Already boasting of its fame as the most privileged army in the world with far-reaching connections in the economy, the TSK is running a center that commands economic assets amounting to $50 billion. OYAK has now grown into a giant holding incorporating 60 companies and affiliates. The areas in which these companies operate are incredibly diverse and include automobiles, cement, iron and steel, finance, energy, mining, agricultural chemicals, foodstuffs, construction, transportation and logistics, private security and information technology. OYAK even has investments abroad, including cement plants in Romania and Cyprus and two companies in Spain and the Netherlands.

The Turkish Economic and Social Studies Foundation (TESEV) recently released a report titled “Military-Economic Structure in Turkey: Present Situation, Problems, and Solutions” that pinpoints what makes the Turkish military unique among other armies of the world: “In cases when militaries step outside of their immediate universe, where they serve their core function, to act as economic actors through this or that corporate structure, the minimum requirements for democracy are not met.”

As the product of an extraordinary period, i.e., the military coup of 1960, the OYAK Law is still one of the most indomitable pieces of legislation in Turkey’s history. Established with the express purpose of providing members of the TSK with lifestyles that correspond to their social status, OYAK has not only erased the TSK members’ concerns for the future, but also given them a privileged status for 49 years.

Originally intending to equip members of the TSK with additional social security benefits, OYAK is capable of giving its members retirement pensions three times higher than that given by the state thanks to its for-profit activities. Now OYAK can truly implement its slogan of “one house, one car” for its members.

OYAK is exempted from restrictions on investing in revenue-generating activities with its savings funds, which would otherwise be placed with the Social Security Institution (SGK), which manages the social security affairs of all Turkish citizens.

While its affiliates pay taxes, OYAK itself is exempt from taxes. OYAK’s full-fledged tax exemption (including income, corporate, inheritance and estate transfer taxes, as well as revenue stamp duties) is under legal protection. Compulsory deductions from members’ salaries provide cost-free cash for OYAK, the constant supply of which becomes its greatest strength during times of financial crisis.

OYAK has also secured big profits by establishing a multitude of partnerships with local and foreign business groups. Among OYAK’s prominent partnerships are STEAG-AG, Nuh Holding, Eti Holding, Halkbank the Social Security Authority (SSK) (during the period when Republican People’s Party (CHP) leader Kemal Kılıçdaroğlu acted as its head), Axa, Goodyear, Elf, Sabancı Holding, Koç Holding, Yaşar Holding, Gama, Yapı Kredi Bank, Garanti Bank, Kutlutaş Holding, Alarko, Cerrahoğulları, Ziraat Bank, the Turkish Petroleum Corporation (TPAO) and Petkim.

Unique in the world

Although armies have partnerships with universities in many countries around the world, the Turkish case may be considered unique. The only army that has an assistance center like OYAK is the Pakistani army, where every force command has its own assistance organization.

In Iran, the Revolutionary Guard has more than 50 companies, but they are not active in every economic area.

In China, Honduras, El Salvador, Ecuador, Chile, Bolivia, Colombia, Guatemala, Nicaragua, Indonesia, Thailand, Egypt, Pakistan and Syria, armies are known to have economic enterprises, but none of them is as ubiquitous as OYAK in the economic field.

The most privileged institution

OYAK, as defined in the law drafted by the military junta, is “an administratively and financially independent legal entity attached to the Ministry of Defense and subject to special legal provisions,” and this had bestowed considerable privileges on it. The same law also provides for all assets, revenue and claims of the organization to be eligible for the rights and privileges attached to state property and that offenders are subject to similar charges received by violators of state property. Thus, OYAK is the sole organization in Turkey that enjoys only the benefits of the private and public sectors.

Membership in OYAK is compulsory and the organization currently has around 250,000 members. As for its administrative structure, it has a board of representatives comprising 50 to 100 military-only officers and a 40-seat general assembly that has only nine civilian members. Although the law states that only three members of the seven-member board of directors may be military personnel, the military, in practice, occupies four seats. The present board contains two active-duty military officers. A supervisory board oversaw OYAK’s activities until 2001, when a private auditing firm started to carry out a financial audit of its activities.

According to TESEV’s report, the figures for year-end 2009 indicate that OYAK’s total assets are worth TL 12.676 million, the combined sales revenue of all OYAK companies reached TL 19.1 billion and their total assets TL 28.3 billion. OYAK is one of Turkey’s five largest holdings. For example, in terms of its rate of capital gains, OYAK ranked third after the Koç and Sabancı holdings in 1990 and fourth after Koç, Sabancı and Çukurova in 1996.

In 2000, Koç Holding stood at the top with $11.7 billion in annual turnover, followed by Sabancı at $5.6 billion and OYAK in third place with $4.9 billion. OYAK CEO Coşkun Ulusoy announced in 2005 that OYAK is the most profitable holding in Turkey.

TESEV’s report lists additional privileges OYAK enjoys as follows: “OYAK benefits particularly from the potentially high impact of the military’s political influence over the economy. OYAK enjoys this particular advantage when handing over its bankrupt companies to publicly owned enterprises, in entering into partnerships with public institutions and thereafter securing public procurement contracts and when using public resources.”

Selling its failing companies to the state

The fact that OYAK handed over two failing automotive companies –Türkiye Otomotiv Endüstrileri A.Ş. and Motorlu Araçlar Ticaret A.Ş., which had been in crisis since the early 1980s and had almost gone bankrupt — to Ziraat Bankası, a public sector bank, is the clearest example of OYAK’s use of this particular advantage. Similarly, Emlak Kredi Bank bought shares in 1985 in four construction companies, which were parts of Oyak-Kutlutaş Holding, then in financial crisis.

An agreement signed with the SSK, headed at the time by current CHP leader Kılıçdaroğlu, was one of the biggest supports given by the state to OYAK. Under this agreement, the SSK became a junior partner with 25 percent Oyak İnşaat shares in 1995 and agreed to pay $2.554 million to OYAK and to employ Oyak İnşaat in all SSK construction contracts with a 1 percent discount. Following the rewarding of nine SSK contracts, then worth TL 17 trillion, to Oyak İnşaat, the contractor handed the nine projects over to subcontractors at a 23.24 percent discount and kept the outstanding sum of TL 2.443 trillion as an additional profit.

It is known that after the 2001 crisis, a financial rescue operation was devised to channel public funds into banks in financial difficulty, and Oyakbank received special favor from the state during this operation. The Savings Deposit Insurance Fund (TMSF) had decided that the rescue package would be extended only to banks controlling more than 1 percent of the total market share within the sector. But it turned out that Oyakbank was not entitled to benefit from the package, and Oyakbank merged with four other failing banks, including Sümerbank, to increase its market share above the specified threshold.

OYAK recorded huge gains through privatization efforts, which accelerated particularly in the 1990s. OYAK teamed with Sabancı affiliate OYSA to purchase two cement factories that were privatized in 1992. Today it has nine cement plants.

In 2005, OYAK bought one of Turkey’s largest and most profitable public sector companies, Erdemir, and it was the only organization that secured growth while other big groups shrank during the several episodes of financial crisis in 1994, 1999, 2001 and 2008. TESEV’s report further makes the following observations:

“OYAK reached the peak of its growth in the 1990s. While OYAK’s average rate of profitability was 16 units between 1961 and 1980, it jumped to 100 units in the period between 1981 and 2000, and then jumped to 165 units in the period from 1990 to 2001.”

Nationalist rhetoric at OYAK’s disposal

TESEV’s observations about how OYAK acted without restrictions with respect to privatization clearly depicts the distorted structure in Turkey. “A striking example is the sale of Erdemir to OYAK; both OYAK’s administration and public opinion agreed that Erdemir was strategically important to Turkey’s national security and must therefore remain in the hands of national capital holders when privatized. Consequently, when OYAK bought Erdemir, several institutions, ranging from TOBB to the Mining Union [Maden-İş] and the media, cheered. Neoliberal capital accumulation strategies, fueled by nationalistic rhetoric, helped ensure the transfer to OYAK of Turkey’s third most profitable public enterprise, whose 2003 profits equaled the total profits recorded by 40 OYAK affiliates,” the report said.

It is known that despite this nationalist rhetoric and without heeding the “total de-nationalization” of Turkey’s financial sector, OYAK sold Oyakbank, which was strengthened by the welcome addition of Sümerbank, an excellent bargain for OYAK, to the Dutch ING banking group for $2.7 billion.

Is EU aware of OYAK’s existence?

Surprisingly, not a single EU progress report mentions OYAK, although they categorically point out Turkey’s need to introduce the Court of Accounts audit to its military spending.

In 2005, one of the EU’s five core organizations, the European Economic and Social Committee, a 222-member committee representing interest groups of businessmen, laborers, farmers and cooperatives, pointed out in a draft report to be presented in the Council of Europe’s December 2004 session that oversight of military spending and OYAK were issues in urgent need of reform. However, the then-president of OYAK and of the İstanbul Chamber of Commerce (İTO), Hüsamettin Kavi, used his capacity as the co-chair of the EU-Turkey Joint Consultative Committee to lobby for the removal of OYAK from the draft report. Furthermore, since 2003 OYAK has been a member of the European Federation for Retirement Provision, a federation of associations of EU retirement funds. While no other EU member state would tolerate a structure like OYAK, the EU overlooked the fact that OYAK’s existence is a challenge to democratic oversight and regulation of the military in Turkey. OYAK’s long-standing partnerships with the French AXA Group is claimed to be what prevents the EU from focusing its spotlight on this organization.

Defense industry

Defense industry spending represents the second biggest area of economic activity for the Turkish military. The vast majority of the spending in this area is made via the companies and affiliates of the Foundation to Strengthen the Turkish Armed Forces (TSKGV). The TSKGV even owns gas stations.

The TSKGV’s affiliates account for a third of the sector’s total revenue. A total of 36 percent of revenue is generated by private companies, 33 percent by TSKGV affiliates and 31 percent by public sector companies. Of the sector’s top 10 earners, half are TSKGV affiliates. Among the foundation’s subsidiaries are Aselsan, Aspilsan, Roketsan, Havelsan and İŞBİR. TEİ, TAI, DİTAŞ, NETAŞ, MERCEDES-BENZ TÜRK A.Ş., HEAŞ, TAPASAN, TÜRKTIPSAN and HTR A.Ş. are the foundation’s affiliates. Mikes A.Ş., EHSİM A.Ş., ESDAŞ A.Ş. and STM A.Ş. are its indirect subsidiaries.

The foundation was planning to transfer TL 22 million in financial resources in 2008, and six out of 14 TSKGV affiliates are the largest companies owned by the TSKGV with the following percentages of shares: İşbir Elektrik (99.8 percent), Havelsan (98.9 percent), Aspilsan (97.7 percent), Aselsan (84.6 percent), TAI Tusaş (54.5 percent), Roketsan (35.5 percent), TAPASAN (25 percent), Türktıpsan (20 percent), DİTAŞ (20 percent), Netaş (15 percent), Mercedes-Benz Türk (5 percent), TEİ Tusaş (3 percent), HEAŞ and HTR Havelsan Teknoloji (2 percent).

Gendarmerie in water and oil business

Although it is attached to the Interior Ministry, the Gendarmerie General Command has a number of economic activities in many areas. These economic activities, conducted via the Gendarmerie Public Order Foundation (JAV), include defense and security, construction, food, cleaning materials, phone cards, flour-based products, insurance, military insignia, signs and plates, gift shops, driving and safety courses, etc. JAV owns two natural spring water plants in Kızılcahamam, Ankara province, two gas stations and an online retail store. (Today’s Zaman, ERCAN YAVUZ, 8 August 2010)