Private-public joint projects for infrastructure accelerate

Private-public joint projects for infrastructure accelerate

Mustafa SÖNMEZ
Private-public joint projects for infrastructure accelerate

The Limak-Kolin-Cengiz-Mapa-Kalyon joint venture won the right to construct Istanbul’s third airport and operate it for 25 years with an offer worth 22 billion euros. DHA photo

Instead of directly investing in public infrastructure projects and employing workers by itself, in recent years the state has tended to realize these investments through cooperation with private actors. With the private-public partnership model, particularly encouraged by the World Bank, a number of substantial projects have been undertaken, and the process is still gathering pace.

Three fundamental supports are expected from the state in this model. The allocation of public land or assets such as shores, forests or water resources, comes first. Secondly, the state is expected to guarantee the purchase of generated energy, or other services for around 25 to 30 years. Thirdly, it is expected to stand as a guarantor for loans received from international banks; in other words, to become indebted together with the private partner.

Private-public partnerships

The state’s cooperation with the private sector takes place in various forms in Turkey. It is particularly eye-catching that private-public partnership projects have gained momentum during Justice and Development Party (AKP) rule. It’s widely acknowledged that the AKP government is opening space for the private sector in construction and management not only of infrastructure services, but even in health and education facilities.

As of 2012, the High Planning Commission (YPK) has granted authority for 138 projects, and implementation agreements have been inked for 42 of these. While these 42 are operating businesses, construction works are ongoing for the remaining 13.

Marinas take the top place among the agreed projects in terms of numbers, and there are airports and customs facilities as well.

Overall, health campuses rank first with 19 projects that received authorization from the YPK in the last three years.

In addition to these projects, 17 other highway service facility projects and 25 energy projects, which are outside scope of the YPK’s authority, have been undertaken in compliance with the built-operate-transfer model.

There are already 13 energy projects in which state has transferred its operational rights, as well as five others realized with build and operate model. Also, the Privatization Administration (ÖİB) transferred the operational rights of 16 ports, the General Directorate of State Airports (DHMİ) transferred the operational rights of five airports, and the Undersecretariat for Defense Industries (SSM) transferred the operation rights of one airport to the private sector.

How much do these 138 PPP projects cost? The information, which isn’t taken from state sources, is on the World Bank’s website about the Private Participation in Infrastructure (PPI). The projects’ total cost is shown as being $86 billion on the page where the developing countries’ PPI projects profiles are indicated. While there were KOİ projects worth $18 billion up to 2002, there was a series of projects that amounted to $68 billion between 2003-2012. We understand from the notices to the World Bank that 44 percent of these projects were based on energy and 41 percent were based on communication. The share of transportation is $15 billion.

How much do the PPP projects, which are worth $86 billion in Turkey according to World Bank data, cost in similar countries? Brazil leads in PPP projects with $402 billion, India inked contracts worth $306 billion, Russia has projects worth $127 billion, China has projects worth $119 billion, Mexico has projects worth $115 billion, and Argentina has projects worth $91 billion. Turkey ranked seventh in the top 10 list.

However, it should be reminded that these are the results for 2012. Istanbul’s third airport doesn’t take its place in Turkey’s contracts worth $86 billion, but this project is worth 22 billion euros (around $29 billion). After adding it into the PPP projects, Turkey’s ranking might rise on the list by the end of 2013.