However, it is still too early for a large-scale proliferation of construction projects on home soil – a fact that surprises few, given the fiscal tightrope the Turkish government has been treading under the watchful eye of the IMF. Splashing out on multiple construction projects is, after all, hardly expected from a cash-strapped administration such as Turkey’s.
But in spite of monetary strictures, a number of grand projects have been progressing. The construction of Istanbul’s subterranean, transcontinental Marmaray metro link has drawn particular attention given its impressive scale. Financed by a $2.5bn loan from the Japanese Bank of International Co-operation (JBIC) and up to 650m euros from the European Investment Bank (EIB), the project expects to carry 1m passengers a day following completion in 2008. As winners of the tender, Turkish construction giants Gama and Nurol have reason to smile. So do their Japanese partners Taisei and Kumagi Gumi.
Meanwhile, the government has pushed ahead with the expansion of Turkey’s sprawling road network, with the construction of the South Black Sea Road (560 km) and the Ankara-Samsun route (402 km) well underway. Also, a consortium composed of Akbank, Garanti Bank and Is Bank has extended an $831m loan for a highway project connecting the Caucasus region, Central Asia and Europe.
With an emphasis on transport, the government has also focused its energies on building and upgrading Turkey’s airports. Tepe-Akfen-Via is now committed to constructing the new domestic and international terminals at the Ankara Esenboga Airport – a project that is expected to consume some $189m.
Analysts in the meantime wonder whether Turkey’s long-neglected rail infrastructure will receive fresh investment and attention. After the fast-link rail service connecting Ankara and Istanbul skipped its tracks in July 2004, the government will want to avert similar incidents in the future.
This is not to suggest that such large-scale projects in Turkey are the norm. Measuring the health of the construction sector on the basis of half a dozen tenders would be to ignore the overwhelming majority of small- and medium-sized construction firms which continue to scramble in search of less ambitious contracts, particularly in real estate.
But this area poses its own set of problems. Turkey needs to bring its mortgage market up to a par with Europe and the United States so as to spur local demand for property. It was only just recently that the Turkish Capital Markets Board approved the initiation of a mortgage system, guaranteeing longer periods of maturity and more favourable terms for mortgage-seekers. Construction companies, along with consumers, have high hopes of the new system, which should come to fruition in 2005. But the true effect of the initiative has yet to be felt.
However, despite this, the construction sector as a whole is growing. The first quarter of 2004 saw the sector expand by 2.9% y-o-y, according to analysts IntelliNews. Not bad considering that construction registered a contraction of 9% y-o-y in 2003, preceded by two years of stagnation.
Yet the truly impressive growth comes from the Turkish firms that have won tenders abroad. According to statements in July 2004 by State Minister Kursad Tuzmen, Turkish construction companies are expected to secure $5bn worth of foreign contracts by the end of this year. First half figures confirm this, as construction companies won $2.85bn worth of contracts in the first six months of this year. This has translated into 125 separate projects across the world. By comparison, Turkish firms tallied $3.18bn worth of contracts for the whole of 2003, against less than $1bn for 2002.
A reflection of this exposure can be seen in the activities of individual firms. In May, Zorlu Holding signed an $800m deal for the construction of three natural gas stations in Israel. Meanwhile, Tekfen Insaat won a $76m tender in Morocco for the construction of a highway, whilst Gama Endustri has embarked on building a $173m power plant in Jordan. This is only the top of a much longer list.
Hopping the world has also helped many of Turkey’s big-hitters adapt to the highest of standards.
“We have no problem adjusting ourselves”, says Ergil Ersu, executive member of the board of directors for Gama Holding, “since we have vast experience in adapting to the conditions of different countries.”
Add to this Turkey’s competitive rates, coupled with the use of cutting-edge technology, and you get a winning formula.
Turkey’s leaders in construction have thus been able to build solid reputations in the region. According to official trade statistics, Turkish companies won $15m worth of contracts in the Russian Federation, $229m in Iraq, $231m in Afghanistan and $246m in Kazakhstan last year. New figures for the end of 2004 expect a further boost – notwithstanding a possible reduction in Iraqi contracts due to the poor security situation there.
Now though, analysts are pointing to Europe as a hub for future business. Many Eastern European countries will be looking to renew and upgrade their infrastructure over the coming years, and Turkish companies are particularly well placed to help them do this. While the majority of Turkish companies still have a way to go to meet European standards, those that do already look to have some busy times ahead.