Turkey becomes global power in construction

Turkey sees its influence rising in construction projects as well as diplomatic affairs

An army of Turkish cranes and bulldozers is at work across the Middle East, Central Asia and Africa, building dams, stadiums and highways in a boom that's helping drive Turkey to record growth and bolstering its efforts to become a regional power broker.

Frustrated by slow progress toward joining the European Union, Turkey's Islamic-rooted government is pursuing a strategy intertwining political influence with economic might in the developing world, particularly in Islamic countries and the former Soviet Union but extending in recent years across much of Africa.

Essential to the effort are the Turkish constructions firms at work in more than 80 nations, One is building Dubai's new subway system in a joint venture with Japanese companies. Others are responsible for much of the construction in Kazakhstan and Kurdish-controlled northern Iraq in recent years.

In parts of the Middle East and Central Asia, Turkish flexibility at meeting kickback demands and handling complex laws give them an edge, experts say.

While Turkish builders don't yet rival their giant competitors in Europe, the U.S., China and Japan, the value of Turkish overseas projects soared from $750 million (euro596.71 million) in 2000 to $23.6 billion in 2008, before sliding to $20 billion last year during the global financial crisis.
The government says it hopes to increase the volume of international contracts to around $50 billion by 2015.

Leading construction trade journal Engineering News-Record included four Turkish firms among the world's top 225 international contractors in 1999. Ten years later, that number rose to 31, which generated $14.05 billion in revenue from projects outside of Turkey and represented 3.6 percent of all international revenue reported by the ENR's top 225, the journal said.

Turkish delegations to countries in the developing world often include hundreds of business executives. Turkey has recently signed bilateral agreements with countries including Russia, Libya and Syria to mutually waive entry visas, easing travel and trade. It added dozens of new destinations, including Baghdad and Nairobi, for national carrier Turkish Airlines.

Zafer Caglayan, the state minister in charge of foreign trade, said Turkey would increase the number of diplomatic missions in Africa from 12 to 27 this year. Thirty-five percent of Turkish overseas building was in Africa last year, he said.

In the capital of Kazakhstan, one of five Central Asian countries with close linguistic and ethnic ties to Turkey, Turkish companies are responsible for an estimated 70 percent of construction since 1997.
"That includes everything from roads to stadiums, shopping centers, schools and five-star hotels," Ozer Oral, secretary-general of the Kazakh-Turkish Businessmen Association said by telephone from Astana.

Turkish firms have long been active on the international construction market, but the search for higher profit margins has driven more outreach over the last 10 to 15 years, said Gary Tulacz, a senior editor at Engineering News-Record.

"Part of this may be from some of the difficult economic times in Turkey early in this decade, which made the international market more attractive to Turkish companies," Tulacz said.

Turkey restructured its ailing banking sector after emerging in 2001 from a deep financial crisis that saw the economy shrink 8.5 percent as inflation hovered around 80 percent. The one-party government has boosted investor confidence in a country once wracked by bitter fighting among coalition partners. The eight-year-old administration has curtailed chronic inflation, encouraged exports and even rejected taking a new loan from the IMF this year.

Turkey is heavily dependent on the textile, automotive, manufacturing and tourism industries but the construction sector is one of the forces driving Turkey's record growth of 11.7 percent in the first quarter of this year, the fastest expansion in about six years.

With $863 billion in gross domestic product, Turkey was the sixth-largest economy on the continent of Europe last year based on the International Monetary Fund World Economy Outlook, Caglayan said.

"People should never forget that those who have closer economic relations with Turkey will prove to be the profit-makers in this region," Caglayan told The Associated Press. "This applies to the European Union, too."

Turkey was the premier builder in the former Soviet Union and nearly a quarter of Turkish construction business is done in Russia, followed by Libya, and the former Soviet republics of Turkmenistan and Kazakhstan. Turkish firms launched their first projects in Brazil and Angola in 2009, Caglayan said, and they are also heavily involved in Qatar, Algeria, Iraq, Romania and Afghanistan.

"Turkish firms are putting their signature in remote parts of the world thanks to their flexibility in working in sometimes difficult or dangerous environments and ability to handle complicated local laws," said Demir Engin, president of NACE, a company that specializes in equipment for cement and asphalt plants.

Ilnur Cevik, former partner in a company that built the airport and dormitories for thousands of university students in the town of Sulaymaniyah in Kurdish northern Iraq, said that some Turkish firms found it easier to give kickbacks to local officials because they're not obliged to show bribe money in their books and had familiarity with bribe-giving culture back home.

"Corruption is a major problem in countries like Kazakhstan or Turkmenistan," Cevik said. "Everybody wants some kind of kickback in the Arab world too. Turks went to places where Westerners could not because foreign companies want to do everything according to the book."

In Astana, the palatial, tent-shaped Khan Shatry shopping center designed by renowned British architect Norman Foster and built by Sembol Construction of Turkey in a joint venture with Russia's Coalco Development was opened in early July to mark the 70th birthday of Kazakhstan's president.

The translucent structure includes an artificial beach made of sand from the Maldives at an indoor pool on the fifth floor.

Sembol Construction also built the Foster-designed 250-foot-tall (77-meter) glass Pyramid of Peace, which holds an opera house, library and cultural research center, at a cost of more than $65 million.
Paul Barry, an international construction expert with London-based Navigant Consulting, said Turkish firms were becoming "very serious" rivals for international contractors.

"Because they can relate to Muslim cultures and are very competitive," Barry said. "Because they are starting to get a good reputation for being involved, probably in a joint venture with complex and demanding projects."

Barry said, however, that: "they are developing but have yet to demonstrate that they can do it on their own and prove themselves in Western Europe or the United States."
Associated Press Writer Ceren Kumova in Ankara contributed to this report.

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