Roll Up, Roll Up

What are the main challenges facing Turkey’s privatization process, and what are the Privatization Administration’s (ÖİB’s) strategies to overcome them?

Economic conditions directly affect the performance of privatization implementation. For example, the contraction in credit facilities may limit the financing abilities of buyers, while the rise in interest rates could increase financing costs. Regulatory changes during the course of a tender are also among factors that affect the potential investor appetite. In response to these risks, the ÖİB has put in place responsive stipulations for tender specifications where necessary, such as modifying payment and installment schemes. To be able to overcome possible challenges, we are also working closely with potential investors and welcome their feedback on the privatization process. We consider our approach market friendly, aimed at achieving open, transparent, and competitive privatization at each tender. However, despite rather volatile market conditions, 2013 was a record year in Turkey’s privatization history. Revenue from privatizations amounted to $12.5 billion and we managed to finalize 259 tenders.

ÖİB has found success in recent years in the energy sector. What further room is there for privatization in this area, and what other sectors are on your radar?

Privatization of the electricity sector has been a particular success story. We have managed to privatize 18 distribution companies with the goal of minimizing distribution and operating costs. From these privatizations, approximately $13 billion in revenue has been accrued. Meanwhile, we continue privatizations in electricity generation that we are confident will also prove successful. The tender process has already begun for the Çatalağzı, Yatağan, Kemerköy, and Yeniköy thermal plants, with bidding deadlines set for April 2014. There are also other sectors of potential. For example, the privatization of marinas and ports is on the horizon. We now have the Fenerbahçe-Kalamış Marina in our portfolio, which is Turkey’s largest marina. The process has started, and the bidding deadline is May 12, 2014. We also have port projects, namely Izmir Cruise Port, Izmir Container Port, Derince Port, and Tekirdağ Port, for all of which zone planning and preparatory studies are ongoing. As a newcomer, Inebolu Port will soon be included in our portfolio, and we will proceed with its privatization. We also announced the tender for the National Lottery, or Milli Piyango, and the bidding deadline is set for May 20. We are also planning to privatize eight motorways and two bridges under a renewed model. Another major project for the year involves the privatization of winter sports facilities in Erzurum.

How would you assess the attractiveness of Turkey’s privatization tenders to foreign investors?

Turkey has become attractive to foreign investors thanks to its strong macroeconomic fundamentals and demographics. Furthermore, the country has a relatively low unemployment rate, solid banking system, dynamic domestic market, excellent infrastructure, and improved credit rating. Given these solid growth prospects, Turkey is a promising investment address, and boasts a pro-business climate with strong international credentials. In 2012, FDI reached $12.4 billion and the total number of foreign companies hit 33,081. Turkey is not only present in the MENA region, but also has strong ties with Central Asia and the Balkans. We stringently pursue the principles of transparency and accountability in all privatization processes. Furthermore, there is no general limitation on foreign investor participation at tenders. Indeed, almost 35% of our closed deals have seen foreign involvement. The high international standards we utilize are also recognized by international organizations like the OECD and the World Bank.