The Army Conglomerate

In addition to practicing the profession of arms, military men in some countries have maneuvered themselves into a new and more profitable role: private entrepreneurs. Despite a war that might have been expected to occupy all their time, army colonels in South Viet Nam operated a string of civilian enterprises that included banking, construction and transportation, until a government crackdown earlier this year forced them out of business (TIME, April 3). The military in Indonesia owns a domestic airline, Mandala, bus services and banks. For sheer scope, drive and staying power, however, the business offensive of Turkey's army is in a class by itself. Turkish military chiefs openly and aggressively run what amounts to the country's biggest and most pervasive conglomerate.

The instrument of this entrepreneurial clout is the Armed Forces Mutual Assistance Fund (known as OYAK in Turkish), which was established in 1960 when a military junta temporarily seized control of Turkey. Under OYAK rules, regular officers (commissioned and noncommissioned) in the air force, navy and ground forces, who number about 80,000 in all, are required to pay 10% of their wages into the fund for eventual reimbursement. So far, OYAK has collected more than $100 million.

With this inflow of capital, OYAK investments have spread throughout the Turkish economy. The fund owns controlling interests in Turkish Automotive Industry, a company that assembles International Harvester trucks and tractors; MAT, a truck and tractor sales firm; the OYAK Insurance Co.; Tukas, a food canning firm; and a $3,000,000 cement plant. OYAK also holds 20% of the $50 million Petkim Petrochemical plant, scheduled to begin operations within three years, 8% of state-owned Turkish Petroleum and 7% of a $5.6 million tire factory owned mostly by Goodyear. Civilians operate the companies, but many key posts are held by former officers, often appointed by the top brass, who tightly control fund activities.

Many lower-ranking officers, the "members" whom the fund was established to benefit, are increasingly unhappy with the arrangement. Under the rules, regular officers are allowed to borrow from the fund to buy homes and appliances. On leaving the service they get back what they put into the fund, in addition to 5% interest, plus another 2% per year, which is supposed to represent their share of the profits (reserve officers, drafted for 18 months, are forced to pay out 5% of their wages but get nothing back). The regular officers complain that Turkey's roaring inflation is chewing into their involuntary savings. They also complain that the amount of money they get back is inadequate because it does not reflect the growing value of the fund's assets, which are now worth an estimated $300 million. Military officials of the fund reply rather lamely that the payout is kept low so that increased investment of plowed-back profits will yield even greater benefits for future generations of officers. Though most officers are dissatisfied with this explanation, few, if any, believe that there is any rake-off at the top.

Blunted Lead. Civilian businessmen sometimes find that competing against companies in which OYAK has an interest is like standing in the way of a cavalry charge. Last year, for example, a plant near Istanbul that is owned jointly by Italy's Fiat Motor Co. and Turkish Tycoon Vehbi Koc began producing cars for the Turkish market. Construction of an auto plant owned jointly by France's Renault and OYAK was well behind schedule, and it seemed that Fiat cars would gain a long sales lead--until the fund swung into action. After arranging the specifications so that other companies were in effect barred from bidding, the army ordered 100 Renaults for its brigadier generals, thus giving the cars the cachet of being the military's official vehicle. Fiat claims that contrary to a law that limits imports of auto components, all the parts for the Renaults were shipped in from France and assembled in Turkey. Thus Fiat's advantage was blunted.

The fund also enjoys special tax breaks. It pays none of the 25% corporation tax on its earnings. It is exempt from paying the 10% stamp tax charged for business transactions, and the payments to and from its members are untouched by income or inheritance taxes. For all that, Lieut. General Fikret Elbizim, fund chairman, solemnly asserts: "We are not after any privileges. We merely want to coexist with the private and state sectors." Turkish businessmen can only imagine what they would have to contend with if the armed forces wanted more than coexistence.

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