Turkish Railways to Get Funding Boost as EBRD Raises Investments

(Bloomberg) -- European Bank for Reconstruction & Development plans to invest in Turkey’s railways for the first time on expectations that a return to economic growth will spur demand for transport.

The lender will probably deploy 1.1 billion euros ($1.2 billion) in fresh capital in the country this year, up from about 1 billion euros provided for 35 projects during 2019, EBRD Turkey Managing Director Arvid Tuerkner said in an interview in Istanbul. The bank expects Turkey’s economy to expand 2.5% this year from an estimated contraction of 0.2% last year.

The planned investment comes after Turkey’s government in 2016 opened up its railway industry to revamp an aging system and reduce reliance on road transport that shifts almost all of the country’s freight. EBRD is targeting the Halkali-Kapikule high-speed line linking Istanbul to the Bulgarian border to support the “reform momentum” in the sector, he said.

The project, which will take four years to build, is anticipated to cost 530 million euros and has already secured 275 million euros in grants from the European Union. EBRD, which manages total investments of about 6.9 billion euros in Turkey, is in talks with the transport ministry on the project, Tuerkner said.

Hospital Projects

The lender is also urging the health ministry to move “a bit faster” in coming up with solutions to some hospital projects that have run into difficulties, the MD said. These included problems with loan repayments and construction delays, which could be resolved with the participation of lenders, contractors and the ministry of health, he said.

EBRD has lent 607 million euros to half of the 16 state-hospital projects carried out under a $10 billion private-public partnership to double the number of beds to more than 95,000. The government in November decided to end the use of PPPs for the facilities and will use regular tenders because the program was too costly.

“These hospital projects are highly complex,” Tuerkner said. “It’s only natural that with PPPs things change along the way that includes sometimes contractual arrangements, adjustments to payments or construction periods.”

Other highlights from the interview:

• EBRD plans to allocate as much as 15% of its Turkish funding in 2020 to equity investments, with a focus on companies that have an “export-driven manufacturing business,” compared with 12% in 2019
• EBRD will continue financing foreign direct investment deals and exporters in 2020 as well as green energy projects, including a plan to fund Turkey’s ministry of education to improve energy efficiency of school buildings
• Lender is in talks with the energy and treasury ministries over amending regulation on renewable energy projects that require use of locally manufactured components, which EBRD can’t support

To contact the reporters on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net;Asli Kandemir in Istanbul at akandemir@bloomberg.net

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, ;Onur Ant at oant@bloomberg.net, Vernon Wessels

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