Party) deputy Mümtaz Soysal, these popular classes worked together to establish KIGEM -the Center for the Development of Public Management. KIGEM formed centres of opposition within the Constitutional Court, which acted as the key institution voicing the concerns of the popular classes on divestiture. For example, following the appeal of KIGEM, the Constitutional Court blocked Türk Telekom’s divestiture several times between 1993 and 2000 (Soysal 2005, 60).

In brief, the extent and pace of divestiture remained limited between 1984 and 2001. The power bloc, as the key class agent behind privatization, was neither willing nor united to push for privatization. The prevailing dynamics of capital accumulation (such as duty losses and state debt financing) also acted back on the power bloc fractions and reduced their support for divestiture -the only exception to this was their special interest in bank privatizations. ⁶

The Second Phase: 2002–2009

In the post-2001 era, Turkey’s divestiture process accelerated decidedly. The bulk of the shares in the large-scale SOEs, including Tüpraş Refineries ($4.14 billion) and Türk Telekom ($6.55 billion) were divested by block sales to domestic and foreign investors. As a result, the total divestiture revenue of Turkey, which had been around $7 billion between 1984 and 2001, reached $38 billion in 2009. Three specific, but interrelated, factors enabled the acceleration in Turkish divestiture in the post-2001 era. First, the divestiture of the SOEs constituted a central strategy, for the power bloc as a whole, in which domestic accumulation strategies were internally restructured to the new imperatives of international competitiveness—mostly at the expense of labour. Second, there was a shift in the fractions of the power bloc that had previously resisted privatization. Third, a single-party AKP government, in line with the pressures of the domestic accumulation strategies and the interest of the power bloc, undertook a series of reforms to facilitate divestiture. Let me look at these three factors in more detail.

First, it was the very depth of the February 2001 crisis that exposed the vulnerabilities of the domestic capital accumulation regime based on the short-term capital flows, state-lending practices, and duty losses, and convinced the state elites and fractions of capital that a systemic and fundamental structural change is needed. In response, the authorities introduced the neoliberal-inspired “Transition to Strong Economy” (TSE) recovery programme (Marois 2019, 110). The TSE programme gave rise to the 2001 Banking Sector Restructuring Programme (BSRP), which focused on the reconfiguration of the relations between banking and industry. In this way, BSRP intended to shift money-capital from state debts (and duty losses) into fixed capital investments through comprehensive banking and regulatory reforms (Ercan and Oğuz 2015, 121). The TSE programme also initiated the Reform Programme for the Improvement of the Investment Environment (RPIIE), which aimed at improving the business environment for the private sector and encouraging the inflows of foreign direct investment into Turkey. The top priorities of the RPIIE programme were thus foreign direct investment, productivity, and international competitiveness.

Table 2

Selected Divestitures from 2002 to 2009

Notes: D stands for domestic. F stands for foreign.

Source: Calculated based on Privatization Authority Website (www.oib.gov.tr).

The reform programme has acquired a new momentum after AKP’s coming to power in the 2002 general elections. As a result, the post-2001 accumulation strategies in Turkey were characterized by a transformation in which the fractions of capital moved away to some degree from their unsustainable reliance on inflows of finance, state-lending practices, and duty losses to dealing with increased production and integration into world markets through augmented competitiveness and commodity exports (Ercan and Oğuz 2015, 117; Taymaz and Voyvoda 2009, 151). This, however, by no means suggests that the dependence of capital accumulation on financial flows has disappeared in Turkey. What was new in the post-2001 era was the fact that the financial flows had also become a channel for the acceleration of productive capital formation and commodity exports (Gültekin-Karakaş 2009; Gültekin-Karakaş and Ercan 2013). In that sense, it differed from the previous era during which financial flows tended to finance state debt and duty losses.

In this altered atmosphere, the entire power bloc and the policymakers became enthusiastic supporters of economic policies that would enhance the international competitiveness of the Turkish economy (Ercan and Oğuz 2015, 120–121). In fact, the restructuring of the SOE sector was an important part of the broader goal of enhancing international competitiveness. This meant that the post-1945 internal relationship between the SOEs and the social classes, which had been based on duty losses and resource transfers, had to be reestablished around competitive imperatives (Zaifer 2021). In this way, the power bloc began promoting divestiture to restructure the entire state productive apparatus—SOEs and public provisions—to its advantage (through cost reduction, productivity gains) and to the detriment of the labouring classes (through employment losses, de-unionization, socialization of investment risks). This refers to what is indispensable to the power bloc as a whole.

Second, in the post-2001 era, the TÜSİAD-based holding groups and Islamic-influenced Anatolian capital fractions of the power bloc shifted their positions from resisting privatization to being supportive of privatization. Both the holding groups and the Anatolian capital fractions saw specific material benefits—in addition to the previously mentioned objective of completing internal restructuring of the domestic accumulation regime around competitive imperatives that was indispensable to the power bloc as a whole- and therefore supported privatization. Moreover, a consensus emerged that foreign capital, especially large multinational corporations, was warmly welcomed to participate in the divestiture process (Şahin 2010, 485). All these changed attitudes had significantly reduced the intra-capital conflicts (e.g. TÜSİAD vs. Anatolian; domestic vs. foreign) of the previous decades and created an unprecedented political drive for privatization.

As a hegemonic fraction of the power bloc, the TÜSİAD-based holding groups saw divestiture as a stepping stone to achieving their corporate restructuring strategy, which prioritized the competitive and high-value-added sectors at the expense of the low-value-added sectors (Şenalp 2012, 355–357). For example, Koç Holding, Turkey’s largest conglomerate, prioritized the high-value-added and/or export-oriented sectors (such as automotive, energy and finance) and withdrew from the low-value-added sectors (such as supermarket retailing and animal food) in the post-2001 era. ⁷ As part of this strategy, Koç Holding turned its attention to the large-scale companies in the Turkish divestiture portfolio and secured the tender for the Tüpraş divestiture in 2005 for a price of $4.1 billion.

Previously a rival fraction in the power bloc, Islamic-influenced Anatolian capital, also championed divestiture in the post-2001 era. It should be said that two material forces made privatization the preferred option for Islamic-influenced Anatolian capital. The first factor was the existence of the AKP government, which could ensure the Islamic-influenced Anatolian capital’s equal participation in the privatization process (Angın and Bedirhanoğlu 2012). The second and related factor that made privatization the preferred option for Islamic-influenced Anatolian capital was the expectation that the privatizations would present new opportunities for their long-waited transformation from generally medium-sized enterprises to large multi-sector conglomerates (Buğra and Savaşkan 2014, 80–90). For example, Çalık Holding, a founding member of MÜSİAD, purchased Bursa Gas Distribution from the privatization portfolio. Moreover, Albayrak Group, whose Chief Executive Officer (Ömer Bolat) acted as the president of MÜSİAD between 2004 and 2008, took its first step into the manufacturing and logistic sectors by winning three divestiture tenders—namely, SEKA Balikesir Pulp and Paper Mill, Trabzon Port, Tümosan.

Indeed, these divestitures helped the Islamic-influenced Anatolian capital groups join in the ranks of big capital. While MÜSİAD had only three members in the list of Turkey’s top 500 industrial enterprises in 2004, by 2010, there were 31 MÜSİAD members on the list. TUSKON has also made significant headway, having 45 TUSKON-affiliated companies among Turkey’s top 500 industrial enterprises list in 2010 (Buğra and Savaşkan 2014, 105). ⁸

What underlies this increased participation by Islamic-influenced Anatolian capital in the divestiture tenders is the diminishing of intra-capital conflicts. While TÜSİAD-based holding groups and Islamic-influenced Anatolian capital had focused on blocking each other’s participation during the 1990s, they joined forces to participate in divestiture tenders between 2002 and 2009. For example, Alarko Holding (a TÜSİAD member) and Cengiz Holding (Anatolian capital) cooperated to secure the Meram Electricity Distribution tender in 2008. ⁹

During the 2002–2009 period, foreign capital that was seeking new areas to invest with the accelerated global liquidity cycle showed genuine interest in Turkey and its divestiture opportunities. The successful implementation of structural reforms (TSE programme) in 2001, the election of a single-party AKP government in the November 2002 general elections, and the enactment of the FDI Law in 2003 convinced foreign investors and helped FDI inflows to bounce. While the FDI inflows amounted to less than $1 billion before 2001, it reached a record level of $10 billion in 2005. FDI inflows continued to increase to $20 and $22 billion in 2006 and 2007, respectively. Despite the global financial crisis, the FDI inflows stayed around $20 billion in 2008. ¹⁰

The rise in FDI has gone hand in hand with the divestiture boom. Major divestiture deals of the 2002–2009 period demonstrate a significant foreign presence—over 25 per cent of total sales. ¹¹ Foreign companies participating alone or acting in joint ventures with powerful domestic partners succeeded in acquiring the ownership of some large-scale SOEs (see Table 2). For instance, Turkey’s biggest-ever privatization materialized in 2005 as the 55 per cent stake in the country’s fixed-line telecommunications operator, Türk Telekom, was sold to Saudi Oger Telecom for a fee of $6.55 billion.

Third, these partnerships were crafted under the representation capacity of the AKP government. At first, the government internalized the common interests of TÜSİAD, MÜSİAD and foreign capital to drive the acceleration of divestiture and strove to balance the conflicting involvement of the three groups in the divestiture tenders. The AKP’s focus on divestiture can also be rethought in relation to its politically vulnerable position within the power relations, particularly during its first term in office (2002–2008). This was a period in which the AKP government was in office, but lacked confidence in light of the fate of a previous Islamic-based party—the RP. At the domestic and international level, there was a welcoming but cautious attitude toward the AKP’s rise to power. Within such an atmosphere, the AKP had a special imperative to remain loyal to the neoliberal agenda and to accelerate the divestiture process to demonstrate to domestic and international actors that it was the right party to govern Turkey (Angın and Bedirhanoğlu 2012, 150).

Explaining Divestitures in Turkey in the 2010s: Comparative Historical Perspective

Although PPPs began to emerge as the dominant form of privatization in Turkey during the 2010s, the country has continued to undertake divestitures. Most of the divestitures in the 2010s relate to block sales of electricity distribution companies, electricity generation plants, seaport companies, sugar production factories and state lands. The total proceeds from these divestitures are estimated to be close to $30 billion. However, it is important to note that there are two significant differences between divestitures in the 2000s and 2010s. First, while divestitures in the 2000s were an important part of the broader goal of enhancing international competitiveness and productivity of the Turkish economy, divestitures in the 2010s were geared more towards earning revenues for the state to postpone crisis dynamics and maintain political domination. Second, while major divestiture deals of the 2000s were dominated by TÜSİAD-based holding groups (and foreign capital to some extent), Islamic-influenced Anatolian capital groups that have close relations with the AKP won a majority of the divestiture deals in the 2010s. This demonstrates beyond doubt that Islamic-influenced Anatolian capital groups have now become a favoured player in the Turkish divestiture process. This article will explore these in more detail below.

Electricity Distribution Companies (EDCs)

The divestiture procedures of a total of 15 EDCs out of 20 were completed between 2010 and 2013. ¹² The process began with the Osmangazi EDC, which was divested in May 2010. The divestiture efforts accelerated in the second half of 2010. Uludağ and Çamlıbel EDCs were both divested in the month of August followed by Çoruh EDC in September as well as Yeşilırmak and Fırat EDCs in the last month of the year. In 2011, the only divested company turned out to be Trakya EDC, and no divestiture activities were conducted in 2012 (Karahan and Toptas 2013, 616). The year 2013 was breathtaking and the remaining eight EDCs were divested one after the other. The divestiture scheme of electricity distribution assets was completed with the transfer of the Toroslar EDC to the private sector in the final days of September (see Table 3).

Table 3

The Divestiture of EDCs and the Beneficiary Firms between 2010 and 2013

Source: Privatization Authority Website (www.oib.gov.tr).

From Table 3, we can see the divestiture of those 15 EDCs generated $10.479 billion in revenue between 2010 and 2013. The two largest transactions occurred in 2013 with the sales of Boğaziçi EDC and Toroslar EDC for $1.960 billion and $1.725 billion respectively. The Boğaziçi agency distributes electricity to more than 5 million subscribers on the European side of Istanbul, while Toroslar distributes electricity to 7.7 million people in southern cities like Adana, Osmaniye, Gaziantep, Mersin, Kilis, and Hatay.

The domestic capital won all tenders. The particularly active fraction was comprised of Islamic-influenced Anatolian capital groups, such as Cengiz Holding, Kolin Group, Limak Holding, and Çalık Holding, which had proven their closeness to the AKP government. For example, Cengiz and Kolin along with Limak Holding formed a consortium and won four EDCs. Meanwhile, Çalık Holding won the tender of Yeşilırmak EDC on its own and partnered with Kiler Group to take over Aras EDC. This marked a fundamental difference in opportunities for the Islamic-influenced Anatolian capital groups. While those capital groups could target the small and mid-scale divestitures between 2002 and 2009, as noted above, they began participating in large-scale divestitures in the 2010s. Yet this does not mean that another major domestic capital fraction, TÜSİAD-based capital groups, were totally excluded from EDC tenders. A prominent TÜSİAD member, Sabancı Holding, won tenders for two major EDCs (Ayedaş and Toroslar), which amounted to nearly $3 billion (see Table 3).

Electricity Generation Plants

In 2010, the Privatization Authority announced a strategy to divest some of the hydroelectric and thermal power plants owned by EÜAŞ—the state-owned and operated Electricity Generation Company. The plants in the portfolio included 56 small river-type hydroelectric power plants with a total capacity of 150 MW, 27 larger hydroelectric power plants with a total capacity of 3.7 GW and 18 thermal power plants with a total capacity of 11.8 GW (PWC 2015).

The first step in this process occurred with the divestiture of 50 small river-type hydroelectric power plants in multiple divestiture rounds (see Table 4). The tenders for these plants took place between 2011 and 2014. In 2011, 28 plants were divested for about $240 million. While TUSKON (Confederation of Businessmen and Industrialists of Turkey) member Boydak Holding acquired three plants (Bayburt, Çemişgezek, and Girlevik) for $29 million, TÜSİAD member Batı Anadolu Group purchased Kovada I and Kovada II plants for $56 million. ¹³ No divestiture activities were conducted in 2012. In 2013, the divestiture processes of 17 plants were completed for $194 million. There were some large, high-profile beneficiaries such as Nurol Holding that purchased the Göksu plant with its $57.5 million bid. Nurol Holding is highly active in building and public works and a pioneer in the field of the Turkish defence sector. The directors of the company also formed personal connections with the key AKP officials, as evidenced in 2012 by the presence of the then Minister of the Economy and the Mayor of Ankara at the wedding of the son of the Vice President of Nurol (Corte-Real Pinto 2017, 316). The Privatization Authority sold off the remaining five plants for about $15 million in 2014.

Table 4

Selected Divestitures of the Small River-Type Hydroelectric Power Plants and the Beneficiary Firms between 2010 and 2014

Sources: Privatization Authority Website (www.oib.gov.tr); EÜAŞ Website (https://www.euas.gov.tr/en-US/annual-reports).

From Table 5, we can see the Privatization Authority then turned its attention to the divestiture of thermal power plants (TPPs). From 2013 to 2016, 11 TPPs with a total installed capacity of 5.8 GW were transferred to their new owners for $8.70 billion (see Table 5). In 2013, Çelikler Holding, won the tender for the 600-MW lignite-fired Seyitömer TPP (together with accompanying large feeding field) with a bid of $2.25 billion. In 2014, İÇ İçtaş–Limak Holding equal partnership paid $2.67 billion and acquired 420-MW Yeniköy and 630-MW Kemerköy TPPs that were bundled together. Limak Holding also placed the highest bid ($105 million) for the purchase of 1156-MW Hamitabat TPP that supply energy to the Marmara region, where Limak is part of the consortium that runs the Boğaziçi (İstanbul European Side) EDC (PWC 2015). In 2016, 50-MW Hopa TPP went to Cengiz Holding for a price of $76 million. The inclusion of the operating rights for the nearby port and three precious real estate properties in the tender increased the plant’s desirability ( Sendika.Org 2015).

Table 5

Divestitures of the TPPs and the Beneficiary Firms between 2013 and 2016

Sources: Privatization Authority Website (www.oib.gov.tr); EÜAŞ’s Annual Reports (https://www.euas.gov.tr/en-US/annual-reports).

In terms of the identity of the beneficiary firms, many of the same firms that benefited from divestiture opportunities in the EDCs were dominant in the divestitures of the TPPs too. At the same time, it needs to be said that most of these firms (such as İÇ İçtaş Holding, Limak Holding, Kolin Group, and Cengiz Holding) fit into the category of what this article described earlier as the Islamic-influenced Anatolian firms that enjoy direct personal ties to ruling AKP government.

Following the divestiture of TPPs, the Privatization Authority began to divest larger hydroelectric power plants. The tenders for these power plants attracted significant interest from domestic companies because, as PWC Turkey’s Energy Team effectively wrote, “the acquisition of these operating assets is more favourable than licensing of greenfield investments, as greenfield investors have to face high water utilization fees and poor public opinion” (PWC 2015). Between 2016 and 2019, the Privatization Authority completed divestitures for 26 hydro-plants and generated nearly $2 billion in revenue (see Table 6).

Those Islamic-influenced Anatolian firms that have direct personal ties to the leading AKP members acquired some of the hydroelectric plants, although they were nowhere near as dominant as they used to be with TPPs and/or EDCs. For example, İÇ İçtaş Holding won a tender to divest 70-MW Kadıncık I and 56-MW Kadıncık II hydropower plants. Cengiz Holding won the tender for the 17-MW Fethiye hydropower plant with its offer, and Ankara-based Kolin Holding submitted the highest bid in the tender regarding the divestiture of three hydropower plants with a total installed capacity of 263-MW.

Unlike TPPs, TÜSİAD-based capital groups played an active role in acquiring hydroelectric plants. GAMA Holding, which operates in construction, energy and healthcare sectors and its partners are known to be members of TÜSİAD, purchased the Karacaören I and Karacaören II plants. ¹⁴ Rönesans Holding, which was founded by Erman Ilıcaklı who acted as the TÜSİAD vice president before, placed the highest bid for the divestiture tender of the 51-MW Şanlıurfa hydropower plant and associated property. Koç Holding, as one of the leading TÜSİAD members, took control of a pair of 54-MW Kılavuzlu and 124-MW Menzelet hydropower plants with the financing package that is provided by the EBRD and commercial banks. Alarko Holding, whose founders (İshak Alaton and Üzeyir Garih) were active members of TÜSİAD, won the tender for the Gönen plant.

Table 6

Selected Divestitures of Hydroelectric Plants and the Beneficiary Firms between 2016 and 2019

Sources: Privatization Authority Website (www.oib.gov.tr); EÜAŞ’s Annual Reports.

Having sold great quantities of hydroelectric and thermal power plants, the Privatization Authority has to a large extent completed the divestiture process of electricity generation plants. As a result, the state’s share in Turkey’s total electricity generation capacity had fallen from around 55 per cent in 2009 to 19 per cent in 2019 (EÜAŞ [The Electricity Generation Corporation] 2019, 24).

Seaport Companies

Turkey’s seaports are linked to the Aegean, Mediterranean and Black Sea and are known as critical nodes in the global sea transportation network. Most of the state-owned seaports have historically been operated by the TCDD (Turkish State Railways). In 2004, all those TCDD-operated seaports were included in the scope of privatization with the decision of the Privatization High Council. ¹⁵ Within this context, as a first step, the operating rights of the Mersin Port were transferred to PSA (Singapore-Based PSA International Ltd) Akfen Joint Venture Group with a price of $755 million in 2007.

The divestiture process of TCDD-operated seaports has continued during the 2010s (see Table 7). First, the operating rights of the Samsun Port and Bandirma Port were transferred to private companies in March and May 2010 respectively. Ceynak Lojistik won the operating rights of Samsun Port, which is the biggest port in the Black Sea, for 36 years at the price of $125.2 million. Çelebi Holding Consortium offered the highest bid of $175.5 million ahead of Torunlar Consortium and won the operating rights of Bandirma Port for 36 years. Second, the tender announcement for the divestiture of Iskenderun Port was published in May 2010, final offers were received in September 2010, and the operating rights were transferred to Limak Holding with the highest offer of $372 million in January 2011. Third, Derince Port have been transferred for a period of 39 years to Safi Holding in 2015. Fourth, Ceynak Lojistik, which acquired the Samsun Port a few years ago, was awarded the operating rights for the Port of Tekirdağ for 36 years in 2018. The TCDD has still performing port services at Haydarpaşa and Izmir ports.

Table 7

Divestiture of Seaports

Source: TCDD Annual Reports (https://www.tcdd.gov.tr/en/organizational/reports).

In terms of the identity of buyers, foreign capital (e.g. PSA of Singapore) only participated in the Mersin Port divestiture which was held in 2007. The later port divestitures during the 2010s were dominated by domestic capital groups. Islamic/Anatolian capital groups that have close relations with the AKP such as Safi Holding and Limak Holding acquired Derince Port and Iskenderun Port respectively. ¹⁶ TÜSİAD-affiliated companies such as Ceynak Logistics and Çelebi Holding were also active in the port divestitures. The former through the acquisition of Samsun Port and Tekirdağ Port and the latter through Bandırma Port. ¹⁷

State Lands

According to Turkey’s Privatization Authority database, 5,000 different state lands were divested, and about $4.1 billion in revenue was collected since 1986. However, the divestiture of state lands accelerated significantly in the 2010s. The opening up of state land-to-profit imperatives played an instrumental role in enabling the AKP government to create new financial resources to meet the state’s debt-recycling requirements and address some immediate financial and electoral concerns, while at the same time helped reaffirm the government’s political commitment to fiscal stability. The government collected nearly $2.9 billion in revenue from the sale of state lands between 2010 and 2021. ¹⁸

Some of these divested state lands include large areas in major city centres like Istanbul, Ankara, and Izmir (see Table 8). Indeed, to increase their attractiveness, the government sold those lands in city centres to investors together with new development rights and special construction privileges (Celik 2020). Local companies dominated the tenders and acquired almost all the divested state lands.

Sugar Production

After the foundation of the Turkish Republic in 1923, sugar factories were some of the first industrial investments of new Turkey. In February 2018, the government announced a divestiture process roadmap for 14 sugar factories belonging to the state-owned TÜRKŞEKER (Turkish Sugar Refineries Corporation). Most of those factories are located in relatively poor regions of central and eastern Turkey (USDA [United States Department of Agriculture] 2021, 7). ¹⁹

The unexpected announcement triggered harsh objections from a wide range of actors across the country whose biggest concern was the closure of factories after the divestiture, as occurred with other divested plants in the past. Specifically, sugar factory workers and their labour union, Şeker-İş, launched a campaign to stop divestiture. During one of those protests organized by Şeker İş and Trakya Sugar Platform on 25 March, the workers and consumers alike chanted the slogans: “Do not shut up,” “Long live the solidarity for sugar,” and “Sugar factories belong to people, and so they will” (Sol International 2018). The main opposition party (CHP) also fiercely opposed the divestiture of the sugar factories and organized a rally to condemn the sales, recalling that the sugar plants marked the achievements made in the early days of the Turkish Republic (UKrAgroConsult 2018). The CHP leader, Kemal Kılıçdaroğlu, stated this perception bluntly: “Sugar factories are part of our history. They were the first factories built in the Republic of Turkey” ( Milli Gazette 2018).

However, the AKP government was determined to finalize the divestiture process and hold tenders in April 2018 to accept bids for the 14 state-owned factories. By the end of the year, ten sugar factories were divested for a total of $766 million, and the buyers have all been relatively small domestic companies (see Table 9). ²⁰ Most of these companies are known to be representatives of Islamic-influenced capital and have close relations with the AKP government and President Erdogan. For example, Albayrak Group, which is run by a close ally of Erdogan, purchased two factories in Turkey’s northeast region—Erzincan and Erzurum—for a total price of $64 million (Duvar English 2021).

Table 8

Divestitures of State Lands (Above $15 Million)

Source: Data collected from the Privatization Authority Website (www.oib.gov.tr).

I believe that this decision to divest state-owned sugar factories individually to relatively small and inexperienced domestic companies not only greatly damaged the integrated structure of TÜRKŞEKER but also imposed significant pressures on the productivity of sugar factories. Hence the AKP government appears to have not prioritized the objective of fostering international competitiveness of the Turkish sugar sector and the Turkish economy anymore. Rather the AKP seems to have two strategic objectives in the current conjuncture: raising fiscal revenues for the state, and supporting favourable (i.e. politically connected Islamic-influenced) capital groups.

Table 9

Divestitures of Sugar Factories and the Acquirer Firms

Source: Deloitte (2019)

Conclusion

The purpose of this article has been to evaluate divestiture implementations in Turkey in the 2010s, which is still a relatively neglected area of research. The article showed that divestiture implementations in Turkey in the 2010s evolved in a primarily different direction. First of all, divestitures in the 2010s had become narrower and more limited in terms of sectoral scope—focusing only on state-owned assets in electricity, seaport, sugar production and real estate sectors. ²¹ Second, in contrast to the earlier phases of divestiture discussed in the historical background that prioritized international competitiveness and productivity imperatives, divestitures in the 2010s have been geared towards earning revenues for the state to address some immediate financial and electoral concerns, and to maintain political domination. Thirdly, Islamic-influenced Anatolian companies that have close relations with the AKP government won many of the divestiture deals in the 2010s. This contrasts with the 1984–2009 period, in which the majority of the divestiture tenders were secured by the TÜSİAD-based capital holdings and foreign investors.

The analysis of this article contributes to our understanding of contemporary Turkish political economy in different ways. Most importantly, it demonstrates that “short-termism” and “favouritism” have become a common practice in Turkey’s divestiture implementations in the 2010s. As we have seen, Islamic-influenced capital groups that enjoy direct ties to the ruling AKP government were favoured in almost all divestiture tenders in the 2010s without any concern for competitiveness and productivity. This was openly expressed by TÜSİAD members, who felt uncomfortable with the close relations between the government and some capital groups. President of the High Advisory Council of TÜSİAD, Tuncay Özilhan, told in a speech that:

A loose regulatory framework that gives too much discretionary power to the administration is neither conducive to fair competition. . . . Proper use of the citizen’s money requires that public tenders should be awarded in accordance with the principles of transparency and accountability. (General Assembly of TÜSİAD 2018)

However, one should be very careful not to fall into a methodological trap that hides the class-based nature of privatization (and divestiture). Using “particularism” and “favouritism” as units of analysis to explain divestiture as exclusively privileging the interests of favourable (politically connected Islamic-influenced) capital groups, as TÜSİAD leaders and the Weberian-inspired-liberal-cum-institutionalist studies of Buğra and Savaşkan (2014) did, without saying that divestiture is a class-based policy that attempts to further increase capital accumulation and systematically privileges the interests of capital as a whole over those of labouring and popular classes is problematic. Divestiture is not only part of a corrupt network between a group of favourable business groups and the political leadership but also is a deadly sin of capitalism that privileges the capital as a whole over labouring classes and environment.

Notes

1.

Also, the minority shares of a petrochemical firm (Petkim) and the bank (Halkbank) were offered publicly in 2012.

2.

See the Privatization Authority website, https://www.oib.gov.tr

3.

TÜSİAD means Turkish Industry and Business Association.

4.

See the Privatization Authority Website (www.oib.gov.tr).

5.

Personal communication with Bekir Erkus, Chair of Machinery Sector Committee, January 30, 2013; Personal communication with the operating rights of the Mersin Port transferred to PSA with Mustafa Albayrak, Chair of Energy Sector Committee, February 1, 2013.

6.

Discussed in more detail in Zaifer (2020).

7.

See https://www.koc.com.tr/investor-relations/reports. Accessed September 16, 2021.

8.

The 500 lists have been provided by the İstanbul Chamber of Industry.

9.

See the official website of Cengiz Holding (http://www.cengiz.com.tr/en-us/Sectors/Energy/Pages/Meram-Elektrik-Dagitim-Anonim-Sirketi.aspx).

10.

The FDI data is taken from UNCTAD.

11.

The participation of foreign investors in the privatization process between 1984 and 2000 was around 10 per cent of total sales.

12.

Three EDCs (Başkent, Sakarya and Meram) were divested in 2009. The operation rights of the two EDCs (Menderes and Göksu) were transferred to the Gediz and Akedaş EDCs, respectively, in 2010.

13.

Tufan Ünal, who serves in Batı Anadolu Group companies as the Chairman of the Board of Directors, Deputy Chairman and Executive Member, has been a member of TÜSİAD since 1992. He also served as a member of TÜSİAD board of directors between 2003 and 2004. See https://ceis.org.tr/cs-biyografi/tufan-unal/. Accessed November 17, 2020.

14.

For example, the honorary chairman of GAMA Holding, Erol Üçer, was elected as the TÜSİAD member of the supervisory board in 2003.

15.

Except for the Haydarpaşa Port.

16.

Atakan Sinan Safi, member of Safi Holding Board of Directors, acted as the AKP’s Deputy Chairman of İstanbul Beyoğlu District.

17.

The owner of Ceynak Logistics, Ali Avcı, is a member of TÜSİAD and was the vice president of TÜRKONFED (i.e. TÜSİAD’s nation-wide confederation to represent SMEs) for the period of 2015–2018.

18.

Data collected from the Privatization Authority’s website (www.oib.gov.tr).

19.

At the time, there were 33 sugar factories in Turkey, with 25 owned by the TÜRKŞEKER.

20.

The divestiture tenders of the remaining four sugar factories—Kastamonu, Burdur, Yozgat, and Ilgın—had been cancelled, as the bidding firms did not fulfil the obligations set by Turkey’s Privatization Administration.

21.

For example, many state-owned assets were transferred to the TVF (Türkiye Varlık Fonu—Turkish Wealth Fund) instead of being put into the privatization portfolio. The fund, owned and managed by the Turkish state, contains three of Turkey’s state-owned banks (Ziraat Bank, Halkbank, Vakıfbank), two largest state-owned power generation and distribution companies (Botaş and Turkish Petroleum), Turkish Airlines and other 17 state-owned companies from eight different sectors.

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