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Republic of Turkey, Investment Support & Promotion Agency: Investing in Infrastructure and Public Private Partnership in Turkey

IM Insights
By IM Insights
6 years ago
Republic of Turkey, Investment Support & Promotion Agency: Investing in Infrastructure and Public Private Partnership in Turkey

Islamic Wealth Management


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  1. INVESTING IN INFRASTRUCTURE AND PUBLIC PRIVATE PARTNERSHIP IN TURKEY April 2018
  2. Agenda • Executive Summary • Need for Infrastructure Investment • Track Record • Opportunities • Benign Investment Climate
  3. Executive Summary Turkey has a strong case for investment in infrastructure .. • Turkish economy is robustly growing with an average annual GDP growth rate of 5.7%. Investment Need for Development • Turkey’s 81-million strong population is growing with additional 1 million every year coupled with a rapid urbanization process which has resulted in more than 20 urban centers with populations over 1 million. • Turkey’s growing trade volume and strategic location compels Turkey to develop its infrastructure. Track Record with Significant Opportunities in the Pipeline • Turkey has implemented $135 Billion worth of Public Private Partnership (PPP) projects in a variety of sectors. This trend has picked up in recent years with a bright prospect. • Turkey has set ambitious targets to upgrade its infrastructure by 2023, the centennial of the Republic of Turkey. • From transportation to healthcare and energy, ample opportunities are available in the pipeline. • Turkey has a favorable investment legislation for PPP investments that can be realized through various models, such as buildoperate, build-operate-transfer, transfer of operational rights.. etc. Favorable Investment Climate • Turkey’s investment climate is further strengthened by domestic and international laws that protect investments and provide international arbitration. • Turkey’s macroeconomic policies, investments and more importantly, strong public finance management support PPP investments that require guaranteed purchase.
  4. Agenda • Executive Summary • Need for Infrastructure Investment • Track Record • Opportunities • Benign Investment Climate
  5. Infrastructure Need Turkey has a significant investment need in infrastructure development .. $569 Billion 2016-2040 $975 Billion Investment current trends $405 Billion Investment needed Investment Need by Sector (2016-2040) Turkey’s Infrastructure Current Trends and Need ($Billion) 50 Investment gap Need Water $53.4 45 Telecom $98.8 40 Airports $18.2 35 30 Trend Transport $581.1 25 20 Rail $62.7 Ports $1.1 15 10 Energy $241.5 5 Road $499.2 Source: Global Infrastructure Hub 2039 2037 2035 2033 2031 2029 2027 2025 2023 2021 2019 2017 2015 2013 2011 2009 2007 Investment Gap by Sector: $335.5 bn in Road, $48 bn in Energy, $19 bn in Rail, $2.2 in Water, $0.7 bn in Airports and Ports
  6. Infrastructure Need 5 .7% GDP GROWTH PER YEAR Turkey’s investment need in infrastructure is driven by several factors.. GROWING ECONOMY Turkish economy has been robustly growing with an average annual GDP growth rate of 5.7 from 2002 to 2017 22 URBAN CENTERS WITH POPULATIONS OVER 1 MILLION URBANIZATION As Turkish economy has developed, people from rural areas have migrated to urban centers.. 81 MILLION 2017 GROWING POPULATION Turkey’s population has been rapidly growing by 1 million every year STRATEGIC LOCATION Turkey is strategically located in the proximity of energy resources and trade routes $391 BILLION TRADE VOLUME GROWING TRADE Tukey’s foreign trade volume has increased from $88 billion in 2002 to $391 billion in 2017 GROWING NEED FOR EFFICIENCY In order to maintain competitiveness, Turkey needs to enhance efficiency and productivity by investing in infrastructure
  7. Robust Economy Turkey has sustained stellar economic growth over the past 15 years and continues to grow .. Average Annual GDP Growth (%), 2003-2017 Turkey Poland Romania Czechia Hungary 5.7 3.8 3.7 Number of individuals by annual disposable income per capita 1.8 2.8 13th largest economy in the world Real GDP Growth (Index: 2002=100) Ranking of Economies by GDP at PPP 2003 275 2016 2021 2002 1 million 3.3 million 17.8 million 250 23 million High income Upper-middle Middle income Low income 225 21.3 million 200 Poor 2016 Source: TurkStat, OECD, World Bank, IMF, PPP: Purchasing Power Parity 2022 2021 2019 2020 2018 2017 2016 2015 2013 2014 2012 2011 10.8 million 2010 100 2009 40 million 2007 2008 125 2006 21.2 million 2005 150 2004 5 2002 2003 175 High income Upper-middle Middle Low income 3 million High income (>$55K); High income (>$55K) Upper-middle ($25K Middle ($10K – $25K); Low ($5K – $10K); Poor (<$5K) Poor – $55K);
  8. Demographics A young and growing population has been spurring economic activities .. Population (million) 95 91 86 81 71 61 1997 2007 2017 2025 2035 EUROPE 90+ G r o u p s ( % ) 80-84 80-84 70-74 70-74 60-64 60-64 50-54 50-54 40-44 40-44 30-34 30-34 20-24 20-24 10-14 10-14 A g e G r o u p s ( % ) 90+ A g e TURKEY 0-4 0-4 5 3 1 Female Source: Turkstat, Eurostat, UN 2045 1 3 Male 5 5 3 1 Female 1 Male 3 5
  9. Urbanization With economic development , Turkey has also been rapidly urbanizing.. More than 20 urban centers with populations over 1 million Source: TurkStat, 2017
  10. Strategic Location Turkey is strategically located at the epicenter of trade routes , which require a developed transportation infrastructure.. Connectivity with key markets through road, rail, sea and air.. Proximity to major markets (1.5 billion people and $24T GDP* at 4 hour flight-distance) Europe GDP: $19T Population: 673mn Russia GDP: $1.3T Population: 144mn 391 Export Import 277 Central Asia & Caucasus GDP: $0.3T Population: 87mn MENA GDP: $3.2T Population: 501mn Follow and cover markets in 16 time zones from New York to Tokyo Turkey’s Foreign Trade ($ Billion) Already a manufacturing & export hub for global companies.. Exporting 85% of its production Exporting 77% of its production 75 88 1997 2002 2007 2017 Turkey’s Foreign Trade by Mode of Transportation (2017) Value (%) Quantity (%) 14.1% 10.3% 22.9% 62.5% Production base for MENA 88.9% Largest production facility worldwide Source: Turkstat, *IMF and World Bank Maritime Road Rail Air
  11. Agenda • Executive Summary • Need for Infrastructure Investment • Track Record • Opportunities • Benign Investment Climate
  12. Turkish PPP Market Turkey ’s socio-economic necessities have spurred investments in infrastructure, significantly increasing in recent years.. Number of PPP Projects in Turkey PPP Contracts in Turkey ($ Million) 158 88,687 Investment Fees* 23,549 10,686 5,193 6,713 1993-1997 1998-2002 16 41 1986-1992 2003-2007 2008-2012 1986-2002 2013-2017 225 $135 1986 BILLION Source: Ministry of Development *Fees to the government for the transfer of operating rights 2003-2017 2017 1986 PROJECTS 2017
  13. Turkish PPP Market Transportation and energy infrastructure projects dominate the PPP market in Turkey .. Breakdown of the PPP Contracts (Number) Breakdown of the PPP Contracts ($ Million) 69,403 86 Investment Fees* 42 27,690 19,443 22 11,708 2,657 1,745 1,391 430 265 BILLION Source: Ministry of Development *Fees to the government for the transfer of operating rights 18 17 15 2 137 1 1 225 $135 1986 21 2017 1986 PROJECTS 2017
  14. Turkish PPP Market Build-Operate-Transfer and Transfer of Operating Rights are the main contract models in the Turkish PPP market .. PPP Contract Models (Number) PPP Contract Models ($ Million) Build-Operate 4,197 Build-LeaseTransfer 11,708 $135 225 BILLION PROJECTS 1986-2017 Transfer of Operating Rights 34,216 1986-2017 Build-OperateTransfer 84,748 Transfer of Operating Rights 93 Source: Ministry of Development Build-Operate 5 Build-LeaseTransfer 21 Build-OperateTransfer 106
  15. Agenda • Executive Summary • Need for Infrastructure Investment • Track Record • Opportunities • Benign Investment Climate
  16. Ambitious Targets Turkey has set ambitious targets for the centennial of the Republic .. RAILWAY (KM) MOTORWAYS (TOLL ROADS) (KM) 8,248 25,030 High Speed Conventional 12,915 10,959 - 12,532 1,213 2,622 10,959 11,319 12,115 2003 2017 2023 INSTALLED POWER CAPACITY (GW) 1,714 2002 2017 2023 HOSPITAL BED CAPACITY OF QUALITY ROOMS 125 230,000 85.2 113,166 35.6 18,934 2003 2017 2023 Source: TURKSTAT, Ministry of Health, Ministry of Transport, Ministry of Energy *Quality rooms: one or two-bedded rooms with a private shower and toilet 2002 2016 2023
  17. Opportunities in Healthcare Turkey has recently introduced new PPP projects to build integrated healthcare campuses across Turkey and more opportunities are in the pipeline .. PPP PROJECTS IN INTEGRATED HEALTHCARE CAMPUSES Number Bed Capacity Completed (in service) 4 4,074 Under Construction 17 In Tender Process 2 Status Number Bed Capacity Closed Area (M2) In Bidding Process 30 1,761 418,538 26,735 Under Construction 153 21,034 4,885,643 1,900 Planned (Feasibility Studies) 208 23,733 4,734,162 Total in the Pipeline 391 46,528 10,008,343 Samsun 900 Denizli 1,000 Approved by High Planning Council (HPC) 3 Antalya 2,700 1,000 Diyarbakır-Kayapınar 750 Aydın 950 Submitted to HPC for Approval 3 İzmir Tınaztepe 900 İstanbul Sancaktepe To be Submitted to HPC for Approval 3,800 1 Trabzon Total in the Pipeline Source: Ministry of Health 5,900 1,200 Ordu 800 800 9 OTHER PROJECTS FOR VARIOUS HEALTHCARE FACILITIES 11,300 Status
  18. Opportunities in Healthcare Turkey has significantly improved its healthcare services and continues to invest in healthcare infrastructure to catch up with OECD average .. NUMBER OF HOSPITAL BEDS PER 1,000 POPULATION 6 5.6 5 2000 2015 4 4.7 4.7 3.8 3.5 4.1 2.7 3 2.7 3.2 2.8 2 2.6 2.6 2.1 2.1 1.8 1.5 1 Canada UK 5,627 1,519 719 1,896 Source: OECD, Ministry of Health, values as of 2016 for Turkey and Canada, 2014 for the USA and 2015 for other countries 363 Mexico Turkey 1,115 Chile USA NUMBER OF HOSPITALS Italy OECD35 0 4,456
  19. Opportunities Turkey has heavily invested in transport infrastructure across the country and continues in Transportation to do so with ambitious targets .. Infrastructure Investments (₺ Billion*) PPP Investments in Transport & Communication (₺ Billion*) Maritime 4.3 Communication 33.3 Airport 32.7 ₺362** Railway 64.3 Ongoing 46.8 BILLION 2003-2017 ₺99.8 BILLION 2003-2017 Completed 53 Roads 227.4 Source: Ministry of Transport, Maritime Affairs and Communication, *at 2017 prices, **Including completed PPP investments
  20. Opportunities Investing in transportation has remarkably transformed Turkey ’s infrastructure in Transportation landscape, yet Turkey is determined to improve it further.. DUAL CARRIAGEWAY 2002 2017 6,101 km 25,709 km 0 km 1,213 km million TEU 10 HIGH SPEED RAILWAY MARITIME CONTAINERS TRANSPORT NUMBER OF AIRPORTS Source: Ministry of Transport, Maritime Affairs and Communication 2 26 million TEU 55
  21. Opportunities in Transportation Motorways (toll roads) are key to Turkey’s road transportation.. Around 5,000 km is in the pipeline offering significant PPP opportunities.. Target for 2023 (1,400 km) To be tendered soon Source: Ministry of Transport, Maritime Affairs and Communication Target for 2035 (3,214 km) Motorways under construction Motorways in service
  22. Opportunities in Transportation Turkey is committed to transforming its rail transport infrastructure from conventional to high speed .. HIGH SPEED RAILWAY MAP OF TURKEY High Speed Completed Under construction Tender Project phase Preliminary surveys and studies Existing conventional railway network Source: Ministry of Transport, Maritime Affairs and Communication
  23. Logistics is an integral part of Turkey ’s transport infrastructure.. Turkey has established Opportunities intermodal logistics centers alongside the Trans-Asian Railway Network to lower costs in Transportation and increase efficiency of logistic networks.. LOGISTICS CENTERS In Service (8) Ready to be operational (1) Under construction (5) Planned-Tender or feasibility stages (7) Source: Ministry of Transport, Maritime Affairs and Communication High-Speed Railway Conventional Railway
  24. Opportunities Turkey has significantly improved and upgraded its airport infrastructure and continues in Transportation to invest in airports .. Terminals under construction/study Source: Ministry of Transport, Maritime Affairs and Communication Airports under construction/study Planned Airports
  25. Showcase Projects Turkey has implemented a variety of mega projects and continues to do so .. Istanbul New Airport A new airport in Istanbul to replace the existing one, with an eventual annual capacity of 200 million passengers and 6 runways. Contracted in Nov 2013 and operations to start in –end-2018. Operation period 25 years. Cost: $6.5 Billion and $29 Billion in fees with BOT Gebze – Orhangazi – İzmir Motorway Yavuz Sultan Selim Bridge (Istanbul Third Bosphorus Bridge) A 95-km-long motorway with a bridge for rail and motor vehicle transit over the Bosphorus strait. Construction started in May 2013. Operation period: 10 years 2 months 20 days (including construction period). Operation started in August 2016. Cost: $3.5 Billion with BOT model Eurasia Tunnel (Istanbul Strait Road Tube Crossing Project) I S TA N B U L A 427-km-long motorway connecting Istanbul, Bursa and İzmir with world’s 4th longest suspension bridge. The suspension bridge is operational as of July 2016; Operation period 15 years Cost: $6.5 Billion with BOT A twin-deck highway tunnel crossing underneath the seafloor connecting the Asian and European continents. Construction started in 2011; Operation started in 2016 Operation period 26 years Cost: $1.2 Billion with BOT
  26. Showcase Projects Another mega project has just been launched .. 1915 Çanakkale Bridge ✓ Longest main span (2,023 km) of any suspension bridge in the world ✓ Bridge Length: 4,608 m ✓ 88 km motorway (including the Bridge) ✓ Construction started in March 2017 ✓ Operation to start by 2023 ✓ Operation period: 16 years 2 months (including construction) ✓ Investment: $2.8 Billion with BOT
  27. Opportunities in Transportation Turkey is set to implement a magnificent feat of engineering projects ; an artificial sea-level waterway connecting the Black Sea to the Sea of Marmara, and a triple-deck tunnel under Bosphorus Strait .. Tender process to start soon KANAL ISTANBUL ✓ 43 km, 25 m depth and 150 m width ✓ 6 bridges ✓ New satellite cities Source: Ministry of Transport, Maritime Affairs and Communication GRAND ISTANBUL TUNNEL ✓ Triple-deck with 17.5 m in diameter and 4.5 km in length ✓ 2×2 lane highway and dual line metro ✓ 30 km metro line with 13 stations and 16 km highway
  28. Opportunities in Transportation Another exemplary transportation project is soon to be launched in İzmir.. IZMIR BAY CROSSING connecting south and north coasts of Izmir Bay; ✓ Total length: 12.6 km ✓4,175 m bridge ✓1,903 m submerged tube tunnel ✓880 m artificial island SUBMERGED TUBE TUNNEL SECTION İZMİR BAY CROSSING 12.6 km 31 km 52 km Artificial Island İzmir Source: Ministry of Transport, Maritime Affairs and Communication
  29. Opportunities in Transportation Turkey is also investing in maritime transportation infrastructure .. Port of Filyos • Ongoing infrastructure construction • 25 million ton/year capacity • With special economic zones in the hinterland • Port management to be BOT model Port of Çandarlı • 1,500 m jetty work completed • To reach 4 million TEU/year capacity in 3 phases; • • • Phase I: 1 million TEU Phase II: 2 million TEU Phase III: 1 million TEU • Tender for Phase I expected • Port management to be BOT model Mersin Container Port • Studies ongoing • 12.8 million TEU/year capacity • Port management to be BOT model Source: Ministry of Transport, Maritime Affairs and Communication Ankara Izmir Mersin
  30. Opportunities in Energy As Turkey heavily depends on energy import , specific targets have been set to diversify the energy mix and utilize indigenous resources to reduce dependence on imports.. WIND POWER 20GW installed wind power capacity by 2023, up from 6.5GW in 2017. NUCLEAR ENERGY To have 8 nuclear reactors with ~10GW capacity operational and start building 4 additional reactors with 5GW capacity by 2023 SOLAR POWER 10GW installed solar power capacity by 2030, up from 2.6GW in 2017. LIGNITE & COAL To utilize all known indigenous coal & lignite resources to build coal-fired power plants with 18.5GW by 2023 GEOTHERMAL POWER 1GW additional geothermal power in the pipeline in addition to existing 1GW capacity HYDRO POWER 34GW installed hydro power capacity by 2023, up from 27GW in 2017
  31. Opportunities in Energy Turkey is realizing the targets one by one through successful PPP models with strong participation of international players .. RENEWABLE ENERGY RESOURCES AREAS (YEKA) NUCLEAR POWER GENERATION YEKA aims to use renewable energy resource sites more effectively and efficiently in Turkey through large-scale mega projects with a high share of locally manufactured technologies. Turkey considers nuclear power generation as a key element of its economic development to secure energy supply and reduce dependency on energy imports. The YEKA scheme is highly attractive with guaranteed feed-in-tariffs for 15 years. SOLAR 1,000-MW solar power project tender in March 2017 won by the consortium of; $1.3 billion investment is expected. The project will be fully operational in 36 months with a power take-off price of $0.0699 kWh. Source: Ministry of Energy and Natural Resources Turkey has already started to build its first nuclear power plant while preparatory work for the second and third plants is underway. WIND 1,000-MW wind power project tender in July 2017 won by the consortium of; More than $1 billion investment is expected. Turbines to be installed by 2019, with a power take-off price of $0.0348 kWh. The governments of Russia and Turkey signed a cooperation Agreement in 2010 to build a nuclear power plant consisting of four power units of NPP-2006 project with VVER-1200 reactors of total capacity 4.8GW in Turkey. The project is the world's first NPP project implemented on BOO (build-own-operate) principle. The groundbreaking ceremony was held in April 2017, construction underway. In 2013 Japan and Turkey signed an agreement for the construction of Turkey’s second nuclear power station with four Atmea1 reactor units (4,480MW capacity), developed by ArevaMitsubishi Heavy Industries (MHI) joint venture Atmea. Work will be performed by a consortium that will include MHI, ITOCHU, Engie, and the Turkish Electricity Generation Company (EUAS). Feasibility studies are ongoing for verification of site suitability and development of the financial scheme.
  32. Agenda • Executive Summary • Need for Infrastructure Investment • Track Record • Opportunities • Benign Investment Climate
  33. Investment Climate Turkey ’s investment legislation supports and protects investors through various legal mechanisms.. Bilateral Investment Protection Treaties with 75 countries 53.7 56.5 61.4 64.3 67.4 69.6 70 70 74.8 75 84.6 68.4 68.0 62.8 62.0 60.6 52.0 51.6 51.6 50.0 49.0 (Index=100 as most competitive) 48.9 2016 International Tax Competitiveness (% of Profit) 43.2 Treaties to avoid Double Taxation with 80 countries Total Tax Rate, 2016 48.9 47.4 46.5 44.0 41.1 Foreign Direct Investment Law Source: Ministry of Economy, Ministry of Finance, WB Doing Business Report, Total Tax Rate: Profit or corporate income tax, social contributions and labor taxes paid by the employer, property taxes, turnover taxes and other taxes (such as municipal fees and vehicle taxes). Tax Foundation (Tax competitiveness measures countries’ tax policies five categories: corporate income tax, consumption taxes, property taxes, individual taxes, and international tax rules.)
  34. Investment Climate Relevant legislation is quite flexible , enabling to adapt various PPP models according to the nature and requirements of projects.. Build Operate Build Operate Transfers ✓ Thermal Power Plants ✓ ✓ ✓ ✓ Airports Power Plants Marinas Border Gates Law 4283 Law 3096 Transfer of Operating Rights ✓ ✓ ✓ ✓ ✓ ✓ ✓ Privatizations Airports Ports Power Plants Electricity Discos Gas Discos Marinas Laws 4046 5335 3465 3096 4458 Operate Transfers ✓ ✓ ✓ ✓ ✓ Tunnels Bridges Motorways Ports Airports Laws 3096 3996 3465 3096 Built Lease Transfer ✓ ✓ ✓ ✓ Hospitals Colleges Dormitories Schools Laws 5396 652, 6428 351
  35. Investment Climate Incentives in Turkey make PPP projects more bankable .. DEBT DEBT ASSUMPTION The government may assume project companies’ foreign debt in BOT and BLT projects either partially or in full. In order qualify for debt assumption, the minimum investment must be ₺1 billion in BOT projects and ₺500 million in BLT projects. ✓ LAND PPP projects in Turkey allow free use of government-owned land and expropriation. TAX INCENTIVES Exemptions from certain fees and taxes (VAT and Stamp Duty). In addition, where applicable, PPP investors may benefit from corporate tax deductions and other financial incentives. $ REVENUE GUARANTEE Certain PPP projects provide minimum revenue guarantees.
  36. Investment Climate Strong macroeconomic fundamentals allow the government to support PPP projects .. Gross Public Debt Stock as % of GDP Budget Balance as % of GDP 0 90 Turkey EU 28 80 EU 28 -3 70 -6 60 50 -9 40 Turkey -12 30 20 -15 Net Public Debt Stock as % of GDP 59.9 53.6 FX-Denominated/Indexed 47.6 TL 40.1 32.7 28.2 26.8 30.9 27.4 20.8 Source: Eurostat, Treasury, Ministry of Finance, Gross Public Debt Stock and Budget Balance as defined by the EU, Net Public Debt Stock as defined Gross Public Debt Stock minus Central Bank net assets, public sector assets (all deposits accounts and other financial assets) and unemployment insurance fund net assets. 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 15.3 2012 10.9 2013 9.1 2014 6.9 8.4 8.4 2015 2016 2017
  37. Investment Climate Bankability of the PPP projects enables investors to access finance through both national and international financial institutions ..
  38. What can ISPAT do ISPAT would assist you before , during and after your entry into Turkey for you? A governmental body attached to the Prime Ministry General & customized business information & Sectoral analysis & reports Facilitating your investment at all stages Private sector approach with public sector capabilities Site selection support to find appropriate location/land for your investment Matchmaking with local partners & establishing business linkages Acting as your solution partner Arrangements of meetings with governmental bodies and other stakeholders Project launch & Press release Services Facilitating your visit to Turkey
  39. Useful Links • Ministry of Transport, Maritime Affairs and Communication: http://www.udhb.gov.tr/ • Healthcare Investments (Ministry of Health): http://www.saglikyatirimlari.gov.tr/ • Ministry of Energy and Natural Resources: http://www.enerji.gov.tr/ • Ministry of Development: http://www.kalkinma.gov.tr/ • Treasury: https://www.treasury.gov.tr/ • Turkish Wealth Fund: http://turkiyevarlikfonu.com.tr/ • Privatization Administration: http://www.oib.gov.tr/ • European Bank for Reconstruction and Development: http://www.ebrd.com/turkey.html • European Investment Bank: http://www.eib.org/infocentre/contact/offices/turkey-istanbul.htm • International Finance Corporation: http://www.ifc.org/ • Banks in Turkey: https://www.bddk.org.tr/WebSitesi/english/Institutions/Banks/Banks.aspx
  40. THANK YOU www .invest.gov.tr