Risk Management in Transport PPP Projects
In the Islamic Countries
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structured definition of the roles and responsibilities of the involved parties at the different
stages of the PPP project life-cycle as also recently commented by the International Monetary
Fund (IMF, 2018).
For the improvement of institutional capacity standardized guidelines and templates are
expected to be adopted according to the Eleventh Development Plan.
Investment attraction
The Turkish Authorities adopted several measures to attract foreign investments, including:
 An equity/credit ratio equal to 20%/80% for PPPs;
 VAT, stamp duty and charges extension;
 Shadow toll or revenue guarantees by the procuring institution;
 Termination payment commitments and investment guarantee by the procuring
institution;
 Provision of Debt Assumption by the procuring institution for Airport projects or by the
Treasury for road BOTs with a minimum investment cost of 1 billion Turkish Liras;
 «Step-in» right for the creditors;
 Fee-free use of state-owned immovable assets and expropriation;
 International arbitration.
The above investment conditions particularly favorable to attract foreign investments represent
to a large extent the result of the attempt by the Turkish Authorities to overcome the difficulties
experienced by several PPP concessionary companies in securing financial resources after the
start of the 2008 credit crunch, which caused in the past the delay and cancellation of initiatives
in the energy sector. As also commented by the International Monetary Fund, these measures
may however potentially expose the Turkish state to financial and fiscal risks, as particularly
in cases of economic downturns revenues from users and concession fees may significantly
reduce thus increasing the costs of the PPP projects for the state (IMF, 2018). Indeed, revenue
guarantees and investment guarantees transfer significant demand risk to the public partner.
Also, termination payment and debt assumption commitments transfer to the public partner the
risks that may result in early termination (including force majeure). In perspective, this risk may
become especially critical for the public sector, given the growing number of PPP projects and
the size of the investments.
What makes Turkey’s PPPs also attractive to foreign investments are the economic past trends
and perspectives of possible future further growth. According to private sector representatives
involved in the road market, the PPP institutional and legal system in place is not significantly
different from other countries, and traffic guarantees together with the potential of the Turkish
economy to grow makes their participation in PPP road initiatives attractive. Another
positive element is the certainty of the construction period of PPP projects, which generally
ranges from 3 to 5 years, whereas for conventional procurement implemented projects, the
construction phase may last more than ten years. Accordingly, PPPs present a more stable
planning activity and cash flows for contractors. Furthermore, BOT PPPs involving both
construction and operation and maintenance activities allows the contractors to expand their
business from the implementation phase of the project to the operation andmaintenance stages.