Concern is mounting over Turkey’s ‘wealthless sovereign wealth fund’, which is exempted from public auditing.

Critics claim the sovereign wealth fund (SWF), named the Turkey Wealth Fund (known as TWF or TVF, and chaired by President Recep Tayyip Erdogan) amounts to little more than an alternative borrowing tool for the government. “Wealth fund” is a misnomer, they point out—TWF is similar only in name to an SWF, typically created by oil or gas-rich countries to transform their current account surpluses into investments. Turkey has long had a chronic current account deficit. Its economy relies on foreign capital to grow.

These points were made by Mustafa Sonmez, an economist and writer, in a January 13 article for Al-Monitor. He observed that in 2017, a year after TWF was hastily created, Selin Sayek Boke, a professor of economy and senior member of the main opposition Republican People’s Party (CHP), contended that the fund, in its existing shape, “could only take over public assets and put them up as collaterals in order to borrow”—and with little accountability. It lacked the means “to convert resources into investment,” she said, describing TWF as “a borrowing fund rather than a wealth fund.”

Sonmez also noted: “The lack of any public auditing of the fund, even though it uses public assets for certain transactions, remains one of the most controversial aspects of the body. Critics say it has become a tool for unaccountable governance and cronyism. Boke has slammed the fund as an ‘unchecked parallel treasury,’ while Meral Aksener, leader of the opposition Good Party [Iyi Party], has called it a ‘highly dangerous parallel treasury’ that should be abolished.”

TWF has used public assets as collaterals to borrow, but has so far only managed to obtain a loan of one billion euros ($1.2bn), guaranteed by the Treasury. The loan was issued in 2019 by a consortium led by Citibank NA/London and China’s ICBC. It was used to rescue troubled construction companies. TWF in 2020 abandoned an attempt to sell eurobonds due to a lack of interest from investors.

Deals with Qatar

Turkey’s so-called SWF late last year came under fire for selling 10% of the Borsa Istanbul, a company in its portfolio, to its Qatari counterpart. The transaction was part of a series of deals with the wealthy emirate, Erdogan’s only clear ally in the Gulf.

The fund’s portfolio contains 20 public enterprises, some licences and a range of immovable public properties.

But in reality, it hardly possesses any wealth as the majority of the entities in its portfolio remain attached to the Treasury and Finance Ministry or other ministries. Any revenues they generate go to the central government budget.

Similarly, any capital decreases or losses they incur are covered by that budget. TWF, which has a company status, is beyond the auditing authority of the Court of Accounts, Turkey’s top public auditor. That’s in contrast to the enterprises and banks whose shares it holds.

An example of the fund’s de facto lack of “wealth” can be seen as regards its stakes in four public enterprises, namely pipeline operator BOTAS, oil exploration company TPAO, the Turkish Maritime Organization and mining enterprise Eti Maden. They all rest on a special legal framework that bars TWF from making decisions on their management and operations. Their budgets are drawn up by the Treasury and Finance Ministry, which is also where their profits go, said Sonmez.

He added: “Also, many of the companies in the fund’s portfolio, including the Borsa Istanbul, the postal service PTT, satellite operator TURKSAT, [state lenders] Ziraat Bank and Halkbank, have their own legal statutes, which is another reason preventing them from becoming the ‘wealth’ of the fund.

“Each entity is attached to a ministry. The law regulating Ziraat Bank and Halkbank, for instance, says that their publicly owned shares are represented and managed by the relevant minister. In other words, the fund cannot use any shareholder rights regarding the banks.”