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ASSET OWNERS

Turkey plans massive transfer of assets to sovereign wealth fund

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The Turkish government transferred its holdings in the country's biggest bank by assets and a state-owned phone company to a new sovereign wealth fund created to finance large infrastructure projects.

The treasury's stake in TC Ziraat Bankasi, oil and gas producer Turkiye Petrolleri, and a nearly 7% holding in phone operator Turk Telekomunikasyon are among assets that the sovereign wealth fund will own, according to a decree in the Official Gazette on Sunday. The government will also move its 51.1% stake in Turkiye Halk Bankasi and 49.1% in Turkish Airlines after regulatory approvals, according to a regulatory filing Monday.

“The existing management of these companies, their operational policies and business plans will continue in accordance with their investment and growth strategies,” Prime Minister Binali Yildirim said. Mr. Yildirim's office will manage the sovereign wealth fund under a strategic investment plan to be approved by the Cabinet, he said.

The sovereign wealth fund, approved by Parliament in August, will use proceeds from the sale of assets to finance large infrastructure projects such as airports, seaports, roads and railroads, with Economy Minister Nihat Zeybekci saying the fund could eventually control businesses worth $200 billion. President Recep Tayyip Erdogan is seeking to boost economic growth after a series of terrorist attacks damaged consumer confidence and tourism, while Fitch Ratings last month became the last of the major credit ratings agencies to cut the country's debt to junk status.

“The move is likely to increase political control over the companies,” said Wolfango Piccoli, co-president at Teneo Intelligence. “The government is currently struggling to finance a series of high-profile infrastructure projects; Erdogan hopes these will boost his domestic prestige and enable him to consolidate his grip on power through the introduction of an executive presidential system with almost no checks or balances.”

“Turkey's most valuable state assets are being given to a specially authorized and unsupervised company,” said Cetin Osman Budak, a lawmaker and deputy chairman of the main opposition Republican People's Party. “This is not a step for the benefit of the public.”

The Treasury's 73.6% stake in Borsa Istanbul, the owner of the country's only stock exchange, holdings in miner ETI Maden Isletmeleri Genel Mudurlugu, tea producer Cay Isletmeleri Genel Mudurlugu, Postal Services Co., and cable TV and satellite operator Turksat Uydu Haberlesme ve Kablo TV Isletme have also been transferred to the fund.

A facility of 3 billion lire ($810 million) held by Turkey's Defense Industry Support Fund will also be given to the sovereign wealth fund for a period of three months, while several plots of land in tourism regions in Antalya, Aydin and Izmir will be shifted to the fund. The government last month also moved its license in the national lottery and horse racing operations for the next 49 years to the fund.