Turkey Infrastructure Report Q1 2008

The earthquake of 1999 resulted in huge expenditure on reconstruction efforts and started the consolidation phase of the Turkish construction industry. The economy (and the construction industry in particular) is expected to gather momentum in the run-up to Turkey's anticipated accession to the EU in 2015. Large infrastructure projects involving investment of billions of dollars have been planned or are under way. Due to Turkey's recent achievements and security provided under the prospects of EU membership, foreign direct investment (FDI) has increased substantially since 2005, reaching US$19bn in 2006 alone from an average of US$1bn between 1990 and 2003.

Rising demand has led to a shortage of residential dwellings, as a result of which construction of more than 400,000 new housing units is required each year up to 2010 to meet the housing needs of a growing population. The government is taking many initiatives to improve infrastructure of the fast-growing tourism sector over the coming years and is encouraging private investment. Turkey is a major producer of building materials such as cement, structural steel, bricks, timber and glass. The nation is among the leading manufacturers of cement in Europe and existing cement companies are looking at acquisitions or setting up new plants or enhancing capacities at existing plants to increase business activities.

However, widespread corruption and non-adherence to international building standards are hampering the progress of the Turkish construction industry. High levels of external debt and reliance on domestic and international portfolio investment to support the balance-of-payments position lead to a precarious situation on the macro-economic front. The country's current US$10bn standby deal with the International Monetary Fund (IMF) expires in May 2008.

Despite this, this report forecasts an average growth of 9.2% for the construction industry over the 2008- 12 period.