The earthquake which killed at least 40,000 people last August also shattered popular faith in the Turkish state. It seems particularly fitting therefore that the government has this year successfully relaunched privatisation, cutting back the economic role of the state which spearheaded industrial development in the early days of the republic.

Ugur Bayar, Turkey's privatisation chief who, together with his brother, dug the corpses of six relatives from the earthquake rubble when the authorities failed to show up, says the disaster underlined the need for the government to focus on its proper role. "People were asking 'where is the state?'. I'll tell you where it was, it was manufacturing tractors and underwear for the army which the army is not even buying."

The 35-year-old former banker, who has been involved in Turkey's stop-go privatisation efforts since 1992, argues that, this time, privatisation is here to stay.

Nothing could symbolise this better than the $1.2bn sale in March of 51 per cent of Petrol Ofisi, the country's biggest chain of petrol stations, to Turkey's biggest banking and media conglomerates.

A previous sale of the same stake in 1998 collapsed when an earlier administration, already criticised for choosing the third highest bidder in the Petrol Ofisi deal, had to resign over allegations of irregularities in a bank sell-off.

The renewed Petrol Ofisi sale was followed in April by the flotation of 31.5 per cent of Tupras, the quasi-monopolistic state-owned oil refiner, for $1.25bn, exceeding the government's $1bn target. Next on Ankara's agenda are Turkish Airlines, the national carrier, and Türk Telekom, the fixed line telecommunications monopoly valued at around $20bn and seen as the pièce de résistance of this year's sell-off programme if partial privatisation mooted since 1994 finally goes ahead. While retaining a 51 per cent stake in Türk Telekom, Ankara plans to cede control of THY, which is worth about $4bn, by selling 20-30 per cent in a block sale, 20-25 per cent as a public offering, and 5 per cent to employees.

A priority has been to make privatisation politically palatable by starting with already profitable state-owned enterprises. "They have gone for a politically easier and smart option of starting the privatisation process with big revenue earners which can be privatised with very little pain," says Ajay Chhibber, director of the World Bank office in Turkey. Separately, however, Mr Bayar says he has completed 57 tenders of smaller, state-owned assets since January.

Sell-offs totalling more than $5bn so far, including the auction of a third GSM licence in April for $2.5bn, have put the government within striking distance of its $7.6bn target for the whole year.

Question marks remain, however, over whether the sell-offs represent anything deeper than a revenue-raising exercise to help the government implement a three-year disinflation programme backed by the International Monetary Fund.

In most of the big deals so far, apart from Petrol Ofisi - which was considered otherwise unsellable - the government has hung on to a controlling stake. Some analysts argue that continuing state control is likely to limit new investors' ability to enhance profitability and cut back gross-overmanning prevalent at state enterprises.

Apart from Mr Bayar's almost missionary zeal in spreading the word, the government has also done little to promote the virtues of private ownership.

But Mr Bayar argues that successful first sell-offs will promote deeper privatisation in future. "When privatisation started in the UK, there was no privatisation culture forged in people's minds and people looked at privatisation purely from a proceeds point of view," he argues.

He says that in Turkey the government's mentality is already changing, not least under the influence of the strong performance of the Turkish private sector. "The government realise they cannot compete with private industry," he says. Some analysts have also however questioned Turkey's preparedness to sell assets to stand-alone foreign investors.

A law stipulating that foreign companies could not hold more than 49 per cent of the new GSM licences earmarked for auction this year was seen by some analysts as disturbing. Others argued that it is much easier to do business in Turkey with a local partner.

Here again, however, Mr Bayar pleads for a softly-softly approach. Although the government fears it would expose itself to fierce criticism if it ceded strategic telecommunications and airlines to foreign control, other industries will not be subject to such restrictions.


Era of the real thing
Sights are set beyond the core
Sector set to undergo sweeping reforms
Target is energy security at affordable cost