Oger Telekom, which recently acquired a 55 percent stake in TT, is operating in a number of countries in the Middle East and Asia along in addition to Turkey. The holding operates in an economy of scale fed by a market with a total population of 110 million. Encouraged by such potential, the representatives of holding affiliates in different countries come together at certain times to keep the synergy among the units at its highest level.
The privatization of TT, a long-criticized operation, represents a prominent example for other similar endeavors. We can gauge the success of a privatization based on four criteria: the creation of employment with new investments; helping minimize the current account deficit by focusing on increased exports and foreign capital inflow to the market; contributing to the development of the technological infrastructure of the country; and the supply of quality service and healthy competition in the market, which eventually contributes to the country’s Treasury in the form of taxes paid.
I would love to analyze TT based on these criteria. Those interested could measure the success of previous privatizations of public institutions by looking at these same criteria.
To achieve the goals mentioned above, a company needs to restructure as well as prioritize increasing its productivity and profitability following its privatization. It is impossible to achieve such a target in the State Economic Enterprises (KİT) model because KİTs both in Turkey and in many other countries have in general endeavored to form a monopoly to increase their profits or compensate for the loss that emerged as a result of non-productiveness. Most of the chronic problems in Turkey’s economy in the ‘90s emerged particularly because of this fact.
The “KİT reality,” which, at the beginning, seemed to be in favor of workers and labor unions, has in the long run turned out to be to the disadvantage of the market as it brought high public deficits, inflation and interest along with it. The longer KİTs dominate the country’s market, the higher the exchange costs will rise and the more difficult it will be to talk about economic rationality in that market. Under such circumstances, the private sector will receive a major blow while entrepreneurs gradually cancel new investments, problems in the market reach worrisome levels and production falls short of demand. All these factors will eventually threaten social welfare. Another scenario is that the state will try its best to manage the process as long as it can before a growing subsidy burden, a skyrocketing budget deficit and public debts lead to the collapse of the system.
The golden rule of our time is known to everyone: You will have to simultaneously become a trademark while increasing the quality and reducing the cost of the services that you provide to your customers. Doing this requires two things: innovation and productivity. We are experiencing a period in which companies in the trade sector have to invest more while employing fewer people and making less profit than they used to. Add a “China and Chinese-like countries syndrome” to this and one can find growth in favor of employment only in sectors out of trade.
We can see efforts to rationalize the market in an example. Investors find themselves compelled to reorganize their companies while prices steadily drop amid strong competition; you have to invest if you want to continue your existence in the future. Following its privatization in 2005, TT experienced a decline in the number of its employees and the amount of taxes it paid. The company paid TL 1.1 billion and TL 1.3 billion in corporate tax in 2004 and 2005, respectively; this number fell to TL 650 million in 2008. The company paid the highest amount in taxes to the state in 2007 and came second after the GSM operator Turkcell in 2009. Seven companies out of the top 10 with the highest taxes paid in 2009 were banks!
Banks in Turkey enjoyed historic high profits during the 2009 global financial crisis.
TT experienced a similar impact on employment, too. The existing market conditions were not feasible to further increase employment in this sector. The number of TT workers declined to 25,000 from 45,000 prior to its privatization. (A big part was transferred to the public sector.) However, following new investments and an increase in profits, there was an increase in employment as well. The company was hence able to create a relatively younger, more dynamic and better-trained staff. TT hires people in all corners of the country. This shows the importance of a transformation in the labor force.
