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Major competition to get into ports

It caught everyone’s attention. In the last few years the subject of ports has frequently come onto the agenda and investments in this area have come to the fore. There has been an incredible...

Son Güncelleme: 01.09.2006

It caught everyone’s attention. In the last few years the subject of ports has frequently come onto the agenda and investments in this area have come to the fore. There has been an incredible demand for the privatized ports, and businessmen have been preparing new investments. Those who know the sector say that this trend will continue and that capacity will double. They believe that the increasing volume of foreign trade and Turkey’s geographical location mean that the sector will be one of the stars of the future in Turkey.

The attempts to privatize the ports belonging to the Turkish Republic State Railroads (TCDD) have become one of the most discussed subjects on the economic agenda. These ports, which play an important role in Turkey’s foreign trade, have caught the eye of many foreign and domestic investors. The development and growth plans of Marport, Kumport and Gemport, which are the largest privately-owned ports in Turkey, have clearly demonstrated that, if it is done correctly, managing a port is a profitable business. The success of these privately-owned ports has whetted entrepreneurs’ appetite for this field still further.

So far this year none of the tenders for the privatization of a port has yet been definitely concluded. But the consortium of Akfen and PSA of Singapore has won the tender for the port of Mersin after submitting the highest bid of $755 million. But it has so far proved impossible to resolve a number of legal problems. The Akfen-PSA consortium has also submitted the highest bid in the tender for the privatisation of the port of İskenderun. But, following a decision by the Competition Council, the tender was awarded to the second bidder, Arkas. Although the legal procedures here have yet to be concluded.

One of the leading businessmen in the Aegean region explains: “For the last year everyone in Izmir has been holding their breath and waiting for the privatization of the port. At the beginning there was very little interest but gradually the number of people who said that they would bid for the tender began to rise. More names may appear in the future.” He believes that there will be an incredible competition for Izmir Alsancak Port, which is one of the largest ports in Turkey.

The date for the tender for Izmir Alsancak Port was set as 6 April. But the last date for bids was later postponed to 21 September 2006. At the beginning, only domestic companies were interested. Over time other names and foreign companies joined the bidders. The leading foreigners who have said that they will bid include Hutchison Port of Hong Kong, Rotterdam Port of the Netherlands, PSA of Singapore, and the Dubai Ports and NYK Consortium. In addition, 150 businessmen and industrialists have established a consortium to bid for this port. The consortium is led by Arkas Holding and includes Batıçım, Söktaş, Limak Group President Nihat Özdemir, Sina Holding, Gökhan Tekstil, Fiba Holding and the Atay Group.

It is not just these companies and businessmen. The port privatizations that were previously realized in various provinces in Turkey attracted considerable interest. Domestic and foreign investors competed with each other for this small number of ports. Some decided to open their own ports rather than trying to buy the ones that were being privatized. All of them see ports as one of the stars of the future. Many groups and companies want to position themselves now in what will be one of the future boom businesses.

Why Has It Become More Attractive?

There are some realities behind why there is so much demand for the ports. Borusan Logistics General Manager Kaan Gürgenç explains the attraction as follows:

“The main reason why ports have become attractive is that the need for ports rises in direct correlation to the development of the country’s economy. For example, in 2002 Turkey’s total foreign trade was $87 billion and doubled in volume to $160 billion in 2004. In parallel to this, global container traffic increased by 22 percent over the same period, while container traffic in Turkish rose by 37 percent. This shows that the throughput in Turkish ports increased more than economic development.”

In 2005 the total volume of Turkey’s foreign trade was $190 billion. 86 percent of foreign trade is carried by sea. This suggests that the ports handled $163 billion worth of trade. When one considers that goods which are light but highly valuable, such as electronics, are transported by land and air, it is possible to say that Turkish ports handled a trade volume of $130-140 billion.”

“Another factor is that in the globalising world, for example in automotives, a factory no longer manufactures every model but produces just one or two models which it then stores and distributes all over the world; and manufacturing is carried out according not to orders rather than for stock, which means that there is a need for a higher proportion of exports and imports. In order to reduce costs and save time, people prefer ports which are closest, most accessible and operational.”

The New Structure Of The Market

So what are the figures for port management in Turkey which is attracting so much interest. In fact, there are no reliable figures for the size of the market. According to data provided by the Chamber of Shipping, in 2005 maritime transportation generated revenue of $3 billion. Ports had income of $750 million.

According to data for the end of 2005, Turkey’s total handling capacity, that is to say loading and unloading, is over 3.3 million TEU. The number of ports which have a storage capacity of more than 100 cubic metres, that means ports which are managed, is 33. TCDD has seven ports, six of which are earmarked for privatization while plans for the privatisation of the seventh, Haydarpaşa, have been abandoned. The ports of Mersin, İskenderun, Izmir Alsancak, Samsun, Derince and Bandırma have yet to be privatized. Ortadoğu Antalya Liman İşletmeleri, which was previously owned by Hayyam Garipoğlu, is in the possession of the Savings Deposit Insurance Fund.

In terms of income, the most important of the ports included in the privatization process is the port of Izmir. In 2005 it had revenue of over $92 million. Next comes Mersin, which last year had turnover of $87 million. At the end of 2005, TCDD received approximately YTL 354 million in revenue from ports.

Yasemin Balaban