Erdogan grants Turkish contractors unauthorized Libya reconstruction to save his economy

To save Turkey from its collapsing economy as a result of clumsy policies, President Recep Tayyip Erdogan covets the wealth of other peoples and the goods of politically fragile countries, such as Libya, whose capital is under the control of the Ankara-backed Government of National Accord (GNA) militias.

Government contractors

On August 13, the GNA signed an agreement to open the market of the oil-rich Libyan state to Turkish contractors, following the naval and military agreement signed in November 2019.

Scandalous agreement

Turkish website Ahval reported on Thursday, August 20, that the agreement signed by Turkish Trade Minister Ruhsar Pekcan and GNA Planning Minister Al-Taher al-Juhaimi solves the outstanding problems between Turkish companies and Libyan employers, paves the way for new investments and projects, and encourages Turkish construction companies to lead projects in the country.

100 Turkish companies

The agreement provides about 100 Turkish companies that had abandoned their projects in Libya in 2011 due to the civil war the ability to continue their work, while compensating them for damage to their property.

According to the report, a sector official said in January that “the volume of Turkish contracted business in Libya is $16 billion, including $400-500 million in projects that have not yet started. The deal also includes incomplete projects worth $19 billion, for a total of $35 billion in construction and infrastructure projects in the war-torn country.”

At a meeting in Ankara following the signing of the deal, Pekcan portrayed the process as a “new opportunity to show the Turkish-Libyan cooperation to the world,” referring to the work of Turkish contractors in more than 10,000 projects in 127 countries in the world, with a total value of $407 billion.

Mithat Yenigün, chairman of the board of directors of the Turkish Contractors Association (TCA), confirmed that the deal signals a new hope for the Turkish construction sector.

He told the Daily Sabah newspaper that Turkish construction companies had to leave their Libyan projects incomplete in 2011 due to security issues, which prompted the return of about 25,000 workers to Turkey.

Yenigün added that there is about $1 billion that Turkish companies will receive in Libya as compensation for their losses, another $1.7 billion in the form of advanced payments and guarantees for ongoing projects, and another $1.3 billion for damage to equipment, machinery and inventory.

Libya ranks third among investment destinations for Turkish companies, representing 7.2% of projects, and there are projects worth $19 billion dollars initiated by more than 100 companies in the country.

In June, a Turkish delegation that included Foreign Minister Mevlut Cavusoglu and National Intelligence Organization (MIT) head Hakan Fidan went to Tripoli to discuss the financial and political agreements between Ankara and the GNA. A memorandum of understanding was signed between the two sides to solve the obstacles faced by Turkish contractors shortly thereafter.

The agreement comes at a time when the value of the Turkish lira is declining against foreign currencies, amid concerns about foreign exchange reserves that continue to fall. A day before the signing of the memorandum, Turkish Finance Minister Berat Albayrak, who is also Erdogan’s son-in-law, raised a discussion about the country's economy with his statements about foreign currency.

Albayrak said in a live interview that the high foreign exchange rate against the Turkish lira does not pose a threat to the country and that competitive prices and a low-value currency provide Turkey with the ability to develop its economy at a faster pace.

According to the report, Albayrak's statements raised questions about why central and public banks in Turkey chose to support the lira by selling $100 billion in foreign currencies at a lower price instead of restricting exchange rates to prevent further deterioration of the value of the Turkish lira if the decline of the local currency is an advantage that strengthens the country's economy.

Last week, the Turkish Central Bank took a decision allowing banks to impose a tax of between 1.5% and 5% on cash withdrawals from accounts in foreign currencies, and it is reported that the tax began at 0.1% in May 2019 and then rose to 0.2%, with the authorities trying to prevent a dollarization in light of Turks’ desire to continue buying dollars and other foreign currencies.

“Although Albayrak pretends that there is no problem in Turkey, the lack of foreign currency reserves is dragging the country into a crisis path, which contributes to further weakening the economy,” Erdogan has said.