Turkey's Wealth Fund: What's next?

The government has transferred the public stakes in a number of major public companies to a recently established sovereign wealth fund, stating that the aim was to secure credit at lower rates for big projects by using the shares in these valuable companies as collateral.

The total publicly held shares of the companies are worth over 31 billion Turkish Liras ($8 billion) and include companies like Turkish Airlines, the national grid BOTAŞ, Turkey's largest state-run bank Ziraat, and national post services company PTT.

The companies were included in the fund on Feb. 5-6, shortly after the names of the five-member board were announced. President Recep Tayyip Erdoğan's chief economy advisor, Yiğit Bulut, and the head of the Istanbul stock exchange, Himmet Karadağ, are both on the board.

According to the government decree, the board will report to the prime minister. But the government-supported constitutional changes aiming to shift Turkey to an executive presidential system foresees the abolition of the prime minister's post. So if the changes, which are expected to be voted on in a referendum in around two months, are approved in a popular vote, Prime Minister Binali Yıldırım will do this job only until control of the fund is handed over to President Erdoğan.

Sovereign wealth funds are financial mechanisms used to direct states' surpluses into investments aimed at increasing future wealth. In the Turkish example, however, the fund will collect the existing wealth of the state only in order to take on more debt for the future, hoping to secure loans with lower interest rates.
The main opposition Republican People's Party (CHP) has slammed the move, likening it to the "Düyun-u Umumiye," or the Public Debt Administration, in the...