FRFI 144 August/September 1998
On 8 May the International Monetary Fund (IMF) warned that Turkey could become the next Indonesia. The Turkish state is exhausting its stock of credit. Action Is called for, yet the remedy will further destabilise the crisis-prone political system. TREVOR RAYNE reports.
Turkey’s strategically important position in the balance of global forces, together with its membership of NATO and the Organisation of Economic Co-operation and Development, give it favourable treatment by the US and European powers. Turkey and Israel are the USA’s main Middle Eastern allies. Turkey is a forward base against Iraq and Iran, a channel for diplomacy with and investment in Central Asia. It provides access to Caspian Basin energy reserves and is a major arms purchaser and recipient of multinational companies’ investment. British companies intend to increase investments in and weapons sales to Turkey.
But strategic significance does not provide financial stability and bankers cannot ignore their sums; the time of reckoning is due, the IMF steps forward. Turkish capitalism is to be brought into line with ‘globalisation’.
In 1997 Turkish government annual borrowing reached $17bn, 12% of national income, up from $7bn in 1995. British government borrowing seldom rises above 3% of national income. Debt service payments are expected to consume 75% of government revenue in 1998; they took 60% in 1997. Foreign debt is still $84.5bn, after $10.4bn was repaid in 1997. Inflation, fuelled by debt, never below 50% in the 1990s, went over 100% in January 1998, then fell to 91% in June, helped by lower oil prices.
Debt expansion has contributed to the increase in imports and the $7bn 1997 current account deficit. Denied IMF loans since 1995, the government has to fund deficits with short-term loans charged at high interest, adding to the budget deficit. The Turkish lira, which stood at an average of TL30,774 to £1 between 1991-95, in July 1998 exchanges at TL440,000 to £1, undermining the role of the Turkish lira within Turkey.
In September 1997 the IMF demanded cuts in public sector borrowing, the imposition of VAT (taxes only amount to 15% of national income compared to a European Union average of 40% and perhaps 60% of the economy is in the informal sector), cuts in subsidies to low and middle income families and the retirement age raised. Any one of these could be politically inflammatory. The IMF also wanted privatisation proceeds to reach $4bn this year.
Denied $15bn from the IMF for 1998, the government was forced back to high-interest loans.
While the economy shows over 5% annual growth, much of that growth is speculative and parasitic. Turkish companies and banks increasingly profit from lending to the government rather than investing in production and the private sector is forced overseas for funds, resulting in corporate and banking short-term foreign currency liabilities of $20bn. As the lira devalues these become more difficult to service without recourse to yet further borrowing.
With debt looming, the government reached a deal with the IMF in June. No loan, but the IMF will examine agreed government policy every three months to see that public spending targets, privatisation, tax changes, social security cuts etc, are satisfactory. If the Turkish government is sufficiently compliant, loans can be restored.
Workers’ living standards are under attack and inequalities are exacerbated by high inflation. Salaries are adjusted on a semi-annual basis, but with 100% inflation they rapidly lose their value, pushing people to destitution levels. Average per capita incomes in the west of Turkey range from $3,000 to $7,400 pa, while in central and eastern Turkey and along the Black Sea coast they average $863 to $1,361. Consequently, the Kurdish population is further impoverished. As state spending is squeezed the poorest suffer most: the average population per doctor in Turkey is 909 people, in the Kurdish areas it is 2,150. Cuba has 200 people per doctor!
In a gesture to the IMF, Prime Minister Yilmaz has reduced the public sector pay rise, claiming lack of resources. However, parasitic earnings from government debt servicing channel ever more wealth to a handful of corporations and families. It is this growing social injustice that the IMF fears will trigger revolt as in Indonesia.
Privatisation
In March the government stated that telecommunications, petrol refineries and retailers, ports, shipping, banks and energy are scheduled for privatisation in the coming year. Large sections of the economy are state-owned and Turkey is seen as a priority target for multinationals. In 1997 foreign direct investment in Turkey was a little over $1bn. Privatisation revenues for 1996-97 were $465m and total receipts since 1985, when the privatisation programme was adopted, are just $3.7bn, insufficient to match IMF, government and multinationals’ ambitions. This year the government seeks to raise $12bn.
At the end of 1997 BAT Industries from Britain launched a joint venture with state tobacco and alcohol firm Tekel. This was a tactic to avoid opposition to full privatisation. Over 13/14 May a forum on ‘Privatisation, Financing, Regulation and Projects (Gas and Electricity)’ was held in Istanbul. Participants included the Turkish Minister for Energy and Natural Resources, National Power, Shell, ABB and the World Bank. The business development manager for National Power said that Turkey is ‘an important investment target. It will be one of our biggest investments anywhere in the world.’ National Power intends to build gas-fired power stations and operate state-owned coal-fired power stations.
Indebtedness and political considerations make privatisation of the state sector energy concerns a problem for the government.
Coopers and Lybrand, the British accountants and consultancy firm, are drafting a regulatory framework for the energy industry. In February the government ended price controls on oil products, increasing the chances of privatising Tupras, the state-owned oil refinery which controls over 80% of the domestic market, and Petrol Ofisi (Poas), the chain of petrol stations. State-owned oil refineries operate at a loss because the government sells fuel below cost price. Privatised profits from energy production will reflect on prices and living standards as well as causing redundancies in the privatised concerns.
On 29 June the government auctioned Poas to local textile and property development companies, whom the head of Privatisation Administration said would negotiate alliances with international firms to run the petrol stations. Given the scramble by multinationals to develop the Caspian Basin oil and gas reserves this is a strategically important privatisation. The assets were sold for less than half their value.
Opposition to privatisation has come from sections of the ruling class and workers. Legal challenges have come from parliamentarians who cite the ‘national interest’ and who echo an import substitution phase of Turkish capital accumulation that predominated over two decades ago. Also, MPs have traditionally used the state sector as a means of political patronage and are reluctant to see this disappear. It has also supplied the private sector with cheap inputs.
Most significantly, the military has come out in favour of the privatisation programme and wants to join in. They have a holding company, Oyak, which participates in a range of Turkish industry and with foreign capital. By encouraging privatisation the Turkish military undermines its ability to present itself as independent and representative of the general national interest, ‘protector of the nation’ etc, and is seen as identifying with a fraction of the bourgeoisie. This will add to the political crisis in Turkey, which has had eight governments since 1993 and where the military justifies its interventions into the political system on the basis of guaranteeing stability, as it did when ejecting the Welfare Party government last year.
Both the Treasury Minister and the head of Privatisation Administration are former Citibank managers, representing international capital. They plan to use privatisation proceeds to reduce short-term debt: debt will be swapped for capital as Turkey is bought up.
Communists and socialists made opposition to privatisation central to their May Day demonstrations. They also focused on other ways in which privatisation is being ushered in and the working class forced to pay for the economic crisis: they opposed fee-paying education and healthcare. A joint Platform Against Privatisation has been formed. However, trade union opposition to privatisation, such as that of the trade union Petrol-Is against the sale of Poas, tends to be confined to an illusory appeal to national interests.
The state’s privatisation programme requires an enfeebled working class and trade union movement; consequently the government has announced anti-union laws which attack the rights to strike and collective bargaining. The public sector union KESK has held widespread protests against this legislation, facing police repression.
Oil and gas
Turkey wants to be the energy cross-roads of the region. with US support: the crossroads for resources from the east to markets in the west. The collapse of the Soviet Union has transformed Turkey’s strategic position as the energy resources of the Caspian Sea, Kazakhstan and Tajikistan have fallen within reach of the multinationals. The USA wants to avoid the influence of Russia, Iran and European powers over these supplies. Thus, the USA and the Turkish state want to channel oil and gas east from Azerbaijan through Turkey to the Mediterranean. The Kurds – and particularly the Kurdistan Workers Party (PKK) – are presented as a threat to this plan. So, as the October date for announcing the route draws near, the military and propaganda effort against the PKK is intensified. Kurdish rights weigh negligibly in the balance against energy riches.
The main multinationals in the consortium exploiting Caspian oil are BP and Norwegian Statoil. Shell intends to build a pipeline across Iran. The French firm, Total, already operates there, and BP is looking to see if the US government adjusts its sanctions policy against Iran allowing BP to operate as well. BP is the biggest holder of US oil reserves and the biggest overseas investor in the USA; it does not want to offend the US state. In May President Clinton said the US government would waive threatened sanctions against Total; the US is seeking a rapprochement with Iran. Nevertheless, US influence in the Caspian region will be strengthened if Turkey gets a major stake in the oil and gas routes.
The Turkish state is playing a strategic role in manoeuvres for control of reserves and distribution, just as it plays the prospect of privatisations as counters to win more financial and political credit from the international powers.
Militarisation of Turkey
Britain is the world’s second biggest arms trader, although the Ministry of Defence has recently claimed that it is now the biggest; Turkey is the second biggest importer of weapons. The Turkish armed forces plan to spend $150bn on weapons over the next 25-30 years; they are currently in the midst of a $31bn military modernisation programme and British firms want a share of the orders. The Turkish General Staff discriminate against suppliers from countries that criticise Turkey’s human rights record. Vickers Defence Systems is bidding to supply them with 800 battle tanks. If successful this will be Britain’s biggest-ever order for armoured vehicles. The chances of Labour’s ‘ethical foreign policy’ extending to Turkey are negligible. British Aerospace, GEC, Land Rover, Short Brothers, Marconi, Siemens Plessey etc have all sold arms to Turkey and are looking to sell more.
Furthermore, the enormous modernisation programme is likely to involve major joint projects with international capital. British firms are seeking not just to sell to Turkey but to establish plants there as well.
While Germany has been most adamant that Turkey is ‘not yet ready’ to join the European Union – Turkey is too strong an ally of the USA, and liable to send it more Turks and Kurds the racist German state does not want. Not surprisingly, Britain has been the most consistent defender of Turkey’s claim to membership. The Labour government has the interests of British big business at heart and is, as ever, pleased to comply with US wishes.
The war against the Kurds costs the Turkish state approximately $10bn a year. Repression is being extended to the entire working class in Turkey. This is unsustainable without European and US credits and weapons. Socialists in Britain demand an end to Labour’s defence of the Turkish state and an end to arms sales to Turkey. We call on people not to holiday there. Tourism deposited $8.1bn in Turkey in 1997 as eight million people disregarded appeals to stay away – 15% up on the 1996 visits. It is the country’s biggest foreign exchange earner. This is intolerable. If tourism revenues dry up, and the credit squeeze continues, plans to turn Turkey into a heavily armed fortress would dissolve.
CENSORSHIP OF SOCIALIST PRESS IN TURKEY
The 17 June issue, no 159, of the newspaper Sosyalist Iktidar (Socialist Power), the weekly central press organ of the Party for Socialist Power, was recently confiscated by the Turkish state.
This act of censorship was carried out under the provisions of the anti-terrorism act which refers to ‘propaganda aimed at dividing the integrity of the Turkish republic’s land and nation’. This section is notorious for being used against communists, revolutionaries and all progressive movements.
The article in question, entitled ‘The knot will be untied by socialism’, is a discussion of current tendencies within the Kurdish movement. It examines the Kurdish liberation movement’s effect on, and relationship with, the working class movement in Turkey and points to the crucial need for ideological clarification by the Kurdish movement regarding it relationship with the working class.
The article goes on to suggest a political framework within which the revolutionary aspects of the Kurdish struggle can be combined with the working class movement’s current agenda. This constitutes, of course, a highly threatening combination for the Turkish bourgeoise.
