Why Construction (The Big Fish Edition)?
Aside from the local construction projects, the real game is in government construction projects. Government tender laws have changed 191 times in Turkey since 2003. With an average change of 10.6 per year or once in every five weeks, just to follow the government tender law is a full-time job.
Turkey also has a lot of projects which President Erdoğan considers to be “mega” projects. Some of these projects include Istanbul Grand Airport ($12 billion airport project, considered to be the biggest Airport in the world),
Eurasia Tunnel (a tunnel that goes under the Marmara Sea, connecting European and Asian parts of Istanbul), Marmaray (a railroad that goes under the Marmara Sea connecting Istanbul), Yavuz Sultan Selim Bridge (the third bridge that connects the Bosphorus Strait), Osmangazi Bridge and Çanakkale Bridge. All these mega projects have government-guaranteed usage contracts.
Government-Guaranteed Usage Contracts?
The image below is an image of the Çanakkale Bridge. The last active mega project.
The expected cost of the bridge is $924 million (793 million euros).
Credit terms are 15 years of payment with no payment in the first five years.
45,000 guaranteed vehicle passes (Government pays if the actual number of cars passed is under 45,000 a day).
Payment per pass is roughly $17.48 plus tax (15 euros plus 18% value-added tax or VAT).
The consortium of companies that got the bid will operate the bridge for 16 years.
So, the operators of the bridge are guaranteed to make a revenue (in euros) of 15 x 45,000 = 675,000 euros per day, 246,375,000 per year, and 1,231,875,000 in five years. They will start paying back for their credit of $924 million (793 million euros) after they generate roughly $1.43 billion (1,231,875,000 euros) which is mostly profit.
The main problem here is the guarantees and the guarantee fees. Osmangazi Bridge, for example, has a daily guarantee of 40,000 vehicles per day. It has been operating since July 1, 2016. The first half of 2021 was the first time they managed to average above 40,000 vehicles per day (42,000 vehicles on average). However, the original contract for the bridge
was $35 + 18% VAT. The consortium currently charges the users $17 + 18% VAT and the $18 of difference is subsidized by the government costing an extra $684,000 per day and around $250,000,000 per year.
On top of that, they recently started to build city hospitals. Currently, 13 of them are operating and the Turkish government guarantees to pay 70% of the
patient capacity. Last year, 15% of all the Ministry of Health’s budget was spent on the payment of these hospitals. There are eight more under construction and, when completed, the total capacity will increase to 22,221 patients from 17,842. So, if the Ministry of Health gets the same budget upon completion of these hospitals, they will be spending 18.6% of its budget on these hospitals.
The list, unfortunately, goes on and these are huge compounding liabilities for the future. They are all projects that provide good short-term economic data. A lot of people are employed via these projects, they help the country show short-term growth, but they are all long-term debts the citizens will have to pay to the friends of Erdoğan.
Who Are These Friends?
The chart below shows the data for the top-10 companies in the world that received government tenders in dollar terms between the year 1990 and July 2018. Five of these 10 companies are Turkish companies. Limak, Cengiz Holding, Kolin Grup, MGN Holding, and Kalyon Holding made to the list thanks to the Turkish Treasury guaranteed projects.
In 2020, the Minister of Commerce Ruhsar Pekcan also told the senate that between 2010–2020 these companies had a lot of tax deductions.
In a span of 10 years,
Kolin Grup’s taxes were deducted 36 times.
Cengiz Holding had deductions 30 times.
Kalyon Holding and Limak had 19 tax deductions.
In 2016 alone, Cengiz Holding’s tax liabilities of $148 million that occurred between the fiscal years of 2009–2015 were canceled. Cengiz Holding also had their name listed for tax evasion in the recent Pandora Papers.
Erdoğan is pushing forward for another mega project. This time it is called Kanal Istanbul. The project will be handled by the crony companies mentioned above.
The image above is an image of Istanbul. The strait you see on the right side of the map is the Bosphorus. It is a natural strait that connects the Black Sea and the Mediterranean Sea. Erdoğan wants to create a secondary strait that is 45 km long, 275 meters wide, and 20.75 meters deep. They are also planning 11 bridges across this canal and housing to inhabit 500,000 more people. Istanbul is already one of the most crowded cities in the world with a population of over 15.5 million people. The city is already too populated and is on the brink of water shortages. The channel will be built on top of the agricultural land and underground water basins of Istanbul. On top of all these things, Istanbul is located in an earthquake zone. In fact, not too long ago, on
August 17, 1999, an earthquake near Istanbul caused the deaths of 17,480 people and damaged 285,000 houses.
The project requires an investment of between $30–40 billion. Turkey does not have the sort of money to finance the project. Some sources say that the financing of the project will be provided by China.
Nevertheless, considering all the above data, someone with a sense of logic would not go for this project. Erdoğan, on the other hand, says that he will complete the project no matter what, even if it’s against the people’s will.
Why So Stubborn About Kanal Istanbul?
The land that the Kanal Istanbul will take place on is already bought by the insiders for very cheap. The project was first announced in 2011. Between 2011–2019, 30 km² of land were traded. To understand how big this land is, Paris sits on an area of 105 km².
Some of the landowners there include middle-school friends of president Erdoğan, ex-minister Erdoğan Bayraktar, the Emir of Qatar Sheikh Tamim bin Hamad Thani’s mom, members of Ak Parti (Erdoğan’s party) and Mhp (political party close to Erdoğan), and three companies from Kuwait, U.A.E. and Saudi Arabia own 0.3 km² of the land. How Does Bitcoin Fix This?
In a world where money is not controlled by someone (the president of Turkey in this case), it is much harder to fund these projects by printing money and diluting people’s savings and earnings. Bitcoin, in this case, would be very beneficial for the majority of Turkish people who want to opt out of this craziness. People would prefer to store their wealth in a sound money that can’t be diluted instead of one printed to support these otherwise zombie companies and government cronies. As mentioned at the beginning of the article, this is a war between Bitcoin — a mathematically backed software that only aims to deliver immutable blocks every 10 minutes — versus a mathematically illiterate tribe that does as many malinvestments as possible to sustain their Ponzi-like business.
This is a guest post by Stackmore.hodl.Sucre. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine .