A $200 billion pipeline of projects means Turkey’s infrastructure sector is booming
Turkey’s President Recep Tayyip Erdogan plans to make infrastructure his lasting legacy. Despite recent political uncertainty, he has vowed to “push ahead rapidly” with a $200 billion building programme through to 2023.
Many projects will be delivered using the ‘build-operate-transfer’ (BOT) model that’s typical for revenue-generating projects such as toll roads and bridges. These include the planned Canakkale Suspension Bridge in the Gallipoli area, which at 3.6 kilometres will become one of the world’s longest bridges.
Under BOT, a private consortium borrows the money to build the project, and operates it for a period of 10 to 25 years before returning it to the state.
Unlike traditional PPP, revenue risk is limited. On the third Bosphorus crossing, for example, the government guarantees a minimum level of toll income.
Locally, pure PPP is being used mainly in healthcare: 34 new PPP hospital campuses will be completed by 2018, at a cost of nearly $12 billion.
The state-financed ‘engineer-procure-construct’ (EPC) model – where there is no operating concession – is the government’s preferred approach for projects such as water, sewage, hydro-electric power, non-toll roads and rail.
EPC is likely to be used for Turkey’s planned 10,000 kilometre high-speed rail network, with the Ankara-Istanbul link completed and transferred to the state-owned rail operator.
There is still plenty of appetite for private infrastructure investment. According to the World Bank, Turkey closed deals worth $45 billion last year – that’s 40 per cent of the global total.
A growing share of this investment comes from within Turkey. The new $5 billion third Istanbul airport will be the world’s largest, and is being financed by six Turkish banks. It is another reflection of Erdogan’s ambition.
For more information contact Omer Askin, Executive Director at JLT Turkey by emailing email@example.com