Fresh privatization wave to spur Turkey

ISTANBUL - Hürriyet Daily News

Four strategic state-run companies – the sole oil and gas pipeline firm, postal services, a leading tea producer and a giant agriculture organization – are set to top the agenda in a new wave of privatization in Turkey, according to a top name on the privatization board.

The privatization board’s timing is strategic and is aimed at a possible sell-off of the pipeline firm as the country bids to become a regional energy hub.

“The PTT, Botaş, TİGEM and Çaykur will be privatized once the necessary conditions have been met,” Ahmet Aksu told Anatolia news agency in an interview yesterday.

The privatization of the four companies adds to the government’s ongoing bid to sell off all electricity distribution grids, Ankara’s natural gas grid, some toll roads including those on the two money-making bridges in Istanbul, and a number of marinas and sugar plants.

Botaş headlines the four companies that are to be put up for sale as it sits at the heart of Turkey’s ever-growing energy needs. Despite ongoing efforts to liberalize the natural gas market, Botaş provides more than 40 percent of the total energy consumption in Turkey’s gas demands by buying gas mainly from Russia. The company also represents Turkey with the petroleum firm TPAO in a $7 billion deal signed last month with Azeri Socar to carry Caspian gas to western Turkey via the Trans-Anatolian Project (TANAP); the line also forsees the sale of gas to Europe via Turkey.

The Agricultural Enterprises General Directorate (TİGEM) acts as a regulator for seed and livestock prices while also conducting various activities in horse breeding.

Çaykur undertakes a similar role in the tea market despite emerging players in the field. The company buys more than half of the annual tea production in Turkey and has a 28 percent share in a leading packaging firm.

After the sale of its telecommunication arm in 2005, the PTT remains active mainly in postal and cargo services. The company’s money-transferring branch is also on the rise.

Privatizations in Turkey from 1984 to 2003 brought the country roughly $500 million per year. Now, however, Turkey is able to generate 1 billion Turkish Liras with just one privatization tender and any figure below this fails to even draw media attention, Aksu said.

The country has earned $43.1 billion since the processes of privatization began in 1986, netting total revenue of $32.4 billion as of Dec. 31, 2011, according to official figures revealed in May.

Some 200 institutions have been privatized via share or asset sales since then.

Last year’s privatization revenue was a mere $1.4 billion, but the administration has set an ambitious goal of 12.5 billion liras for this year.

The sale of electricity distribution plays a large role in raising hopes for such an ambitious revenue number as Energy Minister Taner Yıldız said earlier this week that Ankara planned to finalize the process this year. Electricity transmission has been divided into 20 regions; 12 of them have already been handed over to the private sector.

The privatization of the Ankara gas grid, however, is a lingering problem after a number of previous attempts failed.

The privatization process of the two bridges on the Bosphorus also remains unclear.

Aksu said Turkey was set to continue with its privatization agenda, but will follow its own unique model which was fashioned after the privatization experiences of countries like Poland, Argentina and the United Kingdom.

 “Turkey has developed its own unique privatization model and was able to complete many successful privatizations based on this,” said Aksu. “We are even transferring some of our expertise in this area to the Balkans. In any case, the World Bank finds our privatizations worthy of praise.”
However, Aksu’s goal may be overambitious when recent failures are considered, mainly due to the financing problems of possible buyers.

PTT:

The postal services firm increased its revenues to 174 million Turkish Liras in 2011 from a mere 11 million liras in 2002, despite the fact it lost its land-phone operator in 2005 due to privatization. Founded in 2004, the PTT Bank has more than 1,350 branches and is active in the money-transfer market.

ÇAYKUR

Tea company Çaykur bought 653 tons of tea last year, more than half of the country’s total production. The company’s 2011 losses were 74.5 million Turkish Liras, up from a more moderate loss of nearly 27 million liras a year earlier.

TİGEM

The Agricultural Enterprises General Directorate (TİGEM) owns 343,220.2 hectares of land, according to its officials. The company’s 2010 profits stood at nearly 8.8 million Turkish Liras. It is responsible for producing agricultural seed and stallions and protecting gene sources.

BOTAŞ:

The state-run pipeline company Botaş lost 550 million Turkish Liras in 2011, according to unofficial figures reported in the Turkish media. However, the company was hurt in subsidizing domestic natural gas sales, claims said. The depreciation of the lira last year also played a role in losses. Currently, the company carries Iraqi oil to Turkey.