PUBLIC-PRIVATE PARTNERSHIP TURKISH EXPERIENCE Mehmet UZUNKAYA Planning Expert Undersecretariat of SPO

1. PUBLIC-PRIVATE PARTNERSHIP TURKISH EXPERIENCE Mehmet UZUNKAYA Planning Expert Undersecretariat of SPO « Concessions and Public-PrivatePartnerships »Ankara, 10-11 March 2008

2. PPP in TurkeyOTTOMAN PERIOD Public service concessions Railroad,Post, Telegram, Telephone, Lighthouse, Port, Pier, Tram, Tunnel, Electricity, Gas, Water, etc. Manufacturing Industry Concessions Food, Weaving, Quarry-terrain, Metal Objects, Paper, Chemistry, Rubber.

3. PPP in TurkeyRECENT HISTORY Turkey is one of the first countries to apply PPPs since 1980s. One of the leading laws in this area is the Law 3096 on the Assignment of Institutions other than Turkish Electricity Administration for Electricity Production, Transmission, Distribution and Trade” dated 1984.

4. PPP in TurkeyMETHODS COVERED BY THR CURRENT LEGISLATIVE INFRASTRUCTURE Build – Operate - Transfer (Laws no: 3996, 3465, 3096) Build - Operate (Law no: 4283) Build - Rent - Transfer (Law no: 5396) Transfer of operation rights (Law no: 4046, 5335, 3465, 3096) Long term leasing (Law no: 5335, 4046)

5. PPP in TurkeyLAWS AND REGULATIONS BUILD – OPERATE - TRANSFER LEGISLATION Decision no. 94/5907 on the Law 3996 on Performance of Certain Investments and Services within the framework of Build-Operate-Transfer 4 Regulations related to Law 3096 on Assignment of Institutions other than Turkish Electricity Administration for Electricity Production, Transmission, Distribution and Trade Law no. 3465 on Assignment of Institutions other than General Directorate of State Highways for Highway (with tolls) Construction, Maintenance and Operation and Regulation no. 93/4186 regarding this Law

6. PPP in TurkeyLAWS AND REGULATIONS BUILD – OPERATE LEGISLATION Law no. 4283 on Establishment of Electricity Production Facilities with Build-Operate Model and their Operation and Regulation of Electricity Sales and Regulation no. 97/9853 regarding this Law BUILD – RENT – TRANSFER LEGISLATION Law on the Addition of an Article to the Health Services Law no. 5396 and Regulation no. 2006/10655 regarding this Law LEGISLATION ON TRANSFER OF OPERATION RIGHTS AND LONG TERM LEASING Privatisation Law no. 4046 Law no. 5335 (Law authorising the State Airports Authority to totally or partially transfer its airports to the private sector through long term leasing or transfer of operation rights methods)

7. PPP in TurkeySECTORS COVERED BY THE CURRENT LEGISLATIVE INFRASTRUCTURE • HEALTH • Hospitals • TOURISM • Marinas • GENERAL ADMINISTRATION • Customs • MINING • Mines and operation facilities • ENVIRONMENT • Investments on prevention of pollution • MANUFACTURE • Factories and similar facilities • COMMUNICATION ENERGY Electricity generation, transmission, distribution and trade Dams TRANSPORTATION Highways, bridges, tunnels, carparks, highway operation facilities Railroads Ports and airports for civil use AGRICULTURE Irrigation DRINKING WATER, SEWAGE Drinking water Water treatment facility Sewage system

8. PPP in TurkeySECTORAL PRACTICES • Girlevik II-Mercan HP • Gaziler HP • Gönen HP • Kısık HP • Hasanlar HP • Suçatı HP • Dinar II HP • Ahiköy I-II HP • Sütçüler HP • Bozcaada Wind Power • Çeşme-Alaçatı Wind Power HP: Hydroelectric Plant ENERGY BOT PROJECTS Marmara Ereğlisi-Trakya Natural Gas Marmara Ereğlisi-Unimar Natural gas Gebze-Dilovası Natural Gas Esenyurt Natural Gas Birecik Dam and HP Berdan HP Çal HP Çamlıca HP Aksu-Çayköy HP Fethiye HP Tohma-Medik HP

9. PPP in TurkeySECTORAL PRACTICES ENERGY BO Projects Gebze Natural Gas Combined Binary Power Plant Adapazarı Natural Gas Combined Binary Power Plant İzmir Natural Gas Combined Binary Power Plant Ankara Natural Gas Combined Binary Power Plant İskenderun Geothermal Power Plant TOR Projects Çayırhan Geothermal Power Plant Hazar I-II HP

10. PPP in TurkeySECTORAL PRACTICES TRANSPORTATION AIR TRANSPORTATION Antalya Airport International Terminals I and II (BOT) Atatürk Airport International Terminal Building (BOT) Dalaman Airport International Terminal Building (BOT) İzmir Adnan Menderes Airport International Terminal Building (BOT) Ankara Esenboğa Airport Domestic and International Terminals (BOT) Sabiha Gökçen Airport International Terminal Building and Supplementary buildings (BOT) Atatürk Airport Domestic and International Terminals (long term leasing) Antalya Airport Domestic and International Terminal Buildings (long term leasing) Zonguldak Çaycuma Airport (long term leasing) Antalya Gazipaşa Airport (long term leasing) LAND TRANSPORTATION Göcek Tunnel (BOT) Highway Service Facilities (BOT)

11. PPP in TurkeySECTORAL PRACTICES TRANSPORTATION SEA TRANSPORTATION Çanakkale Kepez Port Superstructure Facilities (BOT) Güllük Quay (BOT) Bodrum Passenger Quay (BOT) Trabzon Port (TOR) RAIL TRANSPORTATION Antalya-Alanya Railroad Project (BOT) (no tender was submitted) Reconstruction of the Kapıkule Border Train Station (*) URBAN TRANSPORT İstanbul Bosphorus Tunnel Road (BOT) (*) (*) HPC Authorisation was received for BOT contract, HPC authorisation will be taken for implementation contracts

12. PPP in TurkeySECTORAL PRACTICES TOURISM Bodrum Turgut Reis Marina (BOT) Didim Marina (BOT) Çeşme Marina (BOT) Sığacık Marina (BOT) Kaş Marina (BOT) Alanya Marina (BOT) Mersin Marina (BOT) Dalaman Marina and Quay (BOT) Datça Marina (BOT) Tekirdağ Marina (BOT) (*) Yalova Marina (BOT) (*) Afşa Island Marina (BOT) (*) (*) HPC Authorisation was received for BOT contract, HPC authorisation will be taken for implementation contracts . DRINKING WATER Yuvacık Dam (BOT)

13. PPP in TurkeySECTORAL PRACTICES GENERAL ADMINISTRATION Edirne İpsala Border Gate (BOT) Iğdır Gürbulak Border Gate (BOT) Şırnak Habur Border Gate (BOT) Edirne Kapıkule Border Gate (BOT) Artvin Sarp Border Gate (BOT) Hatay Cilvegözü Border Gate (BOT) (*) Mardin Nusaybin Border Gate (BOT) (*) Edirne Hamzabeyli Border Gate (BOT) (*) Pazarkule Border Gate (**) Esendere Border Gate (**) Türkgözü Border Gate (**) Dilucu Border Gate (**) Akçakale Border Gate (**) Öncüpınar Border Gate (**) Yayladağ Border Gate (**) Kırklareli Dereköy Border Gate (BOT) (***) İstanbul Halkalı Border Gate (BOT) (***) Şırnak Ali Rıza Efendi Border Gate (BOT) (***) (*) HPC Authorisation was received for BOT contract, HPC authorisation will be taken for implementation contracts. (**) HPC Authorisation for BOT contract is submitted to the approval of HPC members. After this, HPC authorisation will be taken for implementation contracts. (***) Preparation works are going on.

14. PPP in TurkeyPROJECTS AT THE PREPARATION STAGE PROPOSED BY THE DG STATE HIGHWAYS TRANSPORTATION Gebze-Orhangazi-İzmir Highway (Including the İzmit Körfez passage)(377 km) (*) Kınalı-Malkara-Çanakkale-Savaştepe Highway (Including the Çanakkale strait –passage) (566 km) Ankara-İzmir Highway (503 km) (Ankara-İzmir)Ayr.-Afyon-Burdur-Antalya Highway (345 km) (Ankara-İzmir)Ayr.-Eskişehir-Bursa Highway (202 km) (*) HPC Authorisation was received for BOT contract, HPC authorisation will be taken for implementation contracts. .

15. PPP in TurkeySOME METHODS NOT COVERED BY THE CURRENT LEGISLATION Design – Build – Finance - Operate Build – Own – Operate - Transfer Rehabilitate – Operate - Transfer Build – Own – Operate Build – Transfer – Operate Made additional investment - Operate Establishing a company with the private sector Shadow tolls

16. PPP in TurkeySOME METHODS NOT COVERED BY THE CURRENT LEGISLATION Justice Services Education Services Cultural Services In order to set up the legal basis for the shadow toll application, which is not covered by the existing legislative infrastructure, a draft law on amending Law no. 3996 was prepared by the Ministry of Finance and was submitted to the Parliament. The draft was approved by the Planning and Budget Commission. It is expected to enter into force in 2008.

17. PPP in TurkeyMAIN PROBLEMS Lack of Institutional Capacity and Structuring in PPP Applications Failure to carry out preparation activities for PPPs in time and sufficiently to help with the analyses on technical, economical and financial feasibility of the projects, economical and social costs, returns and risks. Lack of interest by the public sector to PPP projects as they are financed and operated by the private sector. Lack of experience in the public institutions related to PPP projects which require more complex processes than the classic financing methods (differences of knowledge and experience between public and private entities) Lack of a specialised unit responsible for the analysis, prioritisation and selection of the PPP Projects. Lack of a sectoral standardisation related to the project documents (feasibility studies, contracts, etc).

18. PPP in TurkeyMAIN PROBLEMS Unorganised structure of the existing legislation and its narrow scope covering few models Regulation of different models by different laws and regulations. Shortage of different models: The legislation only covers BOT, BO, TOR, Build-Rent-Transfer and Long term leasing methods.

19. PPP in TurkeyPROPOSALS FOR SOLUTIONS Centralised Unit: Establishment of a centralised unit which will: İdentify the PPP policies in Turkey, Monitor compliance of the PPP Projects to the development plans, programs and sectoral policies, Be responsible for the analysis, evaluation, prioritisation, selection and monitoring of the PPP Projects, Be specialised in PPP area, Prepare guidelines and standard documents for the implementing organisations. Drafting of a single framework law which covers applicable models and sectors Establishment of a national PPP strategy Raising awareness among and providing information to the public institutions about PPP processes

20. PPP in TurkeySTEPS TAKEN FOR SOLUTION Current Situation, Problems and Analysis of Needs Starting from 2005, a series of meetings was organised by the Undersecretariat of SPO with the participation of the relevant institutions and organisations in order to discuss realised PPP Projects, experiences, problems and solutions and new applicable models; and a report was prepared as a result. PPP Draft Framework Law In light of the information acquired and the needs arose during those meetings, a draft PPP framework law, which covers all applicable models and sectors, was prepared by the Undersecretariat of SPO and submitted to the opinion of relevant institutions and. The draft law has been sent to the Prime Ministry and is expected to enter into force in 2008. Secondary legislation regarding this law will be prepared until the end of 2009.

21. PPP in TurkeyINNOVATIONS INTRODUCED BY THE DRAFT PPP LAW Definition of the Public Private Partnership concept Unification of the PPP legislation Definition of PPP models and bringing flexibility to the models Extension of the scope by adding new sectors Introduction of objective criteria related to the PPP Process Introduction of the risk concept to the PPP Projects and definiton of the guarantees

22. PPP in TurkeyINNOVATIONS INTRODUCED BY THE DRAFT PPP LAW Definition of the Public Private Partnership Concept This definition helps to regulate the different concepts of private sector participation to public services under one title, Public Private Partnership, which is a new concept for our country. Unification of the PPP Legislation With the draft law, one single framework is introduced for the unorganised legislation on PPPs. The existing legislation is simplified and a single process valid for all applications is developed by eliminating differences.

23. PPP in TurkeyINNOVATIONS INTRODUCED BY THE DRAFT PPP LAW Definition of PPP models and bringing flexibility to the models The current models of BOT, BO, Build-Rent and Transfer of Operation Rights are now defined under one law, which also brings a flexibility to implement different types of these models.

24. PPP in TurkeyINNOVATIONS INTRODUCED BY THE DRAFT PPP LAW Works such as completion, renovation,development, research, restoration, maintenance, repair, etc. are within the scope of “build”. Shadow tolls implementation is also covered by the law

25. PPP in TurkeyINNOVATIONS INTRODUCED BY THE DRAFT PPP LAW Extension of the scope by adding new sectors Areas such as education, culture, justice and general administrative infrastructure, which are not covered by the existing Public Private partnership legislation, are regulated with this draft law. Introduction of objective criteria related to the PPP Process Feasibility study is introduced as a requirement in the selection of the projects and decision making process is more clearly and rationally defined. HPC (High Planning Council) process Obligation of a feasibility study Risk analyses

26. PPP in TurkeyINNOVATIONS INTRODUCED BY THE DRAFT PPP LAW Introduction of the risk concept to the PPP Projects and definiton of the guarantees It is the first time with this Law that the efficient risk sharing concept, which is the basic element of successful PPP projects, is mentioned. Mechanisms are developed to monitor the financial liabilities for the public sector which might occur as a result of the guarantees and to ensure that these liabilities are in compliance with the the macro-economic balances.

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