Turkish academic criticizes OYAK

The Turkish Armed Forces Pension Fund, or OYAK, a major producer of steel and cement as well as a leading car manufacturer, is little more than a “military holding,” said İsmet Akça from Istanbul’s Yıldız University.

He also condemned the fund as being a creation of Turkey’s military coup in 1960 and said its mission is to increase the socio-political status of the military and to protect its privileges.

OYAK, known for its deft 2006 sale of its banking unit to ING Group for $2.6 billion, has frequently been the target of such claims in the past. The company, however, has convinced investigators dispatched by the European Commission of its arm’s-length distance from the military. The company also frequently points out that while it was created in 1960 as a military pension fund, the same legislation that year also created analogous retirement funds for teachers and civil servants. The other two funds languished amid mismanagement and closed in the 1960s.

Akça argued that despite efforts by current OYAK Chairman Coşkun Ulusoy to emphasize the institution’s civilian dimension, the administrative structure presents a contrary picture. All of its 241,000 members are military personnel, he said. Its 40-member board of directors includes only nine civilians, he claimed.

Its companies are run by professional civilians, said Akça, but he argued that the decision-making mechanisms are dominated by the military.

Akça also claimed OYAK enjoys a special tax status and enjoys liquidity that other commercial enterprises lack because all military personnel pay 10 percent of gross incomes directly to the fund, to be returned as annuity upon retirement. That structure, however, is routinely defended by the company as being analogous to many public pension funds in Europe and the United States.