Turkey's military has a stake in 60 companies

Critics say the armed forces' pension fund, which is making money in sectors ranging from cars to chocolate bars, has 'unacceptable' clout and warrants scrutiny.

A consumer buys ETI brand cookies at a supermarket in NIsantasi,Istanbul.

Credit Kerem Uzel for The National
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ISTANBUL // Despite losing much of its political power in recent years, Turkey's military has managed to hold on to its considerable economic interests, with an army pension fund making money in sectors ranging from cars to chocolate bars.

"That is unacceptable in a modern parliamentary democracy," Ismet Akca, a political scientist at the Yildiz Technical University in Istanbul and the author of a recent study on the subject, said in an interview this month.

Still, there was "no public discussion and no public pressure" for a reform of the system, he added.

Some observers say that might change as the political clout of the once-powerful generals decreases.

The Armed Forces Pension Fund (Oyak) was created in 1961, one year after the country's first military coup, to provide financial assistance to officers, who pay a 10 per cent levy on their base salary to provide money for the fund.

"A home and a car" for Oyak members is still the motto of the group. But over the years, Oyak has developed far beyond an assistance fund into a major economic force with investments in many industries, from car companies to cement and construction firms to the food sector.

Democratic reforms under Turkey's bid to become a member of the European Union have stripped the military of much of the political power it enjoyed in recent decades. In the latest example, a referendum last month approved constitutional amendments that opened key military personnel decisions to control by civilian courts and ended judicial immunity for ex-generals who took part in coups d'état.

But the economic power of the military has remained in place, Mr Akca said. "The political power of the military is such a big issue that the economic power is seen as secondary." He and other critics suspect the fact that Oyak co-operates with leading national and international companies may have shielded the group from scrutiny by both Ankara and the EU.

According to the fund's annual report for 2009, the Oyak group has 250,100 members and total assets of roughly 28.3 billion lira (Dh73.6bn). As one of Turkey's biggest corporate groups, Oyak has a stake in 60 companies, 29 of which it owns, and employs about 28,500 people. Oyak's portfolio includes some well-known brands and partners, such as the car company Renault, the canned-food company Tukas and the marketing company for Eti, a producer of chocolate bars, crackers and biscuits.

For all the high-profile companies that Oyak has invested in, the fund's connection to the military is largely ignored by the public, Mr Akca said.

"Most ordinary people in Turkey do not even know that Oyak is connected to the military," he said. Even though Oyak enjoyed tax privileges and other advantages over ordinary commercial companies, it was "not a big deal issue" in the country.

Oyak did not respond to written questions concerning the accusations. The group's annual report for last year said that Oyak "is not a part of the Turkish Armed Forces" and "not an institution that receives aid or subsidies from the government" or state agencies, but "Turkey's first and still its biggest privately owned pension fund".

But Mr Akca thinks the group's efforts to distance itself from the military are not convincing. "A review of the membership and administrative structure of Oyak reveals that the military is clearly in control," he writes in his study, which was published by the Turkish Economic and Social Studies Foundation, a liberal think-tank in Istanbul, earlier this year. "The 50 to 100-member board of representatives contains only military officers, and the 40-seat general assembly has only nine civilian members."

Oyak's annual report for 2009 stated that the group "is not an institution that does not pay taxes", but Mr Akca insists that Oyak does enjoy wide-ranging privileges. While companies attached to Oyak do have to pay taxes, Oyak itself is exempt "from all kinds of tax", including income and corporate tax, he writes in his report for Tesev. He also cites several cases where he says Oyak handed over bankrupt companies belonging to its group to the state, in effect leaving the taxpayer to foot the bill.

Mr Akca also sees another problem with Oyak. Pension benefits, as well as cheap loans provided by the fund for its members, add up to one of the factors setting Turkish military officers apart from the rest of society. "This process of consolidation strengthened the model of praetorian militarism and remains an obstacle to the normalisation of Turkey's democracy," he writes.

While Mr Akca does not expect the system to change soon, other critics of the military predict the army will come under economic pressure.

"With the political influence of the TSK [Turkish Armed Forces] waning rapidly in Turkey, the spotlight is gradually but surely turning on the economic activities of the military," Abdullah Bozkurt, a columnist, wrote in the English-language daily Today's Zaman last week. "Special protections and privileges bestowed upon the military when dealing with business activities are open to intense debate now."