FROM MORE TO MEGA

Turkey 2014 | TRANSPORT & INFRASTRUCTURE | REVIEW: TRANSPORT

Turkey has major plans to overhaul its transport matrix, so as to position the economy as a hub for the greater region.

The steady growth of the Turkish transport sector over 2013 was capped off by the Republic Day opening of the Marmaray Tunnel in early 2014. Dubbed the “Project of the Century," the completion of the tunnel concluded a decade-long project and realized the centuries-old dream of Sultan Abdülmecid. The over $4 billion project, financed mainly by the Japan International Cooperation Agency (JICA) and the European Investment Bank (EIB), will eventually link freight cargo between Western Europe and China.

Even so, road remains the dominant method of transporting freight in Turkey, and will be for some time. The YoY growth of road freight in 2013 was approximately 2.8%, and it could reach up to 6.4% for 2014. This figure is helped by the fact that there will be no forced reductions in road haulage volumes, such as those pledged by neighboring EU countries.

Turkey currently has over 2,200 kilometers of motorways, with a planned total length of 4,773 kilometers by 2023. The build-operate-transfer (BOT) model will be the primary model used to realize these ambitions, with 23 BOT motorway projects in Turkey already completed. Sixteen priority projects at a cost of $47 billion have been designated to reach the 2023 motorway goals, with an additional 12 secondary projects scheduled for 2035. By 2035, the total motorway system in the country will total 9,680 kilometers. After a February permit crisis for Turkish truckers entering Bulgaria stalled them at the border for two weeks and created lines up to 10 kilometers long, Turkey is also looking to diversify its routes into the EU.

CLICKITY CLACK

With the liberalization of the railways still mainly at the preparation stages, 2014 rail freight is forecasted to grow by 2.1% in 2014. Air freight tonnage is expected to grow by 4.9%, and the total real trade growth for 2014 will be approximately 5.5%.

However, the government is making a coordinated effort to increase the share of both rail and sea freight. In line with the Vision 2023 goals of increasing the shares of railway freight transportation to 15% and that of sea freight transportation to 10%, the government has announced plans to invest over TL5.5 billion in transportation and infrastructure projects. Of this TL5.5 billion, TL3.5 billion will be allocated to state-owned Turkish State Railways (TCDD).

These investments come simultaneously with efforts to prepare the rail sector for further liberalization. The government is currently in the midst of a three-year, TL20 billion plan to upgrade Turkish rail facilities before inviting tenders from private firms. The TCDD plans to spend the bulk of this money on vehicle repairs, production, and railroad and naval transportation, with the program ending in 2015.

A draft bill introduced in Parliament in 2013 would restructure the TCDD into a corporate entity and open the state-owned railways to the private sector. This would possibly allow third parties to build their own railway infrastructure, as well as operate them; TL4 billion has been allocated over 2014 for these purposes.

In addition, 2014 has been dubbed the Year of High-Speed Rail by the Ministry of Transport, Maritime, and Communication. The main headliner of the year will be the opening of the Istanbul-Ankara high-speed line, scheduled for 4Q2014. The line between Ankara and Eskişehir has already been operational since 2009, and test runs for the extension to Istanbul began in 1Q2014. Starting at 40 km/h, they will eventually reach speeds of up to 250 km/h. Initial plans call for 16 services a day between Istanbul and Ankara, significantly shortening travel times to three-and-a-half hours.

High-speed trains carried roughly 4.5 million passengers in 2013, and the completion of the Istanbul-Ankara line is expected to push this figure to over 20 million in 2014. According to Minister of Transport, Maritime, and Communication Lütfi Elvan, the Ministry plans to invest $45 billion in rail systems until 2023, which includes the construction of approximately 10,000 kilometers of high-speed lines.

Beyond the Istanbul-Ankara line, the government plans to construct new high-speed and conventional railway lines between 15 of the most populous cities. Such lines following the opening of Istanbul-Ankara include Ankara-Izmir, Ankara-Bursa, and Ankara-Sivas-Erzincan.

ON THE DOCKS

The growth of Turkey's shipping and maritime sector has mirrored the country's increasing foreign trade volume. In the last decade, freight handling expanded at a CAGR of 7%. The capacity of Turkey's ports have risen at a CAGR of 8% since 2003, and cargo traffic at these ports has more than doubled, surpassing 400 million tons. The steadily rising domestic fleet now features over 650 vessels carrying the national flag. Turkey has more than 8,000 kilometers of coastline covered by 175 ports. With its natural geographic advantage and investments in the maritime sector, logistics firm DHL expects Turkey's handling capacity to reach 10.5 million TEUs by 2015.

Meanwhile, the privatization of Turkey's ports and the level of private sector investments continues to gain steam. Most recently, Turkey's Privatization Administration (ÖİB) announced a tender in February 2014 for the right to operate the Fenerbahçe-Kalamış marina in Istanbul for a period of 30 years.

In 2013, Doğuş Holding won the privatization tender for the Istanbul Salıpazarı Port Area, also known as Galataport, with a $702 million bid. This tender also gave operational rights for 30 years. The Istanbul Salıpazarı Port Area's coastline extends up to 1,200 meters, with a total area of roughly 100,000 sqm.

Elsewhere in Istanbul, the Sembol-Ekopark İnşaat-Fine Otelcilik joint venture won the privatization tender for the Golden Horn port with the highest bid of $1.35 billion. These companies, which all have shares owned by the Rixos Hotels chain, will employ the BOT model. These activities represent a general trend in more investments flowing into Turkey's ports as the private sector becomes more actively involved.

However, even with Turkey's naturally blessed geographic position and strong infrastructure investments, a significant portion of Turkey's exporting strength potentially lies in the negotiations of customs union deals with the EU. According to the existing Customs Union with the EU, any country that currently has a free trade agreement (FTA) in place with the EU is allowed to ship duty-free to Turkey, without automatically reciprocating this right. The most significant deal on the negotiating table at the moment is the proposed Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU. Turkey's exclusion from this deal, which would effectively allow a one-way FTA from the US to the Turkish market, would be a huge blow to Turkey and is the source of criticism from Turkey's exporters.

Free trade deals between the EU and third parties enable other countries' goods to enter Turkish markets via Europe with zero duties, but the decision to provide the same privileges to Turkey is up to the third party. Global trade is bound for good growth potential in the coming decades. In this regard, Turkey needs to make further improvements in its customs procedures to facilitate and stimulate global trade for Turkish exporters and importers.

AVIATION

After several years of double-digit growth in passenger numbers, Turkey's aviation sector broke past the 150 million passenger milestone by growing over 14% in 2013. Istanbul Atatürk Airport was once again the busiest airport, itself welcoming 17.2 million domestic and 34 million international flight passengers, with both categories witnessing double-digit growth on the 2012 figure.

These trends have not shown any signs of slowing down any time soon. The European Organisation for the Safety of Air Navigation has estimated that Turkey will see an average annual 7% increase in the number of flights until 2019. Currently, there are 44 airports in Turkey, but additional airports are planned to accommodate this growing demand, with the most famous project being the third Istanbul airport. Six airlines cater to the country's growing domestic market, and 99 international carriers connect Turkey and the world.