Rulings by the constitutional court against privatisation by decree have again delayed the closing date for bids for the government’s controlling stake in the Eregli Iron and Steelworks (Erdemir) on the Black Sea. Bids for the deal were to have closed on 12 August and were expected to fetch up to $400 million.
The recent court rulings have invalidated the legal existence of not only the recently formed privatisation administration (OIB), but also its predecessor, the public participation administration (PPA – MEED 12:8:94). Although Prime Minister Tansu Ciller subsequently said the PPA will remain until new legislation can be framed, the cancelled decree creating the OIB from the PPA included a clause annulling the previous state of affairs.
The government is seeking a compromise with the opposition which will allow privatisation to go forward again in the autumn. The opposition has not contested the principle of privatisation itself, but rather the manner of its introduction by decree.
The Erdemir deal was to have been the first of several major deals in a tight 1994 schedule, which has now slipped badly. If the legislative difficulties can be resolved, a new deadline may be set by the end of September, permitting negotiations to start in October, say officials. Interest has already been expressed by large foreign steelmakers together with local companies, and a consortium may be established. Among local companies which may tender are Cukurova, Colakoglu and Ekinciler.
Erdemir is one of the most profitable companies in the state sector, benefiting from being the sole domestic manufacturer of flat products. The company is also nearing the completion of a $1,500 million capacity improvement and expansion programme which will increase its raw steel output capacity by a third to about 3 million tonnes annually by 1995- 96.