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January 2, 2019
Controversial tender system allows Turkish companies to dominate World Bank public investment list
Five of the world’s top 10 private sponsors of public infrastructure projects are Turkish companies, figures in the World Bank’s 2018 Private Participation in Infrastructure Database show.
Limak Holding, Cengiz Holding, Kolin, Kalyon and MNG Holding are the Turkish companies crowding the top 10, where they are joined by companies from Brazil, Germany, the United States and France.
The heavy Turkish presence on the list reflects Turkey’s status as one of the world’s highest investors in infrastructure projects. The World Bank’s data places Turkey as the fourth highest with $143 billion worth of investment, after Brazil, India and China.
The increased investment that brought Turkey back to the top five in 2018 was largely thanks to four highway megaprojects, the World Bank’s report said.
However, the number of Turkish companies on the list is likely down to Turkey’s private-public partnership system, which has been used to fund a diverse array of megaprojects that includes bridges, ports, roads, airports and even the planned construction of a massive canal that will join the Black Sea and Marmara Sea, turning Istanbul into an island.
High-profile projects still under construction include a new airport in Istanbul, where a soft opening was held in October. The airport, which is planned to be the world’s largest when construction is finally complete, is being built by a consortium of five companies, four of which - Limak, Kolin, Cengiz and Kalyon – feature in the World Bank’s list. The fifth, Mapa Construction, is a Saudi-based company.
Turkey’s Justice and Development Party (AKP) government has gained great political capital from the projects completed in Turkey using this system, and the long list of successful infrastructure projects serves as an inexhaustible source to draw from when AKP politicians are challenged to defend their party’s achievements over 16 years in power.
However, critics say the system has been used as a way of giving out handouts to the government’s clients. It allows private companies granted tender on the projects to make an initial investment and construct the infrastructure, after which they are granted the license to operate it for periods often reaching decades.
One of the main sources of criticism stems from the guaranteed income the government often grants these companies during their tender period. Agreements may stipulate that, in the event that a tender-operating company’s revenues from the infrastructure projects do not reach a certain level, the government will pay the difference.
This has led at times to massive pay-outs from the public coffers to contractors. That the income is often guaranteed in dollars or euros has exaggerated public losses even further this year, as the lira lost value heavily against international currencies.
With the revelation that five Turkish companies had done enough business in this fashion to enter the World Bank’s top ten list, Turks on social media quickly pointed out that none of these five companies were among the list of Turkey’s top taxpayers.
A glaring example demonstrating the shortcomings of the AKP’s public-private partnership system came with the construction of an airport designed to service the three western Turkish provinces of Kütahya, Uşak and Afyonkarahisar.
The income guaranteed to the contractor, IC İçtaş, is based on passenger quotas of hundreds of thousands of passengers per year. However, over the first five years in operation, the passenger numbers have fallen 95 percent short of these quotas, a figure that has cost the Turkish public over 20 million euros to date.
With the company granted tender until 2044, that figure if it maintains its current rate will rise to over 200 million euros in total – a figure that dwarfs its initial 50 million-euro investment.