ECONOMY

This time Turkey hopes for more success in sale of state-owned firms

ANKARA – Turkey expects planned sales of state companies to be successful this year with the help of favorable market conditions, an improving economy and the prospect of EU membership, economic officials said yesterday. The government predicts that foreign investment will rise to $4 billion in 2005 from an estimated $2.5 billion in 2004, with privatization accounting for the lion’s share of this year’s total. Until now, Turkey’s privatization process has been marked by more disappointments than successes due to legal spats and poor market conditions. Foreign investment inflows were at just $586 million in 2003 and $1.04 billion in 2002, while the country battled an economic crisis. Previously canceled privatizations of oil refiner Tupras, landline phone company Turk Telekom, petrochemicals firm Petkim and tobacco company Tekel are being put back on the agenda in 2005. Steel-maker Erdemir, aluminum producer Eti Aluminyum and the country’s electricity distribution business will also be advertised for sale this year. «Now we have a ripe legal infrastructure for privatization,» said an economic official, adding that the government will adopt an aggressive marketing strategy to lure local and foreign investors. Some analysts said greater political stability after a single party took office in 2002 as well as an EU decision to start entry talks with Ankara in October and agreement on a new loan deal with the International Monetary Fund would add to investor confidence in the emerging market economy. But some others said legal challenges are likely ahead and that a possible mobilization of a large number of workers in state companies slated for sale could make things difficult both for the government and for investors. «I am cautiously optimistic on this because past cancellations do not make room for being very optimistic,» said Turkish Yatirim’s Emre Tezmen. It will be difficult for buyers to implement cost-cutting strategies in state companies in which tens of thousands of people work, he said. Flagship firms The government is expected to announce a new strategy for Tupras this month. Last month, the tender for the company failed when the country’s top administrative court annulled the $1.3 billion block sale of a 65.76 percent stake. The reason for the annulment was the lack of an open auction process, said the economic official, adding this would not be repeated in the new tender for Tupras, which is the largest Turkish company in terms of revenues. Officials have said a public offering or sale of Tupras assets will be out of the question but that again a block sale of Tupras stock is possible. Erdemir is another Turkish company in which foreign investors have expressed an interest. Europe’s Arcelor, one of the world’s largest steel groups, and Russian steel giants Novolipetsk and Severstal are interested in the company. Officials said concrete steps toward the Erdemir sale were likely in the first quarter of 2005. The privatization authority, which holds 46.12 percent of Erdemir, is expected to favor the sale of a block of the company’s stock. Another 49 percent of Erdemir is already listed on the Istanbul Stock Exchange. Privatization of electricity distribution is another field in which Turkey is eying foreign inflows this year. It plans for a total of 21 distribution zones to be reorganized in the form of corporations and privatized for 49-year periods through the sale of licenses. Tenders for the licenses are set to start in March. Separately, it was announced yesterday that state-run Halkbank could hold an initial public offering for a 30-40 percent stake in the bank by end-2006 at the earliest. A local and a foreign group were both interested in the bank and a first round of talks could be held this month, Zeki Sayin, chairman of the common management of public banks, told a news conference.