Mar. 1, 2015


Hüseyin Arslan

Turkey

Hüseyin Arslan

Chairman of the Board, YDA Construction Industry and Trade Inc.

"Turkish companies are competitive and meet international quality standards."

BIO

Huseyin Arslan graduated from Middle East Technical University in 1992 and has been the Chairman of Board at YDA Group since 1993. He also sits on the board of the Turkish Contractors' Association, and has attended numerous national and international conferences about real estate investment and property development, contracting and construction, infrastructure projects, and public-private partnerships (PPPs).

YDA Group celebrates its 40th anniversary this year. How has the company evolved since its establishment and what do you consider YDA's landmark achievement?

There were some key milestones in the history of the YDA Group. One of these was the merging of YDA and AKSA Construction, which was the genesis of the group known as YDA Construction. The YDA name is much more valuable to us than all of our assets, because it is our father's name. Penetrating the aviation sector with the Dalaman Airport BOT Project in 2003 was one of the other key milestones for us. It enabled YDA to enter a very prestigious sector and to establish facility management knowledge and experience, which drove us to enter the hospital PPPs. We started the journey into PPPs three years ago, as Turkey has a great vision for 2023 and a main part of that is the transformation of the healthcare system. The Ministry of Healthcare is expected to invest around €20 billion for this massive program. I can say that hospital construction PPPs are some of the most important key milestones in YDA Group's development.

What is YDA's growth and diversification strategy for the long term?

YDA is very diversified in various sectors, including aviation and construction and agriculture and facility management for PPPs as well as concessions. We have a backlog of more than $5.8 billion. Firstly, we have already issued bonds, which is very unique in the construction market in Turkey. We now want to achieve further penetration in the capital markets. By becoming familiar with the capital markets, our main vision is to enable YDA to be listed as one of the top 10 companies in the industry, one which has already finalized corporate governance, guaranteeing sustainability, and which is respectful of international standards in environment and healthcare. Elsewhere, our strategic vision is to change our portfolio from construction to other sectors such as facility management so that we can easily talk about a predictable and stable cash flow for YDA. We are also trying to increase the PPP projects in our portfolio to ensure a stable cash flow for the future. We have five PPP projects, including two airports and three hospitals. We are still interested in hospitals and upcoming projects and tenders. We are already planning on establishing a company and integrating all these PPP projects under one holding. Our main target is to hold a successful IPO either in the local market or internationally.

“Turkish companies are competitive and meet international quality standards."

Kazakhstan is YDA's core area for activity abroad. What opportunities do you see there at the moment?

This is our 14th year in Kazakhstan. We have great experience there mainly in the construction market, acting as a conventional contractor. We have completed very prestigious and landmark projects, including the Almaty Finance Center, the Nobel Pharmaceutical Plant, and the Esentai Shopping Mall. We just delivered the Astana National Museum, a unique project, costing around $400 million. We are currently constructing the Astana Waste Water Treatment Plant and also building a large landscaping project for a recreational area in Astana, a city park. On the other hand, we are also invested in Kazakhstan. We have an airport in Kazakhstan in which we have already invested $90 million and have a 30-year concession. Besides for this, we also have land development experience in the real estate market in Kazakhstan. In 2009, we had a portfolio there worth more than $1 billion. We developed the Samal Turkuaz Tower, the Maxima Residences, the Almaly Country Club, and the Arman Ville, which was the most prestigious project in Kazakhstan and sold for up to $10,000 per square meter. Now we will discontinue land development projects because of market demand and supply risk, but we have a lot of experience in Kazakhstan and consider it our second home. When we analyze and look at Kazakhstan's future, there are many opportunities. As you know, Kazakhstan was awarded Expo 2017, and we are in talks with the government for three related projects. We are very hopeful that we will be awarded two or three of these projects. We are also following the Kazakhstani market and we know that the government is very interested in PPP developments for schools and hospitals. It is discussing the subject with the IFC and other international financial institutions, with the intention of utilizing their knowledge. We want to export our knowledge of PPPs to the Kazakhstani market for the construction of hospitals and universities. If the authorities launch a successful PPP program, we hope that it will have bankable documentation meeting international standards. We will then definitely be interested in future PPP projects there.

What makes Turkish companies in the construction sector so cost efficient?

As a member of the Board of Turkish Constructors Assembly, we are proud to say that Turkish companies are competitive and meet international quality standards. I can even say we are much better than our European competitors because of our efficiency. We have an office in Dubai, and when you compare construction site work done by GCC contractors, the output of one Turkish laborer is equal to the output of at least five workers from other countries; this is the main secret. For our first projects in Kazakhstan we brought our local team with us because we had to be successful. We had to prove our quality and ability to deliver projects ahead of schedule. We wouldn't have been able to do this with a local team or other foreign workers. After our first two projects we started to optimize our efficiency. We started with an 80-20 Turkish labor to local labor mix. Then we began training local workers and created mixed teams. The locals learned from working alongside the Turks, and now we have no more than 10% Turkish laborers while the rest are locals. This took 13 years and optimized our costs. We know that Turkish laborers are more expensive, but when efficiency and output are compared, they are equal to four or five.

© The Business Year - March 2015

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