Piero Castellano
Jun 24 2018

Turkey's oppressive turn doesn't deter Italian investments - Ahval article series "Business as usual" (1)

Introduction

An investigation by Ahval reveals how increasing trade between European companies and Turkey affects political relations between European Union states and the mainly-Muslim nation.

A close examination reveals that while EU leaders express concern about the Turkish government's human right abuses, companies based in the EU are stepping up trade with Ankara and continuing to make more money.

Experts say foreign investors may be willing to ignore human rights violations in Turkey, but authoritarian practices may eventually risk property rights and might come back to haunt them in the end.

The question is do European firms engage in lobbying on behalf of one of their most lucrative clients, Erdoğan, pleading with their governments for his abuses to be tolerated?

Business as usual: In a series of articles Ahval lifts the cover over a dark trade, driven by greed.

Turkish President Recep Tayyip Erdogan, left, welcomes Italian Premier Matteo Renzi, at the G-20 summit in Antalya, Turkey, Sunday, Nov. 15, 2015. The 2015 G-20 Leaders Summit is held near the Turkish Mediterranean coastal city of Antalya on Nov. 15-16, 2015. (AP Photo/Lefteris Pitarakis)arabicphoto 20151115140146 appapp

 

In February of this year, a month before the elections that changed the Italian political landscape, Turkish President Recep Tayyip Erdoğan visited Italy. In a rare interview, he praised relations with Italy as Turkey’s third biggest commercial partner and vowed to further increase the trade volume.

According to Italian media, Erdoğan was later disappointed by the coldness of officials during the visit. Both President Sergio Mattarella and incumbent Prime Minister Paolo Gentiloni had asked him to end Turkey’s state of emergency and to respect human rights.

In contrast, Erdoğan’s meeting with Italian businessmen was very successful. Economic exchanges between the two countries are flourishing despite the souring of Turkey’s relations with the European Union and many European countries.

It was clear that Italy’s policy towards Turkey is guided by interest in business, while official calls to respect democratic values amount to little more than lip service.

“Italian companies keep investing in Turkey because of its steadily expanding market, whose 2018 growth is still expected to be between 4 and 5 percent, and its political stability, unchanged despite the authoritarian turn,” explained Federico Donelli, postdoctoral research fellow at University of Genoa. “Turkey is still the safest market for investors in the region.”

While overall foreign direct investment in Turkey decreased by 18.8 percent in 2017, investment from Italy increased by 42.5 percent, well above the 28.1 percent increase from the EU as a whole.

Italian companies with their Turkish partners are playing a leading role in mega-projects, a pillar of so-called “Erdoganomics.”

The Astaldi group has the lion share: besides being the main contractor for the third bridge over the Bosporus, it built and manages the Gebze-Izmir highway, including the bridge over the bay of Izmit, and it is building the Etlik mega-hospital in Ankara.

Impregilo is building the Çetin hydroelectric plant in Siirt and the health campus in Gaziantep. Italferr participated in the Eurasia tunnel construction.

But the core of Italian business in Turkey is less visible than the spectacular megaprojects.

“A peculiar complementarity of the two countries’ economies draws them to each other: both Italy’s and Turkey’s industrial landscapes are made of a few big, formerly state-owned groups, and a backbone of small, mainly family owned businesses,” Donelli said. “In Turkey, these were the real engine of the economic boom.”

Italian big groups working in megaprojects and small companies opening factories in Turkey share a common goal. “Turkey is trying to play a stronger role on the global market of large infrastructures in Middle East, but especially in Africa. Joint ventures with Italian companies benefit both sides,” Donelli said. “But the Turkish market is also a ‘gate to the East’ for Italian small businesses,” which can acquire international dimension with small investments in a friendly market not dissimilar from their own.

It would appear a win-win situation for entrepreneurs from both countries, but the erosion of Turkish democracy could change the context.

“Megaprojects like Istanbul’s third airport or the Istanbul Canal have both economic and propaganda value,” Donelli said, beyond the obvious importance of such infrastructure for the country. “From the economic point of view, investments in infrastructure ensures employment of a large workforce and attracts new foreign investors.”

But the political value of megaprojects has an even larger impact. “Government tenders favour big construction conglomerates like Limak, Kalyon and others, close to both the ruling AKP and the president’s family. Thus these large projects, described as having zero cost for the state and as a boost to national pride, reward two pillars of Erdoğan’s consent: businessmen and poorest segments of the society.”

The Italian role in Turkey’s economy supports the very same government that Italian leaders call to respect the rule of law and democratic principles. The matter is not trivial: as a candidate to EU accession, Turkey agreed to respect those principles, abandoned during Erdoğan’s ascent to presidency, the renewed conflict with the Kurdistan Workers’ Party (PKK) and in the aftermath of the attempted coup

However unlikely Turkey’s joining the EU might seem, it preserves the special relationship of Turkey with Italy and the EU.

Donald Sassoon, historian at Queen Mary University of London is sceptical:

“The chances of Turkey joining the EU in the foreseeable future are zero. So it will be business as usual with the addition of comments on human rights which Erdoğan could use to show that the EU is anti-Turkish while EU countries could use such comments to show that they have principles” he told Ahval.

It will not be easy. Erdoğan has said he will ask the EU to honour its immigration deal with Turkey and pay 3 billion euros owed to keep refugees out of western Europe.

Ironically, it is immigration from North Africa that could affect Turkey’s friendship with Italy.

After a campaign marked by the theme of immigration being an Islamic invasion, Italian elections saw the victory of the populist Five Star Movement and the success of the anti-immigration Northern League, whose leader Matteo Salvini will probably be the next prime minister.

“The Northern League has always been on an actual propaganda crusade against Turkey, marked by ideological hostility loaded with racism and viscerally anti-Islamic,” said Carlo Pallard, analyst of Turkey’s politics and PhD candidate at the University of Turin. “But there are always differences between words and facts. It is interesting that the league’s leadership has excellent relations with a Turkic country like Azerbaijan. The league’s Turcophobia has always been selective, negotiable after all.”  

Sassoon does not think that Italy’s relations with Turkey will change. “It is perfectly possible to be Islamophobic at home and ‘friendly’ with Islamic governments elsewhere. In Hungary where Islamophobia is greater than in Italy, relations between Orbàn’s government and Erdoğan are fine. I do not see any reason why matters would change in Turkish-Italian relations even with Salvini as prime minister,” Sassoon said.

The Five Star Movement position is less clear. “They have denounced the immigration deal and the erosion of rule of law in Turkey,” said Pallard, “but they are not prejudicially against Turkey.”

Italy seems likely to remain the last major EU country supporting Turkey’s accession, in spite of Ankara’s constant EU-bashing and the ever-worsening repression of civil society. “If its policy was more coherent and coordinated with the union, Italy could be a mediator between Turkey and EU, to try to alleviate its Anatolian neighbour’s anti-democratic drift,” Donelli said.

Sassoon is less optimistic: “The EU can do nothing for the rule of law in Turkey. It is barely able to do much over Hungary and Poland trying to control the judiciary and the media, even though both are major recipients of EU funds. So Erdoğan can sleep soundly,” he said.

Whatever leverage Italy or EU could have, it seems to have been sacrificed to business centred relations. But alarming signs that Turkey’s economy is actually faltering; rating agency downgrades and a new slide of the lira could undermine such an approach. Moreover, the increasing unpopularity of Erdoğan in Italy could push populist parties, always sensitive to their electorate’s mood, to adopt tougher policies.

“Both Turkey and the EU understand that they need good relations for economic and security reasons, the relationship is simply too valuable to disregard,” said Howard Eissenstat, a Turkey expert at St. Lawrence University.

“The problem is that Erdoğan is both too ambitious and too disdainful of basic norms of rule of law and of diplomacy to make a healthy relationship possible. Turning a blind eye to Turkey's abuses at home won't change its disruptive tactics in international relations. Normalisation is unlikely to occur under these circumstances.”