Public-Private Partnerships: Lessons learnt from Turkish experience

1. tepav TheEconomicPolicyResearchFoundation of Turkey Public-Private Partnerships:Lessons learnt from Turkish experience Sibel Guven 10 October 2011, Batumi

2. Turkey′s experience in PPP solutions Framework • What do we mean, when we say PPP? • Any role chambers can play? • Two examples from Turkey • Organized industrial estates creating conducive local business environment. • Turkish case • Border management companies to facilitate trade. • GTI example of TOBB

3. Turkey′s experience in PPP solutions Public-private partnerships • Problem definition • Not all public-private interaction is a partnership • Two essential prerequisites for PPPs: • Joint decision-making • Risk-sharing • Financial returnshould be lessthaneconomicreturn • Why do they matter? • The gray/intersection area between markets and states • Market failures and state failures • Key for the effective functioning of both • The complexities of the private sector development process

4. Turkey′s experience in PPP solutions A PPP is collaboration among government and business • A collaboration, in which risks, resources and skills are shared in projects that benefit each partner as well as the community • PPPs can effectively overcome complex public policy problems by bringing together multiple stakeholders • PPPsexpand the set of resources by not only bringing together financial assets but also each partner’s skills

5. Turkey′s experience in PPP solutions PPPsstrengthenthealignment of publicandprivatevalue • PPPs can accomplish what outsourcing cannot: creating and sustaining public value by leveraging the combined assets • The scale and sustainability of a PPP depends on the strength of the alignment of public and private value created by the project • Publicvalueaims to attain a desirable collective social outcome, • Privatevalue aims to attain or exceed privately established benchmarks, such as returns and earnings. • Dueto these differences, simply outsourcing when the government does not have the resources to perform a service becomes problematic.

6. Turkey′s experience in PPP solutions Not everyproject is appropriatefor PPP • PPPs are appropriate under certain conditions • havingtrust and credibility between partners • having a competent and committed executive body • neither of the parties areable to complete the task on their own • creativity in handling the problems where money is not the only answer • no warped priorities of partners and unsuitable assets, such as national security • A competentuse of politicalmanagementamongpartners

7. Turkey′s experience in PPP solutions Chambers as natural PPP catalyzers • Chambers play a very key role because of their structure • both private and public features • strong dialogue mechanisms • integral role in private sector development process • Two cases from Turkey • Organized Industrial Zones • Border Crossing Arrangements

8. Turkey′s experience in PPP solutions Case 1: Turkey’s Organized Industrial Zone Experience • Governments cannot deliver adequate services everywhere equally and efficiently • Designating certain areas as “more equal” for improving the investment climate • 250+ Organized Industrial Zones, 70 fully operational • Started as a urban development tool in the 1960s, with a loan from the World Bank • Private-public partnerships were facilitated through the local chambers • Evolved over time to obtain regulatory oversight • The Law on OIZs was enacted in 2000

9. Turkey′s experience in PPP solutions PPP model in Industrial Zones • A mixed structure of the Management Body • Public involvement • through local government bodies • through chambers • Private involvement • Investors of the OIZ • Areas of joint risk sharing and decision-making • Land development • Utilities provision • Regulatory authorities (licenses and permits)

10. Turkey′s experience in PPP solutions Roles of actors in OIZs • Public support • Land expropriation • Credit for infrastructure construction • Investment incentives (tax breaks for relocation) • Private contribution • Partially or wholly financing construction and land development • Utilities provision • Management • Investment promotion • Maintenance • Regulatory support to investors

11. Turkey′s experience in PPP solutions Performance of OIZs in Turkey Infrastructure Setup Time (days): enterprises inside and outside the OIZs Time for Getting the Permit and the License (days): inside and outside the OIZs Kaynak: TEPAV – World Bank Investment Climate Survey 2005

12. Turkey′s experience in PPP solutions OIZs surely play a role in the diversification performance of the Turkish Industry 65 % of MENA regionsIndustrialexportsarefromTurkey.. ) Number of export items with a volume over 1 billion USD (SITCrev2 classification in 2 digits)

13. Turkey′s experience in PPP solutions Case 2: TOBB has launched the modernization projects of border gates in Turkey • TOBB / GTI has modernized customs gates with a private-public partnership model • Easing bottlenecks at the gates • First project completed in 2003 • Now 8 gates: İpsala, Habur, Cilvegözü, Kapıkule, Sarp, Dereköy, Hamzabeyli, Nusaybin • Build-Operate-Transfer model • No burden on public budget • Effective daily management • Transfer of a modern facility to government after the concession period Goal is toimprovetradefacilitationthrough a PPP scheme

14. Turkey′s experience in PPP solutions What do we mean by trade facilitation? • Enhancing border management facilities • Effective customs administration • ICT usage • Logistics • Institutional capacity building border crossing times Reducing inland clearance physical inspection • Upgrading and adjusting transport infrastructure • interoperability of transport systems • Multi-modal systems • Private sector capacity enhancing

15. Turkey′s experience in PPP solutions TOBB-GTI border gate modernizations • İpsala to Greece

16. Turkey′s experience in PPP solutions TOBB-GTI border gate modernizations • Sarp to Georgia

17. Turkey′s experience in PPP solutions TOBB-GTI border gate modernizations • Habur to Iraq

18. Turkey′s experience in PPP solutions TOBB-GTI border gate modernizations • Cilvegözü to Syria

19. Turkey′s experience in PPP solutions TOBB-GTI: private management is accomplished, next step is to facilitate the public part • What is in the new gate model? • Effective daily management • User-friendly architecture • Facilitation of customs formalities • A high level of ICT use • Next step: facilitate the public part • Multiple public agency involvement • Feedback-based approach (surveys of private logistics companies) • Shorten the time & reduce cost in each step, starting from the longest • Target: full integration of all public agencies involved • Ultimate target: Fully integrated border management Private sector control Public control

20. Turkey′s experience in PPP solutions Next Step: Fully Integrated Joint Border Gate Management • One-window for controls of both countries • First pilot: Tel Zivan border crossing between Turkey & Syria • Bolstering strategic partnership framework • Increased trade volume between two countries • Improvement in the logistics sector • 60-70 % decrease in the border waiting time - Threefold the capacity • Investment and operational costs will get significantly lower • A concrete example for the revitalization of the Modern Silk Road in the big picture

21. Turkey′s experience in PPP solutions Takeaways from a PPP framework • PPPs arekeyto private sector development • Chambers have an essential role to play for creating conducive business environments • It is not only national • Easing bottlenecks have cross-border spillovers • It is not only public sector • Critical role of private sector in design and financing • It is not only demand-driven • Projects to create access to new markets • It is not only economic • Transport issues as a vehicle to bring conflicting parties together