Don’t mess with Loki or TOKİ

For my readers not too familiar with Turkey, TOKİ is not Loki’s little brother. It is the acronym by which the state-run Housing Development Administration is known among Turks. 

I started contacting folks in construction as well as financial analysts covering the sector on Wednesday, when I decided to write about TOKİ. By the end of the day, I was feeling like a high school geek searching for a prom-night date after getting rejected by nearly a dozen people despite explaining to everyone that the column was not about the five people recently killed in a flood, trapped in housing complexes built by the agency near a river bank. 

Those I contacted by email wrote me back, as if on cue, that TOKİ was implementing a successful urbanization model copied by other countries. I don’t blame them: If there is someone they should not piss off, it is TOKİ. Just as Loki is a jötunn, a frost giant, the agency is a behemoth: It has built 550,176 residential units since 2003, during which time around 6 million occupancy permits were granted.

It is difficult to gauge TOKİ’s performance: Other than a few numbers from 2008 and 2009 reported in their 2010/2011 corporate profile, there is no data. My email request for some figures went unanswered. Moody’s and Fitch, which rate TOKİ, were equally quiet. This is not surprising, as the agency reports only to the prime minister. I have been told that they thought about borrowing from the World Bank a few years ago, but could not satisfy the bank’s corporate governance standards.

But I certainly don’t doubt that they are doing very well. After all, they can develop land held by the Treasury and have the power to modify zoning plans when necessary. I am sure I could approach their 2008 net income of 1.8 billion liras without leaving my office in Marmaris had I so much power.

Writing in Turkish daily Radikal, fellow Daily News columnist Güven Sak argues that the agency’s impact on the economy may be even bigger. He notes that, because TOKİ is so big, many local construction companies have essentially become its subcontractors. Those that could not had to try their luck in international markets, but without a domestic base, they too ended up being subcontractors.

My sources have told me that TOKİ has indeed created its own ecosystem by working with its own “preferred” subcontractors. Some of its tenders are not public, with only a “select few” invited to bid. And it is known to cancel projects or file complaints with prosecutors at a whim. Many contractors have been banned from public procurement as a result. So maybe TOKİ is crafty Loki’s brother, after all.

I pushed this narrative further by looking at the list of companies that have completed TOKİ contracts, which is surprisingly on the agency’s website, at least for now. Out of the 20 random companies whose records I pulled from the Trade Registry Gazette and the relevant chambers of commerce, only two were registered before 2002, when the ruling Justice and Development Party came into power.

For those of you wondering about the source of money for the SUVs driven by covered ladies, a common sight in Istanbul these days, this might provide a clue.