This content is from: Local Insights

Highway privatisation and investment

Ender ÖzekeEmek Sunat

In the late 1940s, Turkey replaced manpower with machinery and equipment for road construction, and adopted a programme to build a new road network to meet the country's needs. The General Directorate of Highways (KGM) was established on March 1 1950 to implement this programme, and since then its duties and authority have continuously expanded. Today, it is responsible for the construction, improvement, repair, operation and maintenance of roads, motorways, tunnels and bridges in the state road network. KGM's legal status and structure have evolved concurrently in accordance with current needs and trends.

In line with the Law on the Establishment and Duties of the General Directorate of Highways (Law No. 5539), KGM was set up as a general directorate with a distinct legal personality, affiliated with the Ministry of Public Works and Settlement. On August 30 2007, the President of Turkey approved KGM's affiliation with the Ministry of Transportation (MoT). Finally, on July 13 2010, the Law on the Organisation and Duties of the General Directorate of Highways (Law No. 6001) was enacted, abolishing Law No. 5539, and classifying KGM as a public legal entity affiliated with the MoT, with a separate budget as well as a certain degree of budgetary autonomy.

Under Law No. 6001, KGM's main duties include planning, building, operating and maintaining motorways and related facilities, or procuring the same, and supervising motorways operated by others, in particular through holding shares in the companies appointed under the Law on the Procurement of Certain Investments and Services within the Framework of the Build-Operate-Transfer Model (Law No. 3996), and Law No. 3465 on Appointment of Institutions other than the General Directorate of Highways for the Construction, Maintenance and Operation of Access-Controlled Highways.

According to Law No. 6001, KGM is still a general directorate with the status of a legal entity separate from the legal personality of the Republic of Turkey, and affiliated with the MoT. Law No. 6001 confirms that the MoT has direct control over KGM, reflecting the related principles under existing laws and regulations governing public-sector entities' activities (including financial activities), such as the Law on Public Financial Management and Control (Law No. 5018). Accordingly, the Minister of Transportation approves the appointment, transfer and promotion of high-ranking KGM officials, assists KGM in adopting certain decisions specified in Law No. 6001, and approves various important decisions and actions of KGM.

Law No. 6001 entrusts the KGM general director with responsibility for supervising the activities, transactions and accounts of KGM's central and provincial organisation. Accordingly, the general director may be viewed as someone with the power to represent KGM in the broadest sense. The general director is appointed by a Council of Ministers' decree upon the Transportation Minister's proposal. Following the general director's proposal, the Minister approves the appointment of the president of the inspection board, department heads and internal auditors. The KGM general director may also relegate his powers and duties to his staff, although such delegation will not relieve the general director of responsibility.

Law No. 6001 defines the privatisation procedure only for existing motorways, but these provisions are nevertheless important because they enable the privatisation of such roads. According to Article 29, operating rights for motorways under KGM's responsibility, maintenance and operation facilities, service facilities, other goods and service production facilities, and assets on such motorways may be transferred to third parties through privatisation in accordance with the Law on Privatisation (Law No. 4046).

Since the Presidency of the Privatisation Administration is the governmental entity authorised to implement related privatisation transactions, it can reasonably be concluded that the Privatisation Administration will be responsible for privatising existing motorways, such as the Bosphorus Bridges and Istanbul-Ankara motorway, and that these privatisations will not be included in the scope of KGM's activities.

Furthermore, the same provision holds that these privatisations – to be implemented through transfer of operation rights – will be carried out under concession contracts. However, it is explicitly stated that the provisions of Law No. 3996 are reserved. Even though this only serves as a clarification, it is useful in avoiding uncertainties about the legal nature of contracts concluded under Law No. 3996, which are private-law contracts pursuant to explicit and mandatory provisions of that law.

Law No. 6001 further states that the tolls KGM applies as of Law No. 6001's entry into force will be considered in determining the tolls for motorways privatised through transfer of operation rights. In addition, tolls that pertain to subsequent calendar years will be calculated in accordance with the formulae and procedures under the related concession contracts. Law No. 6001 also regulates the consequences of illegal passage across motorways to be privatised, and procedures to be followed by operators of these motorways in the event of illegal passage.

Under the Privatisation Administration's resolution 2010/88 of October 15 2010, motorways now operated by KGM (including the two Bosphorus Bridges) will all be privatised together as a single package through transfer of operation rights for a period of 25 years. It has also been resolved that the relevant privatisation process be finalised by the end of 2012. Pursuant to the Privatisation Administration resolution, the motorways to be privatised under the aforementioned tender process are: Edirne-Istanbul-Ankara Motorway, Pozant¦-Tarsus-Mersin Motorway, Tarsus-Adana-Gaziantep Motorway, Toprakkale-Iskenderun Motorway, Izmir-Ayd¦n Motorway, Izmir-Çesme Motorway, Gaziantep-Sanl¦urfa Motorway, Izmir and Ankara Freeways, Bogazici Bridge and Fatih Sultan Mehmet Bridge.

Ender Özeke and Emek Sunat

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