-
The Bank in the recent past has financed a number of water and urban development projects28 in Turkey, and is closely involved in the broader reform efforts related to increasing macroeconomic stability, reducing the fiscal burden, improving public sector management and the public investment program, and strengthening the financial sector.
-
With this broad experience, the Bank can assist Turkey in a number of ways that are outlined below. In the context of the Country Assistance Strategy (2003 to 2006), possible areas of Bank involvement are being considered in the discussion between the Bank and the Turkish Government. The Bank’s assistance could be in the form of technical assistance, investment and adjustment lending, and a possible guarantee operation.
-
Performance benchmarking: Under the IDF grant, the Bank is currently assisting the Government to develop a system that would track the performance of pilot municipalities. This system would allow benchmarking and the operations of the municipalities would be made public. Building on this initial work the Bank could assist Turkey to expand the benchmarking system to all municipalities in the country, including the establishment of the financial management system to be used at the municipal level.
-
Advisory role: The Bank could continue to share international experience on various facets of local government issues that have been discussed in this report. As policy makers review existing legislation and consider various options, international experience on adopting certain laws would be relevant. In the May 2002 workshop, the experience of various countries in local government administration and operations of financial intermediaries was discussed and well received. This discussion can be expanded for specific items that may come up in the context of drafting new legislation.
-
Support public sector reform: Through its adjustment and investment operations, the Bank is likely to continue its support for the broad public sector reform agenda. This is a core competency area for the World Bank and issues related to central Government oversight and transfers as well as municipal revenues may be addressed through upcoming operations. Possible areas of support could include local tax reform and establishment of an improved local government financial management system. As mentioned above, there is a great need to expand the recently mandated reforms to the local authorities in areas such as financial accountability, audit reform, budget classification and public procurement.
-
Enabling private sector entry: Currently, the role of the private sector in delivering municipal services is limited. While Build Own Transfer (BOT) and management contracts are possible, lease or concession contracts are not. Management contracts are a good start but an increased private sector involvement (lease or concessions) increases the efficiency gains as the private sector is more vested, taking on commercial risks. The Bank could help to develop a strategy (including the development of a regulatory framework) that will reduce the barriers for the private sector entry and also implement pilot projects with increased participation of the private sector. A strategy for the water sector is currently being prepared. Further, the Bank could assist in helping the municipalities disengage from commercial activities that they currently practice and where the private sector is crowded out. A thorough review of the commercial activities would be needed and then an action plan to transfer the businesses to the private sector could be developed.
-
Assist in reform of municipal borrowing: Although fiscal pressures exist, there is still a need to provide funding for local infrastructure given the needs of Turkey’s urban population. Through adjustment and investment operations, the Bank can help develop a sustainable system for municipal borrowing for priority investments. A Bank loan may be used to capitalize the reformed system, working under prudential conditions and a supporting legal and regulatory framework.
-
Use of the Bank’s guarantee instrument: To mobilize private resources for municipal financing, the Bank’s guarantee scheme may also be considered (Annex 4). Prior to the use of the Bank’s guarantee instrument, a methodology should be developed by the Government to determine the contingent liability of such an instrument. The Bank could assist in this matter. Two types of guarantee are possible: a) Partial Credit Guarantee: this maybe used to support market funding of the reformed municipal borrowing system. Through this guarantee the reformed Iller Bank or any other suitable agency would be able to extend the maturity period compared to regular borrowings on its own credit; and b) Partial Risk Guarantee: the regulatory and pricing risks related to municipal operations may be covered under this approach scheme. This guarantee would provide comfort to the private sector on performance of stipulated government regulatory functions when they invest in local infrastructure.
Turkey Municipal Sector Review
Iller Bank Income Statement
April 2002 Constant Prices; in Millions of US$
No.
|
Revenue/Expense Items
|
2001
|
2000
|
1999
|
I.
|
Interest Income
|
522,7
|
355,4
|
396,7
|
II.
|
Interest Expense
|
132,9
|
126,3
|
179,8
|
III.
|
Net Interest Income
(-Expense) (I-II)
|
389,8
|
229,1
|
216,9
|
IV.
|
Non-Interest Income
|
50,0
|
61,0
|
48,9
|
V.
|
Non-Interest Expenses
|
382,6
|
79,7
|
79,7
|
VI.
|
Net Non-Interest Income
(-Expense) (IV-V)
|
-332,6
|
-18,7
|
-30,9
|
VII.
|
Profit (-Loss) Before Tax (III-VI)
|
57,2
|
210,4
|
186,1
|
VIII.
|
Provision for Profit Tax
|
122,5
|
83,7
|
75,8
|
IX.
|
Net Profit (-Loss) (VI-VIII)
|
-65,4
|
126,7
|
110,3
|
Turkey Municipal Sector Review
Iller Bank Balance Sheet
April 2002 Constant Prices; in Millions of US$
No.
|
Assets
|
31/12/2001
|
31/12/2000
|
31/12/1999
|
I.
|
Cash on Hand
|
0,1
|
0,1
|
0,1
|
II.
|
Cash in Banks
|
13,3
|
191,9
|
305,2
|
III.
|
Other Financial Institutions
|
0,0
|
0,0
|
0,0
|
IV.
|
Interbank Money Markets
|
384,8
|
0,0
|
0,0
|
V.
|
Loans Extended
|
770,0
|
1.128,3
|
812,4
|
VI.
|
Rediscounts on Interest and Income Accruals
|
0,0
|
0,0
|
0,0
|
VII.
|
Miscellaneous Receivables
|
0,4
|
0,7
|
0,6
|
VIII.
|
Participations (Net)
|
1,9
|
1,7
|
2,3
|
IX.
|
Fixed Assets (Net)
|
28,4
|
33,9
|
26,5
|
IX.A.
|
- Gross Fixed Assets
|
36,1
|
42,3
|
32,9
|
IX.B.
|
- Depreciation (-)
|
7,7
|
8,3
|
6,4
|
X.
|
Other Long-term Assets
|
70,3
|
60,4
|
92,3
|
|
Total Assets
|
1.269,4
|
1.416,9
|
1.239,3
|
| Liabilities |
|
|
|
|
Short- and Long-term Liabilities
|
31/12/2001
|
31/12/2000
|
31/12/1999
|
I.
|
Bank Loans Received
|
7,8
|
251,4
|
231,9
|
II.
|
Debts to Funds
|
1,7
|
0,1
|
21,5
|
III.
|
Taxes and Duties Payable
|
6,5
|
5,8
|
7,7
|
IV.
|
Collaterals received from Contractors
|
353,6
|
460,6
|
443,3
|
V.
|
Allowances for Employee Termination Benefits
|
2,2
|
3,4
|
3,8
|
VI.
|
Profit Taxes Payable
|
84,9
|
72,0
|
57,6
|
VII.
|
Miscellaneous Debts
|
540,0
|
176,2
|
264,5
|
|
Total Short- and Long-Term Liabilities
|
996,8
|
969,5
|
1.030,2
|
| Equity |
|
|
|
VIII.
|
Paid-in Capital
|
276,6
|
292,7
|
89,9
|
IX.
|
Asset Revaluation Fund
|
20,5
|
24,6
|
21,0
|
X.
|
Retained Earnings
|
20,8
|
21,2
|
14,3
|
XI.
|
Net Profit (-Loss) After Tax
|
-65,4
|
126,7
|
110,3
|
XII.
|
Balancing Item Due to Currency Difference
|
20,1
|
-17,8
|
-26,4
|
XIII.
|
Total Equity
|
272,5
|
447,4
|
209,1
|
XIV.
|
Total Liabilities
|
1.269,4
|
1.416,9
|
1.239,3
|
Turkey Municipal Sector Review
Iller Bank Cash Flow Statements
April 2002 Constant Prices; in Millions of US$
No.
|
Cash Inflow/Outflow Items
|
2001
|
2000
|
1999
|
I.
|
Cash Flows Related to Banking and Commercial Operations
|
355,0
|
181,9
|
154,4
|
I.A.
|
Interest Received from Credits Lended
|
506,4
|
324,8
|
363,1
|
I.B.
|
Interest Paid for Loan Facilities Utilized (-)
|
-132,9
|
-126,3
|
-179,8
|
I.C.
|
Dividends Received From Participations
|
0,0
|
0,0
|
0,0
|
I.D.
|
Fees and Commissions Received
|
0,5
|
0,6
|
0,6
|
I.E.
|
Other Non-interest Revenues
|
49,5
|
60,4
|
48,2
|
I.F.
|
Personnel and Other Expenses
|
-65,2
|
-73,6
|
-74,1
|
I.G.
|
Taxes and Duties
|
-3,2
|
-4,0
|
-3,6
|
I.H.
|
Miscellaneous
|
0,0
|
0,0
|
0,0
|
II.
|
(-Increase)/Decrease in Operational Assets
|
152,2
|
-202,7
|
-226,4
|
II.A.
|
Net (-Increase) / Decrease in Bank Accounts
|
-206,3
|
113,4
|
-83,9
|
II.B.
|
Net (-Increase) / Decrease in Loans Extended
|
358,3
|
-315,9
|
-142,4
|
II.C.
|
Net (-Increase) / Decrease in Other Assets
|
0,3
|
-0,1
|
-0,2
|
III.
|
Increase/(-Decrease) in Operational Liabilities
|
-825,3
|
-313,7
|
171,5
|
III.A.
|
Net Increase / (-Decrease) in Bank Loans Received
|
-243,6
|
19,5
|
119,5
|
III.B.
|
Net Increase / (-Decrease) in Other Liabilities
|
-581,8
|
-333,2
|
52,0
|
IV.
|
Net Cash Flow from Banking and Commercial Operations
|
-673,1
|
-516,4
|
-55,0
|
V.
|
Financial and Fixed Asset Investments (-)
|
-8,0
|
-16,3
|
-16,7
|
V.A.
|
Participations (-Increase)
|
-1,5
|
0,1
|
0,0
|
V.B.
|
Fixed Asset Investments (-Increase)
|
-6,5
|
-16,4
|
-16,7
|
VI.
|
Increase in Capital
|
147,6
|
237,4
|
1,1
|
VII.
|
Net Increase / (-Decrease) in Cash
|
-178,5
|
-113,3
|
83,9
|
VIII.
|
Cash on Hand and in Banks-Beginning-of-Year
|
191,9
|
305,3
|
221,4
|
IX.
|
Cash on Hand and in Banks-End-of-Year
|
13,4
|
191,9
|
305,3
|
Turkey Municipal Sector Review
Share with your friends: |
