Profile of Mrs Nuray Çolak Tatlı Istanbul Technical University

Nuray Çolak Tatlı

PhD Student, Urban Planner

General research interests

Urban planning, transaction cost theory and institutional economics, planning law, housing

PhD/Postdoctoral Research Title

Institutional analysis of the Turkish planning system and transaction costs

PhD Abstract

Turkey, which is a developing country, failed to solve the urban problems arising as a result of the rapid urbanization process starting in the 50s. In urban areas in Turkey, as well as municipalities, central government units have a share in the production of land, directly or indirectly, with the authority granted by special laws. On the other hand, urban land in sufficient quantity and diversity, appropriate for housing requirements, cannot be produced (Kentleşme Şurası 2009, 2009).
The Urbanization Forum (Kentleşme Şurası) has been organized in 2009 by the Ministry of Public Works and Housing, with the participation of representatives of public organizations, academics, employees, and experts of the private sector. In the Forum, the current institutional planning structure of Turkey, and the problems arising from the current planning practice and process have been discussed. The aim is to develop a new planning approach and institutional structure proposal. The current problems have been summarized as follows in the report of the “Spatial Planning System and Institutional Structure Committee” formed within the scope of the Forum :
• Absence of a spatial planning system and strategy associated with a national development planning;
• Absence of a planning vision and strategy on which a consensus is reached;
• Absence of vertical and horizontal integrity and consistency in the current planning system;
• Presence of partial applications and confusion of authority in the current planning system;
• Presence of multi-headed, several planning authority in the same spatial level;
• Constitution of several plans in the same spatial unit;
• Absence of coordination and cooperation between institutions;
• Presence of traditional planning type at lower echelons;
• Failure to meet the requirements of the rapidly developing social structure with this traditional and stable approach (Kentleşme Şurası 2009, 2009).
According to Ersoy (2001) the plan is defined with two elements. The first one is the objective we plan to reach, in other words, the project. The second one is the regulations required to reach this objective, in other words, the means. After having provided this definition, Ersoy observes that in the Turkish planning process there is a bureaucratic centralist attitude and indicates that this reduces the probability of success. Ersoy determines the problems in the legislation on housing (2001) and indicates that there are 25 different organizations having planning authority, and that a significant coordination mechanism has not been established between these different units. A similar observation is also made by Ünal (2015) (2008).
The International Financial Board (Foreign Investment Advisory Service/FIAS) (2001) report also defines the zoning process as one of the most complex parts of the investment process in Turkey. It is indicated that at state as well as local administrative levels, too many licenses, authorizations and permits are required in the process to which many ministries and authorities are included. This process probably constrains investments, requires much time and resources. The report states that 6 weeks are required to obtain the authorization for the place, 5 weeks for the installation permit, between 3 months and 2 years for the construction permit, and 2-3 months for the housing permit. Another fact indicated in the report is that in order to accelerate the process, an investor may make unofficial payments. According to the report, when investors make their zoning plans, they think that it is very difficult to estimate the speed and the cost (FIAS, 2001).
It is observed that the adjustments made after 2005 in the administrative structure changed these results partly. In the report of the World Bank on the Evaluation of the Investment Environment in Turkey (2010), it is indicated that investors complain about the bureaucratic difficulties and unrecorded payments in regulatory environments. It is indicated that in spite of these problems, according to the time measure used for the construction of a warehouse, the average period of site development of Turkish companies, between 2005 and 2009, has been reduced by 44 days. However, it is indicated that the period for obtaining a construction permit varies greatly between the cities of Turkey, firms in Istanbul wait longer (87 days) to obtain a construction permit, compared to the firms in other cities. Furthermore, it has been observed that there are differences according to the size of the firms, that SMEs spend twice the time compared to large enterprises to obtain a construction permit (60 days compared to 32 days).
Within the framework of the “Project for the Reduction of Seismic Risk of Istanbul and Emergency Case Preparation Project” carried out by the Istanbul Governorate Project Coordination Unit and initiated in 2006, the Bağcılar Municipality has been chosen as the pilot region for the “Efficient Application of the Development Law”. Results regarding the project have been published by Reis (2014). In the project, first the current situation has been analyzed and the local planning process and permit process until the granting of a building use permit has been analyzed. The work steps and work flow chart related to the process document and the construction permit have been put forwards. As a result of the analysis made, periods which are not well planned, documents which are not compulsory, unnecessary signatures and approval procedures, in-site and external correspondence and same processes and steps defined under different names have been determined. It is indicated that at the end of the project, the construction permit process which was 140 days before 2007 decreased to 51 days at the end of 2014 (Reis, 2014).
In Turkey, after 2000, several legal and administrative changes were made which modified the planning practice. The answers to the questions of how these changes affected the current system, whether they made it more productive or not will be provided with the institutional analysis. The new institutional economic theory developed at the beginning of the 20th century in the U.S.A., which is an economic concept approach and points to the importance of rules and institutions for institutional economics and economic order, can be used for this analysis.
The aim of this study is to analyze on the legal and institutional structure on transaction costs in the Turkish planning system by taking into consideration the changes were made after 2000, within the framework of the institutional economic theory.
The new institutional and transaction cost theories have been used in works realized in areas such as sociology, political science, organization theories, law of contracts, business strategies and marketing where the classical economic theories remained useless. As a method used in social science works, it was frequently used in the planning literature, especially after the 90s.
In the planning literature, the opportunities of the transaction cost analysis were first discussed by Alexander (1992). Following this study, the new institutional economic theory and the transaction cost analysis took their place in the planning literature. Nedham and Kam (2004) pointed to the importance of the transaction cost analysis related to land transfer, Lai (2005) to the importance of transaction costs in the land and real estate market and opened to debate the opportunities they can provide.
In their studies, Alexander (2001) provided an institutional analysis of the İsraeli planning system, Buitelaar (2004) an analysis of transaction costs in the housing Project development process in the Netherlands, Buitelaar (2007) provided an comparative transaction cost analysis of the Netherlands having a planning practice based on plan and national state structure, the English planning system based on discretionary power and focused on development control, and the United States of America having a special system which is not based on zoning in planning; Egbu, Olomaiye and Gameson (2008) an analysis of the land development process in the planning system of Nigeria; Omar and Prijono ( (2009) an analysis of the land development process in the Malaysian planning system; Krabben and Buitelaar (2011) an analysis of the land development process of industrial structures in the Netherlands, Cho (2011) an analysis of the land development process in the planning system of South Korea.
In the Turkish planning literature, there is no adequate studies other than Baharoğlu and Leitmann (1998) who analyzed the supply of infrastructure in shanty areas in Turkey and Kuyucu (2014) who analyzed the role of the legal vagueness on the establishment of the private ownership regime and its institutionalization. Turk and Korthals Altes (2010) examined the institutional structure of the land development process of some recent large-scale housing projects using a framework of institutional analysis by taking into consideration transaction steps. Although these studies were prepared within the scope of the new institutional economic theory, they do not include an analysis of the transaction costs of the planning system.
In the study, first a literature survey will be made on the new institutional economic theory and its use in planning. Then, the current institutional structure of the Turkish planning system will be analyzed and transaction costs will be put forth. In the subsequent section, the impact of the institutional structure on the use of development rights will be analyzed within the framework of an empirical study. The study will provide the opportunity to follow up the impact of legal regulations on the planning practice and discuss how it can be made more productive, and to compare the Turkish planning system with the planning system of other developing countries and developed countries.
After 2000, laws such as the Law on Metropolitan Municipalities, the Law on Municipalities, and the Special Provincial Law regulated the structure of local authorities, and financial audit institutions were established. No amendment was made on the Development Law No. 3194 but a new structure was created with the amendments made on related laws such as the Law on the Preservation of Cultural and Natural Heritage, the Coast Law, the Forest Law, and the Pasture Law etc. fter the regulations of the Capital Market Board (SPK) and the Banking Regulation and Supervision Agency (BDDK), regulations related to the institutionalization of the construction sector affected the structure of the sector. In this period, the number of real estate investment companies (GYO), valuation companies etc., and institutional companies increased. As of 2014, the number of public GYO is 31. TOKİ’s subsidiary Emlak Konut GYO A.Ş. which is a participant of TOKİ is a real estate investment company (Emlak Konut GYO AŞ, 2014).
Regulations encouraging privatization and reducing bureaucracy are made in many democratic countries. Buitelaar (2007) presents the amendments made in the laws on planning in France, the Netherlands and England, after 2000, and indicates that these regulations are related with the policies of the 80s. The privatization and deregulation policies applied in Turkey are also reflected in the field of planning.
Under classical economics, the market is assumed to be totally competitive. With this point of view, all actors are assumed to be under equal terms in the land market. However, the examples of Malaysia (Omar, W, & Prijono, 2009); Nigeria (Egbu, Olomolaiye, & Gameson, 2008) and South Korea (Cho, 2011) show that in land development processes certain persons or institutions are more advantageous. It appears that the high level of transaction costs is a factor hampering competition. In his study on Istanbul Ayazma, Kuyucu (2014) indicates that uncertainties in the transformation process affect the behavior of the actors and increases opportunism.
The risk for changes in the institutional structure emphasized by Krabben and Buitelaar (2011) to create private sector monopolies becomes more important in developing countries like Turkey, where uncertainties are at a high level.
The transaction cost economy assumes that whereas all the other variables are equal, the choice of a structure depends on the nature of the transactions and the costs arising from the transactions. In studies made within this context, transaction costs are considered as independent variables and administrative structures as dependent variables (Buitelaar, 2007). This study will focus on the relationship between transaction costs and the institutions, in the field of planning.
Buitelaar (2007) indicates that institutions arise at different levels by different means and can be dependent and independent variables at the same time. Referring to Gualini (2001) Buitelaar (2007) indicates that planning can be at the same time an institutional practice and a factor of institutionalization. This study aims at explaining how the transaction costs arise at different institutional levels and how they are reflected on the land development process, especially, focusing on the situation after 2000s.
When the literature review and the change in the Turkish planning system are appraised together, an institutional economics and transaction cost analysis can be made and answers provided to certain questions. The main purpose of the thesis is to make an institutional analysis of the Turkish planning system and the transaction costs. To this end, answers must be provided to the following questions:
1. Are transaction costs high in developing countries?
2. Are uncertainties high in the Turkish planning practice?
3. Are the uncertainties in the land development process high?
4. Do uncertainties imply that transaction costs are high?
5. What are the actors efficient on the institutional process?
6. In the planning process, is the local authority or the central authority efficient?
7. Did the institutional regulations made after 2000 increase the power of the local authority?
8. How do the institutional changes made after 2000 affect transaction costs?
9. In Turkey, is it expensive to obtain a construction permit and a habitation permit?
10. Are illegal payments made to reduce transaction costs?
11. Are the costs of individual ventures high compared to big companies?
12. Did the institutional regulations made after 2000 provide advantages to big companies in terms of transaction costs?
2.1 Hypotheses
Main hypothesis:
“Transaction costs are high due to uncertainties in the institutional structure of the planning system in Turkey which is a developing country, especially after 2000s”
“Transaction costs are not equal for each mode within land development process.”
 First sub-hypothesis:
“Transaction costs are low in favour of large scale projects within land development process”.
 Second sub-hypothesis:
“Transaction costs of medium-scale projects are high, compared to the transaction costs of large scale projects”.
 Third sub-hypothesis:
“Transaction costs of small-scale projects are high, compared to the transaction costs of large scale projects”.
2.2 Method
In the study, transaction costs will be analyzed at two different institutional levels, by making an empirical analysis of the institutional structures in the country at a macro level and the land development process at a micro level.
In the first stage, an institutional analysis of the Turkish planning system will be made. As a result of the institutional analysis, all stages of the planning process and transaction costs will be put forth. Within this context, a model for the local physical plan preparation process in Turkey will be created. The institutional analysis of the local physical plan preparation process will be made by examining the existing laws, regulations and other legal documents and benefiting from the studies already made.
By comparing the results obtained with the examples of Israel (Alexander E. R., 2001) and Nigeria (Egbu, Olomolaiye, & Gameson, 2008), we think that it will be possible to understand the difference between developed and developing countries.
In the second stage, by using the conceptual model related to the land development process put forth by Alexander (2001) and the transaction cost model of Buitelaar (2004, and 2007), transaction costs will be analyzed on sample projects. With this analysis, the aim is to determine the stages of the process as well as the actors that are efficient on the process.
Subsequently, interviews will be held with professional actors of the land development process such as city planners and architects, large-scale companies, and medium-scale and small-scale developers, to determine the time cost and financial cost of the stages of the land development process and put forth the stages and costs that are defined by the legislation. By using the in-depth interviews technique, it will also be possible to determine which actors are active.
In the study, one of the objectives of the analysis of the land development process is to determine whether transaction costs vary according to the scale of the companies. To this end, transaction costs will be analyzed on a housing project realized by a large-scale company in the choice of the sample land and a project realized by a small-scale company on a single structure scale.
Emlak Konut GYO, a participant of TOKİ (Housing Development Administration), whose authority has been increased with the regulations made after 2000, is Turkey’s greatest real estate investment trust. This company realized large-scale housing projects, under the “Revenue-Sharing Model”, after 2002. For this reason, as a first example, a large-scale housing project developed by Emlak Konut GYO, which is a participant of TOKİ, under the “Revenue-Sharing Model” will be analyzed. Second, a medium-scale housing Project developed by a medium-scale developer and which has no relationship with public organizations will be examined. Third, a small-scale project realized by an individual developer will be analyzed.
The empirical study will be realized on the Istanbul example. Istanbul is the province with the highest economic activity and population in Turkey. It is one of the world’s important cities having a hinterland in the Balkans, Black Sea, Middle-East and Eastern-Mediterranean. According to the study carried out by the Loughborough University Globalization and World Cities Research Group, based on the data of 74 main producer service company offices in 263 cities, Istanbul ranks 49 in the status of Gamma cities which is the final category (İstanbul Büyükşehir Belediyesi, 2009). We believe that a city where the real estate sector is developed is more suitable for a comparison at the international level. Furthermore, there are large-scale, medium-scale and small-scale projects in Istanbul.
In the first six months of the study, research required for the analysis of the institutional structure and the land development process will be made and information will be gathered on sample projects to be used in the empirical study. In the second six month period, transaction costs will be analyzed from the findings of the Radboud University. In the third term, the results of the analysis will be evaluated. In the fourth term, the results obtained will be compared with empirical studies realized in developing and developed countries. In the final term, general evaluations and proposals will be prepared.