During Russian President Vladimir Putin’s April 3 visit to Turkey, the two sides finalized an agreement on the creation of a $500 million joint investment fund, among other deals. The fund, which, according to official statements, will focus on infrastructure, health care and information technology projects, will be a joint venture between Ankara’s sovereign wealth fund, the Turkey Wealth Fund (TWF) and the Russian Direct Investment Fund.
The deal comes as another sign of the growing ties between Turkey and Russia, but how it will unfold is a curious question, for the future of the TWF itself is mired in uncertainty. Ever since its creation in 2016, the TWF has been under criticism, and even President Recep Tayyip Erdogan has admitted that it has been a failure, calling for restructuring. The main opposition, meanwhile, calls for dissolving the fund altogether.
The legislation creating the TWF was passed hastily in the summer of 2016 amid the clamor of the July 15 coup attempt, outlining ambitious objectives to support Turkey’s development. Public assets worth $160 billion were transferred to the fund, though many were skeptical over its stated goals and some even saw it as a government move to create a “parallel budget.” Looking at what the TWF has achieved thus far, one could conclude that it is next to nothing, an assessment that even the fund’s spearheads, including Erdogan, appear to share. So what went wrong?
To start with, the TWF has nothing in common with the world’s best-known sovereign wealth funds such as Norway’s Government Pension Fund, United Arab Emirates’ Abu Dhabi Investment Authority, China Investment Corporation, Kuwait Investment Authority and Saudi Arabian Monetary Agency. Generally, sovereign wealth funds rely on the budget surpluses of their respective governments. In other words, genuine wealth funds belong to countries with current account surpluses and certain natural riches, mostly oil and gas. Turkey has none of these, struggling with both budget gaps and a chronic current account deficit.
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