BIGGEST PRIVATIZATION ACHIEVEMENT TURNS OUT TO BE BIGGEST HEADACHE
Garipoğlu admitted that he did not have such an enormous sum to pay and promptly flew to London to find the necessary financing. On his return home, in less than a couple of weeks, he declared that he had found four different finance groups to raise the necessary financing, but would not reveal their names due to business secrecy.
Spreading the capital to the masses determines the result.
The next day, on July 15th, the Privatization High Board (PHB) convened under PM Mesut Yılmaz and his Deputy Bülent Ecevit and decided to hand over the contract to the third biggest bidder composed of İşbank, PÜİS and two big holdings, Bayındır and Park. State Minister Işın Çelebi announced after the meeting that the decision was taken in the light of a number of criteria called for by the Privatization Law such as
- The partnership structures of the bidders,
- Encouraging big corporations to open up to the public,
- Spreading capital to large masses,
- Relations of the potential purchaser with the sector,
- The work plan and
- Strategic considerations.
Answering questions, State Minister Işın Çelebi said that the final power for picking the winner at tenders for privatization belonged to the PHB. It could make a selection among the highest bidders bearing in mind the above criteria. Besides, the winner consortium had risen its bid from $1,010 million to the highest bid of $1,060 million. To the complaints of the Competition Board that their final decision had not been awaited about these companies, Çelebi said that they had consulted the Competition Board. It had no objection to the winning consortium. There was nothing illegal about the selection. İşbank had recently been privatized and now had 100 thousand shareholders. Into the bargain, PÜIS (The Petroleum Products Employers Union) represented 6500 petroleum products’ sellers and this fact was instrumental in the final selection, said the Minister.
In the winning group İşbank and the two holdings have 30% shares each and PÜIS 10%. Of the $1,160 million, $500 million will be paid within three months and the remaining $660 million in instalments. PÜIS will have golden shares for five years and determine the policies, but at the expiry of that period the golden shares will be sold. For these payments İşbank will use its own resources. The two holdings will obtain financing from a German bank and PÜIS will collect money from its members.
The winning consortium will also get in touch with the Competition Board to complete the necessary formalities.
“Transparent corruption” shocks most people, but facts do not justify it.
The President of PÜIS, İsmail Aytemiz, said it was a real privatization by spreading capital to large masses and handing over the business to skilled labour. Not at all in agreement, Hayyam Garipoğlu said that he was “shocked”. What was the reason for the tenders if the offer of the highest bidder was to be brushed aside. “Our financing, international partners, shareholders were all ready. What shall we tell them now,” he demanded.
Garipoğlu was not alone in his “shock.” There was a broadside of criticism from politicians, business quarters, and especially the press, voicing similar views. In a televised panel discussion, the Chairman of the Ankara Chamber of Industry called it a “transparent corruption”. The FP (Virtue Party) is considering bringing it up with Parliament for an enquiry. Metin Münir writes in an İstanbul daily that Mesut Yılmaz has always been a mediocre politician with no charisma, but no one had any doubt about his honesty. “In the aftermath of the privatization of the Petrol Office it is not easy to say now that he is honest,” remarked Münir. There were other claims that the two big holdings had shady deals with the Prime Minister.
The criticisms have so far gone unanswered. Other than Işın Çelebi’s above explanations these accusations were not rejected, much less retorted. Asked why an insider said, “It was too shrewd, too healthy a decision to take these criticisms seriously.”
Indeed, behind this decision there existed an impeccably honest politician of Turkey, Bülent Ecevit. And a simple glance at the facts proves that it was a very shrewd move.
Above all, it is obvious that Garipoğlu is a pawn in this biggest privatization of Turkey. Who is behind him and what are their motives are not exactly known, but rumours are widespread. There is talk of a US-based Iranian oil group as one of the main financiers behind Garipoğlu. Reputable oil multinationals such as Shell and Mobil are keenly interested in this privatization, but they somehow did not overtly take part in the tenders. And they said beforehand that they would not be interested in the tenders because of the frontier trade with diesel oil from mostly Iraq.
Timing of the privatization and deregulation of fuel prices
The most important factor in this choice was strategic, not militarily strategic, but economically.
That the world economy is revolving around oil and natural gas today is an undeniable fact. Turkey has been exerting strenuous efforts to base its economy on sound ground by taking a fair share of this trade now that the Caspian energy resources are appearing in the world’s free markets. As a new step to integrate its economy with the world that is going global, the Government started the automatic pricing of fuel as from July 1st, but contrary to the claims fuel prices immediately went up despite record low crude oil prices throughout the world.
It was an eye opener for Turkish people that if foreigners have full control of oil distribution and sale in the country they can retrieve the $1.16 billion in no time by putting up the fuel prices a few cents a litre.
They do not even need to do that. Fuel is such a strategic item that even playing with the conditions of sale, it is possible to control the Turkish economy. ( Issue No:16)
A case in point is the payment period of petrol stations’ cheques. Foreign oil companies like BP, Shell, Türk Petrol allow their dealers a fortnight to pay these cheques. The Petrol Office used to accord a one-week period for the payment. A few months ago POAŞ extended this period to 11 days. The General Manager of Shell in Turkey, Roy Waight, complained to the press last May that their business and sales were harmed by this extension. After this statement POAŞ again reduced this period to seven days. But at PM Mesut Yılmaz’s instructions, the Competition Board launched an investigation into the case and the privatization of POAŞ was suspended pending the result. The Competition Board’s surveys by 15 experts working round the clock discovered that POAŞ could capture 60% of Turkey’s oil market if only it accorded the same period of 14 days for the payment of the dealers’ cheques. This would entail the disappearance from the market of small companies other than the multinationals.
This being the case, it was obvious that such a strategic trade as fuel sales could not be left to chance by trying out Garipoğlu.
Another important aspect of this privatization is that Turkey can now handle billion dollar privatization contracts without needing foreign participation. It was not the case 12 years ago when privatization was first started and foreign capital’s absence from the tenders used to mean that the figures concerned at the contracts would remain insignificantly small.
Will the privatization of POAŞ dishearten foreign capital?
By putting the privatization of POAŞ under the magnifying glass, it is obvious that the final decision was shrewd. But did it annoy the multinationals? Will it have an adverse impact on the foreign participation in big privatization tenders in Turkey in future? Will it induce Shell and other multinationals to reconsider their plans for future investments in this country? Will it have diplomatic complications with Turkey’s western allies?
All these are important questions that have to be taken into account in making an overall appraisal and analysis of the matter. There are already a number of cases of the West’s disenchantment with Turkey’s energy relations and trade with its neighbours. Some of them are of diplomatic consequences. Crude oil and diesel imports from Northern Iraq, for instance, made Barzani totally dependent on Turkey and his people flourished thanks to this frontier trade, while Talabani's PUK suffered from angering Turkey due to his support to and flirtations with the PKK. At the moment 3000 trucks a day bring diesel into Turkey and this trade will be widened with a second frontier gate in Habur. uras@ada.net.tr . July 19th, 1998
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