Business | Economy
Tesco's expansion in Turkey caught in political turmoil
In a week that Tesco vaunted its international credentials with a move into India, the UK's biggest retailer was trying to disentangle itself from a row in Turkey that underlines the challenge and reputational risk of operating in emerging markets.
- By Alex Barker and Tom Braithwaite, Financial Times
- Published: 23:21 August 18, 2008
In a week that Tesco vaunted its international credentials with a move into India, the UK's biggest retailer was trying to disentangle itself from a row in Turkey that underlines the challenge and reputational risk of operating in emerging markets.
The development of a large supermarket near Istanbul turned into political football when the deputy leader of the governing AKP party was accused by the opposition of accepting a $1 million bribe to help expedite an unorthodox planning proposal.
The money - which Saban Disli, the deputy leader, says was a separate and legal payment - was paid by Mehmet Karasu, a Turkish entrepreneur, who later sold a tract of land with unusually liberal planning permits to Tesco.
"Britain should be proud of Tesco," says Karasu. "I've never worked with a more honest and careful company. They told me their world reputation was more important than anything else. Everything had to be straight." He says he is victim of a "political lynching".
The deal Tesco struck with Karasu was unusual by UK standards. The retailer decided against buying the land and making its own planning application. Instead it made an 'initial payment' of $1.5 million to Karasu to support his buying it.
In a contract, first made public by Turkey's Vatan newspaper, it then pledged to pay a further $6.9 million once Karasu obtained detailed planning permission for a supermarket. Eventually, Tesco paid Karasu $13 million for land he had acquired less than two years previously (with the financial support of Tesco) for just $3.5 million.
"The demands Tesco made break a long list of planning principles and laws that would be very hard to change," says Suay Karaman, an expert in planning and deeds at Gazi University. "Putting a shop this big on the main road will turn the traffic management plans upside down. Moving roads and parks is not something that can be done quickly or easily. But somehow they have found a way."
Tesco says it acquired the land only after the permits were put in place.
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