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Turkish water sector hit by corruption scandal

Global Water Intelligence March 2008

Allegations of corruption have brought the role of the private sector in Turkey's water market into question. The knock-on effects could be massive.

Turkey has been shaken by the ongoing investigation into the privatisation of water and wastewater services in the northwestern city of Edirne. The operation started after local police completed four months of wire-tapping a number of people in connection with crimes committed in the handing-over of the management rights to Edirne's water and wastewater treatment facilities. Nineteen people were taken into custody as a result of the local prosecutor's directive on 8th March. Those arrested included Edirne's controversial mayor Hamdi Sedefci, representatives from companies involved in the tender, as well as Ahmet Ozal, a former MP and son of former Turkish president Turgut Ozal. Ozal and six other suspects were released on 10 March.

The case has attracted a lot of attention due to the wide range of coinciding themes. Private sector participation lies at the heart of Turkey's water future, but like many other preceding examples, corruption seems to have become a central component in this process. The involvement of a high-profile figure such as Ahmet Ozal, combined with Mayor Sedefci's past judicial record concerning corruption and bribery in 2001, have elevated the magnitude of the case in the eyes of the Turkish public. The fact that local elections are scheduled to take place in early 2009 also adds gravity to the circumstances. Last but not least, the Edirne case is a perfect example of how Turkish public opinion remains wary about private sector involvement in water services.

The origins of these latest events can be traced back to 2007, when Mayor Sedefci decided to involve the private sector in the running of Edirne's water services for a period of 30 years. The estimated value of the project was $40 million, and involved the replacement of old water meters with new ones, in order to implement an advance payment system. The tender took place on 14 February 2008, and was won by a consortium of three companies (Elektromed Elektronik Sanayi ve Saglik Hizmetleri, Tekno Yapi Insaat Sanayi ve Ticaret AS and Yerel Yonetim Altyapi ve Aritma Yatirimlari Sanayi ve Ticaret AS).

According to local press reports, the police moved in after wiretaps purported to show shady links between municipal officials and company owners. For example, the consortium managed to place one of their employees into the municipal department, which subsequently prepared the tender conditions so as to be in favour of the three companies named above. Meanwhile, press coverage based on leaked interrogation accounts of the suspects reveal that company owners contacted Mayor Sedefci to fix the deal. Sedefci strenuously denies the allegations.

As part of the investigation process, Ahmet Ozal was detained in Istanbul on charges of acting as a mediator between the companies and the municipality. Turkish daily Hiirriyet reported that Ozal had met with the contacts in Qatar and Dubai to try and drum up financial support, and when asked about his part in the affair, Ozal told journalists: "The government will form a brand-new water ministry. Water services in more than 3,000 municipalities will be privatised. This will create a new market of $90 billion. I tried to use my connections to attract foreign investment." Turkish media leapt on the fact that the consortium that won in Edirne had asked Ozal to find investors who could provide them with the necessary cash for a boom which, in Ahmet Ozal's own words, is "as important as the entry of GSM into the Turkish market". The investigation further revealed that the Edirne consortium planned to use corrupt means to influence the privatisation of water services in nine other cities.

Mayor Sedefci announced the cancellation of the tender on 5th March, ostensibly as a consequence of local public pressure against privatisation. With the investigation still underway, it is hard to know whether or not this was genuine, yet the public backlash is real. A platform organised to unite local opposition against water privatisation in the city, called "Edirne Water is Life Platform", includes representatives from more than 50 local NGOs and other bodies.

The question remains as to what the knock-on effect of the Edirne case will be in enabling local authorities to involve the private sector in the provision of water services in Turkey.