Turkey is selling off state assets at a pace that could soon leave its privatization agency sitting
idle, said the country’s finance minister.
“I think at this speed, the privatization administration could be out of a job in a year or two, because we’ve been very successful,” Finance Minister Mehmet Simsek said in an interview in Ankara yesterday.
Power plants, land and gambling operations could all be sold in the near term, he said, declining to give precise timelines. The sale of stakes in state-controlled lenders TC Ziraat Bankasi AS and Turkiye Vakiflar Bankasi TAO may happen within one to three years. Turk Telekomunikasyon AS, Turkey’s largest phone company, and Turkish Airlines, the national carrier, are among companies being considered for secondary public offerings, he said, without giving a time frame.
Simsek, a former Merrill Lynch & Co. economist, estimated in April that the Justice and Development Party has raised $58.3 billion from privatization during its 12 years of rule. Since
then, the government has completed the sale of rights to operate the national lottery for 10 years for $2.76 billion and awarded the operating rights to Derince Port for $543 million. The finance ministry expects sales in the rest of this year to push privatization income beyond the 2013 record of $12.5 billion,spokesman Ahmet Yetiskin said by phone today.
The AKP, as the ruling party’s known, came to power in the wake of the 2001 financial crisis, after which the economy shrank by more than 5 percent. Prompted by the terms of an International Monetary Fund loan agreement, the party implemented a program allowing stake sales in major state franchises like Turkish Airlines and Turk Telekom.
This increased the appeal of Turkish assets to foreign investors, discouraged in the 1990s by political turmoil and inflation averaging above 70 percent. Turkey’s asset sales have continued into this decade, even as growth exceeds an average of 6 percent a year, as the country tries to plug a current account deficit that the government estimates will be 5.7 percent of of gross domestic product this year.
The number of foreign companies operating in Turkey has increased to 41,000 from around 3,000 a decade ago, Simsek said.
While the government cut its 2014 growth estimate this month to 3.3 percent from 4 percent previously, that compares favorably with other emerging market countries, he said.
“The case for investment is largely linked to the country’s ability to grow,” Simsek said. “Turkey will go back to a trajectory of higher growth, and I think that’s absolutely going to be key to attracting investments.”
“At some point, we’ll have to come up with a structure for the sale of toll roads and bridges,” Simsek said. In February, parliament approved legislation that will facilitate initial public offerings of the two intercontinental bridges that connect the Asian and European halves of Istanbul, Turkey’s biggest city, along with some associated toll roads.
In 2012, Turkey canceled the sale of the operational rights to the same bridges and highways after then-Prime Minister Recep Tayyip Erdogan said that the winning auction bid of $5.72 billion from a consortium led by Koc Holding AS was too low. Turkey will “probably” follow the national lottery rights disposal with the sale of sports betting and horse racing franchises, Simsek said. “Clearly, we want to get the state completely out of it.” Deputy Prime Minister Bulent Arinc said in November that the government would like to remove itself from gambling interests.
“We still have sizeable power-generation assets,” Simsek said. “That’s one major piece that we’ll continue to divest.” Turkey auctioned electricity grids, including those serving the southeastern cities of Mersin, Diyarbakir and Van last year, at prices that reflected power theft ratios exceeding 50 percent.
It’s too early to make a call on whether private companies have had more success in enforcing full payment for power supplies, Simsek said.
Turkiye Halk Bankasi AS, the country’s largest publicly traded state lender, is selling stakes in two insurance units that analysts estimate could generate pretax profit of 450 million liras. The bank held a secondary public offering of its own in 2012. The stake sale in Ziraat would be an IPO, while in Vakifbank it would be an SPO, he said. All this leaves the privatization administration facing
redundancy, Simsek said. “Either we’ll have to expand their portfolio, or we’ll have to find a new job for them.”
(Previous versions of this story were corrected to specify “billion” in the 2013 privatization figure at the end of the fourth paragraph, and to specify that Halkbank’s 2012 sale was an SPO in the penultimate paragraph.)
Oct. 17 (Bloomberg)
By İsabel Finkel