PUBLIC-PRIVATE SECTOR PARTNERSHIP PRACTICES IN TURKEY

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

2. 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 Treasury’s role in PPPs arises from its authorization in issuing Treasury Guaranties for PPPs.

3. 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

4. 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.

5. 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.

6. 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.

7. 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. 5335allows transfer of operating rights (TOR) of existing airport terminals to private sector.

8. 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 Turkey’s 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 İstanbul, 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.

9. 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.

10. 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.

11. 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.

12. 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.