‘Major detention’ for Turkey's construction boom
Mustafa SÖNMEZ - mustafasnmz@hotmail.com
The state-owned Housing Development Administration of Turkey (TOKİ) has been leding the state’s construction investments, while the private sector that has invested an average of 35 billion dollars annually in construction in the past 11 years. The picture shows the huge construction area of the mega colossal third bridge project in Istanbul. DHA photo
The Justice and Development Party (AKP) era is remembered and will be remembered with construction. Rapid rises in construction investments were a reality, both in the public and the private sector. Whether the construction processes that particularly “boomed” in Istanbul were in accordance with development plan laws or urbanization codes, whether the urban profits were channeled to particular capital groups that have been a significant leg in the corruption investigations launched at the end of 2013.Boom in construction
After 2002, as a result of both the favorable domestic and international climates, the influx of external resources increased, and each year there was a flow of external resources exceeding an average of 40 billion dollars. This, as a result, facilitated a growth performance nearing 5 percent annually.
The incoming external resource has been in the form of foreign direct investment, short term investments in the stock market and mostly as foreign loans. When the AKP government applied the “high interest rate-low foreign exchange rate” tactic to attract the resource, the low foreign exchange rate made imports more attractive than exports and also the domestic market. With the effect of this, companies were not very eager in exporting and other activities that would bring foreign currency to the country. Instead, they opted for investing in fields that are protected from foreign competition. Construction was the leader in this. Retailing such sectors as health, education, energy and communications that the state has started to withdraw due to privatization; several service sectors that emerged with domestic migration were other fields of investigation. A significant portion of bank loans went to construction and mortgage. The share of construction in investments rose rapidly.
The share of construction in total investments can be seen from the data from “national income according to spending.” When converted to the average foreign exchange rate of the year, the construction investments of the state and private sector with current prices, we see that during 2003 – 2013 (in the first nine months), the state invested 18 billion dollars and the private sector has invested 35 billion dollars annually in construction. This means an average of 53 billion dollars of construction in investments annually. We are talking about a construction investment approaching 600 billion dollars in the total of 11 years.
Both the state’s and the private sector’s construction investments have tripled from 2003 to 2013. Construction holds more than 80 percent of shares in the total investments of the state. Transportation (highways, ports, railways) takes the first place in public construction investments and the construction of public buildings, dams and irrigation canals, etc., take second place.
Highways (double highways), airports, GAP irrigation and urban infrastructure raised the share of construction in total state investments to higher levels. We see in private sector investments the share of construction - dominated by house construction – is nearing 36 percent, and the rest is “machinery and equipment” investments.
During 2003 – 2013 (in the first nine months), the state
invested 18 billion dollars and the private sector has invested
35 billion dollars annually in construction.
In these circumstances where construction came forward in the last 11 years, the AKP, which dominates the central administration and the biggest local administrations, has a say both directly in state affairs and also in the construction affairs of the private sector. The contracts signed – with or without tender - for the building of the state’s direct investments already grant an initiative to public authorities in determining which firm will undertake the job.
It is a heated discussion about to what extent the laws were applied in mega projects such as the third airport, the third bridge, the Körfez bridge, nuclear power stations, health campuses, the Eurasia tunnel, Çandarlı ports and the Afşin-Elbistan power plant, which are billion dollar projects to be built with the Public-Private partnership (PPP) model.
The control of those projects built with the TOKİ-Emlak Konut partnership, which exceeds 500,000 homes, are a matter of debate just like other public investments. After heading TOKİ for 10 years, Erdoğan Bayraktar continued in his career as the Environment and Urbanization Minister. His son was also detained in the recent investigation, but he was later released after some time. However, Erdoğan Bayraktar who was known as one the closest aides of Prime Minister Recep Tayyip Erdoğan was asked to resign together with two other ministers Çağlayan and Güler. Bayraktar rebelled against the prime minister. He resigned on a live television broadcast and asked the prime minister to resign as well. After this shock statement, we learned from the Official Gazette the next day that Bayraktar did not resign but was dismissed.
The fact that the reports from the Court of Accounts (Sayıştay), which have the power of auditing public spending on behalf of the Parliament, were not brought to Parliament sparked fierce discussions during the 2014 budget debate. The AKP government is criticized for not respecting one of the essential legs of democracy, the principle of transparency and accountability.
In private sector
The private sector that has invested an average of 35 billion dollars annually in construction in the past 11 years is claimed to be involved in the corruption-bribery mechanism both in the issue of building licenses and occupancy permits. There is indeed a “price” for those who will make the most use of it when an area that was closed to development becomes available, or a restricted area becomes less restricted. It is claimed that there was a “price” in the arbitrary issuing of building licenses for protected areas, coasts, forests and water basins or the overlooking of the destruction of the city skyline.
While the authority concerning development used to belong to local governments, after 2011 the Environment and Urbanization Ministry became a ministry that took over a major portion of these powers. It is also claimed that this centralization of authority opened the door for a series of irregularities in ongoing projects.