McKinsey blacklisted from ministerial consulting contracts in Turkey

12 October 2018 Consultancy-me.com

Turkish President Recep Tayyip Erdoğan has reacted to domestic political criticism by banning his ministers from contracting American management consulting giant McKinsey.

In the wake of recent criticism from Republican People’s Party (CHP) opposition leader Kemal Kilicdaroglu over the appointment of McKinsey by Turkey’s Finance Minister Berat Albayrak, Turkish President Recep Erdoğan has ordered a ministerial ban on any further engagement with the American consulting giant. Albayrak had sought support from McKinsey to implement a new economic programme following a period of local economic turbulence.

With Turkish-US diplomatic relations currently strained, including the imposition of reciprocal trade sanctions, the move from Erdoğan, despite the president and other figures in the ruling AK Party defending the deal with McKinsey, was designed to shut the gate on the potential for further political point-scoring. Earlier, Albayrak – who is also Erdoğan’s son-in-law – said that anyone who criticised Turkey for working with McKinsey was “either ignorant or a traitor”.

“This person (Kilicdaroglu) is trying to corner us by asking questions about a consultancy firm that has been paid in full to help our economic management,” Erdoğan is reported to have told members of his party. “In order to not give him that chance… I told all my ministers to no longer receive consultancy from them (McKinsey).” It remains unclear whether the original deal has been scrapped, yet an AK Party spokesperson later said it was not a government contract.McKinsey blacklisted from ministerial consulting contracts in TurkeyAccording to a report from Reuters, AK Party spokesperson Omer Celik told reporters at a party summit that the deal with McKinsey wasn’t an agreement between the Turkish government and US firm, but rather one arranged independently with certain ministries. Celik also however said that Erdoğan had instructed his party and ministers to engage local Turkish consulting firms in the future. Other global strategy and management firms with a presence in Turkey include BCG, Bain, A.T. Kearney and Roland Berger, as well as the consulting divisions of the Big Four.

The new ministerial direction hasn’t however satisfied Kilicdaroglu and other government critics, with Kilicdaroglu remaining on the attack. “I asked you 10 questions, told you to answer them. He read them but couldn’t handle it. He can’t answer and now he has been forced to cancel the deal,” Kilicdaroglu said in accusing Erdoğan of failing to reveal the details of the McKinsey contract, after initially accusing the government of favouring US firms during a period of diplomatic tension.

Originally, McKinsey, which has a long history in national economic restructurings throughout the Middle East, such as most recently for the government in Lebanon, was said to be tasked with evaluating the progress of Turkey towards its economic targets, yet after an earlier round of criticism – including complaints that the US firm would be privy to state secrets – the finance minister said in statement that McKinsey would provide international best-practice analysis only, and ‘have no executive function or authority.”

Founded in Istanbul in 1995, McKinsey's Turkey office has previously advised local government departments on a range of matters, such as on local banking system reforms, the restructuring of the energy and telecom sectors, and the overall privatisation agenda. In 2013, McKinsey was brought in by the Turkish Privatisation Administration to advise on minority state-owned Turkish Airlines’ operations and growth strategies, including potential privatisation measures.

Do consultants have a legitimising effect in the Middle East?

19 April 2019 Consultancy-me.com

Do the often kowtowing international consultants operating in the Gulf simply grant legitimacy to local rulers? The answer’s not so simple says regional expert Calvert Jones, who has conducted a fascinating research study on the local consulting industry.

Now valued at $3 billion annually in the GCC alone, the Middle East management consulting industry has exploded since the global financial crisis, growing at a heady 20 percent clip up until 2014 when the dive in global oil prices and attendant austerity measures briefly applied the brakes; ‘brakes’, in this context, meaning growth which at its lowest point in 2015 dropped to around 6 percent.

The slow-down was brief. With the plummet in oil prices spurring regional governments to act on economic diversification – captured in a range of ambitious national transformation agendas – together with the emergence of a range of digital advances now sweeping the public and private sectors, fresh impetus was given to the local consulting market; this year forecast to return to double-digit growth.

Of that $3 billion consultancy price tag – with close to half of it handed over in Saudi Arabia – the public sector accounts for approximately a third of the take, the vast majority of that paid to foreign consultancies and in particular the advisory wings of the Big Four and global strategy giants such as McKinsey and BCG. Scrutiny of these practices – especially in the wake of the Khashoggi killing – has also increased.

Copping much of the media flak, McKinsey for its part has backed itself as a force for good in the region, contributing greatly toward local economic, education and healthcare development. But the question remains, even if making a positive difference, do international consultancies confer legitimacy on authoritarian governments – “helping to prop up and even strengthen repressive, illiberal regimes?”Does the Middle East consulting industry have a legitimising effect?One person well-placed to address that question is Calvert W. Jones, an Assistant Professor in the Department of Government & Politics at the University of Maryland and author of ‘Bedouins into Bourgeois: Remaking Citizens for Globalization’. Jones spent 19 months between 2009 and 2017 conducting field research in the region, including into the consulting industry and the notion of conferred legitimacy.

According to Jones, some of the consultants she interviewed themselves expressed this concern, particularly when due a range of market factors they may have grown less inclined over time to voice too strong of an opinion. Yet, whether this is indeed the case is not so clear. Among other findings and areas of research, Jones conducted several experiments on the subject of legitimacy at universities in Kuwait, involving some 650 students.

“Conventional thinking about experts in politics suggests not only that experts rationalise governmental decision-making, but also that they confer legitimacy – meaning that the public may be more likely to support government initiatives when experts with the relevant knowledge, training, and experience are involved. In the Gulf, both experts and ruling elites tend to think along these technocratic lines,” she states in an article for the Harvard Business Review.

Experiments

While not addressing potential international legitimacy or other geopolitical or business and trade issues, Jones sought to test the idea of conferred legitimacy as to public opinion in the local polity. For the experiments, she asked participants to imagine that their country’s leaders were launching a major reform to improve either education or infrastructure, exposing them to a variety of mock news articles outlining the likely benefits from the government initiative.

In the first experiment, half of the reports featured reference to a team of top international experts assisting with the hypothetical reform, including their credentials and extensive experience elsewhere, with this detail absent from the remaining half. She found that subjects who read that experts were involved were far less likely to support the reform – indicating the ‘involvement of experts’ may have led to a significant drop in legitimacy. The results, however, are somewhat murky.

In the second experiment, Jones explored the impact of nationality on opinion, with otherwise identical reports on expert-advised infrastructure reform referring to either American, Chinese, or Kuwaiti advisers. She found two surprising results. Support for the reform did not differ significantly whether led by Chinese or Kuwaiti experts, but did however for the American-led reports, with subjects expressing significantly lower support.

The Chinese were also considered far more capable than their American counterparts, which may in itself provide a clue. “It’s not necessarily evidence of profound anti-Americanism, let alone a new love for Chinese experts,” Jones cautions; “Most likely, it reflects Kuwaitis’ longer experience with American experts, which includes their frustration with the lack of progress on various reforms.” The Kuwaitis, she suspects, are just far less familiar with Chinese consultants.

“This experimental evidence raises doubts about the ability of experts to rationalise and legitimise authoritarian rule,” Jones concludes. “Indeed, my research suggests that international experts can actually undermine legitimacy, potentially reducing domestic support for autocrats and weakening their regimes… In my experience, residents of these countries are increasingly critical of their governments paying hefty fees to foreign experts and consultants for little in return.”