Turkey: Latest Developments In Privatization

Last Updated: 11 November 2004
Article by Selin Özbek and Kemal Aksel

As mentioned in our previous articles, Turkey’s privatization program continues to be one of the hottest topics in the Turkish economy. The Government’s desire to privatize entities in the privatization portfolio has intensified in order to achieve the goals set forth by the International Monetary Foundation ("IMF"). Pursuant to the IMF Letter of Intent for the 8th review, proceeds acquired from privatization have reached USD $311 million in the first quarter of 2004. Pursuant to the information provided by Metin Kilci, the Chairman of the Privatization Administration ("PA"), the projects are carried out in accordance with the privatization agenda; the privatization of 14 entities has been finalized and the contractual negotiations are continuing for 7 other entities. Furthermore, new amended procurement legislation for public entities eases the procedure for the recruitment of outside consultants.

Although many of the relatively minor enterprises have been privatized, there were substantial difficulties in finalizing the privatization process for some well-known and publicized projects in 2004. Below are the new developments in Turkey’s privatization journey:

TÜPRAŞ: As reported in our Spring issue, Efremov Kautschuk Gmbh, a subsidiary of Tatneft, the Russian petroleum conglomerate, offered the highest bid of USD 1,302,000,000 to acquire the 65.76% government stake in TÜPRAŞ. Following the approval of the Privatization High Council, Efremov Kautschuk Gmbh, together with its Turkish partner, Zorlu Holding A.Ş., started the negotiations for the share purchase agreement to be executed with the PA. However, the privatization process in TÜPRAŞ has been challenged by the Labour Union (Petrol-İş). Although the closing was expected for the end of May 2004, the privatization process and sale of TÜPRAŞ have been ceased as a result of the administrative court’s ruling cancelling the Tender Committee’s decision for the sale of 65.76% government stake in TÜPRAŞ to the winning bidder. Currently, the judicial process continues with regard to several lawsuits initiated by Petrol-İş against the PA and the Government awaits finalization of the judicial process before taking any action. As a result of the legal actions initiated against the most promising privatization project of the year 2004, the Government may face difficulties in complying with its undertakings concerning privatization income as projected in its latest Letter of Intent to the IMF.

TEKEL: As reported in our Spring issue, the privatization of TEKEL Tobacco, Tobacco Products, Salt and Alcohol Enterprises ("TEKEL")’s alcoholic beverages section was completed as of 27 February 2004 following the execution of the Share Purchase Agreement between the Nurol-Limak-Özaltın-Tütsab joint venture and the PA. Privatization of TEKEL’s cigarette section, however, continues to be considered as one of the major privatization projects in the portfolio of the PA. In the last two months, discussions relating to privatization methods for Tekel Cigarette hit the newspapers again. Although in June there was news stating that the privatization of TEKEL Cigarette would be via block sale and separate sale of trademarks is not considered as a privatization method, the PA did not make any official announcements in that respect. Accordingly, changes to the privatization method for TEKEL Cigarette may still be expected, since the Chairman, Metin Kilci, noted that the method of privatization would probably be determined by the end of this year.

TURK TELEKOM: The PA recently selected the outside financial and legal counsels for TURK TELEKOM privatization. It is reported that meetings are ongoing for the provision of information on legal, financial and organizational aspects of the privatization. According to recent news, the PA plans to privatize TURK TELEKOM in October. The proposed privatization of TURK TELEKOM, is expected to include its cable TV and Internet operation rights. However, based on recent news, following the privatization, the purchaser may be obligated to sell the concerned operation rights within a specified period.

NATIONAL LOTTERY ADMINISTRATION: As reported in our Spring 2004 issue, the PA resolved to privatize the National Lottery Administration ("NLA") by granting separate operation licenses for each lottery activity, instead of block sale or public offering of the entity. Although the preparations for the tender process were expected to be finalized by the end of June, no official announcement has been made yet by the PA concerning the tender specifications. The privatization of NLA only includes lottery activities. Furthermore, a pre-payment and profit sharing system is planned to be established for a term of 10 years. Pursuant to the information provided by the Chairman, Metin Kilci, NLA’s privatization process is still ongoing and planned to be concluded by the end of this year.

ENERGY SECTOR: In line with the privatization plans, categorization of electricity production and distribution facilities is completed. Accordingly, production facilities are categorized into six groups and are planned to be included in the privatization agenda by June 2006. With regard to electricity distribution facilities, it is reported that incorporation of seven distribution regions is completed and the preparations for the incorporation of an additional 13 distribution regions is in progress as of today. At the first stage, 3 distribution regions are planned to be privatized by the end of 2004. It is reported that these 3 regions will be chosen among the ones that has not been party to any dispute and has completed its incorporation process (or is in a position to complete this process without any delay). Furthermore, the PA announced that it is planning to complete the privatization of all electricity distribution companies and regions by the end of 2006. In line with the foregoing the PA has selected Mc Kinsey & Company to carry out the necessary consultancy services for the privatization of TEDAS. This may be interpreted as an indication to show that the PA’s intention to privatize TEDAS has been intensified and the tender process might be launched on the expected date.

THY: This Turkish aviation state entity, which has been active in this sector for over 70 years, has 15% market share in the international market and 98,9% in the domestic market as of 2002. The Chairman, Metin Kilci, noted that the privatization process of THY will be carried out as planned by way of public offering. Furthermore, the PA also selected İş Yatırım Menkul Değerler A.Ş as the outside counsel. Based on these facts and the recent remarks of the PA, it may be expected that the Government would commence to carry out the necessary actions for the privatization of THY in the near future.

ERDEMIR: ERDEMIR, which is one of the most important enterprises in Turkey with approximately 42% market share, has a crude steel and related final products production of respectively 2.38 and 3.13 million tons. Privatization efforts for Erdemir are still continuing. Pursuant to remarks made by the Minister of Finance, Mr Unakıtan, the PA is in the phase of hiring consultants to perform the financial and legal consultancy services for the privatization of ERDEMİR. By virtue of these developments, ERDEMIR is expected to be one of the hottest privatizations of next year.

PETKIM: As reported previously, the PA had initiated two tenders for Petro Kimya Holding A.Ş (“PETKIM”), however, the results were disappointing. The second tender was cancelled as a result of the low bids offered by the bidders. Pursuant to the latest IMF Letter of Intent, the Government seems to be determined to initiate the third tender bid to privatize PETKIM. As indicated in the press release issued by the PA on 20 August 2004, the consultants are selected to carry out the tender process, accordingly, the tender of PETKIM may be expected in the near future.

OTHERS: It is recently reported that the Government plans to privatize Vehicle Inspection Stations, which will need to await approval of the National Assembly for the enactment of the legal framework enabling this project. The tender process is expected to be initiated as soon as possible upon the enactment of the relevant legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions