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Turkish devaluation to fuel growth
27 August 2014
The devaluation of the lira has not yet produced a major benefit to the economy but the effect appears only to have been delayed by a few months, finds Nicholas Clayton
Things do appear to be turning around, however.
Turkey’s capital markets have largely rebounded,
with the main Istanbul stock index reaching its highest level
in July since just before the Gezi Park protests last year.
Should the ruling party win the presidential election as
expected, analysts say there could be a busy fourth quarter
full of deal-closings that have long been on hold.
Ahmet Kesli, founding partner of Group Law Firm, says despite
recent events, foreign firms would be wise to enter Turkey
sooner rather than later. With a steadily expanding economy, a
median population age of 30.4 years and rapidly increasing
consumption, nearly all sectors in the country are primed for
growth, Kesli says.
An increasingly popular way for foreign firms to invest in
Turkey, he says, has been to partner local firms bidding on
infrastructure projects and other public private partnerships
(PPPs). Many international firms have chosen to avoid the risk
of the tender processes and have instead become involved as
lenders or equity partners in infrastructure PPPs after the
winner has been announced.
Last month, Turkish deputy prime minister Ali Babacan announced
that the country was hoping to attract $700bn in infrastructure
investment by 2023, with $200bn of that garnered through the
country’s PPP model. According to Development
Ministry data cited by Hurriyet Daily News, Turkey has signed
167 project contracts worth a total of $88bn since the
government passed its first PPP legislation in 1994.
However, it has been only in the past few years that the
Turkish government has used PPPs as a means of attracting
capital for mega-projects. Last year, the government concluded
a deal with Italian construction company Astaldi to build the
$6.9bn Gebze-Izmir toll road in a consortium with five Turkish
It is also expected to reach financial close later this year
with a Turkish construction consortium on the $29bn PPP to
build and operate Istanbul’s Third Airport for 25
Kesli says Turkey is likely to see the financial close for the
first of its hospital PPPs shortly after the presidential
elections. Turkey is aiming to add 28,000 beds to its national
hospital capacity through PPP tenders, which are currently at
various levels of completion. All and all, the hospital
projects are expected to require about $14bn in investment and
include government-guaranteed bed fees to the operators of the
Another Turkish sector all but guaranteed to grow is energy.
Turkey’s energy demand is expected to rise about
7% annually through 2020 and prices are already high. In the
first quarter of 2014, Turkey had the highest consumer energy
prices among OECD countries, with a price index 16% higher than
the OECD average.
Although the largest electricity generation assets in the
Privatisation Authority’s portfolio have already
been sold, it plans to launch tender processes for its
remaining thermal and hydro plants before the end of 2014,
according to a source close to the authority.
Speaking at the Turkey Private Equity & Venture Capital
Summit in June, Nadia Cansun, a partner at Bezen &
Partners, said investments in greenfield renewables in the
country were highly attractive. But with untested regulations
and a bottleneck of projects awaiting approval, it may be 12 to
15 months before the ideal time to invest in solar power in