In the appointments made after the 2023 elections, we encountered a significant milestone: the appointment of the first female governor (chairperson) to the Central Bank of the Republic of Turkey. Her name is Hafize Gaye Erkan. Similar to Kemal Derviş, she arrived with high expectations after serving in the United States. In terms of the sensation it created, this duo is comparable. Derviş’s arrival felt like transferring a top athlete from the world’s best team during his prime.
We will likely talk about H.G. Erkan for a long time. Through this article, I want to commemorate Kemal Derviş and his achievements, thanks to the presence of this distinguished lady.
Derviş’s actions as the “Super Minister” are still a subject of debate today. Some argue that he was responsible for significant achievements, while others express gratitude towards him. Some attribute Ali Babacan’s involvement in the economy to the implementation of the Derviş Laws.
His accomplishments of ensuring price stability, budget discipline, and resolving the external balance issue were unprecedented economic successes. They hold a significant place in Turkey’s economic history. His swift escape from the inflation spiral was an important example, even for the world. While stand-by agreements with the IMF often ended in problems, Kemal Derviş’s experience proved this belief wrong. By implementing the IMF program to avoid going back to the IMF, we witnessed the fruits of rectifying public finances.
The first reform was in 1999. We should not overlook the political support behind Derviş. Both the IMF agreement and the reform movement did not start with Derviş, who became a minister in 2001. They had already begun with the 57th government in 1999. Thanks to the measures taken at that time, budget discipline was maintained until 2011. However, certain changes made during the reform period worsened with the 58th government, which was the AKP’s first experience in power. For example, laws within the scope of the EU Harmonization Law Packages (such as the public procurement law) were distorted after the V. Ecevit Government.
Red flag
Although Derviş’s economic policies were considered successful during his term, they did not sustain their continuity with the global crisis. The absence of an adequate system and paradigm posed challenges on our path. Subsequent administrations did not consistently follow through with the initiated reform chain. Many state-owned assets were privatized recklessly. In my opinion, the biggest red flag of Kemal Derviş lies at this point. Following privatization, resources were haphazardly allocated to the construction and low value-added sectors. Efficiency and sustainability could not be achieved in the privatized enterprises. While the actions aligned with global realities, the domestic realities should not have been disregarded. Without thoroughly considering the possible consequences of such hasty actions, an indirect result emerged: an economic model even more dependent on foreign capital.
Laws introduced by Derviş
Kemal Derviş represented this country in the best institutions in his field. His significance as an important source of inspiration for us young people is invaluable. When duty called, he left his position as Vice President of the World Bank and came to Turkey, which many people would hesitate to do. He received such strong support from politicians that the 15 laws he prepared were approved within 15 days. Some of the following provisions, albeit unintentionally, paved the way for the exploitation of our current established economic order:
1. The Natural Gas Market Law abolished the state monopoly in production and distribution. The Energy Market Regulatory Authority (EPDK) was established. Harmonization with the EU was introduced. The country’s 80-year accumulation of production facilities and distribution network were privatized for almost the price of land.
2. With the Central Bank Law, the Central Bank was prevented from providing advances to public institutions and organizations.
3. As a result of the Civil Aviation Law, ground handling services HAVAŞ and USAŞ were privatized.
4. The Expropriation Law was restructured with new principles, and it was announced that expropriation without budget allocation could not be carried out.
5. The Budget Amendment Law aimed to rescue failing banks. Along with changes made in the Budget Law, it also included the resolution of tasks such as transferring the financing obligations of public banks and banks in the Fund to the Treasury, which incurred losses.
6. The Telecommunications Law amended the Telegraph and Telephone Law, leading to the privatization of Türk Telekom and causing one of the biggest economic setbacks in the history of the Republic.
7. With the Salt Law, all state-owned enterprises were sold.
8. The Tobacco Law vetoed by the President due to concerns that liberalizing the import of tobacco products would result in losses for domestic producers and open up the domestic market entirely to foreign cigarette monopolies. However, it was later accepted. Cigarette factories were sold, and foreign capital took control. Tobacco warehouses and processing centers were closed. Following the closure of the state tobacco factories, workers staged protests for days. Left-wing organizations still hold a negative perception of Kemal Derviş regarding labor accidents and incidents. In fact, Sırrı Süreyya Önder, a member of parliament at the time, identified Kemal Derviş, who contributed to the restriction of tobacco cultivation, as one of the responsible parties in the Soma mine disaster.
9. The Public Procurement Law eliminated restrictions imposed on foreigners in public tenders.
10. With the Banking Law, the process of foreignization accelerated, and the influence of the state decreased. It was stipulated that no lawsuits could be filed regarding receivables arising from bank mergers that were transferred to the Savings Deposit Insurance Fund. The liquidation process of the state in banking began. Sales and foreignization accelerated.
11. Supplementary Budget Law: In the supplementary budget of 30 quadrillion 640 trillion lira issued to meet the increased financing needs during the crisis, the allocation for public investments was determined as 280 trillion lira, with 130 trillion lira of it allocated to highway investments.
12. International Arbitration Law enabled the transfer of disputes arising from “privatization and contracts related to public services involving a foreign element” to international courts (derived from the constitution enacted in 1999).
13. With the Law on Liquidation of Task Losses and Certain Funds, non-budgetary funds were closed. The laws that provided tax benefits for bank mergers under the Decree on Elimination of Task Losses were consolidated. Some of the closed funds include the Support and Price Stability Fund (DFİF), Defense Industry Support Fund (SSDF), Promotion Fund, and Savings Promotion Fund, which was created with workers’ money.
14. Economic and Social Council Law aimed to establish an institution bringing together the public sector, workers, employers, and other civil society organizations to increase consensus among various segments of society.
15. Sugar Law: The floor price application was abolished, and the authority to determine the price was given to the factories. Quotas were imposed on farmers for sugar beet production. The aim was to promote competition in the sugar sector. Despite the modernization of the industry, the restriction on sugar imports led to a significant increase in sugar prices. Sugar factories were privatized for less than the price of land. While it increased capital accumulation due to inefficient operation, farmers and consumers faced difficulties.
Despite the world’s changing policy set with structural reforms, many businesses and sectors that were intended to be removed from the state monopoly were handed over to foreign control.
As I conclude, without understanding Kemal Derviş, who represented our country in the world, taught at leading universities in his field, had his book used as a textbook at universities, represented our country in the world’s most important institutions, and supported many young colleagues, we would have an incomplete understanding of the Turkish economy, especially in these days when we seek merit.
Yağız Kutay
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