Turkish soccer’s financial crisis potentially sharpens political divide

By James M. Dorsey

Financially stressed Turkish soccer clubs are becoming pawns in the political struggle between Prime Minister Recep Tayyip Erdogan and militant soccer fans who rank prominently among his detractors as soccer pitches and university campuses emerge as major battlefields between the government and its detractors.

Critics of Mr. Erdogan charge that the prime minister is seeking to enlist clubs in much the same carrot-and-stick way that he tamed the media by exploiting financial vulnerabilities and turning Turkey alongside Iran and China into the country with the most journalists behind bars. The impact of Mr. Erdogan’s effort to restrict media independence and limit independent critical reporting was evident when last June television stations broadcast soap operas and penguins instead of pictures of mass anti-government protests on Istanbul’s iconic Taksim Square in which soccer fans played a prominent role.

Soccer may however be a tougher nut to crack than the media. Soccer unlike the media has militant fans determined to thwart Mr. Erdogan’s attempts to use troubled clubs to whip them into line. Fans have defied a recent government ban on the chanting of political slogans during matches, rejected attempts by clubs on instructions of the government to sign pledges to abide by the ban, and ridiculed a government public relations campaign that portrays peaceful protest as a precursor for suicide bombings.

The government has taken similar steps to pacify university campuses, including cancelling scholarships for students who had participated in the anti-government protests sparked by plans to replace Taksim’s historic Gezi Park with a shopping mall. Turkish authorities recently arrested 25 students aged 13-19 who visited Iran on suspicion of espionage and propaganda activities. While the arrests reflected tense Turkish-Iranian relations over Syria, it occurred amid a campaign to deter anti-government activity among students.

“They can try Gezi protests in universities. People should not ruin their lives, should not have criminal records,” Turkish sports minister Suat Kilic warned last month in an ironic twist given that Turkey with its history of military coups and the Erdogan government’s crackdown on the media has scores of intellectuals and journalists with police records. Among those is Mr. Erdogan himself, who spent four months in prison in the 1990s for reciting a controversial poem.

Mr. Erdogan’s ability to whip clubs into line and employ them in his confrontation with soccer fans has been enhanced by the debt burden under which Turkish teams are laboring. Bloomberg News quoted the Istanbul stock exchange as saying that short-term borrowings of storied Istanbul club Besiktas JK, its Istanbul rival and Turkish champion Galatasary SC and Black Sea club Trabzonspor FC created “uncertainty over the sustainability” of their finances. The bourse said that shareholders’ equity for each was negative.

Galatasaray is staring at $57 million of debt due in the next year as the result of the expensive acquisition of players like Didier Drogba and hiring of Coach Roberto Mancini. Even so Galatasary with a debt-to-cash ratio of 13:1 compares favorably to Trabzonspor’s ratio of 40:1 and Besiktas’ 24:1, according to data compiled by Bloomberg.

“If Turkish soccer isn’t reformed, institutionalized and if all goes as it has so far, Turkish soccer is doomed to hit a wall,” said soccer economist and journalist Tugrul Aksar.

The battle over freedom of expression on the pitch was being waged as Mr. Erdogan unveiled what he termed a historic democracy package that granted greater liberties but fell short of the expectations of liberals, Kurds and Orthodox Christians and seemed to run counter to concepts put forward by President Abdullah Gul, a co-founder of the prime minister’s ruling Justice and Development Party (AKP).

Mr. Gul, who is gunning for the prime minister’s job, has in recent days voiced far more liberal and inclusive concepts of democracy than the majoritarian ones advocated by Mr. Erdogan. Mr. Erdogan, who has promised not to seek a fourth term as prime minister after leading the AKP to three sweeping electoral victories, is expected to run next summer for the presidency. Many analysts suspect however that he may only keep his promise if he can turn the largely ceremonial office into an executive one.

The battle for greater freedoms also occurs as Turkey braced itself for next week’s European Union progress report that was expected to take the government to task for its hard-handed handling of the Gezi Park protests, limits on the freedom of expression and freedom of press, and the deceleration of its reform process.

In a twist of irony, anthropologist Elif Babül argueshowever that EU programs designed to bring the Turkish police in line with European standards have served to enhance law enforcement’s capabilities and better package rather than reduce its disproportionate use of force. The brutal response of the police to the Gezi Park demonstrations turned a small environmental protest into mass anti-government protests with thousands of militant soccer fans on the frontline. Ms. Babül’s somber analysis suggests that violence is inevitable in future confrontations between the government and street-battle hardened soccer fans determined to stand their ground.

“My research on human rights training programs for Turkish state officials has taught me that the meetings and workshops organized to improve the capacity of Turkey to become a member of the EU are far from unproductive, useless sites of whitewashing that help the government continue business as usual. On the contrary, these workshops, projects, and other tools of harmonization actually serve as platforms for government actors to manage the terms of EU membership, and the governmental standards that they entail,” Ms. Babül wrote.

“It is by conducting projects that state officials come to learn what these standards are really about. They are place-holders for democracy and the rule of law that are supposed to be managed strategically in order to reduce liability and perform a level of development. For instance, it is by interacting with the British police at experience-sharing meetings that the TNP officers learn what it takes to become ‘security experts,’” she went on to say.

“Rather than installing mechanisms to fight impunity within the organization, they learn that what they need is “better policing” that can be attained by building crime databases or by setting up high-tech labs to better conduct forensic investigation… Scholars who are critical of democratization and development industries have shown that programs for economic and political transition continue to produce unexpected outcomes in a variety of places, leading to more accentuated forms of exclusion, inequality, and authoritarianism. The contradictions between the stated goals and actual outcomes of these projects are inherent to the world of development,” Ms. Babül cautioned.

A just published Amnesty International report concluded that the brutal suppression of the Gezi Park protests and with it the subsequent government campaign against militant soccer fans  “significantly undermined the claims of the ruling Justice and Development Party to be delivering responsible, rights-respecting government and exposed a striking intolerance of opposing voices. The smashing of the Gezi Park protest movement has involved a string of human rights violations – many of them on a huge scale. These include: the wholesale denial of the right to peaceful assembly and violations of the rights to life, liberty and the freedom from torture and other ill-treatment. The vast majority of police abuses already look likely to go unpunished, while many of those who organized and participated in the protests have been vilified, abused – and now face prosecution on unfair or inflated charges.”

Among those facing allegedly unfair or inflated charges are 20 members of Carsi, the popular support group of Besiktas who stand accused of being members of an illegal organization. Carsi’s reply in defiance of the ban on political slogans has been to chant "everywhere is Taksim, everywhere is resistance" during matches echoing a popular June protest tune.

James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and the author of The Turbulent World of Middle East Soccerblog.

Turkish soccer club pioneers new funding strategy

By James M. Dorsey

A top football club from the Turkish hinterland is cementing the Turkey’s economic shift away from the commercial capital of Istanbul to the Anatolian inland with plans to increase revenue by building a hydroelectric power station in a country with growing energy demand and no oil or gas reserves of its own.

Trabzonspor, which is competing in this year’s UEFA Europa League, has added power to funding strategy that traditionally depended on ticket sales and the merchandising of club shirts and scarves The innovative strategy was developed in advance of the European soccer body’s imposition in 2014 of financial fair play rules that will bar clubs from being funded by wealthy owners, according to the Financial Times.

The project could well spark other major European clubs to think out of the box about how they will fund themselves once the new UEFA rules kick in and merchandising and sponsorship prove insufficient, particularly for the purchase of high-priced players.

The legendary club received this month government approval for a 28 megawatt plant in the hills above Trabzon, the Black Sea city it helped make famous and that is known for its fanatical football fans and hot-blooded residents who pick a fight first and think later, according to the Financial Times. The plant is expected to cost up to $50 million and gross annual revenues of $10 million. Trabzon is considering building a smaller, second plant.

Trabzonspor chairman Sadri Sener, a local construction magnate, expects the hydro plant to benefit from the mountains surrounding the city and its usually high annual rainfall. “The club needs a guaranteed source of income, and we have the ideal conditions for hydro power,” the Financial Times quoted a Trabzon club official as saying.

Energy is a booming market in Turkey that grows by eight per cent a year. The government projects that it needs to increase installed capacity by 45 per cent from 55,000MW to  80,000MW in the next eight years to be able to meet demand.

Trabzonspor’s move into energy prepares it not only for the introduction of UEFA’s financial fair play rules but also for concerns that Turkish soccer runs the same risk of economic difficulty that the country faces. Turkey got a taste of the risks when external funding tightened last year because of the global financial crisis and the country’s currency devalued more than had been predicted.

“Turkey’s declining success in football can be mapped to economics,” a Renaissance Capital research note said early this year.

Like the economy, Turkish soccer “imports almost all their best players from abroad, and exports (only) one or two good players every year” incurring high levels of debt to attract stars, the note said. It said Istanbul clubs like Fenerbahce, Besiktas and Galatasaray operated as commercial companies that eschew competitiveness for profit.

Renaissance Capital cautioned that buying expensive but old has-beens such as former Real Madrid stars Roberto Carlos and Gut boosts merchandising, but does not add real quality to a team. The focus on sales rather than soccer performance produces the ills many Turkish companies face:  complacency and reduced competitiveness.

The proof is in the pudding. Turkey’s top Istanbul clubs have dominated the country’s soccer for decades, but failed twice in a row recently to win the Turkish league or qualify for the Champions League. The poor performance mirrors a trend in Turkish economic development as growth shifts from the country’s economic capital to Anatolia.

Trabzonspor alongside Bursaspor, among Turkey’s recently most successful teams, hail from the inland. Renaissance Capital pointed to a further trend in line with the economy: Bursa and Trabzon boast trade surpluses while Istanbul accounts for 60 per cent of Turkey’s trade deficit.

To be sure, the similarities between the economy and soccer are not absolute. In some way, Turkish soccer is more in line with its European counterparts than the economy is. Turkish soccer economics mirror those of European clubs that operate on the basis of high debt levels to import rather than export talented players.

The model in contrast to the Turkish clubs has often translated into performance for their European counterparts. One reason is that Turkish clubs have not seen the kind of influx of foreign investment, particularly from the Gulf, from which teams like Manchester City and Paris St. Germain have benefitted. Nonetheless, in contrast to the Turkish economy and most European clubs, Turkish soccer thanks to domestic demand has so far not faced problems accessing funds.

James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies at Nanyang Technological University in Singapore and the author of the blog, The Turbulent World of Middle East Soccer.

Turkish soccer crisis dents Erdogan’s political prospects

Crisis deepends: TFF Boss Mehmet Ali Aydinal (Source Murad Sezer, Reuters)

By James M. Dorsey

Turkey's soccer federation has rejected a proposed rule change that would have prevented teams found guilty of match-fixing from being relegated in a move that counters Prime Minister Recep Tayyip Erdogan’s catering to soccer bosses and their corporate backers and plunges the country’s troubled multi-billion dollar league into an even deeper crisis.

The vote during a tense emergency session of the federation’s general assembly also threatens Turkish soccer’s efforts to become more competitive.

It came two weeks before the opening of a trial against 93 people, including Aziz Yildirim, president of Istanbul’s Fenerbahce SK and 14 players, in a match-fixing scandal involving eight teams that affected 19 league games last season.

Despite being threatened with relegation and loss of its league title, Fenerbahce was among those opposed to a more lenient treatment of offenders. Fenerbahce has already been barred by European soccer body UEFA from Europe’s Champions League because of the match-fixing scandal.

Under the proposed change of article 58 of the Turkish Football Federation’s (TFF) disciplinary code, clubs found guilt would have been spared relegation but penalized with a minimum 12-point deduction.

The rejection puts the TFF at odds with UEFA which urged the association on the eve of the vote to take quick disciplinary action against those allegedly involved in the scandal. UEFA threatened to exclude Turkish clubs involved in the scandal such as Fenerbahce, Besiktas and Trabzonspor from future European competitions.

Fenerbahce alongside Istanbul rival Galatasaray, which has not been implicated in the scandal, justified its opposition to the rule change with the need to wait for legal proceedings to first take their course. In a written statement from his jail cell, Mr. Yildirim called the proposal "a black stain on the history of Turkish football." Echoing Mr. Yildirim, Galatasaray chairman Unal Aysal warned that “you can't change the rules when the game is being played."

The political fallout of the scandal has highlighted the battle lines in Turkey’s ruling Justice and Development Party (AKP) between Mr. Erdogan and his party comrade, President Abdullah Gul in advance of elections in 2014. Mr. Erdogan last month drove against Mr. Gul’s will a controversial bill through parliament that reduced penalties for match-fixing from a maximum 12 to three years and prepared the ground for the rejected TFF rule change.

The legislative move further fuelled controversy over the match-fixing scandal. Mr. Gul opposed it, arguing that it would render the law as an insufficient deterrent. Mr. Gul said parliament’s penalty reduction would be viewed as benefitting those currently under suspicion.

Mr. Erdogan is widely believed to want to succeed Mr. Gul as president when his third term as prime minister ends in 2014. For his part, Mr. Gul is believed to be weighing his options, which include returning to active politics or accepting an international job, once he steps down from his largely ceremonial post. Critics charge that Mr. Erdogan is pushing for constitutional reform in the next two years as a way to shift power from the prime minister to the president in advance of his becoming Turkey’s next head of state.

Mr. Erdogan’s chances of success ride to a significant degree on Turkey’s continued economic performance. Economists however predict that economic growth in 2012 will drop from a stellar seven per cent to about three per cent as a result of its reliance for growth on foreign capital and government-backed stimulus programs, an unorthodox monetary policy and a widening current account deficit.

In emotional remarks TFF chairman Mehmet Ali Aydinlar responded to the rejection of the rule change, saying that at stake was the image of Turkish soccer. "We have made all efforts so that Turkish football is not harmed or loses prestige abroad. But people spoke differently to us than they did behind their backs. Everyone is innocent and only we are guilty. We came with honour and that's how we'll go. History will write the truth," Mr. Aydinlar said.

If Mr. Erdogan’s political future is hitched to the economy, it is also linked to the country’s soccer performance given that the beautiful game is a reflection of the economy.

Economists worry that Turkey’s imminent economic problems could result in a hard landing for its economy unless it moves quickly to streamline its monetary policy and starts focusing on reducing its macro-economic imbalances and particularly the current account deficit. Turkey got a taste of the risks it faces when this fall external funding tightened because of the global crisis and the country’s currency devalued more than had been predicted.

Turkish soccer faces the same risks because it operates on the same principles, according to a sports research note issued last month by Renaissance Capital. 

“Turkey’s declining success in football can be mapped to economics,” the note said according to the Financial Times.

Like the economy, Turkish soccer “imports almost all their best players from abroad, and exports (only) one or two good players every year” incurring high levels of debt to attract stars, the note said. It said clubs like Fenerbahce, Besiktas and Galatasaray operated as commercial companies that eschew competitiveness for profit.

Renaissance Capital cautioned that buying expensive but old has-beens such as former Real Madrid stars Roberto Carlos and Gut boosts merchandising, but does not add real quality to the team. The focus on sales rather than soccer performance produces the ills many Turkish companies face:  complacency and reduced competitiveness.

The proof is in the pudding. Turkey’s top clubs have dominated the country’s soccer for decades but failed recently twice in a row to win the Turkish league or qualify for the Champions League. The poor performance mirrors a trend in Turkish economic development as growth shifts from the country’s economic capital to the Anatolian inland, according to Renaissance Capital.

Two of Turkey’s recently most successful teams, Bursapor and TrabzonSpor, hail from the former Ottoman capital of Bursa and Trabzon on the Black Sea. The finance house pointed to a further trend in line with the economy: Bursa and Trabzon boast trade surpluses while Istanbul accounts for 60 per cent of Turkey’s trade deficit.

The similarities between the economy and soccer are not absolute. In some way, Turkish soccer is more in line with its European counterparts than the economy is. Turkish soccer economics mirror those of European clubs that operate on the basis of high debt levels to import rather than export talented players.

European spending on players as of Friday, two days before the Premier League player transfer window closes was down by more than half compared to the same period last year, according to Dan Jones, a partner in business advisory group Deloitte’s sports business. “Their comparative restraint is indicative of an overriding reflection on spending levels,” Mr. Jones said.

The model in contrast to the Turkish clubs has often translated into performance for their European counterparts. One reason is that Turkish clubs have not seen the kind of influx of foreign investment, particularly from the Gulf, from which teams like Manchester City and Paris St. Germain have benefitted. Nonetheless, in contrast to the Turkish economy and most European clubs, Turkish soccer thanks to domestic demand has not faced problems accessing funds.

The outlook for non-soccer Turkish companies is far bleaker. “Without an increase in competitiveness Turkey is trapped with manic depressive success,” Renaissance Capital said.

For Turkey to maintain or restore economic growth it will have to enhance competitiveness. Turkish soccer will have to become an important soccer player exporter rather than merely an importer.

James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies at Nanyang Technological University in Singapore and the author of the blog, The Turbulent World of Middle East Soccer.