Construction Company in Turkey

The Turkish government is the largest player in the construction sector with its Build-Operate-Transfer(BOT) model

The Build-Operate-Transfer (BOT) model has become a vital tool for Turkey in addressing its infrastructure needs while leveraging private sector investment and expertise.

From bridges and airports to energy and healthcare infrastructure, the BOT model has accelerated the growth and modernization of Turkey’s infrastructure.

With a clear legal framework, active public-private partnerships, and a proven track record of success, the BOT model is likely to remain a key approach for future projects in Turkey’s rapidly growing economy.

The BOT Model in Turkey

Legal Framework

Turkey has a well-established legal framework that supports the BOT model. The Law on the Regulation of Concessions and the Law No. 3996 (Governing the Privatization of Public Services) are key regulations that govern BOT projects. These laws outline the processes for bidding, project approval, and implementation in collaboration with public entities.

Public-Private Partnerships (PPP)

The BOT model is a subset of Public-Private Partnerships (PPP), which are commonly used in Turkey to develop large infrastructure projects. These PPP agreements typically involve collaboration between government authorities and private firms to finance, build, and operate projects for public benefit.

Key Features of the BOT Model

1. Private Sector Involvement: The BOT model allows private companies to finance, construct, and operate a project for a certain period, typically through a concession agreement with the government.

2. Project Ownership Transfer: After the agreed-upon concession period, ownership and operation rights of the infrastructure are transferred back to the government.

3. Revenue Generation: During the operation phase, the private company collects revenue (e.g., tolls, user fees) to recoup its investment and generate profits.

4. Risk Distribution: Risks such as financing, construction, and operational risks are typically borne by the private company, while political and regulatory risks may be managed by the government.

Types of BOT Projects in Turkey

a. Transportation Projects

• Highways and Roads: Major highways such as the Istanbul-Izmir Highway and Gebze-Orhangazi-Izmir Motorway were developed under the BOT model. These projects involve tolls collected from users during the operational phase.
• Bridges: Iconic structures like the Yavuz Sultan Selim Bridge (Third Bosphorus Bridge) and Osman Gazi Bridge were also constructed using the BOT model.
• Airports: Turkey’s aviation infrastructure, including the development of Istanbul’s New Airport (Istanbul Airport), has benefitted from the BOT model.

b. Energy Projects

• Power Plants: Several energy projects, including hydroelectric and thermal power plants, have been developed under the BOT model. This model enables private companies to invest in and operate energy generation facilities, ensuring energy supply to the country.

c. Healthcare Infrastructure

• City Hospitals: Turkey has implemented large-scale healthcare infrastructure projects using the BOT model. Examples include the construction of Ankara City Hospital and Istanbul Basaksehir City Hospital, which were developed by private companies and operated under the BOT system for a specific period.

Benefits of the BOT Model for Turkey

1. Financing Without Upfront Public Investment: One of the biggest advantages of the BOT model is that the government doesn’t need to allocate significant funds for project initiation. The financial burden is transferred to the private sector.

2. Improvement of Public Infrastructure: The BOT model has enabled the rapid development of critical infrastructure projects, which improves the country’s transportation network, energy supply, and healthcare facilities.

3. Risk Transfer to Private Sector: The BOT model shifts financial, construction, and operational risks to the private sector, reducing the burden on the public sector.

4. Revenue Generation for Both Parties: Private companies earn revenue during the concession period (e.g., tolls, fees), while the government benefits in the long term through ownership of the project post-concession.

5. Attracts Foreign Investment: The BOT model is attractive to both domestic and foreign investors, allowing the Turkish government to attract private capital for large-scale projects.

Challenges and Considerations of the BOT Model

1. Risk of Underperformance: If private companies mismanage or underperform, the quality of the service or infrastructure may suffer, potentially causing issues before the transfer to the government.

2. Public Resistance to Tolls or Fees: Projects like toll roads or bridges may face resistance from the public due to the additional costs users have to pay.

3. Long-Term Financial Viability: Some projects may face difficulties in generating the expected revenue, especially if economic conditions change or if traffic volumes or usage rates are lower than forecasted.

4. Complex Contracts: BOT agreements are highly complex, involving various stakeholders, risk-sharing mechanisms, and long-term commitments. Legal and financial frameworks must be robust to ensure successful project implementation.