Turkishtrain

Turkish Railway System is Liberalized and Welcomes New Investors

A new law, numbered 6461, concerning the “Liberalization of the Turkish Railway Transportation”, which opens railways to private investors in Turkey, was passed at the Parliament of Turkey on 24 April 2013. The law has been in force as of 01 May 2013.

Unlike the previous state-controlled railway network, the new law has given green light to private investments in the railway sector. The new law has abolished the long-standing state monopoly. In order to do so, two different entities with different purposes, called National Railway Institution and TCDD Tasimacilik A.S (a joint stock company), are established and a strict distinction between National Railway Institution and TCDD Tasimacilik A.S. (a joint stock company) is made by law.  While, National Railway Institution will still be a government institution and regulate railway traffic and its maintenance and build high-speed railway lines; TCDD Tasimacilik A.S (a joint stock company) will serve as a railway transportation company. The distinction between these two institutions may be summarized as follows

a. National Railway Institution is the railway infrastructure operator and it is also a government institution that acts on behalf of the State in the railway sector. This institution is not only in charge of the management of the national railway infrastructure network but also the maintenance of the railway infrastructure network. And last but not least, it will build high-speed railway lines according to the Law. Pursuant to the new law, National Railway Institution will ensure that the same conditions are applied to all railway transportation companies, including TCDD Tasimacilik A.S. As National Railway Institution will be responsible for the maintenance of the current railway, it is not expected that the current railways is privatized as of law 6461. However, it may also be privatized later

b. TCDD Tasimacilik A.S. is a joint stock company established and being subject to Turkish Commercial Code as other private companies. TCDD Tasimacilik A.S will serve as a transportation company and will compete with other railway transportation companies in the railway market under the same conditions. In this case, no distinction will be made between TCDD Tasimacilik A.S. and other private railway companies in terms of legal status as they are all subject to the same rules and the regulations of National Railway Institution

In other words, it can be concluded that National Railway Institution is the regulatory government institution for railways while TCDD Tasimacilik A.S. is a private company being subject to Turkish Commercial Code and National Railway Institution’s regulations.

Even though the railway sector will be liberalized, the State will continue to play an important role in the market. As far as private companies are concerned, private investors have several options to enter into this sector.

First of all, all public and private entities including private investors are now able to build their own railway infrastructure by getting help from National Railway Institution They can either build their own railway infrastructure themselves or by a contractor and get revenue through renting their operating railways. According to press, the government plans to add more than 15.000 kilometers to the railway network within 10 years. This law and building railways through this system will be the key point for the construction of new railways. Moreover, according to the law, the government will be able to expropriate the lands but the investors are required to bear the cost of expropriation.  According to the legislation, investors have the right to use these lands for 49 years. These expropriated lands, destined for railway, will be owned by the government at the end of 49 years free of charge as companies are required to transfer their property´s rights to them.

Secondly, new investors may also enter into the railway sector as transportation companies. They can set up their own transportation companies by using the current railway roads provided by the government or the ones built by private companies by paying their usage fees. In this case, they must pay for the railway the same usage fee as other companies. It is expressly stated in the law that there cannot be any different payment list for competitor railway transportation companies. In any way, a license granted by the Ministry of Transport, Maritime Affairs and Communications, is needed for investors to invest in Turkish railway market.

In sum, Turkish Railway Liberalization Law paves the way for not only Turkish private investors but also international investors to enter into the Turkish railway sector.