This content is from: Local Insights

PPPs in Turkey’s healthcare sector

The Turkish PPP mechanism is mainly based on collaboration between public and private sectors. This allows the public and private sectors to share the investment cost, risk and profit related to such investment and services. Throughout the last decade the number of PPP projects in Turkey has significantly increased, especially, most recently, in the healthcare sector. Accordingly, the new PPP law on healthcare sector No 6428 was recently enacted. It entered into force on March 9 2013.

Project agreements executed between investors are subject to civil law provisions providing the investors with equality as the relationship is governed by civil law. The investor is granted with an independent and continuous (for at least 30 years) construction right over the site (excluding the investment term). Upon expiry of the construction right the relevant site is transferred back to the Ministry of Health.

The Law provides significant improvements in respect of the bankability of these projects.

  • First, the independent and continuous superficies right can be mortgaged in favour of lenders. Also, the shares of special purpose vehicle can be pledged and the proceeds generated from the project agreement can be assigned in favour of lenders (subject to approval of the Ministry if set out under the tender documents).
  • A debt assumption guarantee may be provided by the state, if the project amount is at least TL500,000 ($276,500), the facility constructed under the project returns to the state on early termination of the project agreement, and foreign financing is involved in the project.
  • If the investor defaults during the investment term or cannot fulfil its obligations, a grace period is provided to the investor which is also notified to the lenders. If the investor fails to fulfil its commitments within the grace period, the lenders may step in and upon mutual agreement with the Ministry of Health may change of the shareholding structure of the investor company in order to continue to the project.
  • Furthermore, PPP project agreements are exempt from stamp tax duty and other similar charges.
  • A final advantage is that parties can submit their disputes to arbitration.

As a result of these improvements, it is expected that 18 tendered hospital PPP deals will close in the near future.

Ferda Dumrul

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