Location: Kahramanmaraş and Tekirdağ, Turkey

Date of Start and Completion: Oct 2021 – Nov 2022

Clients: World Bank

Project Description:

Over the last decade, several legal and executive measures have been adopted in Türkiye to increase the resilience of the country’s cities against natural disasters and climate change. In this context, the Law on the Transformation of Areas under Natural Disaster Risk (Law No. 6306) offers an opportunity for a systematic strategy to integrate resilience into urban planning and management and to improve the resilience of vital infrastructure and buildings, including housing. Despite these initiatives, Türkiye continues to face financial obstacles. In response to the government’s request for IBRD financing to support the implementation of the government’s Urban Transformation Action Plan, the World Bank is currently providing technical support and guidance on urban resilience and has been working closely with MoEUCC (Ministry of Environment, Urbanization, and Climate Change) to develop and advance its Urban Transformation Program. To support the preparation of the Urban Resilience Project in Türkiye, the Urban, DRM, and Land team mobilized resources from the City Resilience Program (CRP) to aid the government’s efforts to implement an enhanced UT program.

The main components of this project were as follows:

• Reviewing Development Potential in Urban Transformation Areas of Tekirdağ and Kahramanmaraş.
• Cost Estimation for Required Climate and Disaster Resilient Infrastructures
• Reviewing Potential Implementation Strategies for Development Scenarios

Therefore, the main objectives of the study include:

• Modelling potential investments within the selected UT areas that private and public sectors could be interested in and that could reduce identified/priority climate and disaster risks (with an emphasis on vulnerable communities);
• Assessing the potential for attracting private investment in the UT areas;
• Running pro-forma financial analysis of potential development scenarios and PPP arrangements

In the first phase, a macroeconomic analysis was undertaken to evaluate the factors affecting the investment climate in the Metropolitan Municipality of Kahramanmaraş and Tekirdağ. Using the data from the preceding section, the growth potential of the UT areas was then evaluated. We generated three development scenarios for Kahramanmaraş and Tekirdağ Metropolitan Municipality based on upper-level policies and expected growth rates: a “baseline scenario”, a “slow growth scenario”, and a “rapid growth scenario”. These scenarios were applied to the selected UT areas, to identify areas with the potential to generate revenue. Then, a preliminary estimate of potential revenue was conducted based on existing data on building and service prices in the Kahramanmaraş Metropolitan Municipality. Finally, while rapid growth has been the preferred scenario for the next 15 years, we discovered that several factors contribute to uncertainty over realistic scenarios. Therefore, the only alternative was to seek strategies that are both long-term and widely applicable. This report served as the foundation for the following deliverables: “Preliminary cost analysis of climate and disaster resilient infrastructure” and “review of potential implementation strategies for development scenarios.” The ultimate objective was to inform the World Bank of potential partnership opportunities with the private sector for funding infrastructure related to resilience.

The second phase’s purpose was to estimate the cost of the proposed infrastructure in the urban transformation (UT) areas. To achieve this objective, this phase begins with examining the resilient infrastructure that needs to be implemented in the selected UT area. Following that, “susceptibility analysis” was applied as a tool for determining the degree of significance of required infrastructures in terms of resilience. This was accomplished in three steps as follows:

• Analysis of the infrastructure’s susceptibility to hazards/risk
• Evaluation of the required infrastructure’s significance in decreasing susceptibility
• Evaluation of the infrastructure’s role in promoting development potential

As a result, a fifteen-year roadmap was established for two specific UT areas. Finally, during this period, a cost estimation of the implementation of the required infrastructure was conducted. Similar to the first deliverable, this section served as the basis for the third phase: “review of potential implementation strategies for development scenarios.”  The ultimate objective was to inform the World Bank of potential engagement opportunities with the private sector for funding resilience infrastructure.

Public-Private Partnerships (PPPs) basically involve the public and private sectors sharing the costs and risks of investments. As a result, finding the ideal PPP arrangement necessitates an awareness of each party’s strengths and shortcomings. Accordingly, amongst the various PPP schemes, Design, Build, Finance, and Operate (DBFO), Build, Operate, and Transfer (BOT), and Build, Lease, and Transfer (BLT) models were preferable in the context of Kahramanmaraş and Tekirdağ. The former two models, as well as Transfer of Operating Rights (TOR), and Build and Operate (BO), were the most frequent and legally established PPP arrangements in Türkiye. Hence, they were recommended for the majority of infrastructure projects. Furthermore, various incentives, in the form of development rights and projects were proposed to compensate the costs and/or risks of investments in infrastructure for potential developers/investors. These incentives were then allocated to infrastructure projects to form viable investment packages.

It was vital to highlight that all service delivery mechanisms, whether public, private, or mixed, were vulnerable to risk. The major distinction between PPP models is that a significant portion of their effectiveness comes from the effective identification, pricing, and transfer of risk from the public to the private sectors. Failure by the government to appropriately identify, evaluate, and balance these risks may discourage potential private investors from participating.

Depending on how the financing responsibilities and risks were shared between the public and the private sector, the infrastructure projects in UT areas were categorized into four scenarios as follows:

Scenario 1: Fully financed by the private sector, Scenario 2: Partially financed, bankable with government incentives (using Discounts, Policy Incentives, etc.), Scenario 3: Partially financed, non-bankable and requiring lead role of government in funding, and Scenario 4: None to Limited private sector role.

Finally, a series of recommendations based on the financial model were presented to improve the effectiveness of the institutional structure. To accomplish this goal, the institutional context of PPP projects in Türkiye was reviewed, followed by an analysis of the existing organizational procedure and the legal environment. Therefore, several essential recommendations for strengthening public partnerships in UT areas were provided.