Turkey becomes global power in construction

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 US, China and Japan, the value of Turkish overseas projects soared from $750 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 Çağlayan, 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.

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, Çağlayan said, and they are also heavily involved in Qatar, Algeria, Iraq, Romania and Afghanistan.

İlnur Çevik, 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. 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.