tepav The Economic Policy Research Foundation of Turkey Sibel Guven 10 October 2011, Batumi Public-Private Partnerships: Lessons learnt from Turkish experience

Framework What do we mean, when we say PPP? Any role chambers can play? Two examples from Turkey  Organized industrial estates creating conducive local business environment. Turkish case  Border management companies to facilitate trade. GTI example of TOBB Turkey′s experience in PPP solutions Slide 2

Slide 3 Public-private partnerships Problem definition  Not all public-private interaction is a partnership  Two essential prerequisites for PPPs: Joint decision-making Risk-sharing Financial return should be less than economic return Why do they matter?  The gray/intersection area between markets and states Market failures and state failures  Key for the effective functioning of both  The complexities of the private sector development process Turkey′s experience in PPP solutions

A PPP is collaboration among government and business A collaboration, in which risks, resources and skills are shared in projects that benefit each partner as well as the community  PPPs can effectively overcome complex public policy problems by bringing together multiple stakeholders  PPPs expand the set of resources by not only bringing together financial assets but also each partner’s skills Slide 4 Turkey′s experience in PPP solutions

PPPs strengthen the alignment of public and private value PPPs can accomplish what outsourcing cannot: creating and sustaining public value by leveraging the combined assets  The scale and sustainability of a PPP depends on the strength of the alignment of public and private value created by the project Public value aims to attain a desirable collective social outcome, Private value aims to attain or exceed privately established benchmarks, such as returns and earnings.  Due to these differences, simply outsourcing when the government does not have the resources to perform a service becomes problematic. Slide 5 Turkey′s experience in PPP solutions

Not every project is appropriate for PPP PPPs are appropriate under certain conditions  having trust and credibility between partners  having a competent and committed executive body  neither of the parties are able to complete the task on their own  creativity in handling the problems where money is not the only answer  no warped priorities of partners and unsuitable assets, such as national security  A competent use of political management among partners Slide 6 Turkey′s experience in PPP solutions

Slide 7 Chambers as natural PPP catalyzers Chambers play a very key role because of their structure  both private and public features  strong dialogue mechanisms  integral role in private sector development process Two cases from Turkey  Organized Industrial Zones  Border Crossing Arrangements Turkey′s experience in PPP solutions

Slide 8 Case 1: Turkey’s Organized Industrial Zone Experience Governments cannot deliver adequate services everywhere equally and efficiently  Designating certain areas as “more equal” for improving the investment climate 250+ Organized Industrial Zones, 70 fully operational  Started as a urban development tool in the 1960s, with a loan from the World Bank Private-public partnerships were facilitated through the local chambers  Evolved over time to obtain regulatory oversight  The Law on OIZs was enacted in 2000 Turkey′s experience in PPP solutions

Slide 9 PPP model in Industrial Zones A mixed structure of the Management Body  Public involvement through local government bodies through chambers  Private involvement Investors of the OIZ Areas of joint risk sharing and decision-making  Land development  Utilities provision  Regulatory authorities (licenses and permits) Turkey′s experience in PPP solutions

Slide 10 Roles of actors in OIZs Public support  Land expropriation  Credit for infrastructure construction  Investment incentives (tax breaks for relocation) Private contribution  Partially or wholly financing construction and land development  Utilities provision  Management  Investment promotion  Maintenance  Regulatory support to investors Turkey′s experience in PPP solutions

Slide 11 Performance of OIZs in Turkey Time for Getting the Permit and the License (days): inside and outside the OIZs Infrastructure Setup Time (days): enterprises inside and outside the OIZs Kaynak: TEPAV – World Bank Investment Climate Survey 2005 Turkey′s experience in PPP solutions

OIZs surely play a role in the diversification performance of the Turkish Industry Turkey′s experience in PPP solutions Slide % of MENA regions Industrial exports are fromTurkey.. ) Number of export items with a volume over 1 billion USD (SITCrev2 classification in 2 digits)

Slide 13 Case 2: TOBB has launched the modernization projects of border gates in Turkey TOBB / GTI has modernized customs gates with a private- public partnership model  Easing bottlenecks at the gates  First project completed in 2003  Now 8 gates: İpsala, Habur, Cilvegözü, Kapıkule, Sarp, Dereköy, Hamzabeyli, Nusaybin Build-Operate-Transfer model  No burden on public budget  Effective daily management  Transfer of a modern facility to government after the concession period Goal is to improve trade facilitation through a PPP scheme Turkey′s experience in PPP solutions

What do we mean by trade facilitation? Enhancing border management facilities  Effective customs administration  ICT usage  Logistics  Institutional capacity building border crossing times Reducing inland clearance physical inspection Upgrading and adjusting transport infrastructure  interoperability of transport systems  Multi-modal systems Private sector capacity enhancing Turkey′s experience in PPP solutions Slide 14

Slide 15 TOBB-GTI border gate modernizations İpsala to Greece Turkey′s experience in PPP solutions

Slide 16 TOBB-GTI border gate modernizations Sarp to Georgia Turkey′s experience in PPP solutions

Slide 17 TOBB-GTI border gate modernizations Habur to Iraq Turkey′s experience in PPP solutions

Slide 18 TOBB-GTI border gate modernizations Cilvegözü to Syria Turkey′s experience in PPP solutions

TOBB-GTI: private management is accomplished, next step is to facilitate the public part What is in the new gate model?  Effective daily management  User-friendly architecture  Facilitation of customs formalities  A high level of ICT use Next step: facilitate the public part  Multiple public agency involvement  Feedback-based approach (surveys of private logistics companies)  Shorten the time & reduce cost in each step, starting from the longest  Target: full integration of all public agencies involved Ultimate target: Fully integrated border management Slide 19 Private sector control Public control Turkey′s experience in PPP solutions

Next Step: Fully Integrated Joint Border Gate Management One-window for controls of both countries  First pilot: Tel Zivan border crossing between Turkey & Syria Bolstering strategic partnership framework  Increased trade volume between two countries  Improvement in the logistics sector  % decrease in the border waiting time - Threefold the capacity  Investment and operational costs will get significantly lower A concrete example for the revitalization of the Modern Silk Road in the big picture Slide 20 Turkey′s experience in PPP solutions

Takeaways from a PPP framework PPPs are key to private sector development  Chambers have an essential role to play for creating conducive business environments It is not only national  Easing bottlenecks have cross-border spillovers It is not only public sector  Critical role of private sector in design and financing It is not only demand-driven  Projects to create access to new markets It is not only economic  Transport issues as a vehicle to bring conflicting parties together Slide 21 Turkey′s experience in PPP solutions