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The Political Economy of Turkey Wealth Fund: a Case Study Within the State-Business Relations in Turkey

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The Political Economy of Turkey Wealth Fund: a Case Study Within the State-Business Relations in Turkey SEVDE ACABAY ACABAY SEVDE THE POLITICAL ECONOMY OF TURKEY WEALTH FUND: A CASE STUDY WITHIN THE STATE-BUSINESS RELATIONS IN TURKEY THE POLITICAL ECONOMY OF TURKEY WEALTH FUND WEALTH TURKEY OF ECONOMY POLITICAL THE A Master‟s Thesis by SEVDE ACABAY Department of International Relations Ġhsan Doğramacı Bilkent University Ankara August 2019 Bilkent Bilkent Universit y, 2019 ii To My Fiancé Mustafa Said iii THE POLITICAL ECONOMY OF TURKEY WEALTH FUND: A CASE STUDY WITHIN THE STATE-BUSINESS RELATIONS IN TURKEY The Graduate School of Economics and Social Sciences of Ġhsan Doğramacı Bilkent University By SEVDE ACABAY In partial fulfillments of the Requirements for the Degree of MASTER OF ARTS IN INTERNATIONAL RELATIONS THE DEPARTMENT OF INTERNATIONAL RELATIONS ĠHSAN DOĞRAMACI BĠLKENT UNIVERSITY ANKARA August 2019 iv ABSTRACT THE POLITICAL ECONOMY OF TURKEY WEALTH FUND: A CASE STUDY IN THE STATE-BUSINESS RELATIONS IN TURKEY Acabay, Sevde M.A., Department of International Relations Supervisor: Asst. Prof. Dr. Berk Esen August 2019 This thesis aims to explain the reason for the establishment of the Turkey Wealth Fund. It represents an outlier case within the recent global phenomenon of sovereign wealth funds due to being established even though Turkey does not have trade or budget surplus which are considered as the minimum criteria for establishing and financing a sovereign wealth fund. Searching the answer in Turkish domestic politics, the paper argues that Turkey Wealth Fund is established as a new instrument to be used in the selective resource distribution which the government systematized to sustain the state-business relations within the political transformation of Turkey to competitive authoritarianism under the Justice and Development Party. It is one of the tools in economy that employed as a way of legitimization and concealment of the distribution of resources since it provides further discretion. Its foundation alone summarizes the systematization of the erosion of the rule of law and the reinforcement of the President Erdoğan‟s political dominance. Key Words: Sovereign Wealth Funds, Turkey, State-Business Relations, Resource Distribution, Justice and Development Party i ÖZET TÜRKĠYE VARLIK FONU‟NUN EKONOMĠ POLĠTĠĞĠ: TÜRKĠYE'DE DEVLET Ġġ ĠLĠġKĠLERĠNDE BĠR VAKA ANALĠZĠ Acabay, Sevde Yüksek Lisans, Uluslararası ĠliĢkiler Bölümü Tez DanıĢmanı: Dr. Öğr. Üyesi Berk Esen Ağustos 2019 Bu tez, son zamanlarda küresel ve akademik bir fenomen olan Ulusal Varlık Fonları içerisinde aykırı bir örnek teĢkil eden Türkiye Varlık Fonu'nun kuruluĢ nedenini açıklamayı amaçlamaktadır. Türkiye, bir varlık fonu oluĢturmak ve finanse etmek için asgari kriter olarak kabul edilen ticaret veya bütçe fazlasına sahip olmamasına rağmen, 2016 yılında varlık fonunu kurmuĢtur. Böyle bir fona duyulan ihtiyacın sebebini Türk iç siyasetinde arayan bu araĢtırma, Adalet ve Kalkınma Partisi‟nin, devlet-iĢ iliĢkilerini sürdürmek için sistematik hale getirdiği seçici kaynak dağıtımında kullanılacak yeni bir araç olarak Türkiye Varlık Fonu‟nun kurulduğunu savunmaktadır. Fon, kendisine verilen hukuki ve ekonomik ayrıcalıklar sayesinde, ekonomide, daha fazla takdir yetkisi sağladığı için kaynak dağıtımının meĢrulaĢtırılması ve gizlenmesinin bir yolu olarak kullanılması amaçlanmaktadır. ii ACKNOWLEDGMENTS First and foremost, I would like to express my gratitude to my advisor Asst. Prof. Dr. Berk Esen for his guidance, patience, encouragement and immense knowledge which were invaluable throughout my thesis process. I also would like to thank the rest of the examining committee members, Assoc. Prof. Dr. Cenk Aygül and Assoc. Prof. Dr. Tore Fougner for their constructive criticism and significant suggestions. I am also grateful to Assoc. Prof. Dr. Serdar ġ. Güner for his support, caring attitude and guidance throughout my undergraduate and graduate studies. I would like to extend my appreciation to my close friends Aydın Khajei, BüĢra Keser, Ömer Faruk ġen, Selim Mürsel Yavuz, Selin ġahin, Volkan Ġmamoğlu and Yağmur Bayındır for their continuous motivation and irreplaceable friendship. Especially considering the countless hours of studying and discussions that we held together, they contributed a lot to make this thesis better. My heartfelt gratitude goes to my parents who have never ceased to care for me and believe in me. For every achievement I have, I am indebted to them. My siblings Elif and Ġhsan deserve special thanks as they were there for me and motivated me at much needed times. Finally, my fiancé Mustafa Said Öğüç not only stood beside me during this demanding process but also, he helped me improve myself to be better at this research by giving his time and energy to me and my thesis. For all the love and compassion, I am forever grateful to him and the rest of my family . iii TABLE OF CONTENTS ABSTRACT ................................................................................................................. I ÖZET........................................................................................................................... II ACKNOWLEDGMENTS ......................................................................................... III TABLE OF CONTENTS ........................................................................................... IV LIST OF TABLES ..................................................................................................... VI LIST OF FIGURES ................................................................................................. VII LIST OF ABBREVIATIONS ................................................................................. VIII CHAPTER I ................................................................................................................. 1 INTRODUCTION ....................................................................................................... 1 1.1. The Research Design............................................................................................. 4 1.2 Conceptualization ................................................................................................... 8 1.2.1. Competitive Authoritarianism ........................................................................ 8 1.2.1 Neopatrimonialism ........................................................................................ 11 CHAPTER II .............................................................................................................. 13 SOVEREIGN WEALTH FUNDS ............................................................................. 13 1.1. Definition and Trajectory .................................................................................... 14 1.1.1 Trajectory of SWFs ....................................................................................... 18 1.2. Taxonomy of SWFs ............................................................................................ 21 1.3. Rise of SWFs in 21st Century .............................................................................. 26 1.3.1 Politics of SWFs ............................................................................................ 28 1.3.1.1 Issues in Domestic Level ........................................................................ 30 1.3.1.2 Issues in Systemic Level ......................................................................... 32 1.4. Conclusion .......................................................................................................... 33 CHAPTER III ............................................................................................................ 35 THE STATE-BUSINESS RELATIONS AND TURKEY WEALTH FUND UNDER JUSTICE AND DEVELOPMENT PARTY .............................................................. 35 2.1. Preliminary Discussion on Actors and Institutional Change in Turkey‟s Political Economy .................................................................................................................... 36 2.2. Turkey Under Justice and Development Party: Trajectory of the Political Economy .................................................................................................................... 39 2.2.1. 2002-2007: A Center Right Party without the “National View Shirt” ......... 40 2.2.2. 2007-2010: Conservative Democracy with a Reversal ................................ 42 2.2.3. 2010-2016: Towards Full Scale Competitive Authoritarianism .................. 45 2.2.4. 2016-Present: Erdoğan‟s Neopatrimonialism and Capital Accumulation ... 48 iv 2.3. The Pattern of Resource Distribution and Accumulation ................................... 51 2.3.1. The Neopatrimonial Regime ........................................................................ 55 2.4. Conclusion .......................................................................................................... 61 CHAPTER IV ............................................................................................................ 63 TURKEY WEALTH FUND WITHIN COMPETITIVE AUTHORITARIANISM . 63 4.1. The Organizational Structure .............................................................................. 64 4.1.1. The Legal Framework .................................................................................. 64 4.1.1.1 Brief Explanation on Public Finance and Legislation under JDP .......... 65 4.1.1.2 The Establishment Process ..................................................................... 67 4.1.1.3 The Powers and Duties ..........................................................................
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