Does the dispute between Halkbank and Sehir University mean political punishment for Ahmet Davutoglu?

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Does the dispute between Halkbank and Sehir University mean political punishment for Ahmet Davutoglu?

2019-11-22 01:50 GMT
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The default of Sehir University to pay back its loan resulted in the freezing of its assets. The university’s patron Ahmet Davutoglu wants to sell it as a punishment against him

A private university in Istanbul has become a central topic in Turkish politics since this month. Sehir University was founded in 2009 by Science and Art Foundation where then-Foreign Minister and former Prime Minister Ahmet Davutoglu was a key figure.

Today, the university is facing bankruptcy over a dispute with Halkbank, after Halkbank froze its financial assets. The international media outlets were quick to depict it as a political move against Davutoglu since he decided to form his own political party in a bid to be an alternative to the ruling Justice and Development Party (AK Party) headed by President Recep Tayyip Erdogan.

Yet, the situation is of purely commercial nature between Halkbank and Sehir University, and mainly caused by Sehir University’s constant failure to pay loan instalments that started long before Davutoglu left the AK Party.

Sehir University continuingly failed to pay the loan instalments although favourable restructuring options were presented to them, as Halkbank stated. Additionally, the university showed a land worth more than a billion Turkish liras, which was assigned to it free of charge under the irregular application of an exception clause of the Turkish Privatization Law as a collateral to its debts. Former prime minister Davutoglu is accused of using his position to broker this assignment. Turkish Privitization Law forbids public institutions to participate in the privatization tenders. However, Article 2(i) of the Law states that there is an exception for education institutions and local administrations if necessitated by the national security and public interest. However, Sehir University is a private institution charging its students high tuition fees, opposite to the free public universities. So, it is highly controversial to assign public land to a private university in breach of the Privatization Law. For this reason, a district court of Istanbul had opened a case against Sehir University for the cancellation of the assignment.

Halkbank stated that with that development, the collateral lost its value and has become worthless. Therefore, the bank proceeded to freeze the university’s assets, along with considering the long-term default.

While Davutoglu and his entourage wanted to sell the situation as a political punishment, it is completely natural for a financial institution to make sure to recollect its loan. It would be otherwise surprising for a bank to just sit and watch when a creditor failed to pay back a loan worth almost $100 million and lost the collateral for the debt.