Crisis-ridden Turkey on Friday, March 30, scrapped the sale of 51 percent of Turkish Airlines, a key economic reform, after it failed to attract any offers. The government also took a first step towards overhauling its ailing banking sector as part of an economic recovery program.
The deadline for bids for Turkish Airlines had already been extended by one month to March 30. Nine investors had shown interest in buying the stake but none of them made a final offer, said a statement by Turkey's privatization board quoted by Anatolia news agency.
There was no indication of what strategy the authorities would now follow for the privatization of the airline, which they were planning to finalize in April. But in the meantime the government submitted a draft bill to parliament aimed at covering huge losses by three private banks and facilitating the rehabilitation of a dozen troubled private banks taken under state control.
The bill, which amends the budget law, allows the treasury to issue special bonds to generate sources for banking reforms, effectively including the debts of the public banks, estimated at some $20 billion, into the budget.
Both the budget amendment and the bungled Turkish Airlines tender were on the list of priority reforms aimed at putting the ailing economy in order. Turkey had promised to accelerate the airline privatization process in December in return for IMF rescue aid of some $10 billion to contain severe financial turmoil.
The sale was also on a list of urgent measures announced last week following a second financial shake-up that resulted in a February 22 decision to float the Turkish lira, causing the currency to lose some 30 percent of its value.
The flotation of the lira disrupted an IMF-backed disinflation program in place since December 1999 and pushed prices up, making the revision of macro-economic targets inevitable.
Turkish Economy Minister Kemal Dervis had met with officials from the United States, International Monetary Fund, Germany and France in the past week in a bid to ensure foreign support for the economic reforms. He said Turkey needed $10-$12 billion of international aid.
But the outside world has been waiting for concrete evidence of progress in Turkish reforms before extending a helping hand. "Undoubtedly, this is a very negative development. What should be done now is to modify the conditions and go for another tender," Haluk Burumcekci, chief economist at Disbank, told AFP.
However, an Istanbul-based foreign analyst said that the result came as no surprise to financial circles given the negative climate on the international market, marked by sharp falls in valuations of airlines.
"Everybody expected this outcome, because nobody is buying airlines now. So I do not believe that it will have a disaster effect on the markets," the expert, who asked not to be named, told AFP. But he pointed out that Turkey could have sold the airline one or two years ago if it had not dragged its feet.
Turkish Airlines, which flies to 113 destinations with a fleet of 73 planes, was first included in Turkey's privatization program in 1990, but the sale was delayed amid political wrangling and indecision.
"Still Ankara should push for planned amendments in privatization laws to give the markets a psychological boost by showing that it is earnest in carrying out serious reforms," the analyst said.
Last week Turkey and the IMF agreed on the framework of a revised economic program, which is expected to be finalized by mid-April and submitted to the Fund for final approval in late April. The IMF said this week that its future financial assistance to Turkey would be determined by the content of the new reform package.
Last year Ankara dragged its feet on several economic reforms envisaged in the original IMF-backed program, triggering a massive flight of foreign capital in November and an ensuing liquidity crunch, which only was alleviated with emergency aid from the Fund.
The government's subsequent failure to come to grips with the problems and an unprecedented public row between Ecevit and President Ahmet Necdet Sezer over corruption in February led to a complete breakdown of confidence. — (AFP, Ankara)
by Sibel Utku
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)