Turkey: What Happened to the Liberalization of Railway Transportation?

Last Updated: 22 December 2015
Article by Serap Zuvin and Ugur Ates

In Turkey, the first high-speed rail lines project started in 2003 between cities of Ankara and Eskisehir, which was presented to public use in 2009. At the time the Turkish State Railways ("TCDD") was the sole constructer of that project since railway transportation was under the monopoly of the state. Liberalization on Turkish railway transportation process started to be liberalised with the enactment of the Statutory Decree in Force of Law on Administrative Structure and Duties of the Ministry of Transport, Maritime and Communication[1] in 2011 ("Decree"). With the Decree, Directorate General of Railway Management ("Directorate") was established with the goal of providing a fair and sustainable competition in railway transportation sector in order to satisfy the needs of the public, by making available railway transportation services friendly and of high quality. Directorate was given the special regulatory powers, such as specifying operation and service principles as well as financial and professional requirements applicable to service providers. Among all, issuing licenses for operators wishing to take part in the railway transport business was the most important one, in this liberalization process.  On the other hand, however, Temporary Article 8 of the Decree provided that the powers attributed to the Directorate on the liberalization of the railways, would not gain legal effect unless the state monopoly in this sector is removed by another legislation.  Therefore, liberalization of the railway transportation had to wait another two (2) years. 

The Law on Liberalization of Turkish Railway Transportation[2] ("Law") was promulgated with the aim of replacing the state monopoly in the railway transportation with a competitive and transparent market environment by providing the passengers with the most suitable rates and service quality. Unfortunately, scope of the Law is limited only to the railways; metros, trams, light rail systems and railways within mining and industrial facilities are not included in this law.

The Law divides the market activities to be performed in the railway sector into three categories: (i) construction of the railway infrastructure, (ii) operation of the railway infrastructure network and (iii) operation of the trains/railroad cars by using the national railway infrastructure network. Furthermore, the Law discharges TCDD from its train operation related duties and it stipulates that a new company under the trade name of "TCDD Taşımacılık A.S." will be incorporated as a joint stock corporation. Pursuant to Temporary Article 1 of the Law, all the relevant vehicles and railroad cars, along with the personnel employed in the operation service unit of TCDD. These transfers are required to be completed within one-year following the incorporation date of TCDD Taşımacılık A.S. and meanwhile, TCDD will continue to provide train operation services.

Unfortunately, this TCDD Taşımacılık A.S. has still not been established, even though the calendar on the wall shows the year is almost 2016.  It is planning by the Turkish Government to enact the railway operator licence regulation to determine the conditions of granting licences to private investors to operating the trains/railroad cars by using the national railway infrastructure network. One more vital regulation on pricing railway infrastructure and services is still waiting for its turn to be enacted. 

To wrap it up; Turkey is still at the bottom of the ladder for the liberalization of railway transportation. We have a long way to go; first TCDD Taşımacılık A.S shall be established, then secondary legislation will be enacted and then the state will decide to issue licences to private investors. Unfortunately, Turkey is already a back-maker of the race of speed high-speed rail in the world and it is also running very slowly on the liberalization of railway transportation. In spite of all these facts, if Turkey decides to run faster, it can catch up the rest of the world easily due to its powerful economical and manpower resources. Obviously the untouched possibilities of railway transportation of Turkey are still arousing the great attention of both domestic and foreign investors.  

[1] Statutory Decree on Administrative Structure and Duties of the Ministry of Transport, Maritime and Communication dated September 26, 2011 and numbered 655 and published in the Official Gazette dated November 01, 2011 and numbered 28102.

[2] Law on Liberalization of Turkish Railway Transportation dated April 24, 2013 and numbered 6461 and published in the Official Gazette dated May 01, 2013 and numbered 28634.

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.

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Serap Zuvin
Ugur Ates
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