Over the last five years, Turkey has been investing in a massive infrastructure program. Will the resulting connectivity – plus strong sectors and an open business environment – enable the country to overcome current economic woes and put it back on the right track?
On October 29, 2018 – which is, aptly, Turkish Independence Day – the headline-grabbing, ultra-futuristic new Istanbul Airport opened for business. Or, at least, its first phase did. When completed, this infrastructure colossus will be the largest airport in the world. Covering over 76.5 million square meters, it will have six runways, an annual passenger capacity of 200 million, an air cargo capacity of 2.5 million metric tons a year in the first phase, capable of increasing to 5.5 million metric tons a year in the second and third phases, and 100 airlines flying to some 300 destinations. The resulting strengthening of regional connectivity is expected to be a boon for Turkish exporters, increasing their reach to global markets and contributing an estimated 5 percent to GDP.
Unfortunately, Turkey hasn’t only been making headlines with its new airport recently. Since January, the Turkish lira has lost 40 percent of its value against the dollar. In early August, shockwaves were felt when the U.S. administration announced the doubling of tariffs on Turkish steel and aluminum; and later that same month, the credit ratings agencies Moody’s and S&P Global Ratings downgraded Turkey. By September, the rate of inflation in the country had reached almost 25 percent; although, in October, Suma Chakrabarti, President of the European Bank for Reconstruction and Development (EBRD), called Turkey’s troubles “a slowdown” rather than a crisis, predicting 3.9 percent growth in 2018 and around one percent in 2019. “The authorities are taking action to address the issues facing the economy and investors will scrutinize the commitment to the implementation carefully,” he said. “With the right policy response, the economy will recover more quickly.”
Even so, the present current economic situation is undeniably a far cry from the country’s recent heydays when it showed solid GDP growth year after year.
AMBITIOUS INFRASTRUCTURE PLAN
Yet despite this turbulence, there is cause for optimism in Turkey – and new Istanbul Airport is a potent symbol of it. That’s because in 2013 the Turkish government announced it would be pouring $200 billion into infrastructure projects to support its ambitious plan to increase trade levels to $1.1 trillion by 2023. The airport is part of this initiative – and thought to cost around $7 billion – but there are numerous other projects that have either been completed or are underway. This means there’s a real chance that this country of more than 80 million people could become a regional logistics hub. The potential is there, after all.
To begin with, Turkey’s geography is unique – and, possibly, uniquely beneficial. It’s located at the crossroads of Europe and the Middle East, close to the markets of the Balkans, Russia and Central Asia, and acts as a strategic stopover point between Africa and Europe. Its enviable global position should make it a major hub almost by default; but this hasn’t happened – yet – largely because parts of the country’s transport infrastructure have been historically limited.
Turkey’s road network is robust enough, and responsible for delivering 85 percent of domestic freight. Yet the country’s rail network has suffered from years of under-investment – largely because the European Union is Turkey’s main export market, and easily served by road – so that just 5 percent of domestic freight is transported by train. Around 90 percent of the country’s foreign trade is transported by sea, while just one percent of export freight goes by air.
Those statistics may be about to change, however. In 2015, Turkey’s first transshipment container terminal opened at Asyaport, the country’s largest container port with a capacity of 2.5 million 20-foot equivalent units (TEU). In 2016, work finished on the $3 billion Yavuz Sultan Selim Bridge – said to be the world’s widest suspension bridge – spanning the Bosphorus and creating an important link between Asia and Europe. Railways are another major investment component of the country’s new 2023 vision. “In the next five years, Turkey will allocate over $46 billion (€39 billion) to railway transport, either conventional or high speed,” said Ahmet Arslan, Turkey’s Minister of Transport, earlier this year. “Turkey is the second-largest country after China in railway constructions. Our target is to complete 7,270 miles (11,700 kilometers) of high-speed railway lines [by] 2023 and to link 41 cities to each other.”