Cemaat Wars: The Emperor Strikes Back

Deputy Prime Minister Ali Babacan surprisingly dismissed Vedat Akgiray, the head of the Capital Markets Board (CMB), late Dec. 6.

On paper, the move was not directed towards Akgiray at all. While the new capital markets law was being debated in the Parliament, Babacan suggested amending one of its articles so that the tenures of Akgiray and other board members of the CMB would come to an end when the law became official. But conspiracy theorists are having a field day, as there is wide speculation on the government’s motives.

Speaking to journalists at a reception on Friday, Babacan implied that the decision was based on performance, noting that Turkish capital markets had not made much progress since the Justice and Development Party (AKP) came to power in 2002. I completely agree. In fact, that was one of my main criticisms of the Istanbul Finance Center project. I would put the blame not on the CMB, but rather on the weak legal and institutional framework. After all, that’s why the government is preparing a new law.

Others are pointing at the dealings between former and current CMB members and a businessman who is now in jail for organized crime. Fans of Istanbul football club Fenerbahçe have brought up their archrival Galatasaray’s revenue transfers between its publicly-listed company and association as well as the former’s capital raises, both of which resulted in serious losses for small investors. Still more have noted Akgiray’s questionable transfer of shares in his company to his brother a week before he was appointed to the CMB, a clear violation of CMB law.

I don’t outright dismiss these claims, especially since Babacan did not unequivocally rule out corruption. But I believe the removal of the markets czar by the economy czar is the latest move by Prime Minister Recep Tayyip Erdoğan and his lieutenants to weed out top policymakers close to Fethullah Gülen, an influential Islamic cleric living in Pennsylvania. Several prominent members of the “cemaat” (community), as Gülenists are known, have been sidelined of late.

President Abdullah Gül, known to be very close to the cemaat, has appointed several of these fallen bureaucrats, including former Central Bank Governor Durmuş Yılmaz, as presidential advisers. So I would not be surprised if Akgiray ended up in Çankaya (the Turkish White House) as well. I don’t think he will go down this route, but at the extreme, Gül could veto the bill, which would be a pity since the new law brings about much-needed changes to Turkey’s underdeveloped capital markets.

This rising conflict between the government and Gülenists is a perfect example of Turkey’s widely-ignored political risks that I tried to warn about in my Dec. 3 column. Erdoğan struck back last week, but I doubt this was the final battle, especially since many claim he would like to take over the presidency from Gül in 2014.

Let’s see how the next episode of the “Cemaat Wars: The Return of the Gülenist,” will play out.