ABSTRACT
Recent experience Figure 6.1 presents the evolution of privatization revenues over time. Until 2004, with a few exceptions discussed below, privatization revenues have been quite
low, around or below $500 million per year. Indeed, in the 1990s privatization consisted of manufacturing establishments primarily in the food, beverages, electronics and cement industries. In the 1990s there were also a number of public offerings of large state-owned companies, comprising typically a small proportion of total equity (between 2-8 percent), including: Erdemir (steel, 1990), Petkim (petrochemicals, 1990), Tüpraş (refinery, 1991), Petrol Ofisi (retail gasoline, 1991). However, the sale of controlling shares in these companies to the private sector took place in 2000 and after. One exception was the year 1998, during which Etibank, a bank originally established to finance mining activities, was privatized in a block sale and the government’s share in İş Bank was privatized through a public offering. In 2000, another exceptional year, there were a few big-ticket items. One was the block sale of Asil Çelik which was a steel company originally owned by the Koç Group and taken over by the government when it fell into financial distress. The second was the block sale of Petrol Ofisi, a gasoline retailer, and the public offering of 31 percent of the share of the petroleum refinery Tüpraş. Table 6.1 gives the dates and sales values of privatization transactions with values over $100 million. It also presents cases where the divestiture of a company was done in stages. But the real sustained increase in privatization revenues started in 2004. Privatization revenues exceeded $8 billion annually in 2005-2006 and averaged almost $5 billion in 2007-2008. The privatized companies were truly the stateowned giants of the economy, including Turkish Airlines, Tüpraş, Erdemir, Türk Telekom, the incumbent telecommunications operator, a number of ports including some of the largest in Turkey, electricity distribution companies and Tekel, the tobacco and cigarette company. One should underline the recent move toward infrastructure facilities and companies engaged in the provision of what many countries regard as public services. Table 6.1 also indicates that, except for the case of Turkish Airlines, majority shares in most companies have been divested through block sales rather than public offerings. As has been emphasized before (e.g. Karataş 2001), widening of share ownership, an objective that was heavily emphasized in the beginning of the privatization process seems to have been largely forgotten. Even though this could be due to constraints imposed by underdeveloped and shallow capital markets, it could also reflect the government’s desire to ensure the presence of strategic investors with secured control rights, that is, a non-dispersed form of corporate governance. Especially in cases where the interests of the shareholders require that the company goes through significant restructuring, and that the influence of politically appointed insiders be reduced, dispersed ownership may hinder such changes and strengthen the current management instead. Lack of control rights, of course, would also potentially reduce the expected privatization revenues.
