Focus: Rail Liberalization

The Iron Road

The Iron Road

Sep. 8, 2013

New legislation seeking to open up the railway sector to private investment comes at a time when Turkey's role as a transport corridor is expanding.

In late April 2013, Turkish President Abdullah Gül approved a draft law to invite private sector participation in the nation's rapidly growing railway sector. With local companies and the government-led Turkish State Railways (TCDD) involved in a number of programs to build new lines and update existing routes, the added support from the private sector is bound to accelerate development and inject needed know-how in the drive to reinvigorate rail transportation. The law went into effect on May 1, 2013.

Although TCDD will continue to maintain authority over new and existing railway infrastructure, the government entity expects to see a shift in its operations. As Süleyman Karaman, Chairman of the TCDD noted, the “Liberalization of Turkish Railway Transport Law does not seek to privatize TCDD. It only seeks to eliminate regulations that impede the involvement of the private sector, and to restructure the TCDD according to this objective." The TCDD is now expected to manage the participation of foreign and private actors in railway construction and operations, with a heavy emphasis on any kind of infrastructural work and passenger or freight transport. Supervision—in addition to theawarding of certificates, pricing, and other such activities—will specifically be carried out by the General Directorate of Railway Regulation, which is attached to the Ministry of Transport, Maritime Affairs, and Communication.

To a certain degree, the private sector has been involved in the national railways of Turkey since 2003, with the number of privately owned wagons increasing from 771 in that year to 3,159 in 2012. The success of early partnerships has convinced the TCDD and the Turkish government at large that joint ventures with international investors can broadly benefit the railway sector, as was the case with EUROTEM (a joint venture between Hyundai Rotem of South Korea and TÜVASAŞ) for the production of high-speed trains, VADEMSAŞ (a joint venture with Austrian steel company Voestalpine and Turkish steel producer Karabük Demir Çelik) for the production of switches, and SİTAŞ (a joint venture with the Italian company Margeritelli) for the production of sleeper cars.

Turkey's goal of liberalizing and updating its railway network is not entirely self-centered, however. As a key player in international transport corridors, the country is seeking ways to more efficiently and directly act as a connector between Asia and Europe, becoming theliteral bridge from East to West. Meanwhile, Western European nations are looking for transport corridors that provide safe, fast, and cheap ways to reach Asian markets.

With new international partnerships forming and more ways for private investors to participate, Turkey can rest assured that its resources are being spent as efficiently as possible. Turkish legislation now provides a transparent, fair, sustainable, and competitive environment in the railway sector that will enable it to utilize all the advantages of the national system. The lifting of the railway monopoly and the deregulation of the sector is also another way for Turkey to show its observance of EU regulations.