Land of plenty
As the evening call to prayer drifts over Istanbul’s new town, it’s easy to forget about the woes and weaknesses of banks and government in the west.
But the cramped high-rise apartments pushed right up to the sea and unrelenting flow of cargo ships are reminders that Turkey has a population that needs infrastructure, and quickly.
Despite completing its first concession over 30 years ago, it’s only in the past two years that investors have really sat up and taken notice of its colossal pipeline of projects.
Hospitals are pouring into procurement and giant transport schemes such as the €7bn Gebze-Izmir highway and the Eurasia tunnel are ready to eat up what liquidity remains in Europe and Asia. Turkey's government is not crippled with indebtedness and it has its own banking market.
Yet it has its own set of problems.
Its government wants to build 10,000km of high-speed rail by 2023 and add another 5,275km of motorways (all through PPP). But it has yet to secure financing on either the Gebze-Izmir, the €750m Eurasia tunnel or its first healthcare PPP – the €440m Kayseri hospital, which signed nearly a year ago.
"If they don’t close Kayseri or Eurasia this year there will be a very big question mark over PPPs in Turkey," says Alain Terraillon, the European Investment Bank's representative in Turkey.
According to sources in the market, banks are nervous about the combination of the UK’s SOPC4 and Canadian-style contract being used on Kayseri. The IFC’s due diligence has lent credibility to the project, but there are still guarantees and risks to be negotiated.
Although not officially a pathfinder project, the government’s willingness to learn from Kayseri and apply the lessons learned to the rest of its 40 hospital PPPs is now crucial.
At our Winning Bids in Turkey event last week, a senior adviser from the Ministry of Health (MOH) and preferred bidder YDA’s chairman Huseyin Arslan spoke in turn candidly about recent negotiations, to open mouths in the audience.
"We know it will be closed successfully and very soon," concluded Hussein, before thanking his "partner" in government.
Although it has a different structure and support, the Eurasia tunnel is equally important.
Chief among concerns are that bankability issues can be dealt with at tender stage in the future, says Michael Davey, director at the European Bank of Reconstruction and Development.
Yet he is also positive in the long-term.
The scheme recently secured a traffic guarantee from the department of transport and a strong undertaking from the Treasury.
Davey expects the EBRD to have two or three Turkish hospitals in its portfolio by year-end and believes the new fourth quarter timeframe for financial close on Gebze-Izmir is challenging, but realistic.
Being chauffeur-driven through Istanbul later that night, the cherry-tinged fragrance of the car quickly replaces the spice from restaurants outside. A British lawyer in the car talks about the size and ambition of the country and its historic ties with the rest of the world.
Turkey’s Ministry of Education recently joined a growing list of government departments in its support of PPP. Can the lessons being learned in healthcare and transport also be applied to other sectors?
"Maybe one of our problems is that we have too much on the table. Investors are becoming picky," says a government source.
Back at the conference, the MOH adviser admits he has been working for four years on a unifying code for the country’s myriad of PPP and concession laws and a panel of Turkish bankers worry about the chaos of recent lenders’ meetings.
Maybe Turkey isn’t so different from the rest of the world after all.