Public Private Partnership (PPP) in Turkish transports

Due to its privileged geographical settlement, Turkey has been historically a place of transit for people and merchandises between Europe and Asia; that is why the ancient Silk Road found in the city of Istanbul the gates of Europe. The modern Turkey of our days envisages to meet its historical role and it has consequently placed a large number of resources to make transports the backbone of its economic and international future. Furthermore, the year 2023 has inspired a large number of ambitious infrastructure projects in air, railway, road and water transportation, as it will commemorate the 100 anniversary of the modern Turkish Republic. 

All these plans go hand in hand with the extensive use of Public Private Partnership models (PPP), of which Turkey has been a pioneer country. This legal method refers to the cooperation on an equal footing between the public and the private sector on the provision of public services and infrastructures. Public Private Partnership is a wide concept that comprises an array of various legal techniques. It has been the Build-Operate-Transfer (BOT) model, that entails the construction and consequent commercial exploitation by the private actor involved for a defined period of time before transferring it to public hands, the first and most extensively implemented PPP model. However, other PPP models such as Build-Operate (BO), Transfer of Operating Rights (TOR) or Build-Lease-Transfer (BLT) must not be overlooked, as they are quickly gaining grounds. The submission of these models to private law, allows dynamism, efficiency and transparency in the provision of key infrastructure and avoids burdens in the public budget.

 

PPP in transport infrastructure and business opportunities

Turkish transportation infrastructure offers a prosperous terrain for international investment. The economy of Turkey is today ranked as the 17th of the World and it is expected to climb positions in the next years. The pressure of this fast growing economy has to be met with new and continuing infrastructure investment. The Turkish Government has thus allocated a 30% of its budget on the development of the transportation sector, and is openly committed to enhance in the future the participation of the private sector in the achievement of these goals.

 

Public Private Partnership in the midst of a fragmented regulation

The implementation of PPP models in the provision and operation of transport infrastructure faces today important challenges. Public Private Partnership lacks in Turkey of an unified legal corpus and relies in turn heavily in sector-specific laws, which has led to a complex legal panorama that is sometimes difficult to grasp.

Law 3996 on Commissioning Certain Investments and Services within the Framework of Build-Operate-Tranfer Model (8th june 1994) has served so far as the main legal piece to regulate BOT-model PPP’s in Turkey, and it has been the inspiration for the rest of the legislation.

The Build-Operate (BO) model find in turn its sources in the Law 4283 establishing and operating Electric Power Plants and Sale of Energy through the Build-Operate Model (16th 07 1997). Transfer of Operational Rights are conducted mainly through Law 4046 on Concerning Arrangements for the Implementation of Privatization,  and through the sector-specific laws 5335 and 3465. Finally, the source of Built-Lease-Transfer (BLT) patterns are to be found in Law 5396.

Taking into account this legal dispersion, the Turkish authorities have committed to renew the PPP legal framework in the upcoming years, an expected work still in process.  

 

PPP IN FOUR TRANSPORTATION SECTORS

Turkey has developed, is currently developing, or plans to develop Public Private Partnership in air, railway, road and sea transportation.

 

A. Air Transportation

Turkey has the ambitious intention of increasing the capacity of its airports from 165 million to 400 millions of travellers in 2023. PPP has been an irreplaceable tool to do so and it has fit very well in the management of the Turkish Airports since they were opened to the Transfer of Operating Rights (TOR) in 2005, under the scope of Law 5335 on the Transfer of Operation Rights of Airports and Passenger Terminals.

The main airports in the Turkish territory have been developed and operated following the TOR model. The State Airports Authority is the legitimate organism to control and approve the transfer of new rights to private actors. The concession of rights over an airport cannot exceed a maximum period of 49 years, although this has been substantially shortened in practice. For instance, the right to operate the domestic and the international terminals of Atatürk Airport in Istanbul was conceded in 2005 for five and a half years to TAV Construction Group.

The plan to construct a third international airport in the northern part of Istanbul has specially opened interesting perspectives for Public Private Partnership in Turkey. This project will bring an undeniable prestige to the city of the Bosphorus, as it will have the capacity to handle more than 150 million passengers per year upon its fully completion, making it the largest airport in Turkey. So far, it has already become the largest PPP project in Europe, as the tender won by the Limak/Cengiz/Kolin/Ma-Pa/Kalyon Consortium involved more than 26 billion of Euros. The third airport of Istanbul will follow the BOT model, and it will entail the lease of its facilities to private hands for 25 years.

 

B. Railway Transportation

In the next nine years, Turkey aims to build 3.500 kilometres of high-speed tracks, 8.500 kilometres of Speed tracks and 1.000 kilometres of conventional fast operation tracks; a challenging plan that requires from the tight cooperation of the private sector. The planned project to join the cities of Antalya and Alanya by railway is a good example of this commitment.

To do so, the Turkish authorities recently approved the Law 6461 on the Liberalization of the Turkish Railway Transportation, that has opened the doors to private investment and abolished the long-standing State monopoly. Both the National Railway Institution and the TCDD Taşımacılık AŞ play a decisive role in this regard.

We dedicated a special article to this issue in a previous article.

 

C. Road Transportation

The Turkish General Directorate of Turkish Highways has seen Public Private Partnership as the key to implement a large-scale motorway project. On one side, the number of motorways are expected to increase vertiginously, and on the other side, an ambitious enhancement program to upgrade them from single carriage to double one has been set. The Turkish General Directorate has made thus a clear move to improve the level of the service and reduce accidents and mortality.

The BOT model has been chosen as the ideal PPP model for raising the standards of the Turkish road network. The Sabuncubeli tunnel (7kms long), for instance, has been conducted according to the BOT model, what has speeded up significantly the decision making process. The purpose of this project construction is to shorten the distances and develop modern road infrastructure between Manisa, an important industrial place, and İzmir, an important tourism centre in Turkey. Some other major projects that are currently planned to be carried out following the BOT model are the Gebze-Orhangazi-İzmir Highway (433kms) or the Odayeri-Paşaköy Kesimi (95kms).

 

D. Sea Transportation

An immense coastline in the Mediterranean and in the Black Sea, as well as the strategic position of Istanbul that connects both of them, awards Turkey with a privileged international maritime role. The country transports today by sea 80% of its foreign trade, and the current infrastructures have been revealed insufficient to keep the pace of the economic expansion.

The pressing need to provide new ports and maritime infrastructure appears as a clear fact. Turkey plans to reach a container transport handling capacity of 32 million twenty-foot equivalent unit in its ports and expand the shipbuilding capacity of 10 million dead weight tonnage. Moreover, the number of marinas is expected to grow to 100 in the following years.

The use of the BOT model, under the scope of the Law 3996, appears again as an essential legal tool to achieve these goals, and need from the approval from the Ministry of Transport, Maritime Affairs and Communication. The project of Galataport in the historical Istanbulian district of Karaköy has been carried out following PPP schemes and includes the allocation of accommodation and recreational facilities.

 

CONCLUSION

Public Private Partnership has been used successfully in Turkey in the past and it is expected to gain even more importance in the future. The Turkish authorities have understood the potential that can be achieved by involving private companies in the provision of public services and infrastructures and have acted accordingly by establishing the legal framework to make it possible.

Air, railway, road and sea transportation are essential to grant the future development of Turkey and PPP has emerged as a solid, efficient and transparent method for its expansion. In line with a fast growing economy, the demand on transportation infrastructures and services has prospects to increase, making it a very profitable field for international investors.