Turkey Enables Sovereign Fund To Support Economy

Turkey allowed its sovereign wealth fund to take over private companies in distress as part of a series of economic measures to help the Middle East’s largest economy survive the coronavirus pandemic.

The country’s parliament voted Thursday to enable the fund, known by its Turkish initials TVF, to inject cash or acquire controlling stakes in strategic firms under a framework drawn up by policymakers.

The legislation lays the groundwork for what could be a major transformation of policy by Turkey’s government to wrest back control over swathes of the economy following the pandemic, as an increasing number of non-financial companies could fall under the state’s direct control in coming years. That would require the government to borrow more and use the money to rescue or buy companies — in a departure from the last two decades of fiscal strategy.

The law exempted the wealth fund, which last reported its equity value at $40 billion in 2017, from a myriad of corporate regulations governing its investments in private companies.

It will also no longer adhere to some of the Capital Markets Board’s rules, including mergers and acquisitions, and won’t be bound by a commercial law that requires the TVF to compensate minority shareholders for their losses within a certain period — if the fund, as the majority owner, pursues policies detrimental to the bottom line.

The TVF’s reports about the sub-funds or companies it can establish will be submitted to President Recep Tayyip Erdogan in August instead of June.

Other measures voted by the parliament include:

• Preventing outrageous price increases
• Imposing limits on profit distribution
• Providing a legal basis for unpaid leave
• Postponement of water bills for companies that suspended operations or households for three months
• Empowering the Treasury to determine cases of force majeure
• Postponement of strikes

Originally published on www.bloomberg.com