By Metin Munir

When I started investigating my first big corruption case, what surprised me most was how easy it was to unravel it.

At first I thought this was due to my competence as journalist. But soon I understood that I was progressing with ease because the perpetrators of the theft were so confident they were beyond the reach of the law that they had not bothered to cover their tracks. They knew that they would not be caught and the money they stole would not be taken from them. Subsequent events proved they were right.

The case I was investigating involved a dam near the city of Izmit constructed to provide water to homes and industries. Izmit borders Istanbul, Turkey's most populous city, and is in the country's most industrialized province. The project was conceived by the city's social democratic mayor. I stumbled on it while investigating a smaller graft.

The dam was built by a consortium of British, Japanese and Turkish companies and financed by a group of international banks and trade-financing agencies from countries like Japan, Britain,and Germany. It cost in excess of US$890 million. I discovered that the same work could have been done for less than US$100 million.

Furthermore, because of the high cost of the investment, the water would be so expensive that no one would want to buy it. However, under a so-called buy-or-pay agreement, the government would be forced, for years, to pay billions of dollars for water which would be too dear to sell.

I discovered and repeatedly wrote about this before construction of the dam started. No one took any notice.

The Government Audit Department, Sayistay, later issued a detailed report that confirmed my findings, saying that, from beginning to end, "the project was full of violations of laws." What had gone into building the dam was "three to nine times higher than comparable" ones. In 1999 and 2000 Turkey had paid the Turkish-British and Japanese utility company US$387 million for mostly unused water and was currently paying US$20 million a month.

Turkey, trying to extricate itself from its worst recession since World War II, was under obligation to buy 142 million cubic metres of water per year until 2014, when the bill would reach US$3 billion.

Sayistay stated that from the beginning both the sponsors of the project and the government knew the water would be too expensive to sell. It sent its reports to the chief prosecutor of the republic with a request that the culprits be prosecuted. The report was also sent to the president and the National Assembly.

Again nothing happened.

One day I got a call from the chief prosecutor of the republic. "I know what you are trying to do," he said, referring to the columns I was writing on the subject, "but you are wasting your time. The statute of limitations has come into effect." In other words, the legal deadline for prosecuting the culprits had run out, in effect giving them amnesty.

The Treasury continues to pay for the unused water because its hands are tied by the guarantee agreement it signed. The Izmit Water Company is producing water at a cost of 400 cents and selling it for 25 cents.

In any case, last December the mayor of Izmit, Sefa Sirmen, was elected to Parliament, thereby gaining constitutional immunity from prosecution during his five-year tenure as deputy.

The story of the Izmit dam proves an important point: Turkey is one of the countries most debilitated by corruption but is powerless to bring to justice politicians, bureaucrats, businessmen, and organized crime, which constitute the coalition of thieves siphoning off billions from the treasury.

Over the years state institutions—the legal system, auditors, parliamentary committees—that should normally fight against corruption have been emasculated and allowed to decay.

Laws have become outdated or purposefully written in such a way as to make life for crooks easier.

The courts are a mess. They are slow. It took a court in Istanbul 49 years to decide in September that 750,000 square metres of land were appropriated illegally by 1,500 people in the exclusive Sariyer district of Istanbul.

They are also inefficient and corrupt. "Hire a judge, not a lawyer," say the Turks.

Although billions are siphoned off every year, virtually no one is ever sentenced. Punishment is rarely meted out to corruption offenders and can be ludicrously lenient. A judge who was found guilty of cooperating with crooks to give away state land was fined the equivalent of one dollar, according to a Turkish newspaper.

The powerful are privileged. A Heavy Penalty Court gave Mesut Yilmaz, an ex-Turkish prime minister, permission to present evidence at a town near his holiday villa to save him the trouble of travelling to Istanbul. The resort prosecutor was not sent the indictment and could only listen respectfully. Yilmaz is accused of favoring a businessman seeking a state bank that was being privatized. The case, as of the end of March 2004, is ongoing. Auditors are enfeebled by politicians who spike their corruption reports. "The problem is not that there is no audit or supervision," said a senior auditor who did not want to be identified. "Ministries are filled to the brim with reports. The problem is that nothing is ever done about them."

Atılay Ergüven, chairman of the State Auditors Association, says that politicians both indulged in corruption and weakened the state's auditing arm. "There is no institution into which corruption has not entered," he says. "We know that. We also know that auditing done under political tutelage is nonsense. Supervision overseen by politicians doesn't work. Over the last 20 years the politicians did everything they could to emasculate auditors. Auditors must become independent and autonomous."

"It is impossible to prosecute thieves under laws made by other thieves," said a Turkish researcher into graft in utilities.

Banking, utilities, and public tenders are the most important areas of corruption.

More than US$42 billion was siphoned off by state and official banks. This figure is likely to grow. A bank whose owners mysteriously disappeared is believed to have left a US$7 billion hole, which has to be plugged by the government. This was the 22nd bank the government was forced to take over in recent years, obligations and all. While the bank's owners are under investigation, very little of the money lost has been recovered.

The theft from banks, amounting to more than 20 percent of GDP, took place with the encouragement and support of politicians and senior bureaucrats, but none has been prosecuted.

"Virtually all tenders at the Ministry of Public Works are rigged, with the full knowledge of the minister," said one of Turkey's most senior public auditors on condition of anonymity. "Not a single contract can be awarded without the minister knowing about it."

According to the World Bank, "procurement practices lack transparency so much so that before the bidding is started the result is already fixed, i.e., the selected bidder is already decided upon; payments in the form of donations to political parties, especially the ones in power, in the amount of up to 15 percent of the contract value, ensures that a contractor wins."

The World Bank says procurement of goods, works, and services for public projects represent 16 percent to 18 percent of Turkey's GDP, or US$32 to US$38 billion. Experts say that bribes destined for politicians, political parties, and bureaucrats account for at least 20 percent of this total. What's more, a huge amount of money is wasted because the work is invariably overpriced (like the Izmit dam) and never finished on time (very few public projects are ever tendered on a turn key basis). Or, it is just superfluous.

"Politicians generate many projects without proper plans, study, feasibility projects or even budgetary allocation in order to generate sums from which bribes can be got," said the senior auditor. "Nearly 95 percent of investigations opened by public auditors are related to excessive payment. For instance, the contractor reports that he found a bed of rocks where there should have been soil and charges accordingly. In fact, he is lying. Or he is paid for removing 900 lorry loads of dirt when the real figure is 90. The government agency in question goes along and shares the extra money with the contractor. We have discovered that in public housing the government pays on average 25 percent more than the market price. In road building this is much higher."

The World Bank agrees: the enforcement of the procurement legislation, it notes, "is almost nonexistent."

Corruption, waste, and extravagance related to public procurement probably account for a greater percentage of GDP than any other activity in Turkey. In 2001, the Chambers and Bourses Union of Turkey (TOBB) calculated that, over the 1990s, politicians "squandered" roughly US$195 billion a year, equal to about 20 percent of the country's 2000 gross domestic product.

TOBB's calculation is probably incomplete because it does not take into account huge items like non-performing loans of state banks, which are probably in excess of US$10 billion.

But corruption does not stop there either. It has permeated every aspect of Turkish life.

PricewaterhouseCoopers, which studied corruption in 35 countries, placed Turkey at number four after China, Russia, and Indonesia.

"It has become a way of life," said the auditor. "We have turned into a country where no civil servant will do anything without a baksheesh [bribe]. There is no sector that is immune from baksheesh, corruption, illicit gain, or kickback. In the public administration there is a bribe connection everywhere. When I was young, civil servants who took bribes were disgraced. Now if you don't take a bribe people think you are a fool. It's so widespread that people don't even try to hide it."

At customs, where corruption has become institutionalized, it is almost impossible to move anything in or out of the country without paying a bribe. "Bribes are indexed to import or export duties and are posted," said a customs broker. "You go from one desk to the other with a wad of notes and pay. In the old days you would hide the cash. Now it is done openly. You even get a receipt."

In fact, Turkey is paying as much as four times more than market rates for electricity produced by the private sector in some dams and gas powered utilities. As in the case of the Izmit dam, construction costs are inflated to such an extent that the output is grossly expensive. But Turkey is nevertheless obliged to buy this expensive electricity, because it has signed guarantees.

Gas from the Soviet Union constitutes the bulk of the gas bought by energy-poor Turkey. Turkey is also paying way over market prices because a portion of the payment is channelled to corrupt politicians and bureaucrats.

Corruption has become a major public issue. In the last general elections, in November 2002, the electorate punished the three parties that made up the corrupt and inefficient Bulent Ecevit coalition by eliminating them from the Assembly. Tayyip Erdogan's untested moderate pro-Islamist Justice and Development Party (AKP) won a landslide victory and came to power.

Erdogan had promised to clean up the country of corruption and, as his first act, to abolish the deputies' constitutional immunity from prosecution. But on coming to power he backtracked, saying that the immunity issue "is not a priority." "This is for later," he said. But it is likely that later will never come.

When Erdogan came to power, he and some of his chief lieutenants were on trial for alleged corruption during his tenure as mayor of Istanbul. All the cases ended with acquittals after Erdogan became prime minister and his lieutenants were appointed as cabinet ministers.

Erdogan is continuing his anti-corruption rhetoric, but has so far done nothing to actually discourage corruption. On the contrary, he amended the strict World Bank-designed public procurement law in a way that would make it easier for politicians to award contracts to their cronies.

AKP activated a committee in the Assembly to investigate alleged corruption in the banking sector and state tenders, and many high-profile politicians and officials and businessmen were interviewed. Just before the Assembly broke for the summer recess, a report was submitted to that body's speaker, who will decide whether the committee's findings warrant further investigation.

It is too early to dismiss Erdogan as an anti-corruption campaigner or to label his administration as corrupt. But it is also difficult to be hopeful. Graft is so endemic and deeply rooted, the institutions that should fight it are so debilitated and corrupt themselves, that it is likely it will be business as usual.

Peer review commentary is presented as a counterpoint to this report. The views expressed are those of the peer review panel, and not the author.
View Comments >>