Turkey loads sovereign fund with fresh assets to boost growth

The transfer of government held shares in heavyweight companies will help raise money to fund job-intensive infrastructure projects.

Photo by: Reuters
Photo by: Reuters

The share of government in the companies would be used to raise funds at lower interest rate to finance infrastructure projects.

Turkey has transferred government stakes worth billions of dollars in Turkish Airlines, major banks and other state-run companies to a sovereign wealth fund set up last year to help finance infrastructure projects.

The fund was set up with initial capital of just 50 million lira ($13.6 million) in August, but the government is aiming for it to manage $200 billion in assets as soon as possible, the economy minister has said.

The government hopes it will be able to use the newly transferred assets as collateral to secure funding for major infrastructure projects, one senior official told Reuters.

"There will be a search for credit abroad to implement very big projects in the period ahead," the official said.

"Turkey's most important companies have been transferred to the sovereign wealth fund. It will be possible to secure credit at low rates for these projects by offering the shares in these companies as a guarantee."

The official did not specify which type of projects the wealth fund may help finance.

Under President  Recep Tayyip Erdogan, who supports using large-scale projects to bolster the construction industry and domestic demand, Turkey has built high-speed railways, suspension bridges and undersea tunnels.

Other planned mega projects include one of the world's biggest airports in Istanbul.

Mehmet Bostan, who oversees the privatisation board, also heads the fund.

Sovereign wealth funds are often associated with oil producers such as Norway or Gulf states. Those countries set aside money from energy exports for investment.

Turkey has moved the assets of the companies that were destined to be privatised.

The fund is headed by Mehmet Bostan, a former finance sector executive who heads the privatisation board.

The state's 49.1 percent stake in flag carrier Turkish Airlines - worth roughly $1 billion - and its 51.1 percent of lender Halkbank - worth some $2 billion - have been transferred to the fund, the privatisation administration said on Monday.

Stakes in state-owned Ziraat Bank, the Borsa Istanbul stock exchange and state-owned pipeline operator Botas have also been transferred, according to an announcement in the government's Official Gazette on Sunday.

Holdings in fixed-line operator Turk Telekom, oil company TPAO, the PTT post office, satellite communications company Turksat, Eti Maden mining company and tea producer Caykur have also been transferred.

The companies would retain their existing management and policies after the asset move, Prime Minister Binali Yildirim's office said in a statement.

TRTWorld and agencies