Turkey in danger of losing tranche of World Bank loan

ANKARA (Reuters) – Turkey’s delay in implementing energy reforms agreed upon with international lenders could endanger the second tranche of a World Bank loan worth $375 million, energy officials said yesterday. The government has agreed to liberalize its energy market by privatizing the distribution grids and switching to a system of regional tariffs which would better reflect the true costs of producing electricity. But bureaucratic wrangling and the reluctance by the treasury to provide funds for the reforms have caused the government to miss a series of deadlines set by a road map agreed to with the World Bank in July. «The benchmark for the loan in the energy sector is to launch pre-qualification tenders for privatization of the electricity distribution companies,» a senior energy official told Reuters. This has yet to be done. Another key condition for the release of the loan under the World Bank’s Economic Reform Loan (ERL) program is the completion of the new tariff system by the state distribution company TEDAS. «These (tenders and tariffs) will underpin the privatization process. Then investors will know the levels of tariffs and whether there is an adequate basis for investments,» the official said. The system is meant to be fully operational from January 1, 2004, but the treasury says it does not have the funds to implement it this year. The reforms entail some subsidies to help create a level playing field in the market. The road map envisages the start of the sale of the distribution grids by the end of December. TEDAS has divided Turkey into 33 distribution grids for sale and has turned them over to the Privatization Administration. But this body has yet to hire an adviser to decide on how to sell the grids. It should have chosen one by August 30. The Economic Reform Loan aims to help Turkish reforms in the energy, social security and telecommunications sectors. Energy is the only sector where benchmark reforms are behind schedule. The loan deal was signed in May 2000 and the first tranche of $384.6 million was disbursed in June 2000. For the remaining $375 million, the closing date has been extended to March 2004.