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The Ottoman Public Debt Administration (OPDA) in Debt Process of Ottoman Empire”

Authors:
The Ottoman Public Debt Administration (OPDA)
in Debt Process of Ottoman Empire
Prof.Dr. Bedriye Tunçsiper
*
Assist. Prof. Dr. Hasan Abdioglu
**
Abstract
The Ottoman public debt was a term dated back to 1854, when the Ottoman Empire
contracted its European creditors shortly after the beginning with the Crimean War. The
Ottomans were forced to accept new financial controls. By the well known decree Muharrem
Kararnamesi (December 1881) in return for a reduction of the public debt a European-
controlled organization, the Ottoman Public Debt Administration-OPDA (Duyun-u
Umumiye) was set up to collect certain revenues. Taken in conjunction with the activities of
European-controlled banks and with the tariff limitations imposed on the Ottomans by the
Capitulations, the result was distinct restriction on Ottoman ability to guide the allocation of
its resources.
The OPDA played an important role in Ottoman financial affairs. Also it was an
intermediary with European companies seeking investment opportunities in the Ottoman
Empire. In 1900, OPDA was financing many railways and many other industrial artifacts.
Turn of 1900 century the Ottoman Dept debt burden consumed all Ottoman revenues. The
non Muslim subjects of the Ottoman Empire were protected with the capitulations of the
Ottoman Empire. The Ottoman Muslim subjects paid their taxes to the OPDA and watched
their money move to European capitals.
Keywords: Ottoman Debts, Duyun-u Umumiye, Ottoman Public Debt
Administration
*
Dean, Faculty of Economics and Administrative Sciences, Balikesir University of Turkey
**
Bandirma Faculty of Economics and Administrative Sciences, Balikesir University of Turkey
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I. Introduction
Economic difficulties began in the second half of the16th century. The changing trade
routes caused the decline of the provinces taking place on the old international trade routes of
the Middle East. This decreasing of sources created an increasing imbalance of trade between
East and West. The Ottoman economy also faced a serious inflation, caused by the influx of
precious metals into Europe from the Americas. As the treasury lost its revenues, state
obligations like salary payments began to be covered by debasing the coinage (devaluation),
increasing taxes, and confiscations. All these worsened the situation particularly for the reaya
and the salaried askeri class. This further weakened the affairs of the “state” because those
depending on salaries tended to corruption. On the other hand inflation weakened the
traditional manufactures. Functioning under strict price and quality regulations, the guilds
were unable to provide goods at prices to compete with the cheap European manufactured
goods. On the other hand, for the sake of the customs revenues of the state there was no
protective policy, lie the mercantilist measures of European states, to restrict the imports. In
consequence, traditional Ottoman industry fell into rapid decline (Yavuz, 2006:1)
The Ottoman public debt was a term dated back to 1854, when the Ottoman Empire
contracted its European creditors shortly after the beginning with the Crimean War. In 1875
the nominal public debt was £200,000,000, with annual interest and amortization payments of
£12,000,000, more than half the national revenue. After 20 years of borrowing following the
Crimean War, the Ottoman government defaulted in 1875 and declared the Decree of
Muharrem in 1881, which led to the establishment of the Ottoman Public Debt
Administration (OPDA). For the creditors, it was a result of a cooperative effort, which
aimed to secure the repayment of foreign loans and to develop a monitoring and enforcement
mechanism for future investments in the empire. The OPDA tied the interests of the
bondholders to those of the administration and maintained coordination among the creditors.
The strong enforcement mechanism created trust in the Ottoman bonds and benefited the
govenment as well. In 1881 Ottoman Public Debt Administration was established by the
European creditors to collect (certain revenues were assigned) the money by the Decree of
Muharrem. In December 1881, the debt was reduced from £191,000,000 to £106,000,000
with governments confession to PDA. Lastly, with establishment of Republic of Turkey in
1929, it was agreed that Republic of Turkey would only pay 67% of the debt, which
amounted to 107.5 million gold liras.
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II. Ottoman Empire in the Decline Era
There should, in fact, also be a question mark against the phrase “Ottoman Decline”.
It is not at all certain that such a thing existed. It is equally possible to argue that by the 19th
Century the Ottoman Empire was in a much reduced form. The military and political events
during the decline of the Ottoman Empire covers the era between 1828 to 1908. The period
"Decline" was based on the loss/gain comparison of the Empire. Directly affecting the empire
at this time was Russia's expansion. The political rhetoric was dominated with the economic
problems and national uprisings. Empire tried to catch up to the western world by passing
political and administrative reformations (Shaw & Shaw, 1997:56).
The Ottoman Empire as a semi-colonial state and, gives foreign debts, OPDA and the
growing difficulties of permanent capitulations in addition to a classical type of division of
labour in world economy as the most clear examples of it, and, mentions the role of this chain
for the troubles that have been faced during the struggle against economic captivity. The turn
of the century was reflecting an alteration in the relations among the capitalist states and the
states that lack experiencing bourgeois democratic revolutions. Colonialism, as being
essentially a political and military relationship, was evidentiary in the age of competitive
capitalism, in which, one capitalist state forces another state, which is not sustaining similar
features with the latter, to become dependent to its economy and compel the colonized state
to be its raw material source and end product market, furthermore imperialism as the final
stage of monopolistic capitalism, in which exploitation endures through financial capitalism
composed of banking and industrial capital. Thus, for the international system, imperialism
and its adamantine organ, haute finance; “a sui generis institution functioned as the main link
between the political and the economic organization of the world that supplied the
instruments for an international peace system, which has worked with the help of the
European Powers as a permanent agency with an elastic nature by its contacts between
diplomacy and finance (Boratav, 1998:12).
Additionally, for the Ottoman case the role of haute finance had been solidified by its
iron grip when she defaulted on her financial obligations in 1875 and military conflagrations
immediately broke out, lasting from 1876 to 1878 when the Treaty of Berlin was signed28
and following the Treaty, there occurred a peace that lasted remarkably long in comparison
with the antecedent and the following decades of Ottoman history. Due to its relations with
haute finance and the diplomacy network named Concert of Europe, built by the major
European powers, the Ottoman Empire has never been colonized by a single country but
several had lasting ambitions on her. Instead, as couple of examples, such as 1877-78 Russo-
4
Turkish War and First World War have revealed, an attempt for this aim brings considerable
controversies among the European Powers. Therefore, foreign influences and their affection
were depending upon the conjuncture and relative efficaciousness of the European Powers.
However, from the general European perception, the Ottoman state was a despotic state as the
exemplar of permissiveness and iniquity which had to be tamed/adjusted as to be a part of the
European system due to its commitment in the Paris Agreement of the 1856. Throughout the
years of decline, economy and technology based transformation reached to America in the
west and to forgo of the Ottoman state in the east. The enlargement of transformation coerced
the downfall. Since the sixteenth century, the perception that Ottoman élite had put forward
by their reports was in a context of a need for returning to the pure form of old social and
economic system that brought the Ottoman state from a tribal organization to empire. Yet, by
the end of the eighteenth century, the exigencies for the necessity to change became explicit.
The Empire had to confront the challenge of rampageous capitalism and its coercive bodies.
For the European Powers, their intentions towards the Empire could be conceived through the
policy rationale of beggar their neighbor. However, the formation of the Empire was a great
military establishment which conquered vast territories in Europe, Asia and Africa until the
seventeenth century.
When the reforming Sultans of the late eighteenth and nineteenth centuries began to
modernize the structures of their ailing state, they gave their attention first to the army, in
order to defend the borders of the Empire. Consequently, military schools and academies
based on the Western model were set up, and out of these institutions emerged a new
generation of reformist officers committed to the salvation of their state. Inevitably, they
became politicized and conspired with high civilian officials who were also coming from the
same new type of schools that have been reorganized or newly established due to the modern
needs of the Empire. Modernization was a need for survival and all that was modern within
the imagination and the reality of the rising Ottoman élite was in the West. The Ottomans
were cognizant of the forces released by the European revolutions and learned that pre-
modern Ottoman political and social structures would not be able to survive the onslaught of
modern societies, but it was a tardy observation. Infidels were far from being at the door.
They had already overcome the Ottomans by their technology in the economic and political
field as well as in the battlefield. Henceforth, in the last quarter of the nineteenth and by the
beginning of the twentieth centuries, the westernization attitude or being a part of the
European civilization sub-jugate the new élite in each and every aspect of the life. Although,
“they were ready to borrow western civilization with both its rose and its torn”33 the torn
already pricked them and the rose was far from being easily attained. In short, the
modernization period in the late Ottoman era was the source of a new man in the streets of
Đstanbul who was in search of new paths to survival for the state which had created him and
which was also the new major topic and subject of him (Balci, 2004:29).
5
III. Economic Structure in Late Era
The Tanzimat process also led to the reform and modernization of the legal system
and civil bureaucracy as secular legislations in public space were borrowed from Europe. A
wide ranging series of legal reforms, a Napoleonic commercial code among others,
dramatically transformed Ottoman economic and social life, mainly in urban areas. The so
called “reception” movement which initiated secularization in the Ottoman realm included
the adoption of a new criminal code (1840), a compendium of public administration law
(1846), a new commercial code with provisions for Sharia or Religious Law (1850). The
second reform legislation, namely Islahat edict of 1856 proclaimed in the wake of the
Crimean War, permitted the establishment of foreign banks, and the adoption of a new
version of Commercial and Maritime Codes based once again on those of France (1861).
These early moves were part and parcel of a swing towards a secular state and paved a way
for further secularization this time in the private sphere.
Trade with Europe, which had been on the increase since the second half of the
Eighteenth Century, increased rapidly from 1840 onwards and continued to do so until 1873.
Direct investment by Europeans began to grow significantly after the Crimean war (1853),
when the empire was viewed as a land of opportunity and attracted serious business as well as
many adventurers (Zürcher, 2006:3).
Until the development of banks in the middle of the nineteenth century, monetary
activities in the Ottoman Empire laid chiefly in the hands of the Galata Bankers, who were
based in the Galata district of town. These bankers was a group of Ottoman financiers that
had arisen, shortly after the conquest of Istanbul in the fifteenth century, to serve the financial
needs of the government basically on short terms for seasonal ups and downs. They later
offered financial services such as money changing and lending to the Ottoman public. The
Galata Bankers were generally Levantines, Jews, Armenians and Greeks settled mainly in
port cities. Until the seventeenth century, the Jews had been predominant, but thereafter
Armenians, and still more Greeks, who had widespread commercial and shipping contacts
with Europe, played the major role. Their services as intermediaries in monetary transactions
were vital as they evaluated the weights and purity standards of Ottoman money. The coins
issued by the State as part of the process of disguised devaluation lost their intrinsic values
and often did not correspond to their nominal values.
Quasi-paper money, i.e. kaime, issued by the Ottoman Treasury did threaten public
confidence in Ottoman Empire, as it was not backed up by any reserves provided by a central
bank. It was a form of interest-bearing bond or unsecured promissory note issued in small
denominations of 500, 100, and 25 piasters , and was similar to early examples of interest-
6
bearing European paper money, which were paid a premium upon redemption. Originally,
kaime was issued mainly to cover government short-term debts to Galata bankers. It was
solely a domestic currency and was never widely used outside of capital city, Istanbul.
Foreign trade was carried out in hard currency. The further issuance of kaime constantly
devalued ion it and the agio between hard currency and paper money so widened that
financial collapse of the Ottoman system seemed imminent, this, until foreign loans with
Europe were contracted during the Crimean War to withdraw it from circulation. Foreign
debts brought a new supply of sound, i.e. hard currency in precious metal into the country.
During the Russo-Ottoman War of 1876-78, the government resorted to kaime once again. In
1880, the Ministry of Finance, much recovered from the monetary crisis caused by the War,
enacted a comprehensive monetary reform. To promote monetary stability, and create support
for the Ottoman currency, bimetallism was replaced by a quasi-gold standard. The new
standard “unit of account” became the gold lira. Despite all its inconveniences, the notorious
paper money, which ultimately became irredeemable, was nevertheless an important step in
the monetization of the Ottoman economy as it increased the amount of circulating medium
in the country (Pamuk, 2000:230).
Galata Bankers had traded the promissory notes they received from the government
among one another even before the 19
th
century. By the 1840s, they actively bought and sold
government notes such as sergi and kaime on an unofficial secondary market, as well as
trading in precious metals and currency. During the Crimean War (1853-56), when the
government began funding its deficit by foreign borrowings which it covered by bound
issues, a new trade in Ottoman Treasury Bonds (Hazine tahvilleri) began. After the Crimean
War, commerce and foreign investment expanded, due, to a large extent, to the rise in
commodity prices during the American Civil War (1861-65). Until the government defaulted
on interest payments in 1875, precipitating a major crisis and leading to a second important
reform period, Ottoman Treasury Bonds were increasingly popular with Ottoman investors,
vying with traditionally favored investments in metals and jewels. Many Europeans also
invested in Ottoman bonds, including a large number of Frenchmen who put their savings in
them, lured by high yields and the assurances of European bankers and politicians. A later
instrument was the private sector bond, used to finance the development of infrastructure in
Istanbul and in other parts of the Ottoman Empire, ranging from Salonica to Beirut. These
bonds were particularly important for railways. Between 1879 and World War I, Ottoman
railroad bonds replaced Government Bonds as the most lucrative investment, although much
of the initial trading was speculative, similar to the American experience with railroad bonds
after the Civil War. Trading in stocks and shares dates back to mid-century and investment in
common stock on the Istanbul Stock Exchange only became widespread in speculative
periods, and was generally limited to professional traders and interested European parties.
7
The 1870s were a difficult period in Ottoman financial history. The Ottoman
government had contracted excessive debt obligations during the reign of Abdülmecid (1839-
61) and Abdulaziz (1861-75). The government was in such financial straits during Russo-
Ottoman War (1876-78) that it resorted to issuing the notorious paper money, i.e, kaime once
again. When the war was over, the Ottoman government found itself facing debts of 200
million pound sterling and a high war indemnity to the Russians. It defaulted on these debts,
and in 1879 the Ottoman Bank and Galata Bankers stepped in with the so-called Defense
Loan of 9 million pound sterling. In the meantime, as a reminder, the foundations of the
financial services sector in Turkey can be traced back to the moneychangers and Galata
Bankers of Ottoman times before 1847. Until 1847, bankers, who were mostly drawn from
the ethnic minority population in Istanbul, carried out all financial activities. The number of
foreign financial institutions in the Ottoman Empire rapidly increased between the years of
1847 and 1908 (Ozbilgin, 2000:35).
Since the expenditures of the military and the state apparatus far outstripped the tax
collecting ability of an inefficient government, loans were used as a palliative until 1881 to
avoid the harsh necessity of financial reform. The situation did not improve until the 1881
Decree of Muharrem consolidating Ottoman debts and the subsequent creation of the
Ottoman Public Debt Administration (Toprak, 2006:135).
IV. The Ottoman Public Debts in Late Ottoman Era
From the default of October 6, 1875, to the establishment of the Ottoman Public Debt
Administration on December 20, 1881, the Ottoman Empire went through one of the
gloomiest periods of its history. The political situation rapidly worsened: Abdulaziz’s
successor, Murad V, mentally collapsed under the pressure of the events and had to be
removed from the throne only three months after his accession. His brother and successor,
Abdulhamid II, inherited a rather desperate situation with the Empire at war against Serbia
and Montenegro, and the impending threat of a Russian aggression. Despite an attempt at
ingratiating himself with both domestic liberals and the Great Powers by promulgating a
constitution in December, 1876, the new Sultan failed to alleviate the situation. The Russian
threat became a reality in April, 1877, and resulted in the utter defeat of the Empire by the
end of January, 1878. Saved from the humiliating clauses of a peace treaty signed with
Russia by the Congress of Berlin, instigated by western powers, the Ottoman Empire was
nevertheless reduced to the status of a minor power at the mercy of European politics.
The consequences of the bankruptcy of 1875 were harshly felt in every aspect of the
Empire’s administration. The war effort was squeezing every piaster out of the Treasury, and
the government was incapable of meeting its most basic financial requirements, including
8
salaries to civil servants or to officers. Organizing a foreign loan was strictly impossible
under these conditions, and even the Imperial Ottoman Bank had refused to grant the
government an advance of £T 2,000,000 upon instructions received from the London and
Paris committees. The desperation in which the government found itself forced it to resort
once again to paper-money, despite the provisions of the Imperial Ottoman Bank concession
that forbade them from doing so. Derogation was obtained from the institution, and an initial
sum of 300,000,000 piastres was issued between mid-August and late-December, 1876. Soon
enough, two additional issues of 700,000,000 and 600,000,000 piastres were agreed upon,
thus bringing the total issue to 1,800,000,000 piastres, causing a predictable depreciation of
the paper currency of about 65 percent at the end of two years. By the time redemption was
well under way, in 1880, the kaimes had dropped to 10 to 15 percent of their original value
(Eldem, 2004:442). Abstract of Debts and Liabilities in 1276/1860-1 is as follow (Kiyotaki,
2005:26).
Table 1: Abstract of Debts and Liabilities in 1276/1860-1
(Hobart and Foster’s Report)
9
Under these dramatic circumstances, it was clear that the Empire would not survive
unless some solution was found to the crisis created by the bankruptcy of 1875. The Imperial
Ottoman Bank, loyal to its role of a state bank, managed to secure a £ 5,000,000 loan—the
Defense Loan—to contribute to the war effort. More importantly, it mobilized its own
resources in order to provide the Treasury with much-needed short-term advances. In the late
1870s, the proportion of advances to the government to the total of advances lent out by the
bank had soared to nearly 90 percent; in other words, the Ottoman Bank was channeling most
of the resources it could have used on the market to satisfy the desperate needs of the
government. True, the interest rates on these advances clearly reflected the risk taken by the
institution, but it nevertheless signified its willingness to sacrifice its commercial activities
for the sake of keeping the Treasury afloat in these hard times
Yet none of these short-term palliative measures would really solve the protracted
crisis caused by the 1875 default. In this respect, too, the Imperial Ottoman Bank took upon
itself to find a satisfactory settlement. The government was still hesitant to engage in a formal
solution of the foreign debt, most of which was constituted of long-term loans. Much more
pressing was the need to solve the problem of outstanding short-term local debts, including
the bank’s, in order to avoid the shutting down of the doors of local financial institutions. In
November, 1879, an agreement was finally reached between the government and its local
creditors, whereby the state would surrender its indirect revenues from the stamp, spirits,
fishing taxes, silk tithe, and salt and tobacco monopolies. The Administration of the Six
Indirect Contributions thus constituted would be managed by representatives of the Ottoman
Bank and other local creditors. To the surprise of most observers, the arrangement proved to
be a success, and proceeds soon proved to be sufficient to meet the charges of the internal
debt. This success, however, ended up creating a feeling of frustration among foreign
bondholders, who felt left out of a successful deal. Pressuring their governments, they
obtained that negotiations be opened for the settlement of the larger question of the foreign
debt. The negotiations started in October, 1880, and eventually led to the signing of the
Muharrem Decree, on December 20, 1881, which foresaw the abrogation of the 1879
arrangement and its replacement by the Administration of the Ottoman Public Debt. In an
effort to meet the demands of all parties, the outstanding debt of the Empire was reduced
from £ 215,500,000 to £ 128,600,000, bringing it down to a more manageable size. In similar
fashion, the yearly charges on the debt were also reduced significantly, from approximately £
13,600,000 to £ 2,700,000. In return, the government agreed to surrender in totally and
irrevocably the same revenues that had constituted the basis of the 1879 settlement, with the
addition of a number of other state revenues. Overall, the arrangement meant that about one
fifth of the state’s revenues would be irretrievably ceded to the administration until the
complete settlement of the outstanding debt (Eldem, 2004,445).
10
V. Ottoman Public Dept Administration (OPDA)
After the financial crises of 1873 led to the cessation of overseas lending by the
European financial markets, the government was forced to declare in 1875-76 a moratorium
on its outstanding debt which stood at more than 200 million pounds sterling. Bankruptcy of
1875 could only be overcome by central government (House of Osman) giving promises to
bondholders and consolidation of the 210 million pound Ottoman public debt. That is
achieved through establishing a council. After protracted negotiations, the Ottoman Public
Debt Administration (OPDA) was established in 1881 to exercise European control over parts
of Ottoman finances and ensure orderly payments on the outstanding debt whose nominal
value was reduced approximately by half during the negotiations. For the following three
decades until the outbreak of World War I, a sizable share of government revenues were
controlled by the OPDA and applied to debt payments. This control and the regular payments
on the debt were quite reassuring for the European financial markets. The OPDA transferred
huge amount of investments from England to build the credit. In five years the 1/5 of the
huge debt was paid off. In 1880 the sultan had a good credit. That gave chance to other
branches of the Empire to bring new credits. The borrowing was blooming before turn of the
century.
As a result, the Ottoman government was able to resume borrowing towards the end
of the century. With the rise in military spending, both external borrowing and the annual
payments on the outstanding debt gained momentum after the turn of the century. The almost
permanent search for new loans led, in turn, to new dependencies and complications in
Ottoman foreign policy. On the eve of World War I, the volume of annual borrowing as well
as the outstanding external debt had once again reached the unusually high proportions
witnessed in the 1870s.
It may be useful to consider the long term balance sheet for the mid-nineteenth
century regime change from debasements to stable currency and external borrowing. Relative
monetary stability, rapid expansion of foreign trade and European direct investment should
appear on the positive side. Annual rate of growth of Ottoman foreign trade averaged close to
5 percent in real terms during the nineteenth century. There is also some evidence for
economic growth in the period before World War I which can be linked to the growing
commercialization of the Ottoman economy. Monetary stability undoubtedly contributed to
economic growth. At the same time, however, the default of 1875-76, the establishment of
the Ottoman Public Debt Administration and the surrender of some of the leading sources of
revenue to the European creditors in 1881 also suggest that the Ottomans paid a heavy price
for borrowing large amounts from abroad before putting their fiscal house in order (Pamuk,
2002,32).
11
In 1900, OPDA was financing many railways and many other industrial artifacts. The
organization was very famous at this time. It was announced as the new frontiers of the
Ottoman extension. Some claimed that OPDA was an instrument of imperialism. If this
argument was true, the controllers (board of regions) were not obviously the Ottomans. The
Sultan had the power of assigning only one member to the board.
The Muharrem Decree of 1881 was a turning point in the Ottoman debt crisis and led
to the establishment of a commission for financial reforms representing British, Dutch,
French, German, Italian, Austrian and Ottoman bondholders. This commission in turn led to
the formation of the Public Debt Administration (OPDA) which serviced the obligations
incurred during 1854-1877. As most of the foreign bonds were in British and French hands, it
was decided that the president of the United Council of Foreign Bondholders, an office which
was tenable for five years, should be elected alternately from French and English holders.
The OPDA instituted many important financial reforms and implemented new policies such
as the keeping of accounts, double entry bookkeeping, general budgets and generally prudent
fiscal management. Some of the most liquid revenues of the Empire were transferred to the
OPDA, among them the excise taxes on documents, spirits and tobacco, the government
monopoly in salt and the silk tithe (Eldem,2005,440).
VI. Effects of the OPDA to Ottoman Debt Process
The OPDA was highly successful and paid out 113 million pound sterling in debt
service between 1882 and 1914. Its success laid in the direct reforms it applied. Among
others, the OPDA established the Institute of Sericulture in Bursa to increase silk tithe
revenues. This institute provided free instruction and distributed mulberry trees: between
1888 and 1905, some 15-20 million mulberry trees were planted in and around Bursa. These
measures, coupled with sustained world demand for silk, resulted in a sharp increase in
output and exports. Similarly, the OPDA instituted a campaign to raise the domestic
consumption of salt especially in olive and fish processing industries and sent agents to India
to develop a demand for Ottoman salt mined from the Red Sea. As a direct result of this, the
volume of salt exports increased six fold and salt revenues doubled between 1892 and 1909.
The tobacco industries also came under the direct control of the OPDA. However, in
1883, the Commission turned the tobacco monopoly over to a private German-French
company called the Régie Cointeressée de Tabacs de l’Empire Ottoman, which divided the
profits with the Ottoman treasury. The Régie had the sole right to buy and process all tobacco
grown, but in return secured and registered the crops in the fields so that nothing could be
harvested and sold illegally. The tobacco then was stored in the Régie warehouses and the
12
sales price was fixed by negotiations with the planters. Any disputes were settled by
arbitration. The Régie was in charge of selling tobacco products throughout the empire,
setting its own retail prices and choosing its shops. Shops selling foreign tobacco products
operated only under license of the Régie (Toprak, 2006: 137)
The OPDA provided the institutional and personal channels through which European
industrial capital flowed into the Empire. It coordinated direct investment, cooperating
closely with the European embassies and the three major banks, namely the French
dominated Imperial Ottoman Bank, the Deutsche Bank, and the British controlled National
Bank. Between 1854 and 1881, some 19 foreign joint-stock companies had been established
in the Empire. By 1908, this had increased to 82, and in 1914 stood at 212. The companies
formed in the latter period were mostly joint enterprises between Europeans and Ottomans.
External lending plays a crucial role as vehicle through which the hegemony of the
core over the periphery is established or restructured. In mid 1870s and 1880s many debtor
countries faced severe external debt service problems and eventually had to agree on new
contracts for the settlement of their debts, a process that always involved power asymmetries
in favor of the creditors. Among these countries Ottoman Empire presents a unique case of an
empire gradually dissolved and peripheralzed within the capitalist world system. The function
of OPDA supports the colonization through lending arguments due to the crucial role it
played in restructuring the Ottoman Economy in accordance with the developing needs of the
core economies represented in the administration. On the other hand, OPDA initiated several
measures that improved the conditions of the sectors under its control by introducing new
technologies, increasing their productivity, and also generated positive externalities for
several other sectors of the economy.
VII. Conclusion
This paper researched the Ottoman Public Debt Administration and effects to the debt
process of Ottoman Empire in Late Era. It focused on the changing structures of the 19
th
Century in dealing with internal and external borrowing. The influences of moneychangers
and, especially, bankers over the policies of the central government debt policy continued.
Even the reforms of the nineteenth century are best understood as attempts to maintain the
privileged position of the center as well as the territorial integrity of the empire. State
finances were in good shape and there was little need for borrowing until the last quarter of
the sixteenth century. Ottoman institutions of private and public finance retained their Islamic
lineage and remained mostly uninfluenced by the developments in Europe until the end of the
seventeenth century. The Ottoman government continued to rely on tax-farming for both tax
collection and short term borrowing purposes as had been the practice of most Islamic states.
13
State finances came under increasing pressure in the seventeenth century and again from the
1770s onwards, however. European institutions of both private and public finance began to
grow in influence during the eighteenth century. Ottoman state borrowing in the European
financial markets during the nineteenth century led to a default in the 1870s and partial
control of state finances by European creditors until World War I.
The OPDA was highly successful and paid out 113 million pound sterling in debt
service between 1882 and 1914. Its success laid in the direct reforms it applied. Among
others, the OPDA established the Institute of Sericulture in Bursa to increase silk tithe
revenues. This institute provided free instruction and distributed mulberry trees: between
1888 and 1905, some 15-20 million mulberry trees were planted in and around Bursa. These
measures, coupled with sustained world demand for silk, resulted in a sharp increase in
output and exports. Similarly, the OPDA instituted a campaign to raise the domestic
consumption of salt especially in olive and fish processing industries and sent agents to India
to develop a demand for Ottoman salt mined from the Red Sea. As a direct result of this, the
volume of salt exports increased six fold and salt revenues doubled between 1892 and 1909.
The OPDA provided the institutional and personal channels through which European
industrial capital flowed into the Empire. It coordinated direct investment, cooperating
closely with the European embassies and the three major banks, namely the French
dominated Imperial Ottoman Bank, the Deutsche Bank, and the British controlled National
Bank. Between 1854 and 1881, some 19 foreign joint-stock companies had been established
in the Empire. By 1908, this had increased to 82, and in 1914 stood at 212. The companies
formed in the latter period were mostly joint enterprises between Europeans and Ottomans.
The function of OPDA supports the colonization through lending arguments due to
the crucial role it played in restructuring the Ottoman Economy in accordance with the
developing needs of the core economies represented in the administration. Moreover, OPDA
initiated several measures that improved the conditions of the sectors under its control by
introducing new technologies, increasing their productivity, and also generated positive
externalities for several other sectors of the economy.
14
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... Tercatatat sejak tahun 1882 hingga 1914, lembaga OPDA berhasil membayar £130.000.000 utang luar negeri Turki Utsmani (Tunçsiper & Abdioglu, 2019). ...
... Selain itu, komite bank di Paris juga semakin menunjukkan keinginannya untuk ikut campur dalam urusan perekonomian Utsmani. Melalui BIO, para investor Prancis mendikte pemerintah Utsmani untuk mendirikan banyak fasilitas umum seperti pembangunan jalan raya, pelabuhan, pertambangan, dan lainnya hingga tahun 1902 (Tunçsiper & Abdioglu, 2019). ...
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The Formation and Efficiency of Fiscal States in Europe and Asia,1500-1914" of the 13 th International Economic History Congress
  • Sevket Pamuk
Pamuk, Sevket, "The Evolution of Fiscal Institutions in the Ottoman Empire, 1500-1914", "The Formation and Efficiency of Fiscal States in Europe and Asia,1500-1914" of the 13 th International Economic History Congress, Buenos Aires, July 2002.