Reaction to cancellation of highway tender

The echoes of the cancellation of the highway and bridge privatization tender by Prime Minister Recep Tayyip Erdoğan are increasing.

The debate started when Erdoğan sent his first message of cancellation of the highway and bridge privatization tender and the Başkent Gaz privatization tender. Nobody was expecting such a decision. Finally, the words of Erdoğan the other day following the official declaration of the cancellation of the tender, “If I had awarded that [tender] below a price of $7 billion then I would have betrayed my people, my country,” caused reactions to magnify further.

Upon the prime minister’s declaration that he had demanded research to be presented on what the lowest and highest prices could be, the lowest figure was found to be $7 billion and the tender was cancelled for this reason.

The consortium which had the highest bid issued a statement after the cancellation. The Joint Venture Group composed of two strong local firms, Koç and Ülker, and the Malaysian UEM group, said in its statement that they believed in this project from the perspective of Turkey’s present and future. They said that they had submitted the bid after a precise feasibility study, which took into consideration Turkey’s growth and development potential, as well as the high maintenance and management standards required in the tender specifications. The statement did not contain any further comments, only saying: “We have learned that the tender has been cancelled by the High Board of Privatization.”

The cancellation has been met with astonishment not only by the local and international firms that make up the Joint Venture Group, but also by other major local and international firms. Some speculations suggest that a number of foreign firms that were preparing major infrastructure projects have shied away following the cancellation.

The issue of confidence

Representatives of private firms point out that this surprise cancellation in the privatization tenders, which have been managed quite efficiently up until now, might create serious problems after this.

At the top of the problems is that the firms that made serious preparations and studies for the tender at considerable cost have the perception that the price reached at the end of a free competition may not be contracted. Private sector representatives accept that it is natural that the political authority makes the final decision in privatization tenders, “however, if the political authority holds a certain lowest price in its mind, it should announce it before the tender has been finalized, not afterward.”

Meanwhile in stories appearing in the international press, it is reminded again that Prime Minister Erdoğan cancelled the tender alone, emphasizing the importance of this “personal factor.”

Also, with the cancellation of the tender, it should be taken into consideration that the 2013 budget will be deprived of very significant revenue.

In summary, the cancellation of the tender for the bridge and highways is not only the simple cancellation of a tender. With this decision, several side factors and negative aspects emerge. The most important one of these is that a lack of confidence has now been formed in the minds of the private sector and foreign capital about these kinds of tenders and infrastructure projects.