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What Went Wrong in Turkey's Corvette Contest

Nov. 10, 2013 - 04:44PM   |  
By BURAK EGE BEKDIL   |   Comments
FINLAND-TURKEY-DIPLOMACY
Critics believe Turkish Prime Minister Recep Tayyip Erdogan has restarted a competition for a new naval corvette as political payback against a firm that is viewed as sympathetic to protesters. (AFP / Getty Images)
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ANKARA — There are two accounts. The unofficial one hints at a political crackdown on a company owned by an industrial conglomerate that has been at odds with Turkey’s increasingly authoritarian government, especially this summer.

And then there’s official account, which denies everything. Whichever is true, the Turkish government will now open a fresh competition among the country’s seven leading shipyards for the production of four Navy corvettes.

In January, Turkey’s decision-maker on procurement, the Defense Industry Executive Committee, chaired by Prime Minister Recep Tayyip Erdogan, awarded the corvette contract, for six vessels at that time, to RMK Marine, an Istanbul shipyard owned by the country’s biggest business group, Koc Holding.

Defense News had reported that Koc Holding’s defense business could be a casualty of a row between the Erdogan and one of its top executives after a month of civil unrest that battered the Turkish government.

The report quoted an analyst as saying, “It should come as no surprise if the government decided to thoroughly scrutinize all Koc-related contracts, including defense deals.”

In one incident during the June demonstrations, protesters tried to escape police tear gas and pepper spray by taking refuge in a posh Istanbul hotel, Divan, owned by Koc. Hotel management admitted the protesters to its lobby, which quickly turned into a makeshift first aid room.

The police fired more tear gas and pepper spray into the hotel lobby although it is illegal to fire these chemicals into indoor spaces. It was reported that Ali Koc, a board member and third-generation family member, had ordered the hotel to help the protesters.

On June 16, an angry Erdogan said in a public rally: “We know which hotel owners helped terrorists [protesters]. It is a crime to abet terrorists. And those crimes will not remain unpunished.”

Defense News reported on Aug. 13 that the government could revise a contract for the production of corvettes, and on Sept. 26 the Turkish government scrapped the corvette deal, dubbed Milgem, and pledged to renew competition.

Industry sources insist that the decision was political.

“The hostility between Koc and the government is not new. It was there even before the protests. The Koc hotel incident was the last drop in a growing feud,” said one source.

But the top procurement official has a different explanation. “There is no political link here,” said Murad Bayar, head of Turkey’s procurement agency, the Undersecretariat for Defense Industries (SSM).

According to Bayar, one Istanbul shipyard filed a complaint that the earlier two-way contest had violated competition rules. SSM invited two companies, RMK Marine and Dearsan, to the Milgem contest, although a 2007 Strategic Sector Document issued by SSM had named seven shipyards as potential bidders.

Bayar said that in April or May, an inspection board of the prime minister’s office found the complaint accurate and recommended the contract with RMK Marine be canceled. It ruled that all seven shipyards had had to be invited to the competition.

“This has caused us a loss of one year in progressing with this program,” Bayar said. “Now we will invite all seven to a new competition.”

Bayar said two more of a total of eight Milgem corvettes would now be built by the military shipyards, and the remaining four (the first two had been delivered by the military shipyards) would now be commissioned to the winner of the new race. Each vessel, he said, would cost Turkey between US $300 million and $350 million.

Turkey plans to use the experience gained in the Milgem project to develop its first national frigate, the TF-2000, in the 2020s.

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