Mustafa Sönmez

During Russian President Vladimir Putin’s April 3 visit to Turkey, the two sides finalized an agreement on the creation of a $500 million joint investment fund, among other deals. The fund, which, according to official statements, will focus on infrastructure, health care and information technology projects, will be a joint venture between Ankara’s sovereign wealth fund, the Turkey Wealth Fund (TWF) and the Russian Direct Investment Fund.

The deal comes as another sign of the growing ties between Turkey and Russia, but how it will unfold is a curious question, for the future of the TWF itself is mired in uncertainty. Ever since its creation in 2016, the TWF has been under criticism, and even President Recep Tayyip Erdogan has admitted that it has been a failure, calling for restructuring. The main opposition, meanwhile, calls for dissolving the fund altogether.

The legislation creating the TWF was passed hastily in the summer of 2016 amid the clamor of the July 15 coup attempt, outlining ambitious objectives to support Turkey’s development. Public assets worth $160 billion were transferred to the fund, though many were skeptical over its stated goals and some even saw it as a government move to create a “parallel budget.” Looking at what the TWF has achieved thus far, one could conclude that it is next to nothing, an assessment that even the fund’s spearheads, including Erdogan, appear to share. So what went wrong?

To start with, the TWF has nothing in common with the world’s best-known sovereign wealth funds such as Norway’s Government Pension Fund, United Arab Emirates’ Abu Dhabi Investment Authority, China Investment Corporation, Kuwait Investment Authority and Saudi Arabian Monetary Agency. Generally, sovereign wealth funds rely on the budget surpluses of their respective governments. In other words, genuine wealth funds belong to countries with current account surpluses and certain natural riches, mostly oil and gas. Turkey has none of these, struggling with both budget gaps and a chronic current account deficit.

Officially, the TWF’s main objectives are to contribute to Turkey’s economic growth by ensuring value increase of key public assets, support the development of assets suitable for participation financing, deepen capital markets through the introduction of a variety of products, attract further investments to Turkey and provide capital for new investments, support the development of strategically important industries, and participate in large-scale investments.

Public assets transferred to the fund included the shares of giant entities such as public lenders Ziraat Bank and Halkbank, Turkish Airlines, Turk Telekom, PTT postal service, National Lottery, Istanbul stock exchange, pipeline operator BOTAS, oil company TPAO, satellite communications company Turksat, tea company CAYKUR and Eti Maden mining enterprise.

Erdogan had entertained high hopes for the fund. Speaking in November 2016, he described the fund as “a very belated project” and expressed confidence that the assets it would create would “increase our strength, both nationally and internationally.”

Yet the mountain brought forth a mouse. Less than a year later, in September 2017, Erdogan was grumbling that the fund had failed to progress on the “targeted and desired” course. “We have decided that things cannot go on like this,” he said. “Reorganizing the wealth fund is a must.”

By the time of this admission of failure, the TWF was already under fire from the opposition and other critics outside parliament. Atop its hasty creation, almost as a fait accompli without any public debate, the transfer of huge public assets to the fund added to the controversy. Many saw the move as a different way of plundering public resources. The appointment of figures close to Erdogan to the fund’s management fueled speculation over the fund’s purpose.

When it comes to what the fund has done with the assets, it provides the following explanation on its website: “Assessment and independent auditing work on all assets transferred to the TWF is in a process of completion. After the identification of potential development and synergy realms, five-year value creation programs have been drawn up for all assets and submitted to the prime minister’s office for the approval of the Council of Ministers. New investments, to be made simultaneously in this process, will be also outlined.”

In December, Omer Fethi Gurer, a lawmaker for the main opposition Republican People’s Party (CHP), submitted a written parliamentary question to Prime Minister Binali Yildirim, asking about the fate of the fund’s strategic plan and the investments it would finance. He also requested information about any plans to sell or mortgage assets.

The response came from Deputy Prime Minister Mehmet Simsek, who oversees the economy. Simsek said the TWF’s activities could proceed under a three-year strategic investment plan, adding that a blueprint had been submitted to the prime minister’s office for approval in April 2017.

At the time Simsek disclosed this information, the plan had been waiting for seven months without a decision, which seemed to justify criticism that the TWF was stillborn amid discrepancies between its objectives and functions.

This raised further questions about the purpose of the fund and some, like CHP deputy Cetin Osman Budak, wondered whether it could end up dissolved. In his own parliamentary question to Yildirim, Budak asked whether the government would consider scrapping the TWF, arguing that it was essentially designed as “an unchecked second Treasury” and contributed nothing to the economy. According to the lawmaker, the state of affairs was in itself a confession of the fund’s failure and no management reshuffle could make it useful for the economy, hence it should be dissolved without squandering further public funds.

Other opposition questions to Yildirim include the following: What efforts has the TWF made in line with its objectives to secure external funds, increase the value of assets in its portfolio and participate in strategic investments, and what results has it obtained? How much revenue has the fund secured through its activities thus far? How much money has the fund spent on administrative expenditures such as personnel salaries, immovable properties, furnishing and cars? How much payment has been made to members of the fund’s executive board?

While those questions still await answers, the TWF remains an entity that essentially exists only on paper, having failed to make any tangible progress on its objectives and have its strategic plan approved by the government. Some reports suggest that differences between Erdogan and the Cabinet have also contributed to the stumbling, which makes the future of the fund even more curious.

Turkey’s economic troubles are quickly climbing to the top of the country’s agenda amid increasing signs of a rift in the upper echelons of government in Ankara. Even the flashy 7.4% growth rate for 2017, announced March 29, failed to alleviate the economic gloom, punctuated in early March by the decision by Moody’s, the international credit rating agency, to cut Turkey’s sovereign rating further into junk territory. Coupled with other adverse indicators and global headwinds affecting emerging countries, the state of Turkey’s economy has triggered in-house rows among its top managers. With next year’s election cycle in mind, President Recep Tayyip Erdogan is insisting on interest rate cuts, thereby exacerbating tensions with the Cabinet and the central bank, which sit at the steering wheel of the economy.

The friction over interest rates has been ongoing for years, but it has lately increased amid the slump of the Turkish lira, which lost 5% of its value in March alone. What has emerged as a rather novel development is that Erdogan’s outbursts behind closed doors are now leaking from the Justice and Development Party (AKP) and making headlines in the press.

Drawing on the 7.4% growth rate, the government was keen to polish its image, allowing little discussion of the serious drawbacks lurking behind the showy figure. Its efforts, however, suffered a series of blows with the release of additional economic data.

Inflation figures for March, made public April 3, offer little hope of improvement. Year-on-year consumer inflation seems to be ossifying at about 10%, and producer inflation is climbing toward 15%. In the fight against inflation, efforts to reign in cost increases, fueled by rising food and foreign exchange prices, are failing to bear fruit. The use of imports to cover supply shortages in the food sector is also proving inefficient because of the rising foreign exchange prices. In fact, the increase in the dollar price, about 5% in March alone, means higher production costs in every industry as imported materials become more expensive, thus fueling consumer prices.

The failure to slow inflation is denting any prospect of rate cuts. Erdogan may believe otherwise, but the central bank knows that reducing inflation is a precondition for cutting rates and has acted accordingly.

The increasing dollar and euro prices are especially spooking companies indebted in foreign exchange. The real sector’s net foreign exchange deficit stood at $221.5 billion in January. In a bid to minimize risks, companies have turned to buying foreign exchange, further stoking prices. Deputy Prime Minister Mehmet Simsek publicly voiced concerns about this, putting himself in Erdogan’s crosshairs.

In a March 23 speech, Simsek, who oversees the economy, criticized private companies for mismanaging their foreign exchange debt and, quoting John F. Kennedy, said, “The time to repair the roof is when the sun is shining. Interest rates are relatively low at present and economies are growing, but rain will be coming down.” The government, he stressed, will enact measures, including a limit on corporate borrowing in foreign exchange.

Because of his technocratic style and career at top global financial houses, Simsek carries weight with the markets and enjoys confidence among foreign investors. He was a senior economist at Merrill Lynch in London before joining the AKP in May 2007. Since then, he has been a fixture in the Cabinet, first as state minister for the Treasury, then as finance minister and now as deputy prime minister in charge of the economy.

Simsek’s warning angered Erdogan, apparently for highlighting Turkey’s fragilities. Without naming Simsek, the president slammed “unforgivable” missteps by colleagues who he said were supposed to build international confidence in the Turkish economy.

“There is a great achievement in growth, and while we are talking [about it], they say other things,” Erdogan said. “How can people shoot themselves in the foot? They keep whining about exchange rates. Get over with it! … Theory and practice are two different things. If you can bring them together, I’d show respect. But if you can’t, you go your way, we go ours.”

Erdogan’s rant was widely interpreted as a call for Simsek to resign. More was to come.

On April 5 in a lively report, Hurriyet described a stormy meeting of the AKP management board days earlier, including Erdogan raging about “things going on behind my back.” The president was incensed about the central bank’s December rate hike, which, he said, was announced while he was abroad and ignored his instructions for a cut, according to the report.

“They say the central bank is independent,” Erdogan was quoted as saying. “Fine, but we are the ones who pay the price for their decisions. And they call this one-man rule. What kind of one-man rule is this? We make decisions but they are not implemented.”

He further stated, “The comments of some colleagues about the economy are very misplaced. When you look at economic indicators you see at least 50 indicators developing in a positive trend, and yet they keep talking about a couple of indicators that remain problematic. This is a big impertinency. I keep warning to lower interest rates and they say ‘Ok’ at the meetings, but then they do the opposite. How is such disrespect possible?”

According to the report, Prime Minister Binali Yildirim chimed in, remarking, “[The Cabinet is] thoroughly evaluating all indicators and proposals concerning the economy.” Erdogan retorted that the discussions were not remaining confidential, but “are being shared publicly,” another apparent reproof of Simsek.

Despite rife speculation that Simsek would resign, he remains in his post. Some observers, however, believe his departure has only been delayed to avoid turbulence amid jittery markets. What course the central bank will take is an even more curious question, given Erdogan’s unrelenting pressure for rate cuts, regardless of rising foreign exchange prices.

Some pundits advocate the central bank quickly hiking rates to reign in foreign exchange prices without waiting for its regular meeting, on April 25. Others believe the country’s economic managers will look for other formulae in the face of Erdogan’s stance. One formula involves the use of accumulated public funds, especially those at the Unemployment Insurance Fund, to reduce the government’s borrowing needs and thus curb the increase in interest rates. The majority of observers, however, believe that even this formula will have little effect given the scale of the general economic turbulence.

The more trouble the turbulence creates, the more the bickering between Erdogan and the Cabinet is likely to intensify, adding another curious aspect to the run-up to elections.

On March 29, the Turkish Statistical Institute (TUIK) announced that the country’s gross domestic product grew 7.4% in 2017, the highest rate in the past four years. The 7.4% rate made Turkey the second fastest-growing economy in the Organization for Economic Cooperation and Development after Ireland with 7.8% and ahead of Slovenia with 5%. The GDP, however, shrank in terms of dollars to $851 billion from $863 billion in 2016, reflecting the dramatic depreciation of the Turkish lira. Accordingly, GDP per capita went down to $10,597 from $10,883 in 2016.

There is another side of the coin, which shows that Turkey’s spectacular growth came thanks to government propping that is hard to sustain and at the expense of excessive borrowing and increasing fragilities. The social leg of growth is also troubling, as low-income Turks appear to have benefited little in terms of job opportunities and income increase.

As Deputy Prime Minister Mehmet Simsek conceded, government guarantees encouraging loan expansion were the main booster of growth, coupled with tax cuts and incentives. The economy’s growth was driven largely by domestic consumption, which brought about double-digit inflation — 12% in consumer prices at the end of 2017.

As the Turkish lira tumbled, the price of the dollar increased 21.7% last year, making Turkey’s imports more expensive. Coupled with the rise of global energy and commodity prices, this pushed up production costs at home, resulting in a 15% annual increase in producer prices. Hence, Turkey’s growth came at the expense of an unruly inflation.

The consumption-centered growth fueled imports, enlarging the country’s foreign-exchange gap. As a result, the current account deficit reached $47.1 billion or as much as 5.5% of GDP — a rate unique to Turkey.

Last year’s external debt stock is an important sign of how the economy relied on foreign funds to grow. Standing at $453.3 billion in official data, the external debt stock amounts to 53.3% of GDP and 70% of it belongs to the private sector.

So, a giant current account deficit and the hardship of sustaining external borrowing to grow are other troubling elements. Meanwhile, the government’s tax incentives — another stimulant of the growth — widened the gap in public finances, resulting in an alarming “twin deficit” together with the current account gap.

And did the growth contribute to job creation and a fair distribution of income? The unemployment rate remained unchanged at 10.9% from 2016 to 2017. Non-agricultural unemployment stagnated at 13%, while youth unemployment remained above 21%. In other words, the economic growth absorbed only the newcomers to the labor market and offered no hope to the already jobless. Overall, the number of jobless increased by 124,000 to reach 3.45 million in 2017.

When it comes to revenue distribution between employers and employees, the TUIK data shows that the trend developed to the detriment of the latter. Payments to labor stood at 34.5% of GDP, down from 36.5% in 2016, a clear sign that the 7.4% growth resulted in an unfair outcome for workers.

In another ironic development, the Turkish lira was in free fall in the hours when TUIK released the 7.4% growth rate, with the price of the dollar breaking the psychological barrier of four liras. Normally, economic growth on such a scale is expected to involve an influx of foreign investment and thus an abundance of dollars, leading the lira to appreciate. Yet, in March alone, the lira lost 5% of its value against the greenback, dissociating significantly from the currencies of other emerging economies. This in itself is a sign that Turkey’s economic growth has come with increasing fragilities and failed to inject confidence.

No wonder that Turkey’s five-year credit default swaps (CDS), known also as credit risk premiums, have risen to 203 basis points, the highest level since mid-November. Standing at 160 basis points in the beginning of the year, the CDS have been on the rise due to both foreign market developments and Turkey’s own economic and political risks.

The CDS increase reflects the higher pricing of Turkey’s risks and thus the rising interest rates it has to pay on its sovereign bonds. Neither the premium nor the interest rates can fall as long as the risks continue. The yield on Turkey’s 10-year bonds climbed close to 13% in March. It had hit 13.2% in November. The increase in the risk premium has owed also to a March 7 decision by credit rating agency Moody’s to cut Turkey’s sovereign rating further into junk territory, downgrading it to Ba2 from Ba1.

The depreciation of the lira appears bound to continue, chiefly because of Turkey’s external financing needs. Oil prices, meanwhile, are likely to rise during the year, which means the country’s current account deficit will continue to expand. The debt Turkey has to roll over in the next 12 months is close to $180 billion, which means it has to borrow between $220 billion and $230 billion in external funds, a sum amounting to more than 25% of GDP. As foreign capital flows to emerging economies decline, a burden of such a size will not be easy to manage, even though it will spread over 12 months. Moreover, the cost of borrowing is increasing. Given that reserves are not very strong, either, the pressure on exchange rates will continue.

Political uncertainty is the main reason foreign investors hesitate to put money in Turkey. A critical election cycle is looming in 2019, but a wait-and-see attitude prevails on financial markets because of the talk of early elections. This reason alone could prompt the government to bring the polls forward — to fall this year, for instance — to end the uncertainty.

If the slump of the lira continues, the central bank would be expected to intervene forcefully by hiking rates and/or using other monetary policy instruments. Absent an intervention, the rush for hard currency among domestic actors will push up foreign exchange prices even more, threatening further damage to the economy.

Turkish President Recep Tayyip Erdogan served as the mayor of Istanbul before ascending to the helm of the country as prime minister in 2003. During a television debate in 1994, he voiced strong opposition to a proposed third bridge over the Bosporus to the lush, forested area north of Istanbul. According to the then-mayor, such construction would be “a serious mistake” because it would serve the interests of rent-seekers while “destroying [Istanbul’s] remaining lungs” in the area.

The environmental plans for Istanbul — considered the city’s constitution and updated most recently in 2009 — put the northern areas off limits to development and all kinds of public and private investment to protect the city’s remaining forests and water basins. Yet Erdogan — who put his signature on the plans as a mayor — removed the red line in 2013 as he spearheaded projects to build a third bridge over the Bosporus, complete with belt highways and a third airport for the city, flouting the huge environmental damage.

Both projects were based on the build-operate-transfer model of public-private partnership. In return for 25 years of operational rights, the companies would pay certain rents but would enjoy profit guarantees by the government. Accordingly, the Treasury would pay the difference if traffic through the bridge and the airport fell under the guaranteed figures.

In addition to the two giant projects that are meant to complement each other, yet another involves the construction of an artificial waterway called Canal Istanbul — the preparatory work for which becomes a topic for discussion, especially during election times.

The third bridge is already operational but underperforming. The construction of the new airport, meanwhile, is planned to be completed in stages. The facility is scheduled to become operational on Oct. 29, the 95th anniversary of the modern Turkish Republic, with an initial capacity of 90 million passengers per year. The inauguration will mark the closure of Ataturk Airport, Istanbul’s main air hub at present. According to Funda Ocak, the head of the State Airports Authority, Oct. 29 is the date for the inauguration ceremony, while actual moving in will start at 3 a.m. on Oct. 30 and end at 11:55 p.m. on Oct. 31. Turkish Airlines, the national carrier, will halt its flights for 12 hours at 2 a.m. on Oct 31 and move its aircraft to the new airport by road.

The airport project was awarded in 2013 to a consortium of business groups with close links to Erdogan, namely Kalyon, Cengiz, Limak, Kolin and MNG. The same companies have stood out in public projects for years, winning tender after tender in major sectors such as power distribution and the construction of subways, tunnels and dams. The thriving companies have responded in kind, financing the Sabah-ATV media group, which is organically linked to the president.

According to the consortium company IGA, in which the partners have equal shares, the new airport will reach an ultimate capacity of 200 million passengers in 2028, when all construction stages are completed. Under the contract, the company gets operating rights for 25 years, during which it commits to paying the government 22 billion Turkish liras ($5.8 billion). In return, the government has allocated more than 7,000 hectares of land for the project and mobilized public banks for financing, in addition to other assistance.

One of the controversies surrounding the project pertains to the size of the allocated land. In a research note on the issue, BETAM — the research center of Bahcesehir University — draws a comparison to Hartsfield-Jackson Atlanta International Airport, stressing that it has five runways and covers an area of 1,900 hectares, while Istanbul’s new airport will have six runways but has been allocated a much vaster land of about 7,400 hectares. The study then makes a comparison to Ataturk Airport, saying, “Roughly calculated, Ataturk Airport is established on an area of 1,178 hectares and has a traffic of 45 million passengers [per year]. When the new airport’s traffic reaches 150 million passengers, this would require a capacity approximately three times bigger than that of Ataturk Airport. Based on this, we estimate that the new airport needs an area of 3,500 hectares. Even if we assume that passenger numbers meet the expectations, it remains questionable whether an area as vast as 7,400 hectares is [really] needed.”

According to IGA, the utilized land is even bigger: 7,650 hectares. So why allocate such a vast amount of land, which is apparently more than double of what the airport requires? Because the project also involves the construction of an airport city next to the airport. On this aspect of the project, IGA offers the following information: “The airport city, which we plan to build in a vast area stretching from the outside of the terminals to the southern boundary of the airport, will have office buildings, airport hotels, a mosque, a conference and exhibition center, a shopping mall, a medical center and training facilities.” No doubt, the airport city is a no less profitable opportunity than the airport itself.

The project also guarantees profits to the contractors, meaning that the Treasury will make up for any gap between the guaranteed and actual number of passengers. According to BETAM’s optimistic estimates, the Treasury will have to pay close to 93 million euros ($114.3 million) from the central government budget if the number of passengers fails to exceed 80 million per year, and 154 million euros ($189.1 million) if traffic remains below 68 million passengers. Of note, the traffic at Ataturk Airport stood at some 60 million passengers on average in the past four years.

Apart from the generous land allocation and profit guarantees, the contractors have enjoyed support in getting loans from public banks after their attempts to secure financing from abroad failed. According to the World Bank, loans worth $5 billion have been used in the first phase of the $35 billion project. Private Turkish banks Finansbank, Denizbank and Garanti issued only about $1 billion of those loans, while the remaining bulk came from public banks Halk, Ziraat and Vakif. Pundits see the possibility of financial strains for the three public banks in the future, given the magnitude of the risk they have taken.

On the labor side, about 30,000 people have worked in difficult conditions on the construction of the airport, which has been marred by deadly work accidents. Last month, the Labor Ministry said 27 workers had died since construction began in May 2015, denying reports that about 400 workers had perished and that most incidents had been covered up through compensations to the families of the dead.

Crucial elections next year lurk behind the haste to get the first phase ready for Oct. 29, despite an important drawback, namely the delay in the construction of a metro line to the airport. According to Development Ministry data, the 34-kilometer (21-mile) metro line between the airport and Gayrettepe, a downtown area on Istanbul’s European side, will be worth 5.5 billion Turkish liras ($1.4 billion) — with only 1 billion lira in work slated for completion by the end of 2018. Full completion is scheduled for 2022. By then, access to the airport is expected to remain a major problem, with reports suggesting that travelers will be forced to use the idle third bridge.

In sum, Istanbul’s newest airport — intended to capitalize on the city’s strategic location between continents — is headed for an opening ahead of key elections mired in myriad problems from huge environmental damage of lavishly allocated public land to poor access and looming burdens on public finances. Unfortunately, the likelihood of it becoming a financial black hole for Turkey is high.

A year and a half ago, Turkish Finance Minister Naci Agbal voiced reservations about selling off publicly owned sugar plants, which had long been slated for privatization. Speaking in the rural province of Corum in September 2016, Agbal stressed that the chain of production in sugar plants involved local sugar beet suppliers, meaning that whole communities living on agriculture could be affected. “When it comes to privatizing sugar factories, one has to think 40 times,” he said.

Whether the government thought it over 40 times remains unknown, but on Feb. 20, the Prime Ministry Privatization Administration announced its intention to sell off some of the 25 plants of the publicly owned Turkish Sugar Factories Company (Turkseker).

According to the UN Food and Agriculture Organization, Turkey accounts for 7% of global sugar beet production, which makes it the world’s sixth-largest producer after the United States, France, Germany, Russia and Ukraine. The country produces about 2.6 million tons of sugar from sugar beets annually, half of which comes from Turkseker factories and the other half from the plants of the Pankobirlik cooperative.

The Privatization Administration said it would sell off 14 factories — most of them in relatively poor regions in central and eastern Turkey — and invited bids from April 3-18. The plan triggered harsh objections from a wide range of quarters — factory employees and their trade unions, local communities, sugar beet producers, opposition parties and consumers across the nation. The scale of the protests is likely to grow in the coming days.

The initial decision to privatize the sugar factories dates to 2000, two years before the Justice and Development Party (AKP) came to power. In 2008, the AKP government placed the factories on its privatization program. A decade has passed since then, and although public assets worth some $70 billion were privatized in the meantime, the sell-off of the sugar factories was delayed. Why?

First, Ankara was wary of public outcry due to the move’s potential impact on various groups involved in the industrial and agricultural connections of the sector as well as the risks that could arise in terms of consumer issues.

Another problem stemmed from the diverse profile of the plants slated for privatization. A legacy of the early years of the modern Turkish republic, the sugar factories were among the three pillars — “the three whites” — of the First Industry Plan, inaugurated in 1934 to promote import-substituting industrial development, based on raw materials. The plan encouraged sugar beet growing and sugar production, and included similar measures for the two other “whites” — wheat (flour) and cotton (textile).

The first factories built under the program were profitable facilities, located in regions such as Alpullu, Usak, Eskisehir and Turhal, where sugar beet production was thriving. In time, however, sugar factories came to be seen as a vanguard to spread the industrial drive to underdeveloped, impoverished provinces. As a result, the sugar industry acquired a dual character. While some factories operated profitably, others remained inefficient, functioning as a source of employment and social benefits in underdeveloped areas that lacked even adequate sugar beet crops.

The factories in the Pankobirlik cooperative have been operating rather successfully, which shows that, with some effort, Turkseker could also become a profitable public enterprise with no economic burden for the government.

Since 2000, however, the sector has received none of the modernization and automation investments it needs to acquire a sustainable structure, a point highlighted also in a number of official reports. Yet despite the lack of investment, the consolidated balance sheets of the 25 factories speak of an enterprise that is not in the red as a whole, though it is not making big profits either.

In the past two years, the budget deficit troubles of the government have notably worsened, amplifying the need for more revenues from privatization. Having sold numerous public lands and buildings, the government has now turned to the sugar factories.

The privatization of Turkseker will have implications for many actors in the sector and could result in significant changes in terms of nutrition and dietary habits.

One of the biggest concerns is that the privatized sugar factories could end up closed or out of the market, as occurred with other privatized facilities in the past. For example, the cigarette plant in Tokat was shut down in 2009, a year after being privatized, even though the sell-off provisions stipulated it should remain operational for at least five years. The same condition applies for the 14 sugar factories on the line; buyers will be free to claim losses and close the facilities after five years.

The closure fears lie at the core of another concern, namely that the market share of starch-based sugar, whose impact on human health has been controversial, would increase. Gokhan Gunaydin, former head of the Agricultural Engineers Chamber and now a high-ranking member of the main opposition Republican People’s Party, is among critics who see an array of downsides, both in terms of health and economics. In a Feb. 26 interview with an online journal, Gunaydin said, “The factories producing starch-based sugar use corn to make sugar. Corn production in Turkey has notably increased, but still we import about 1.5 million tons of corn per year, and almost all of it is genetically modified corn.”

He said foreign companies control 75% of factories producing starch-based sugar in Turkey, implying they would be among the prime beneficiaries if the Turkseker factories exit the market.

Some critics blame starch-based sugar for the increasing prevalence of obesity in the United States. This is another reason stoking concerns over the future of sugar supplies in Turkey, where obesity affects 30% of the population and is as high as 41% among women, according to the Health Ministry.

In sum, the privatization plan has met nationwide objections, posing risks and uncertainties not only for factory employees and sugar beet producers but also for consumers in general. Earlier privatizations, especially of meat and milk enterprises, have led to serious food supply problems, which continue to profoundly affect consumers. Public pressure is now on the rise to avoid the repetition of similar mistakes in the sugar sector. Time will show whether the AKP will lend an ear to the criticism, but the controversy is not likely to die down soon.