Economic Update

Published 22 Jul 2010

Turkish rail authorities have endured a barrage of criticism over the past few days, after a high-speed train hurtled off its tracks last week, leaving 37 dead. Two further railway disasters then followed, with collisions between trains, a minibus and a car. Now, with the condition of the rail system under great public scrutiny, many onlookers are wondering to what extent the accident reflects the more general state of Turkey’s transport infrastructure.

Whatever the outcome of this wider debate though, one thing is clear: the railway’s antiquated state is hardly conducive to high-speed trains. With stretches of the Istanbul-Ankara line on which the train was travelling not upgraded since the 1950s, attempting to shave three hours off an otherwise eight-hour trip was a disaster waiting to happen.

Warning lights had indeed been blinking from more than one source prior to the crash, yet seem to have been ignored by the authorities. Professors from technical universities across Turkey had criticised officials for moving ahead with the fast-speed link without sufficiently revamping and upgrading the railway’s technical and physical infrastructure. Yet the Turkish State Railway Directorate (TCDD) rebuffed such concerns. With 37 dead and 81 injured, the TCDD may now wish that it had listened.

In an effort to deflect the immediate criticism after the crash, the government tried to take a longer view. Responding to demands that top officials be fired, Prime Minister Recep Tayyip Erdogan retorted, “More than 10 accidents have occurred on the same route since the 1950s, but never was a government asked to take such actions.”

With the arrest of the driver and two engineers, it seems as if negligent driving is likely to be the TCDD’s claim. Yet the rail authorities are unlikely to be let off the hook that easily. Now, it seems at least two inquiries will be launched – one by the opposition Republican People’s Party (CHP) and the other by a more independent panel, provided the composition of such an authority can finally be agreed upon.

Yet in the background, many feel the crash was largely the result of decades of limited investment in the publicly owned national rail system. This had long been neglected, although there had been recent attempts to make improvements. A Spanish credit line valued at 437m euros was secured to finance the rehabilitation of the Ankara-Eskisehir track, commencing in June 2003, while in tandem, the government has pushed on with metropolitan rail projects. These include upgrades to the Sirkeci-Halkali and Gebze-Haydarpasa metropolitan commuter rail lines in Istanbul.

But if significant improvement in the rail system is to occur, there needs to be a far greater injection of investment. Yet whether the conditions exist for this adjustment is subject to question. The state’s ability to fund new infrastructure projects over the last few years has been severely limited by the strictures of its IMF-backed economic recovery programme. The 2001 financial crisis had also forced the State Planning Organisation (DPT) to delay a whole series of rail infrastructure projects planned for 2003 and 2004.

Meanwhile, given a limited rail network operating at low speeds, government statistics show that 95% of passengers and 92% of goods prefer to hit the road, leaving a diminishing incentive to invest in rail. Many of Turkey’s highway projects have instead been given priority for 2004, including the South Black Sea Road (560 km) and the Ankara-Samsun route (402 km).

At the same time, beyond roads and highways, the most promising government initiatives have focused on anti-congestion projects. The Marmaray rail tube, which is expected to open in 2008, stands out in this respect. Having successfully attracted $2.5bn worth of credit from the Japanese Bank of International Co-operation (JBIC), the service will operate between Yedikule in Europe and Sogutlucesme in Asia. With over 1m passengers a day projected, this subterranean link should relieve Istanbul’s transcontinental automobile congestion. Those who worry about local fault lines might also draw comfort from the fact that the service has been designed to withstand earthquakes.

Elsewhere in transport, the future of air travel is looking rosier than ever. This year has seen strong competition on domestic routes, following the ending of a Turkish Airlines (THY) monopoly. Onur Air and Atlas Jet have begun cheap flights to a handful of domestic destinations, putting the pressure on THY.

In this regard, the signing of a $1.5bn deal between Airbus and Turkish Airlines (THY) last week is significant. The deal secured another 36 planes for the Turkish carrier, not only allowing it to augment its market share, but also to respond to the booming demand from domestic passengers.

To complement this acquisition, Turkey intends to buy another 15 jets from Boeing, thereby increasing THY’s overall capacity by 60%. This implies a $1m increase in annual turnover over the next three years. Passenger numbers during this period are expected to jump from 10.5m in 2003 to 20m. But the benefits go beyond simple capacity. Increasing the airline’s market share bodes equally well for the airline’s plans to privatise, with a new fleet on offer and a 15-20% stake up for grabs in 2004.

But unlike trains, planes don’t run on tracks. The question that rail authorities must ask themselves is whether they are willing to invest the resources for the high-speed train project to succeed. Resorting once more to the slow train connection between Ankara and Istanbul would be the easy option. Digging deep into state coffers may prove more painful.

The ultimate spur though may well be the prospect of EU membership, with an associated rise in foreign investment. EU transport corridor plans in Eastern and South-eastern Europe have provided much to the rail networks there. Yet if accidents such as last week’s are to be avoided in the future, clearly some hard thinking needs to be done in Ankara – and done soon.