PUBLIC-PRIVATE SECTOR PARTNERSHIP PRACTICES IN TURKEY

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PUBLIC-PRIVATE SECTOR PARTNERSHIP PRACTICES IN
TURKEY
OKTAY VARLIER Ph.D.
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LEGAL BACKGROUND

• In Turkey, there is no specific or central PPP
  unit.
• Public infrastracture investments are planned and
  reviewed by the State Planning Organization
  (SPO).
• Undersecretariat of Treasurys role in PPPs
  arises from its authorization in issuing Treasury
  Guaranties for PPPs.

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• There are six main laws on PPPs that are
• 1) Law No. 3096 dated 1984 on Granting
  Authorization to Institutions Other Than The
  Turkish Electricity Authority for Generation,
  Transmission, Distribution and Trade of
  Electricity
• This law enables private sector to engage in
  electricity generation, distribution and trade
  and forms the legal basis for electricity
  generating plants (except nuclear plants) to be
  built and operated with the Build-Operate-Transfer
  (BOT) model and to be operated with the Transfer
  of Operation Rights (TOR) model.
• There are 25 generation plant projects subject
  to this Law. 24 of them under operation. Treasury
  Investment Guaranty has been provided for 10 BOT
  and 1 TOR projects.
• Projects under this law are not subject to
  tendering process. Past projects had been
  assigned to specific investors by the Ministry of
  Energy and Natural Resources without open
  tenders.
• Currently, Electricity Market Law No. 4628
  avoids granting the Treasury Investment Guaranty
  in the electricity sector for new projects

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• 2) Law No. 3465 dated 1988 on Granting
  Authorization to Institutions Other Than The
  General Directorate of Highways for Construction,
  Maintenance and Operation of Highways
• This law forms the legal basis for highways and
  related roadside facilities to be built and
  operated under the Build-Operate-Transfer (BOT)
  model and to be operated under the Transfer of
  Operation Rights (TOR) model.
• There are 1 tunnel and 35 roadside facilitiy
  projects under the BOT model subject to this Law.
  25 of roadside facilities built are under
  operation. No Treasury Investment Guaranty has
  been provided for these projects.
• Projects under this law are subject to tendering
  process.

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• 3.) Law No. 3996 dated 1994 on Realization Of
  Certain Investments And Services In The
  Build-Operate-Transfer Model
• This law forms the legal basis for numerous
  categories of infrastructure investments to be
  built under the Build-Operate-Transfer (BOT)
  model named as bridges, tunnels, dams,
  irrigation, drinking and tap water, treatment
  plants, sewage, communications, generation,
  transmission, distribution and trade of
  electricity, mines and mining operations,
  factories and similar facilities, investments for
  preventing environmental pollution, highways,
  railways, underground and ground auto parks, sea
  and airports for civil use, and other similar
  investments and services.
• There are numerous projects subject to this Law.
  Key projects are of airport terminals. The
  Treasury Investment Guaranty has been provided
  only for one project in water sector which is
  under operation.
• Projects under this law are subject to tendering
  process.

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• 4. Law No. 4283 dated 1997 on Construction and
  Operation of Electrical Energy Generation
  Facilities and Energy Sales In The Build-Operate
  Model.
• This law forms the legal basis only for thermal
  power plants to be built under the Build-Operate
  (BO) Model.
• There are 5 projects subject to this Law. All of
  them are under operation and Treasury Investment
  Guarantee has been provided for them by the
  Undersecretariat of Treasury.
• Projects under this law are subject to tendering
  process.
• Like Law No. 3096, currently Electricity Market
  Law No. 4628 avoids granting the Treasury
  Investment Guaranty in the electricity sector for
  new projects.

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• 5) Law No. 4046 dated 1994 on Privatisation
  Applications
• In fact, this law forms the legal basis for
  privatisation. However, it also includes a
  chapter on Privatisation of Public Services in
  Transfer of Operation Rights, Lease and Profit
  Sharing models.
• The Treasury Investment Guaranty is not granted
  for projects performed according to this Law No.
  4046.
• 6) Supplementary Clause No.7 (Law No. 5396 dated
  2005) to the Law No. 3359 on Health Services
• This latest law authorizes Ministry of Health to
  contract with private sector for long durations
  up to 49 years for building health units and
  providing non-clinical support services in return
  for yearly rentals to be paid to private sector.
• 7) Law No. 5335 allows transfer of operating
  rights (TOR) of existing airport terminals to
  private sector.

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• PPP Projects are not included in the Yearly
  Investment Programs prepared by the SPO. However,
  according to the general PPP Law No. 3996 High
  Planning Council approves both the PPP projects
  and contracts between public and private sectors
  .
• Most of the PPP projects are in energy sector. In
  energy sector, between 1995 and 2001 thirty (30)
  power plants with a total capacity of 8500
  MegaWatts equaling one fourth of Turkeys power
  production capacity have been completed under
  Build-Operate-Transfer (BOT), Build-Operate (BO)
  or (TOR) models. Total investment cost of these
  projects are approximately 7 billion US Dollars.
  
• In airport terminal building and operating
  projects Turkey has significant success stories.
  6 civil airport terminals of Turkey including
  Istanbul, Antalya I and II and Ankara Airport
  Terminals with a total investment cost of 1
  billion US Dollars has been constructed and/or
  renovated by BOT model and they are under
  operation at the moment.

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• After those examples in the past 20 years in
  public-private sector partnerships, the Turkish
  private sector has got an important experience in
  infrastructure services. Nevertheless there were
  problems mainly deriving from the lack of legal
  framework and risk distribution between public
  and private sectors. Although first regulations
  were made in 1984, the contracts of the first big
  energy projects were signed in 1993 and completed
  between 1999-2001. This delay decreased the
  interest of local and foreign investors or made
  them foresee high risk premiums.
• Another negative result of the insufficient legal
  framework was that arguments focused on legal
  aspects so that technical and economical
  feasibility of projects and the risk distribution
  between both sides were not given so much
  importance.

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A CASE STUDY BELEK TOURISM INFRASTRUCTURE
PROJECT

• As a successful example for public-private sector
  partnership I will introduce the Belek Tourism
  Center which is shown as a good model of
  governance in tourism by international
  institutions.
• The Belek region on the Mediterranean coast is
  located 30 km. on the east side of the city
  center of Antalya. Belek has 80-150 m. wide sandy
  beach and 300 days of sunshine. In neighbouring
  regions there is the Hellenistic/Roman city of
  Perge which is rated second after Ephesus and the
  great amphitheater of Aspendos that still today
  can hold nearly 15 thousand viewers.
• Belek was proclaimed tourism center by the
  Ministry of Tourism in 1984. First investors in
  Belek faced big problems about infrastructure and
  decided to form a dynamic structure to overcome
  the infrastructure problems with the cooperation
  of the public sector institutions. With this aim
  the Belek Tourism Investors Union (BETUYAB) was
  established in 1989.

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• Investments completed
• With the leadership and coordination of BETUYAB
  following infrastructure investments were
  completed in the 1990s
• Drinking water very good quality drinking water
  from five wells is transported to the facilities.
• Waste water treatment plants there are two waste
  water treatment plants for 70 thousand person
  capacity.
• Road the roads of total 45 km. long were
  constructed in the region.
• Electrification 55 thousand kW/hour capacity
  power was established for the requirements of
  facilities and road illuminations.
• Telecommunication fiber optic lines were laid
  down and 25 lines were given to each facility.
• Intervention to forest fire Wireless radio
  network as the Belek region is surrounded by
  forest fire hydrants were placed inside the
  forest , a fire intervention vehicle was put into
  service, all tourism facilities joined a wireless
  radio network system in connection with Forest
  Area Directorate, Gendarme and BETUYAB and the
  forest was surrounded with wire fences of 35 km.
  long.

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• Presently, there are 35 tourism facilites in
  Belek with 35.000 beds. 6 new hotels are on
  costruction, further 5 are at the project stage.
  When these 11 facilites are completed, the total
  bed capacity in Belek will rise to 46.000.
• Tourism facilities in Belek are eighter 5 star
  hotels or 1st class holiday villages. All the
  facilities offer tennis courts, indoor and
  outdoor swimming pools, completely equipped
  health and fitness centers, play areas and many
  more possibilities.
• The availability of large spaces suitable for
  golf and the temperate climate of Belek create a
  great potential for golf tourism. Presently there
  are five golf courses in Belek. Five others are
  on construction. Belek is a candidate to be an
  important golf center at international standards.
• Superstructure investments in the Belek region
  amount to 2 billion US totally realized by the
  private sector. Total expenditures for
  infrastructure are estimated to be 350-400
  million , 1/3 met by tourism investors, 1/3 by
  the Ministry of Tourism and 1/3 by other public
  institutions like municipalities, Ministry of
  Energy, Ministry of Public Works, etc.