A strong and sustained commitment

The striking economic shifts of the 80's ushered a new era for the world economy, where privatization became one of the most essential and indispensable financial reforms on the economic agendas of many nations. As being one of the fundamental tools of the free market economy, privatization has been on Turkey's

agenda since 1984.

Privatization in Turkey, not only aims to minimise state involvement in economic activities and to relieve the financial burden of State Economic Enterprises (SEE) on the national budget, but also contemplates the development of capital markets and the re-channelling of resources towards new investments.

Turkey, one of the fastest growing economies of the world has positioned itself as an attractive and promising investment environment through the implementation free trade principles and establishment of dynamic capital markets as well as offering liberal incentives facilitating transactions for international investors and exporters.

The fundamental transformation in Turkish economy has moved the country from an in-ward-focussed import substitution model towards an export led growth and industrial one. The East-West expansion of the world's geopolitical horizons has opened up a new era for

Turkey with many promising opportunities for international investors. The investment opportunities in Turkey are particularly attractive in the framework of country's ongoing ambitious privatization agenda. The involvement and participation of international investors is highly encouraged in the massive privatization program. The privatization process in Turkey with a view of relieving the burden of state economic enterprises on the national budget, has proved to be an important source of funds for the government and brought tangible results and progress within this philosophy. Although this task has not been easy, many state-owned companies have passed to the private sector.

Bodies Responsible from Privatization under Law

No. 4046

Under the Privatization Law No. 4046, privatization process is carried out by two bodies: Privatization High Council Privatization Administration

The Privatization High Council (PHC) is the ultimate decision-making body for privatization in Turkey. The Council, headed by the Prime Minister, is composed of four ministers.

PHC nominates the organisations for privatization through taking state-owned economic enterprises in and out of the privatization portfolio and is responsible from the methodology and timing of the privatization procedures by approving the final transfer procedure of the organizations to real people or/and legal entities.

The Privatization Administration (PA) is the executive body for the privatization process. It is a legal public entity with an exclusive budget, reporting directly to the Prime Minister.

PA's major duties include the execution of PHC's decisions, advising the PHC in matters related to the transfer of SEE's into or out of privatization portfolio and restructuring and rehabilitation of SEE's in order to prepare them for privatization.

Privatization Mechanisms and Privatization Methods

Companies within the privatization portfolio are privatized through the use of one or more of the methods mentioned below;

• Sale: Transfer of the ownership of companies in full or partially, or transfer of shares of these companies through domestic or international public offerings, block sales to real and/or legal entities, block sales including deferred public offerings, sales to employees, sales on the stock exchanges by standard or special orders, sales to investment funds and/or securities investment partnerships by taking into consideration the prevailing conditions of the companies.

• Lease: Grant of the right of use of all or some of the assets of the companies for a defined period of time.

• Grant of Operational Rights

• Establishment of Property Rights other than Ownership

• Profit Sharing Model and other Legal Dispositions Depending on the Nature of the Business.

Privatization of Public Services

Notwithstanding with the provisions of Law No. 4046, governing the strategic sectors, the operational rights of the following can be transferred;

Administrations with national and supplemental budgets and their properties, (dams, lagoons, highways, hospitals, ports, etc.)

Public Economic Enterprises offering public services as a monopoly

• Enterprises with national and supplemental budgets that are in the form of an exclusive

monopoly and/or Public Economic Enterprises that serve within the framework of their original establishment tasks.

In order to be able to privatize the above mentioned public service organizations through a transfer of ownership, separate laws should be adopted for each

Other Governmental Bodies in charge of Privatization

Privatization of some specific sectors are undertaken by different governmental bodies. Namely, the privatization of Turk Telekom is undertaken by an independent Tender Committee, Ministry of Transportation issues mobile li-cences and that of state banks are to be accomplished by the Banking Regulation and Supervision Agency.

Value Assessment and Tender Phases of Privatization

Value Assessment Commissions

Value Assessment Commissions are established before each tender according to the provisions set out in Law No. 4046. Value Assessment Commissions employ at least three value assessment methodologies using various criteria regarding the organization such as its industrial, commercial and social features, service dis-tinction, sector and market specifications, potential future cash flows, production methods, technological structure, movables and immovables and quotation of its stocks in the several exchanges.

Tender Commissions

Tender Commissions are established before each tender according to the provisions set out in Law No. 4046.

The Tender Commission may decide to employ one or more of the tender methods listed below: Sealed Bid • Negotiation Public Auction

Sealed Bid Among Designated Bidders.

Competition Issues:

A pre-notification to the Competition Authority is made in advance of the announcement of tender conditions;

where the market share of the entity to be privatized exceeds 20% where the turnover of the same entity exceeds 20 trillion Turkish Liras

even though the aforesaid limits are not exceeded, where the entity to be privatized does have judicial or de facto special rights.

In addition to this, the company which takes over any entity shall obtain a permit from the Competition Board before beginning its activities where;

acquiring parties' total market share in the relevant product market exceeds 25%

acquiring parties' turnover exceeds 25 trillion Turkish Liras.