1 TURKISH EXPERIENCE IN PUBLIC-PRIVATE PARTNERSHIPS

2 Outline Background of PPP Projects in Turkey Background of PPP Projects in Turkey Sectoral Distribution of PPP Projects Sectoral Distribution of PPP Projects Legal Framework in PPP Legal Framework in PPP Demands by the Public Institutions Regarding the PPP Applications Demands by the Public Institutions Regarding the PPP Applications Fundamental Problems of PPP Applications in Turkey Fundamental Problems of PPP Applications in Turkey Requirements for Succesfull PPP Projects Requirements for Succesfull PPP Projects Draft PPP Law Draft PPP Law

3 Need for Public-Private Partnerships The need for additional finance under the ongoing economic program The need for additional finance under the ongoing economic program Faster implementation of the projects Faster implementation of the projects Reduced operation and construction costs Reduced operation and construction costs Transfer of managerial skills of the private sector to the infrastructure management and public service provision Transfer of managerial skills of the private sector to the infrastructure management and public service provision Enhanced public management system Enhanced public management system

4 Critics Regarding Public-Private Partnerships Critics Regarding Public-Private Partnerships Costly, Complicated and Time Consuming Tender Process Costly, Complicated and Time Consuming Tender Process –Many stakeholders and many negotiations over many documents –Costly tender processes An Incentive for More Costly Projects An Incentive for More Costly Projects –Higher cost of capital for the private sector –Incentive to increase the costs in the “cost+profit” method Excessive Sensitivity to Political and Economic Stability Excessive Sensitivity to Political and Economic Stability –Sensitivity of Foreign Direct Investment to political and economic stability –Higher country risks in developing countries Long Term Projects Long Term Projects –Long Pay Back Periods –Detailed Forecasts

5 Background of PPP Projects in Turkey Concessions During The Empire of Ottoman Public Service Concessions Concessions in Manufacturing Food, Paper, Chemistry, Textile Electricity, Gas, Tunnel, Port, Pier, Lighthouse, Tram, Telephone, Post, Telegraph

6 Sectoral Distribution of PPP Projects Transportation 1. Air Transportation Antalya Airport I. and II. International Passenger Terminals (BOT) Atatürk Airport International Passenger Terminal (BOT) 2. Road Transportation Göcek Tunnel (BOT) Motorway Service Facilities (BOT) 3. Maritime Transportation Çanakkale Kepez Port Superstructure Facilities (BOT) Güllük Pier (BOT) Trabzon Port (TOR) 4. Rail Transportation Antalya-Alanya Railway Project (BOT) (no proposal was received in the tender)

7 Sectoral Distribution of PPP Projects Energy Bursa Natural Gas Power Plant (BO) Ankara Natural Gas Power Plant (BO) Unimar Natural Gas Power Plant–Trakya (BOT) Tourism Turgut Reis Marina (BOT) Customs İpsala Border Gate (BOT) Drinking Water Yuvacık Dam (BOT) Kamu Hizmeti İmtiyazları İmalat Sanayii İmtiyazları

8 Legal Framework in PPP Build-Operate-Transfer Legislation Build-Operate-Transfer Legislation Build-Operate Legislation Build-Operate Legislation Build-Lease-Transfer Legislation Build-Lease-Transfer Legislation Transfer of Operation Rights and Long Term Leases Legislation Transfer of Operation Rights and Long Term Leases Legislation Other Legislation Related to PPP Models Other Legislation Related to PPP Models

9 Legal Framework in PPP Build-Operate-Transfer Laws The Law on the Build-Operate-Transfer No (Official Gazette: 13 June 1994, no 21959) The Law on the Build-Operate-Transfer No (Official Gazette: 13 June 1994, no 21959) The Law on Turkish Electricity Authority for Generation, Transmission, Distribution and Trade of Electricity No (Official Gazette: 19 December 1984, no 18610) The Law on Turkish Electricity Authority for Generation, Transmission, Distribution and Trade of Electricity No (Official Gazette: 19 December 1984, no 18610) The Law on Construction, Maintenance and Operation of Motorways. No (Official Gazette: 2 June 1988, no 19830) The Law on Construction, Maintenance and Operation of Motorways. No (Official Gazette: 2 June 1988, no 19830)

10 Legal Framework in PPP Build-Operate Laws The Law on the Establishment and Operation of Electricity Production Plants and Energy Sales No (Official Gazette: 19 July 1997, no 23054) The Law on the Establishment and Operation of Electricity Production Plants and Energy Sales No (Official Gazette: 19 July 1997, no 23054) Build-Lease-Transfer Laws The Law on Build-Lease-Transfer in health sector No (Official Gazette: 15 July 2005, no 25876) The Law on Build-Lease-Transfer in health sector No (Official Gazette: 15 July 2005, no 25876) Transfer of Operation Rights Law The Law on Privatization No (Official Gazette: 27 November 1994, no 22124) The Law on Privatization No (Official Gazette: 27 November 1994, no 22124) Law No (transfer of operation rights of airports and passenger terminals by State Airports Authority) (Official Gazette: 27 April 2005, no 25798) Law No (transfer of operation rights of airports and passenger terminals by State Airports Authority) (Official Gazette: 27 April 2005, no 25798)

11 Legal Framework in PPP Other Legislation Related to PPP Models Public Procurement Law No and Public Procurement Contracts Law No State Tender Law No.2886 Law on Protection of Competition No Law on Municipalities No Law on Council of State No Financial Management and Control Law No. 5018

12 Demands by the Public Institutions Regarding the PPP Applications General Directorate of State Airports Authority Rehabilitate-Operate-Transfer, Long Term LeasesRehabilitate-Operate-Transfer, Long Term Leases Ministry of Health Design-Build-Finance-Operate-Transfer, Rehabilitate- Operate-TransferDesign-Build-Finance-Operate-Transfer, Rehabilitate- Operate-Transfer Establishing an administrative structure for the PPP ProjectsEstablishing an administrative structure for the PPP Projects A new comprehensive and flexible legal frameworkA new comprehensive and flexible legal framework

13 Demands by the Public Institutions Regarding the Applications General Directorate of State Railways A new legislation for new PPP modelsA new legislation for new PPP modelsDLHİ Complete(finish)-Operate-Transfer, Lease-Operate-TransferComplete(finish)-Operate-Transfer, Lease-Operate-Transfer Project prioritization in accordance with the development plans and sectoral master plansProject prioritization in accordance with the development plans and sectoral master plans Effective coordination among related public bodies responsible and authorised with the implementation of the PPP projectsEffective coordination among related public bodies responsible and authorised with the implementation of the PPP projects Municipalities Technical Assistant in the procurement and contracting phases State Highway and State Hydrolic DGs New Model for Shadow Rate

14 Fundamental Problems of the PPP Applications in Turkey 1. Limited Number of PPP Models in the Laws Limited scope of the existing PPP legislation (legislation limited to BOT, BO, TOR and BLT models) 2. Lack of Harmonisation among PPP Laws Several sector specific and model specific PPP laws

15 Fundamental Problems of the PPP Applications in Turkey 3. Lack of Central Administrative Structure for the PPP Projects Assignment of different public bodies for the implementation of PPP Projects Lack of coordination among the related public bodies Lack of a central public body responsible for setting PPP policies and coordination

16 Requirements for Succesfull PPP Projects A Comprehensive Legal Framework A Central Public Body Improving the Institutional Capacity of the Related Public Bodies Detailed Economic and Financial Feasibilities Proper Project Selection Effective Risk Management Competetive and Transparent Tender Process

17 for the Ongoing Problems Suggestions for the Ongoing Problems Enacting a new comprehensive PPP law in order to extend the scope in terms of the applicable PPP models and sectors Establishing a central public body responsible for coordinating the PPP process, policy setting and improving the institutional capacity of the implementing organizations

18 Draft PPP Law A Draft PPP Law is Prepared by SPO A frame law arranging a great variety of PPP models A new and rational approach in project selection based on feasibility studies A new central governmental body responsible for PPP projects A New Purocurement Law Compatible with EU Lagislation (Draft Law Prapared by PPA)

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