Turkish Privatization Law: An introduction
with Aykut Bakirci, Partner, Bezen&Partners, former Legal Counsel of Turkish Privatization Authority
Privatization, in its modern sense, started in Turkey with the establishment of the Privatization Authority in 1984 by the passage of a ministerial decree and with no legislation under the auspices of the Prime Ministry. During its early years, the work of the Privatization Authority (hereafter referred to as the PA) was limited to small “first steps” in form of IPO’s and sale of small assets. Until the passage of the Privatization Law (No. 4046) in 1994, the PA’s early years were marked with judicial challenges in the High Court of Turkey that repealed the legislation effort, stating the constitution did not allow for privatization and the PA’s mandate. During its early years, the PA’s 2 committees were also in charge of mass housing projects. However, with the passage of the 1994 privatization law, following constitutional amendments and High Court’s approval, the PA was granted larger freedoms for starting a more fundamental privatization effort. Shortly thereafter, in 1997, the Constitution was yet again amended for EU compliance reasons and the word privatization is explicitly used in the amendment’s text.
The privatization law and the amendment allowed the PA to privatize with less red tape and issues. When the PA was founded, it’s mission was to privatize all of the assets marked for privatization in 30 years but the PA had only a part of those assets under management. However, with the government’s failure to address this issue, privatization efforts progressed much slower than anticipated. In 2002, the Justice and Development Party (AKP) came into power by winning a two-thirds majority of seats in the Grand National Assembly. The party’s economic program included a dedication to increased privatization efforts resulting in the PA’s efforts were increasing significantly. The official document by the PA entitled the “Privatization Endeavor in Turkey” states that from 1985 until today, the total proceeds from the privatization implementations is recorded as USD 43.1 billion. Aykut Bakirci estimates differently, stating that from 1984 until 2002, the total value of all assets privatized is estimated at around $8 billion while the period after 2002 saw over $24 billion of assets privatized by the PA. The AKP led government insisted on comprehensive privatization and took many steps to ensure a faster process that resulted in a greatly increased number and value of assets privatized by the PA until 2007. In the aftermath of the 2007 global financial crisis, the privatization process came to a slowdown as a result of the global credit crunch yet the PA’s mandate remained the same with many assets privatized in the period from 2007 till today. Recently, announcements have been made that the PA will push ahead again with new privatization processes.
Onur Okşan of Bezen&Partners has contributed to this post.
Excerpt from the PA’s “PRIVATIZATION ENDEAVOR IN TURKEY”:
LEGAL FRAMEWORK
Bodies Responsible from Privatization under Law No. 4046
Under the Privatization Law No. 4046, privatization process is carried out by two bodies:
- Privatization High Council
- Privatization Administration
The Privatization High Council (PHC) is the ultimate decision-making body for privatization in Turkey. The Council, headed by the Prime Minister, is composed of four ministers. PHC nominates the organisations for privatization through taking state-owned economic enterprises in and out of the privatization portfolio and is responsible from the methodology and timing of the privatization procedures by approving the final transfer procedure of the organizations to real people or/and legal entities.
The Privatization Administration (PA) is the executive body for the privatization process. It is a legal public entity with an exclusive budget, reporting directly to the Prime Minister. PA’s major duties include the execution of PHC’s decisions, advising the PHC in matters related to the transfer of SEE’s into or out of privatization portfolio and restructuring and rehabilitation of SEE’s in order to prepare them for privatization.
THE PRINCIPLES AND PRIORITIES OF PRIVATIZATION IMPLEMENTATIONS
PA undertakes privatization with attaching utmost attention to the expectations and requirements of the public and investors. Within this framework PA aims;
- easing the negative effects of unemployment due to privatization, through a social safety net (employment guarantee)
- increasing participation in the privatization implementations
- enhancing transparency of privatization activities
- protecting free market from anti-competitive mechanisms and preventing negative effects of possible monopolies
- enhancing the diffusion of capital into the layers of the society and deepening of the capital markets by increasing the number of participants.
- prioritising the privatization of state banks.
- securing “public interest” through establishing “golden shares” in strategic enterprises.
- privatizing natural resources exclusively through transfer of management rights.
Post a Comment