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Implementing Key Features of PPPs:
Case Studies From Turkey
Mehmet UZUNKAYA
Planning Expert
State Planning Organization
OUTLINE
I. RATIONALE: WHY PPPs?
II. WHAT ARE PPPs?
III. THE EXISTING LEGAL FRAMEWORK FOR PPPs IN TURKEY
IV. PROJECTS IMPLEMENTED WITHIN THE EXISTING LEGAL FRAMEWORK
V. MAIN PROBLEMS FACED
VI. FOR SOLUTION...
VII. INTENDED OUTCOMES
RATIONALE: WHY PPPs?
Increasing Infrastructure
Demand
Constraints on Public
Budgets
Inefficiency in
the Existing Systems
Increased consideration of alternative project management and financing methods in both national and local level.
Need for Rapid Realization
of Infrastructure Investments
The Potential of Private Sector
for Financing Support
Potential for Utilizing
Private Sector
Expertise and Dynamism
Public-Private Partnerships
%
Total Investments
Private Investments
Public Investments
Cental Govt. Budget Investments
(*) Includes investments on the municipal level
RATIONALE: WHY PPPs?
GDP Shares of Investments in Turkey (1998-2012)
RATIONALE: WHY PPPs?
Thousand TL
Total Project
Cost
2009
Cumulative
Expenditure
2010
Budget
Remaining
Financing Need
Remaining Time
for Completion
(Years)
AGRICULTURE 68.568.676 24.524.831 3.666.606 40.377.239 12
MINING 1.951.107 116.630 1.419.800 414.677 1
INDUSTRIAL PROD. 1.506.429 603.996 333.472 568.961 3
ENERGY 38.752.912 15.629.815 3.376.100 19.746.997 7
TRANSPORT 103.344.206 54.327.602 7.744.744 41.271.860 6
COMMUNICATION 734.103 293.372 223.500 217.231 2
TOURISM 1.406.179 446.797 182.202 777.180 5
HOUSING 416.027 110.844 157.021 148.162 2
EDUCATION 19.980.361 9.546.415 4.060.417 6.373.529 3
HEALTH 9.361.289 3.195.457 1.777.892 4.387.940 3
OTHER 27.378.875 9.630.245 4.853.536 12.895.094 4
TOTAL 273.400.164 118.426.004 27.795.290 127.178.870 6
2010 Public Investments in Turkey (Beginning of Year)
Public-Private Partnertships (PPPs):
“Risk-sharing contractual agreements between public and private sector on the realization of a public-mission project through the dominant use of private sector resources which is extended beyond the construction to operation and management stages that constitutes the basis for the private partner to cover its costs by either user charges or government’s partly or fully purchasing of the services”
Whichever definition is used, however, both in terms of PPPs as a general and in terms of contract types (such as BOT, BOO, BOOT, etc), boundaries of public and private responsibilities in a PPPs arrangement are basically determined by the specific contract clauses signed between public and private partners.
A GENERAL DEFINITION
WHAT ARE PPPs?
Special Purpose Vehicle
(Project Company)
Contractor Operator Supplier
Public Authority
(Government) Public
Administration Treasury
Bank or International
Finance Organization
(Debt)
Investor
(Equity)
Financing
Contract
Financing
Contract
Construction
Contract
Input Supply
Contract
Implementation
Contract
(PPP)
Purchasing
Agreement
Guarantee
Agreement
Management
Contract
Guarantee
Agreement
Recourse/Non-Recourse/
Limited Recourse
R
R
R R R
R
R R
WHAT ARE PPPs?
Involvement of a new source of finance, helping expand coverage: particularly attractive
for governments having fiscal constraints
Utilization of private sector expertise, efficiency and innovative approach in construction,
operation and management: Factors that would potentially provide better risk
mitigation and drive down the costs of service provision as compared to public
provision.
POTENTIAL BENEFITS OF PPPs
WHAT ARE PPPs?
Risks from Private Sector Perspective
POTENTIAL RISKS IN PPPs
Source: Yescombe, E. R., (2002).
WHAT ARE PPPs?
Commercial Risks Macroeconomic Risks Political Risks
Commercial Viability
Completion Risks
Operation Risks
Environmental Risks
Operation Risks
Revenue Risks
Input Supply Risks
Force Majeure Risks
Contract Mismatch
Sponsor Support
Inflation risk
Interest rate risk
Exchange rate risk
Investment risks
Currency convertibility and
transfer
Expropriation of the project
by the state
Political violence (war and
civil disturbances)
Change of law risk
Quasi-political risk
Risks from Public Sector Perspective
Information, expertise and incentive asymmetry
Subjective project selection
Biased optimism
POTENTIAL RISKS IN PPPs
WHAT ARE PPPs?
Build-Operate-Transfer (Law No: 3996, 3465,
3096)
Build-Operate (Law No: 4283)
Build-Lease-Transfer (Law No: 5396)
Transfer of Operating Rights (Law No: 4046,
5335, 3465, 3096)
Long Term Lease (Law No: 5335, 4046)
Shadow Toll (Law No: 3996)
METHODS COVERED BY THE EXISTING
LEGAL FRAMEWORK
POWER
Electricity Production, Transmission, Distribution and Trading
Dams
TRANSPORTATION
Motorways, Bridges, Tunnels, Carparks, Motorway Roadside Facilities
Railways
Seaports and airports for civil use
AGRİCULTURE Irrigation
WATER AND SEWAGE Water for Drinking and other use Waste Treatment Sewage
SECTORS COVERED BY THE EXISTING
LEGAL BASE
HEALTH Hospitals
TOURISM Marinas
GENERAL ADMINISTRATION Border Gates
MINING
Mining and Enterprises ENVIRONMENT
Investments to Prevent Environmental Pollution
PRODUCTION Factories, and etc.
COMMUNICATION
POWER
BOT Projects (22) Marmara Ereğlisi-Trakya
Natural Gas Combined
Marmara Ereğlisi-Unimar Natural Gas
Gebze-Dilovası Natural Gas
Esenyurt Natural Gas
Birecik Dam ve HEP Plant
Berdan HEP Plant
Çal HEP Plant
Çamlıca HEP Plant
Aksu-Çayköy HEP Plant
Fethiye HEP Plant
Tohma-Medik HEP Plant
SECTORAL APPLICATIONS
Girlevik II-Mercan HEP Plant
Gaziler HEP Plant
Gönen HEP Plant
Kısık HEP Plant
Hasanlar HEP Plant
Suçatı HEP Plant
Dinar II HEP Plant
Ahiköy I-II HEP Plant
Sütçüler HEP Plant
Bozcaada Wind Power
Çeşme-Alaçatı Wind Power
POWER
BO Projects (5)
Gebze Natural Gas Combined-Cycle Electricity Plant
Adapazarı Natural Gas Combined-Cycle Electricity Plant
İzmir Natural Gas Combined-Cycle Electricity Plant
Ankara Natural Gas Combined-Cycle Electricity Plant
İskenderun Thermic Plant
TOR Projects (2)
Çayırhan Thermic Plant
Hazar I-II HEP Plant
SECTORAL APPLICATIONS
TRANPORTATION
AIR TRANSPORT
Antalya Airport I. ve II. International Flights Terminal (BOT)
Atatürk Airport International Flights Terminal Building (BOT)
Milas-Bodrum Airport Terminal Building (BOT)
Dalaman Airport International Flights Terminal Building (BOT)
İzmir Adnan Menderes Airport International Flights Terminal Building (BOT)
Ankara Esenboğa Airport Domestic and International Flights Terminal Buildings (BOT)
Sabiha Gökçen Airport International Flights Terminal Building (BOT)
Atatürk Airport Domestic and International Flights Terminal Buildings (Long Term Lease)
Antalya Airport Domestic and International Flights Terminal Buildings (Long Term Lease)
Zonguldak Çaycuma Airport (Long Term Lease)
Antalya Gazipaşa Airport (Long Term Lease)
ROAD TRANSPORT
Göcek Tunnel (BOT)
Roadside Facilities on Motorways (BOT)
Gebze-Orhangazi-İzmir Motorway (İzmit Bay Crossing Included) (BOT)
SECTORAL APPLICATIONS
TRANSPORTATION
MARITIME TRANSPORT
Çanakkale Kepez Port Superstructure Facilites (BOT)
Güllük Ship Wharf (BOT)
Bodrum Passenger Wharf (BOT)
Trabzon Port (TOR)
URBAN TRANSPORT
İstanbul Strait Road Tunnel Crossing (BOT)
SECTORAL APPLICATIONS
TOURISM
Antalya Marina (BOT)
Didim Marina (BOT)
Dalaman Marina and Seabus Approaching Facility (BOT)
Fethiye Marina (BOT)
Muğla Marina (BOT)
Bodrum Turgut Reis Marina (BOT)
Kaş Marina (BOT)
Alanya Marina (BOT)
Mersin Marina (BOT)
Sığacık Marina (BOT)
Çeşme Marina (BOT)
Gazipaşa Marina (BOT)
Yalova Marina (BOT)
SECTORAL APPLICATIONS
GENERAL ADMINISTRATION
Edirne İpsala Border Gate (BOT)
Iğdır Gürbulak Border Gate (BOT)
Dereköy Border Gate (BOT)
Hatay Cilvegözü Border Gate (BOT)
Artvin Sarp Border Gate (BOT)
Şırnak Habur Border Gate (BOT)
Edirne Kapıkule Border Gate (BOT)
Edirne Hamzabeyli Border Gate (BOT)
MINING A-Kafa Ore Extraction Facility (BOT)
SECTORAL APPLICATIONS
MUNICIPAL SERVICES
İzmit Urban and Industrial Water Supply Project (BOT)
Pre-qualification for 22 projects under the law No.3996.
Municipalities utilize private finance in drinking water, sewerage, solid waste, transport and other (parking, fairs, etc) under the Law of Municipalities (No.5393)
SECTORAL APPLICATIONS
In summary;
Models: Mainly BOT, BO, Long-term Lease and Transfer of Operating Rights
Sectors: Mainly energy, transport, (especially air transport), marinas, border gates
Projects: Mainly of the central administrative bodies
Arrangements in the municipal level are relatively limited and/or of small scale.
SECTORAL APPLICATIONS
1. The piecemeal nature of the existing legislation
2. Lack of model diversity
3. Lack of quality and timely preperation of documents, due to the lack of institutional capacity, that would asses the technical, economic and financial feasibility of projects and their socio-economic costs, benefits and risks, which would effectively assist decision makers in their decisions
4. Lack of ownership by the public sector of PPP projects due to the fact that PPPs are generally financed and operated by the private sector
5. In some cases, the over-optimism that PPPs are panacea
6. Lack of experience of public officials in PPP arrangements, which include more complex processes as compared to conventional procurement methods. (Information and experience asymmetry between public and private sector)
7. Lack of a central PPP unit, which would be a center of knowledge in PPPs and in charge of appraisal, prioritization and selection of PPP projects
8. Lack of standardization of project documents (Feasibilities, contracts, guidelines, etc)
MAIN PROBLEMS FACED
Steps need to be taken,
A single framework PPP law
Building capacity within the public sector
Institutional arrangements
An administrative structure that would, Ensure the compliance of PPP projects with the National Development Plan
Objectives, Annual Programs and Sectoral Policies
Prepare guidance and standardized documents for the implementing institutions
Assist line ministries and implementers to build capacity in preparing feasibility documents
Formulate the national PPP policy
Be in charge of appraisal, evaluation, prioritization, selection and monitoring of PPP projects
Become a center of knowledge
Coordinate creating capacity in the municipal level
FOR SOLUTION…
Meeting the ever increasing infrastructure demand
Increasing the quality and effectiveness of public
services
Contribituon of private finance
Utilizing the management and organization capacity of
private sector
Technology transfer
Fast and timely realization of public investments.
INTENDED OUTCOMES
THANKS...
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