A new report confirms that Turkey is the place to be right now. The recently-released Turkey Infrastructure Report from Business Monitor notes that despite short-term growth being dented by social unrest and macroeconomic problems, the country still expects a year-on-year growth of around 6% – making Turkey one of the most attractive investment destinations in the world.
In particular, the rail sub-sector is expected to be a strong performer, with a big boost expected due to planned privatizations and the break-up of national rail operator TDCC. Chinese investment is already pouring into the country and is expected to fund the construction of a new US$35 billion 700km high-speed train line from Edrine to Kars as well as the final rail link between Istanbul and the capital, Ankara.
The contract for the country’s third airport, expected to be the world’s largest upon completion, was in May this year awarded to Turkish consortium Limak Holdings for a record US$22 billion, while road infrastructure growth is expected to average 7.3% between 2013-17. Turkey is also privatizing its power and energy sector, which should see opportunities for large investment, with two new nuclear power station contracts already awarded and a third in the pipeline; and the sector is expected to see growth of almost 8% over the next five years.
The healthy construction sector also looks to be riding out the European debt crisis well, although the report warns that downside risks still exist, with “structural flaws in the domestic pension and banking sectors making project financing difficult, along with the increasingly high cost of credit”. Nevertheless despite the tough business environment construction did not appear to slow and a healthy project pipeline has allayed concerns, with sector growth of around 5.3% forecast for the period 2013-22. After a challenging 2012 growth in both the residential and non-residential real estate sector is expected to pick up, and with the privatization of the healthcare system there are also considerable opportunities in this sector with numerous hospital tenders coming onto the market. In addition, the state urban regeneration plan is expected to attract foreign investment of up to US$500 billion over the next decade, while the country is also in the process of developing a new Istanbul Financial Center.
While Turkey is a late entrant into the Islamic banking arena and has been slow to expand its domestic banking sector or enter the debt capital markets, this is rapidly changing as both the government and participation banks issue Sukuk, new licenses are expected to be forthcoming and overseas banks demonstrate strong interest in the country.
The UAE is currently the most active GCC investor in Turkey, accounting for 56% of all GCC foreign direct investment into Turkey between 2004-11 according to data recently released by National Commercial Bank.
With such a mouthwatering spread, however, it surely won’t be long before more hungry mouths come to the table.
— LM