Will Turkey’s negative growth rates lead to political crisis?(Al-Monitor November 18.2016)
Summary Early indicators show that Turkey's economy has begun to contract in the third quarter for…
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.