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(Last updated: 11 Dec 2011)
Trends and opportunities
The market
Turkey is one of the key countries in the Middle East region when it comes to infrastructure projects. According to a report by Goldman Sachs, Turkey will become the world’s 9th largest economy by 2050 (Source: Sabah Newspaper: Goldman Sachs: Turkiye 2050’de dunyada dokuzuncu buyuk olur). Although Turkey saw a rapid decline in its economy during the global financial crisis, its banking sector has not suffered the same problems of toxic assets as many other countries, and a more rapid recovery was realised than other counterparts. Turkey commands a unique position bridging Europe and Asia, and its construction sector has grown rapidly. It has done this by not only exploiting opportunities from the development of the local economy, but by successfully penetrating opportunities in the Middle East, Central Asia and Russia. Collaboration with Turkish contractors or consultants could simplify market entry into some of the more challenging but potentially lucrative markets of the Middle East and North Africa and the Central Asia Republics.
The European Union has already allocated pre-accession funding to Turkey, which is mainly bound for the building and refurbishment of highways; railways and ports. This in turn will create opportunities for Australian companies with experience in similar projects in other developing markets. In addition to the EU, the World Bank is also active in this space. Furthermore, concession contracts, including very large transportation projects and PPP projects are continuing to present opportunities for those providing technical and legal services to lending banks and project consortia. Such major projects may also provide opportunities for Australian companies that supply niche design services, materials or products to form part of the supply chain. Contracts for such projects are often formed by consortia of Turkish and foreign contractors.
While Turkey has its own strong construction consultancy sector, there are opportunities for Australian companies especially in the commercial and retail sectors where institutional investors are involved. Tourism projects remain a growth area, with plans for further resorts and marinas built to international standards, and a growing interest in heritage tourism. Regeneration of city centres is a growing area of interest as well. In Istanbul, competition for the master planning of parts of the run-down areas of the city has already commenced.
Increased energy costs and concerns over security of supply are beginning to drive a commitment to greater energy efficiency in buildings and the sustainability agenda, and there appears to be limited local expertise in this area. Project management and construction management services do not appear to be well developed, and there are indications that even the larger contractors are recognising a skills shortage due to rapid expansion which is beginning to impact on performance and profitability. This is a growing area of opportunity.
Airports
There are currently 12 large airports and 33 smaller airports in Turkey. TAV Holdings and Limak Holding are the two major airport operator/investors in Turkey. TAV Holding has presence in Turkey and in the region. There is currently a tender for the operation of Izmir International Airport – Turkey’s fourth largest airport. By the end of September 2011, there were 54,131 planes used this airport and the passenger traffic is projected to be 6,572,475 passengers by the end of 2011. (Source: Milliyet Newspaper ‘Major competition for two airport projects’)
Some of the planned projects under BOT model are below:
- Zafer (Kütahya-Afyon-Uşak)Regional Airport Project
- Atatürk Airport Cargo Facilities
- Kocaelí/Cengiz Topel Airfield
- Samsun/Çarşamba, Sinop Ve Tokat Airports
- Nevşehir/Kapadokya Airport
- Çukurova Regional Airport
Ports
Turkey’s strategic location at the junction of three economic blocks; its regional economic and political role; its increasing domestic demand; its accelerating infrastructure investments and growing exporting activities make Turkey an international gateway for maritime traffic. For the last 10 years over 85 per cent of Turkish international trade has been carried out by sea. The Turkish ports sector is growing significantly each year. There are 176 ports in Turkey, both privately and publically owned, servicing domestic and foreign trade.
Candarli Port located in the Aegean region of Turkey is to act as a hub-port in the multimodal transportation corridor for the traffic between Europe, the Middle East and Eastern and Black Sea countries. The infrastructure for this port is completed and tenders are going to be announced for the built and the operation of the Port. Estimated value is US$5 billion. (Source: Invest in Turkey presentation ‘Special Investment Zones, Privatization and PPP projects in Turkey - 2011’)
Galata Port project is another on-going project in Turkey. When built, it is going to be the largest cruise port in Turkey. It is a BOT and TOR project. TOR will be up to 49 year. The bidder has to commit to develop the whole region by building a cruise terminal including five-star hotels, shopping malls and free shops. The tender will be renewed in 2012. (Source: Invest in Turkey presentation ‘Special Investment Zones, Privatization and PPP projects in Turkey-2011’)
Rail
Railways are enjoying a period of significant and sustained investment in Turkey, with major investment in high-speed lines, rail-led solutions to freight and distribution, and urban transportation in major cities across the country. A commitment to invest A$42 billion has been made (A$21.9 billion before 2023), in a program of expansion up until 2035. The detail of this expansion program is:
- 2,622km of high-speed track by 2013
- A further 6,792km of high-speed track by 2023
- 4,707km of new conventional track by 2023
- An additional 2,960km of high-speed track and 956km of conventional track in the period from 2023 to 2035
Turkey is being increasingly recognised as a country that is modernising rapidly, growing a competitive economy that is moving up the skills chain, and with increasing capability. Market sectors that are expanding include electronics, white goods, automotive sectors, and defence and aerospace. Privatisation has been underway since 2002. Indeed, there is a suggestion in the market that private capital will have a role to play in railways, certainly in the provision of a high-speed station in Ankara on a public private partnership (PPP) basis for which the tender has been published, on a build operate transfer (BOT) basis for high-speed lines, and possibly also in freight.
Regarding the rail infrastructure, the new high-speed lines will be double-track and electrified, and with line speeds of 250kph. Rolling stock will be partially constructed or assembled within Turkey. (Source: Invest in Turkey presentation ‘Special Investment Zones, Privatization and PPP projects in Turkey-2011’).
A number of major cities have urban rail systems, Light Rapid Transit systems (LRT), tram or metro of some kind. Extensions or new lines are much in demand and being planned. In Istanbul alone, there are plans to provide 118km of new lines by 2018 and a further 276km by 2023.
Rail is seen as the preferred solution for freight, with new freight hubs planned around the country that will use the high-speed lines and the Marmaray Crossing to carry freight overnight. The environmental issues associated with freight are well recognised in Turkey. Road congestion is an issue, especially at border crossings, with as much as 95 per cent of freight currently on the roads. There is an interest in growing railway freight in the market for domestic and international routes. Turkey is keen to capitalise on its strategic geographical location.
Turkey is developing rapidly and has become a manufacturing force in Europe. This will further drive the demand for rail freight between Asia and Europe. (Turkey has borders with eight countries). The future may, therefore, see an end to the monopoly of Turkish State Railways’ (TCDD) railway operations, with cross-border freight and passenger ‘open access’ operators being allowed access to track. To facilitate change and to comply with EU directorates, TCDD is undergoing reform, separating infrastructure, passenger and freight operations in a far-reaching program of modernisation. TCDD is currently a vertically-integrated railway, also owning in-house manufacturing facilities for rolling stock and track materials, as well as maintenance units. Ports and a rail ferry have been part of the portfolio but the former are now being privatised, and the latter upgraded to include a ferry terminal with Russian gauge to accommodate cross-border traffic.
Historically, TCDD has owned a great deal of the maintenance and supply chain market. Many of these facilities have been acquired in partnership, with technology transferred in-house, for example, for track components, locomotives, wagons and passenger cars and their components. Australian companies may see this as an opportunity.
The market is ready to work with international partners and there is desire to diversify these links. France and Germany are traditional players in the Turkish rail market, with more recent involvement from the Chinese, Japanese and Koreans.
Hospitals
In Turkey, there are many hospital projects developing under a PPP framework. These projects create an opportunity for Australian companies who have expertise in construction and operation of hospitals. The Turkish government is planning to increase the number of beds in several cities to 37,182 with a total value of the projects reaching up to AU$8.5 billion. (Source: Invest in Turkey presentation ‘Special Investment Zones, Privatization and PPP projects in Turkey-2011’)
Roads and bridges
The Turkish Government is heavily investing into building new roads and bridges and is planning to construct 4,773km of new highway by 2023. The current projects as of October 2011 are below (please contact Austrade office in Turkey to learn more about the current projects).
Expected motorway projects to be tendered:
- Gebze-Orhangazi-Izmir: 421km
- Northern Marmara: 361km
- Tekirdag-Canakkale-Balikesir: 433km
- Ankara-Izmir: 549km
- Afyon-Antalya: 345km
- Sivrihisar-Bursa: 202km
- Ankara-Samsun: 370km
- Aydin-Denizli-Antalya: 335km
- Ankara-Pozanti: 287km
- Sanliurfa-Habur: 360km
- Gerede-Gurbulak: 950km
- Sanliurfa-Diyarbakir: 160km
(Source: General Directorate of Highways)
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Market drivers
- European Union accession process
Turkey is a candidate country to become a full member of the EU. Turkey is already a member of the Customs Union in the EU and discussions to align laws and regulations to the EU standards have been very successful.
- Ambitious privatisation programs
According to the Turkish Transport Ministry high-value projects in transportation sector will be in service by the end of 2015. These projects include a highway underneath the Istanbul canal, Marmaray, a rail transport project on construction of an undersea rail tunnel under the Bosphorus, which will start to operate on 29 October 2013. Marmaray rail tube tunnel will link the city's Asian and European sides via an undersea commuter train line. The project also includes the modernisation of suburban rail lines along the Sea of Marmara from Halkali on the European side to Gebze on the Asian side. Another important project, a highway beneath Istanbul Strait, is estimated to finish by 2015. The Istanbul Strait Road Tunnel Crossing will be used only by light vehicles. The tender for Gebze-Orhangazi-Izmir Highway will take place on January 10, 2012, and this project will be carried out on Built Operate and Transfer model. Meanwhile, North Marmara Highway, including the third Bosporus Bridge in Istanbul, will start to operate in 2015.
- Turkish contractors
Turkish contractors have grown to become multinational companies with an emphasis on the projects in the nearby regions. Due to their strong presence in the Middle East and the CIS countries, there is a big opportunity for Australian companies to partner up with Turkish contractors for projects in Turkey and in third markets.
- Energy corridor
Turkey is an important energy terminal and corridor in Europe connecting the East and West. Seventy per cent of energy resources are located in the south and the east of Turkey, while the largest energy consumer, Europe, is located in the west of Turkey.
Opportunities
Pre-project studies and technical assistance
EU funding will increase as Turkey progresses towards EU membership. This will create opportunities for Australian consultancies to participate in projects relating to project identification and feasibility, capacity building of local institutions, technical assistance and project supervision. Current areas of opportunity include the new highway projects and new rail road projects. The Nabucco pipeline project, a proposed natural gas pipeline from Erzurum in Turkey to Baumgarten an der March in Austria diversifying natural gas suppliers and delivery routes for Europe, may also present opportunities. This includes the pipeline itself, the associated environmental issues around it, and also the related infrastructure improvements that will be required.
New projects
Tourism is a growth area requiring continuing investment in many areas. The development of international hotels, holiday villages and resorts, marinas and other facilities present opportunities for international designers since the facilities have to compete in quality and concept on the world stage.
The concept of regeneration is now developing in Turkey although this appears to be focused on the generation of land value rather than a balance between this and community needs. As the process develops and matures, there is likely to be the opportunity for those with experience of urban regeneration to provide services to the private and public sectors. Within Istanbul, there will be continuing interest in this sector driven in part by the recognition of the risk of a further serious earthquake.
The concept of sustainability is beginning to be addressed in Turkey as energy costs rise and public perceptions change. However, these concepts are relatively new to Turkey, and there are opportunities for those with experience of sustainable design for both domestic and commercial development to raise awareness and take market share.
Services to Turkish contractors
Turkish contractors have been very successful at securing projects in Turkey and also in developing countries at competitive prices and with a rapid mobilisation. A market is developing to sell specialist services in cost, project, and construction management to Turkish contractors in both their home markets and overseas in order to improve their performance and drive down costs. A good number of Australian companies (eg. Ausenco and Aconex) already have strong relations with Turkish contractors and have worked in projects in the GCC countries and the CIS countries.
Istanbul is in the 'top five' largest cities in Europe by population, and the urban planning for the city is therefore critical. The population is currently estimated to be 16 million in Istanbul. The 2008 OECD Territorial Report (Source: OECD Territorial Reviews: Istanbul, Turkey) for Istanbul reports that over the last three years, there has been progress towards a more open, integrated and decentralised system of urban planning in the city. The Metropolitan Planning and Urban Design Centre (IMP) has been established within the Municipality as a focus to drive forward, in a coordinated way, urban planning for the City. The planning aspect recognises the need for urban regeneration whilst taking into consideration the environmental considerations, seismic risks and urban transportation, however, these are not necessarily being translated into reality due to the diversity and large number of stakeholders involved in progressing redevelopment.
The OECD report acknowledges that moving towards more sustainable development is probably one of the greatest challenges for Istanbul and that environmental and sustainability issues are only now moving properly onto the agenda.
Another problem has been the high level of illegal and uncontrolled development that has taken place over recent years with the expansion of the city and the complex web of political and commercial interests in regeneration.
What makes Turkey an attractive place to do business?
- Centrally located
Turkey is a natural bridge between both East-West and North-South axes thus creates an efficient and cost effective outlet to major markets. From Turkey, companies enjoy an easy access to 1.5 billion customers in Europe, Eurasia, the Middle East and North Africa.
- Economic stability
Turkey continues to be seen as one of the most important emerging markets. Companies have enjoyed strong growth over the last 18 months in particular, pushing Turkey to clearly become one of the fastest growing markets in the world for most multinational companies. Many firms are exploring acquisition targets in Turkey, but are also evaluating greenfield manufacturing opportunities. With a strong demographic boom expected to continue, Turkey will continue to be one of the most promising emerging markets in the next decade.
- Qualified and competitive workforce
Turkey has over 25 million young, well-educated and motivated professionals making it the fourth largest labour force compared with the EU. Each year approximately 500,000 graduate from 156 universities in Turkey. Many of the multinational companies have their regional headquarters in Istanbul and enjoy employing the qualified workforce for their businesses.
- Attractive market
Turkey is one of the fastest growing countries in the world. Many of the renowned economists now place Turkey along with the BRIC countries. In addition to being a hot market for trade and investment, Turkey is a very attractive place to visit, live and do business and has become a favourite destination for international conferences, exhibitions, trade shows and seminars.
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