Turkish
Health sector, with its tourism side, is one of the leading and emerging
sectors of Turkish economy. The highest quality of Turkish hospitals has
already been pleasantly welcomed and accredited by the world’s famous health
accreditation entities, such as Joint Commission International (JCI). According
to JCI, Turkey is the second country at the ranking list with its 42
prestigious health institutions. The Turkish medical device sector is expected to
expand at a CAGR of 8.5% over the 2013-2018 period. Investments in the healthcare sector are
expected to continue as the government strives to increase the number of
hospital beds per 10,000 population to 32 in 2023 from the current number of
26.5. It has also taken on an ambitious healthcare PPP program. According to PPP professionals, Turkey is the
second most attractive market globally for PPP projects in the medium to long
term.
With considerable potential for
growth, the Turkish healthcare sector provides a vast number of investment
opportunities. On the other hand, due to the
enormous rates of population growth in Turkey and necessity to rebuild old
government hospital buildings have also become key and important issues of
Turkey. In order to overcome all of these problems, with minimum limited financial
sources, Turkish government has decided to build huge integrated health
campuses all around Turkey, equipped with latest technological medical
equipments by using Public
Private Partnership Model (PPP). PPPs in the
health sector typically range from simple outsourcing of support services (such
as catering or laundry) to the more complex design, build, and facilities
management of hospitals.
Turkey’s attractiveness as a PPP
destination is growing. A global survey conducted by Deloitte in 2012 shows
that according to PPP professionals, Turkey is the second most attractive
market globally for PPP projects in the medium to long term. According to the
same survey, already by 2013 Turkey was expected to be among the top 10 markets
with the highest levels of PPP activity. Turkey has lived up to these
expectations. According to the Ministry of Development the total value of all
PPP contracts in 2013 was USD 46
billion, a remarkable increase from the 2012 level of USD 2 billion. In
line with this, Turkey yet again displayed its potential by becoming the third
largest PPP market in Europe in the first half of 2013, surpassing not only
countries in the same income group, but also performing better than countries with
more developed PPP markets.
PPP Professionals’ Top Pick
for the Emerging PPP Market in the Medium to Long Term, 2012
PPP Projects Coming to a Financial
Close in the First Half of 2013, by Value
Turkey has undertaken an ambitious Healthcare PPP Program in which a
total of 35 health campuses and city
hospitals will be built using the build-lease-transfer model. The health campuses and city hospitals will
add between 40,000 - 50,000 beds to Turkey’s existing healthcare
infrastructure. It is estimated that the lease payments for the planned health
campuses and city hospitals will be between TL 80,000 and 85,000 per year per
bed, amounting to a total of USD 1.5 to 1.9 billion per year. Assuming the Ministry of Health
(MoH) will lease the facilities for 25 years, the total amount of lease
payments for healthcare campuses and city hospitals will reach USD 38 to 47 billion.There are
currently, 20 projects in the pipeline:
2 in the pre-qualification tender announcement phase, 1 in the
pre-qualification phase, 2 in the bid phase, 3 in the final bid phase, 9 in the
contracting stage and 3 in the construction phase. Yet, more projects will be
tendered in the short to medium term as the MoH strives for swift completion of
the planned healthcare campuses.
Under
the Build-Lease-Transfer (BLT)
model, the project company contracts or renews healthcare facilities, and
subsequently leases it to the government for a set amount of time. During the
contract period, in addition to getting regular lease payments from the
government, the project company also has the right to develop and operate
non-healthcare facilities. If the company is renewing the facility, it receives
the right to provide non-healthcare services and a service fee in return for
its investment. If new facilities are built, the following procedure is
followed:
Tender Phase
|
Projects are awarded through one of
the following procedures:
1.
Open Bid Procedure (preferred)
2.
Open Bid Procedure among bidders selected through a pre-qualification
process
3.
Negotiated
procedure (only allowed in a limited set of circumstances)
|
Build
|
Ø The project company secures the financing required for the completion
of the project.
Ø If the land on which the facility will be built is treasury-owned, the
MoH arranges for the land to be used by the project company, free of charge,
for the project's duration.
Ø During the investment period, the transactions between the MoH and the
company are exempt from the stamp tax.
|
Lease
|
Ø
Once the health facility is built according to the
contract standard, the MoH will lease the facility for a maximum period of 30
years.
Ø
The MoH will pay the project company a yearly lease
adjusted annually on the basis of the Turkish Producer Price Index and the
Turkish Consumer Price Index.
Ø
During this period, the project company also has the
right to operate non-healthcare facilities.
|
Transfer
|
Ø At the end of the contract term,
the project company returns the healthcare facilities built to the MoH in
good working condition and without any encumbrances.
Ø
If the land on which the facility is developed is
not treasury-owned, the MoH takes necessary steps to adequately compensate
related parties.
|
PPPs
generally focus on the concept of value for money, which typically assesses the
affordability and risk transfer of a project. By this standard, the Lesotho
project is affordable for the government. On an operational cost comparison,
the government will not pay much more for the PPP than it currently spends on
the Queen Elizabeth II, yet it will receive vastly improved facilities, medical
services, and patient care. From a patient perspective, services at the new
hospital and filter clinics are affordable and will cost the same as at any
other public health facility in Lesotho. The project has also ensured maximum
risk transfer to the private operator, protecting the government from most of
the financial, operational, and legal risks inherent in a project of this
nature.
RISK ALLOCATION
& MITIGANTS
RISK
|
MITIGATION
|
Land Issue
|
All risks
arising out of the land will be under the responsibility of the
Administration. Superficies agreement has been also executed. The third
parties' allegations related to the land shall be settled by the
Administration.
|
Permits/Planning
|
The
Administration is responsible for planning and zoning. In case of any failure
to obtain the permits without Project Co's default, the Administration shall
reimburse the financial costs of the Project Co and the construction period
shall be extended accordingly. The construction permit shall be flowed down
to the EPC Contractor.
|
Delay
Risk
|
In
case of a delay at the completion of the Project, the Project Co will have to
submit bonds for delay-liquidated damages for each phase. If Project Co will
achieve the Final Completion, then such bonds will be returned by the
Administration without any set off. The bond requirement for delay liquidated
damages shall be flowed down to the EPC Contractor. Furthermore, a long stop
date is stipulated at the Project Agreement so that the Project Co shall be
entitled to complete the Project within such long stop date.
|
Environmental
|
The
Project is exempted from the EIA procedure under the Turkish legislation
provided that the Project Co. prepared an environmental and social impact
assessment report in line with the IFC's guidelines. The EPC Contractor and
O&M Company shall follow this report during the term of the Project.
|
Guaranteed
Payments
|
Administration
guarantees for Availability Payments and Services Payments and the minimum
quantity for the volume based services.
|
Change
in Law
|
Change
in law is to be dealt with through contract adjustment and the definition of
the Administrative Practice can be changed in order to secure any cost impact
of administrative practice. The Project Co shall be entitled to claim a
variation in case of change in law.
|
Unavailability
of Insurance
|
In
case of any unavailability of insurance, the Project Co shall be exempted
from its insurance obligation until such insurance will be available again in
the insurance market. Administration shall not be entitled to terminate the
Project Agreement due to such unavailability of the Project Company's
insurance liability.
|
Expropriation and
Nationalization
|
Expropriation
and project nationalization issues addressed in the Project Agreement will be
an Administration event of default.
|
Assignment
|
The
Project Co shall be entitled to assign the payments and insurance proceeds to
the lenders.
|
MoH PPP PROJECTS
IN TURKEY
Urban
Infrastructure Projects; Ministry of Health Turkey’s PPP health program
includes many PPP hospitals with total investment of more than USD 14 billion.
Almost all of the existing hospitals of the country will be renovate through
PPPs along with the Greenfield investments in the sector. Some of PPP Health
Projects are in pipeline are as follows;
PPP Projects in Healthcare as of December 2013
|
Pre-qualification tender announcement phase
|
Istanbul Bakırköy
Integrated Health Campus
Istanbul Üsküdar Public
Hospital
|
1,043
beds
425 beds
|
Pre-qualification phase
|
Eskişehir City Hospital
|
1,060
beds
|
|
Bid phase
|
Kocaeli Integrated Health Campus
TPHA + TPMDA Campus
|
1,180
beds
N/A
|
|
Final Bid phase
|
Bursa Integrated Health
Campus
Isparta City
Hospital
Izmir Bayraklı Integrated
Health Campus
|
1,355 beds
755 beds
2,000 beds
|
|
Contract phase
|
Adana Integrated Health
Campus
Elazığ
Integrated Health Campus
Gaziantep
Integrated Health Campus
Konya Karatay
Integrated Health Campus
Manisa
Education and Research Hospital
Mersin
Integrated Health Campus
PTR,
Psychiatric and High Security Forensic Psychiatric Hospitals
Yozgat
Education and Research Hospital
Istanbul İkitelli
Integrated Health Campus
|
1,539 beds
1,038 beds
1,867 beds
838 beds
558 beds
1,253 beds
2,400 beds
475 beds
2,682 beds
|
|
Construction phase
|
Ankara Bilkent Integrated
Health Campus
Ankara Etlik
Integrated Health Campus
Kayseri Integrated Health Campus
|
3,660 beds
3,566 beds
1,583 beds
|
Examples
From Around the World: Lesotho Hospital Public-Private Partnership
The
PPP agreement for this project was signed by the government and the private
operator on October 27, 2008. Financial close occurred on March 20, 2009, and
construction began on March 23, 2009. The filter clinics are expected to be
operational at the end of 2009, and the new hospital in July 2011.
The
Lesotho Hospital PPP has demonstrated that it is possible in a low-income
country to embark on a very ambitious project that is affordable for the
country and patients, is attractive to top-quality private investors, expands
services to more people, and has the potential to deliver high-quality health
services that address MDGs and the critical shortage of health
professionals—key constraints for many developing countries.
Although
the project is still in its early stages and the expectation of success is
high, there will certainly be challenges and obstacles for the private operator
and the government to overcome. A key risk is the high probability that the
hospital will reach maximum capacity very early in the project term, requiring
the government to rapidly improve the service offering at other hospitals to
relieve the pressure on the national referral hospital. Another risk is whether
the private operator will be successful in attracting and retaining the numbers
of doctors and nurses necessary to ensure effective service delivery. The key
factor for the success of this project is the commitment and support of the
government demonstrated throughout the project process, from procurement,
during negotiations, and to financial close. Government firmly believes this
project will deliver meaningful results for the country.
Conclusion: The Way to Success;
Ø The demand for infrastructure and services is strong
in Turkey.
Ø Upper middle income country & high economic growth
& domestic demand growth will continue in the foreseeable future (2023
targets and fiscal prudence).
Ø Investment in long-term stability & additional
growth.
Ø PPP provides additional investment and enhance
management of operations and risk.
•Healthcare PPP Projects TURKEY (YDA Groups)
References:
•Healthcare Industry in Turkey (Republic of Turkey Prime Ministry Investment Support and Promotion Agency)
•Infrastructure Investment in Turkey European Transport Finance Forum 2013 by TFI-News (Republic of Turkey Prime Ministry Investment upport and Promotion Agency of Turkey ISPAT)
