AKP legislators vote for constitutional reform in Ankara last week.
AKP legislators vote for constitutional reform in Ankara last week.

Battle over constitutional reforms in Turkey may bring early election



ISTANBUL // A fight over wide-ranging constitutional changes pushed through parliament by the religiously conservative government could mean early elections and a new attempt to close down the ruling party. Abdullah Gul, Turkey's president, and his aides are considering a package of almost 30 constitutional amendments passed by parliament last week with the majority of the ruling Justice and Development Party, or AKP. The package includes a plan to reform the justice system, an initiative that AKP critics say is an unconstitutional power grab. Despite the criticism, it is widely expected that the president will sign the reform package and open the way for a referendum on the amendments to be held in July.

Murat Belge, a leader of Turkey's democracy movement, wrote in the independent Taraf newspaper: "Every day, we get closer to an atmosphere of 'let's see who is stronger'." Recep Tayyip Erdogan, the prime minister, was reported to have told AKP deputies before the vote in parliament: "We will either write history or become history." Although the package includes some amendments that could have found overwhelming support in the chamber, the biggest opposition party boycotted the vote in protest against the AKP's plans for judicial reform.

Critics say the AKP and its followers are a threat to the modern state founded by Mustafa Kemal Ataturk in 1923. Tansel Colasan, a former prosecutor in Turkey's highest administrative court and a known government critic, said the AKP's plans were an effort to "get even with 87 years of republic", according to Turkish media reports yesterday. If the amendments became law, "Ataturk's republic will end", she said.

Though it has a decisive majority in parliament, the AKP has seen several key initiatives stopped by the judiciary. In 2008, the constitutional court annulled a bill aimed at ending the ban on Islamic headscarves at universities. This year, the AKP was irked by the decision of the HSYK, a panel of the judiciary known for its anti-government stance, to fire a prosecutor who was investigating an alleged coup attempt against the government. Now the AKP says the constitutional court and the HSYK need to be reformed. Critics say the government wants to control the judiciary.

The constitutional court in Ankara will play a central role in the struggle. The court is likely to be asked by the opposition to annul the reform package, and it may also be presented with a new demand to close down the AKP. By insisting on the judicial reform despite warnings from the opposition and members of the judiciary, the AKP has sealed its fate, some critics say. "It will certainly be banned," Ms Colasan said about the ruling party. The constitutional court came close to closing down the AKP two years ago, and the prosecutor general is said to be keen to have another go.

This is why the end of two weeks of heated parliamentary debates about the reform bill is not seen as the end of the affair. "The real struggle is starting now," wrote Murat Yetkin, a columnist for the Radikal newspaper. Yetkin said that even though the AKP was ruling out early elections before the next parliamentary poll scheduled for next year, things could change rapidly if the constitutional court stops the AKP's amendment package. "Do not rule out early elections," he wrote.

Turkey's main opposition party, the Republican People's Party, or CHP, which is the political home of the traditional elites, has said it will ask the constitutional court to throw out the package as soon as the president signs it and preparations for the referendum begin. That verdict may come within weeks. The debate about what the court may do has already started. The law says the constitutional court must only look at possible formal flaws when checking constitutional amendments passed by parliament. If the court stops the referendum, a court speaking in the name of the nation would deny the nation a chance to speak, Nazli Ilicak, a columnist and former parliamentary deputy, wrote in the pro-government Sabah newspaper yesterday, summing up the kind of message she thinks would be sent by such a verdict. " 'Just leave the nation aside for a moment; it is not smart enough anyway. Leave it to me to pass judgment in the name of the nation'," she wrote.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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