Ankara is nationalizing the economy. A Turkish fund grows on the ruins of private companies

A state investment fund became one of Turkey's largest holdings when hundreds of private companies were taken into government hands as part of an anti-corruption drive, raising concerns about a politically motivated asset seizure, the Financial Times reported on Wednesday.

Investigations and searches at companies operating in Turkey have given rise to a number of theories about their causes, including because President Recep Tayyip Erdogan's ruling Justice and Development Party (AKP) has in the past used the State Deposit Guarantee Fund (TMSF) to seize the assets of its political opponents.

“The AKP party has long used the TMSF as a tool to regulate the economy, but also as a mechanism to direct resources to companies close to the party, while marginalizing those it perceives as rivals,” Berk Esen of Istanbul's Sabanci University told the FT.

TMSF serves as a fiduciary for companies during judicial investigations. It currently controls 1,056 enterprises under investigation. Just a year ago, this number was 675. These enterprises operate in many sectors of the economy, including the media, finance and energy. Recently, the Kasimpasa football club – a team in which President Erdogan played in his youth – came under his management.

The investigations and accompanying arrests have alarmed the Turkish private sector, raising concerns about property security and selective application of the law, the British daily noted. Analysts and business leaders say the simplest explanation for the seizures is that the government is trying to strengthen its position among voters by showing that the authorities are tough on all forms of corruption.

Another potential reason for these actions is the need for the authorities to finance the related business in the face of Turkey's growing economic problems and the presidential elections scheduled for 2028. The concern is that Erdogan's goal is to “transfer funds directly to the Treasury through the TMSF or shift capital into loyal hands,” said Atilla Yesilada, an analyst at Istanbul-based consulting firm GlobalSource Partners.

The TMSF was established in 1983 to protect Turkish bank deposits. The Fund's powers were expanded after the failed coup attempt against Erdogan in 2016. In its wake, over 1,300 companies suspected of being linked to the conspiracy were seized, for which Ankara blamed the late Islamic preacher Fethullah Gulen and his supporters.

The fund was entrusted with the sale of companies or liquidation of their assets. According to TMSF, more than 600 of them were returned to their original owners after judicial investigations. The rest were sold – sometimes, critics say, to government allies at favorable prices. New laws passed in February strengthened the TMSF's powers, and a “strong suspicion” of crimes such as money laundering is now enough for a court to order a company placed in a TMSF trust. (PAP)

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