The FINANCIAL -- The European Bank for Reconstruction and Development (EBRD) continued to deliver strong support for Turkey in 2016 with a combination of a powerful investment programme and backing of crucial sector policies to modernise the country’s economy and build its resilience to shocks.
Resilience is one of the six transition qualities defining the EBRD’s work. The Bank believes that a well-functioning market economy should be more than just competitive; it should also be inclusive, well-governed, green, resilient and integrated.
In a challenging year, the EBRD invested €1.9 billion in Turkey which reconfirmed its position as the top destination for the Bank’s funding. Turkish projects represented 20 per cent of the EBRD’s total €9.4 billion investment last year across some three dozen countries on three continents.
“In a most challenging year for Turkey, the EBRD has been able to further raise its investment in the country while at the same time encourage key reforms required for its long term prospects, notably more energy efficiency, deeper capital markets, broader Turkish lira financing and an inclusive economy and workforce,” said Jean-Patrick Marquet, whose Istanbul-based country manager role has now been upgraded to managing director. This step reflects the compelling mix of a growing portfolio, sustained business and an extensive policy agenda in the country. This is the first time that the Bank’s operations in Turkey are being run by a dedicated managing director which demonstrates the EBRD’s strong commitment to the country.
On a par with 2015, the Bank financed 43 projects in 2016, 13 of which involved Turkish lira, a priority for the EBRD in Turkey.
The Bank made a strong contribution to Turkey’s hospital building programme under the public-private partnership model. The Bank financed new health campuses in the Turkish cities of Izmir and Kocaeli, alongside Export Development Canada (EDC) and the Overseas Private Investment Corporation (OPIC), the US government’s development finance institution, according to EBRD.
The EBRD also pioneered, together with the World Bank’s Multilateral Investment Guarantee Agency (MIGA), a ground-breaking risk mitigation scheme for a greenfield project bond to raise finance for a hospital in Elazig in eastern Anatolia. The mechanism allowed the rating agency Moody’s to assign the bond an investment grade rating, enabling participation by a larger pool of international investors and mobilising new sources of funding.
Maintaining its focus on developing local capital markets, the EBRD invested in four Turkish-lira denominated bonds. These included the country’s longest tenor corporate bond issued by industrial conglomerate YDA. Encouraging a nascent covered bond market, the EBRD also subscribed to Vakifbank’s mortgage-backed bond, the first of its kind in Turkey.
The Bank continued working closely with local lenders to reach out to small and medium-sized enterprises (SMEs) across the country. It provided over €500 million to longstanding partners in the banking sector, including Akbank, Garanti Bank, Isbank and TSKB, and also partnered with Alternatifbank for the first time. The funds will benefit women-led businesses, agricultural enterprises and companies investing in energy efficiency. In addition, the EBRD became a shareholder in Odea Bank, a Turkish subsidiary of Lebanon's Bank Audi Group, to help it further develop its SME finance franchise.
In addition to financing via partner banks, the EBRD also provided direct support – both equity and debt – to smaller businesses such as lift components manufacturer Arkel, wet wipes producer Sapro and TKG, a company which designs and produces automotive components for Toyota, Renault, Fiat and Honda.
The Bank also joined international efforts to tackle the refugee crisis caused by the civil war in Syria. It extended a €5 million loan and a €5 million grant to the city of Gaziantep, which experienced a sharp increase in population, for the acquisition of 50 new buses.
Reflecting the implementation of the EBRD’s Green Economy Transition (GET) approach, the share of environmental financing rose to over half of the Bank’s 2016 investment in Turkey. The Bank financed ambitious energy efficiency undertakings by large industrial players such as oil refiner Tüpraş and steelmaker Erdemir. It also took an equity stake in the newly established recycling arm of glass producer Şişecam and provided additional financing for glass recycling equipment and energy efficiency investments.
More funds were allocated for small and medium-sized energy efficiency and renewable energy projects through TurSEFF and MidSEFF, dedicated credit lines to local banks. Furthermore, the EBRD finalised its work with the Turkish authorities on a national action plan to enhance energy efficiency across the Turkish economy.
Continuing to support key foreign investors, the Bank financed the expansion plans of tyre maker Brisa Bridgestone, a joint venture between the local Sabanci Holding and Japan’s Bridgestone Corporation; the construction of a new plant by Systemair-HSK, the Turkish subsidiary of the Sweden-based ventilation solutions company; and the development of a gold mine by the Canada-based Centerra Gold.
These investments bring important know-how and innovation to the Turkish economy and also offer opportunities to previously under-employed social groups. With EBRD financing, Brisa is investing in a new tyre plant in Aksaray province where it expects to create over 550 jobs for young people. The Bank will help develop technical and vocational training programmes that will provide these young people with the necessary skills.
Working with Turkish educational authorities and restaurant operator TFI TAB Gıda, where the EBRD acquired preference shares, the Bank is helping develop occupational standards for the fast-food industry across the country. This will benefit tens of thousands of young people employed in the restaurant sector which provides many youth with their first jobs and often helps the unemployed to reintegrate into work.
In traditionally male-dominated industries such as energy and mining, the EBRD is promoting a greater role for female employees within electricity company AKCEZ and gold miner Centerra Gold, among others, through investments and technical assistance.
Mobilising domestic and foreign capital to Turkish projects, the Bank attracted a record of €706 million from other sources such as international banks and institutional investors. As China became the 67th EBRD shareholder, the Bank has successfully attracted co-financing from the Industrial and Commercial Bank of China for infrastructure ventures in Turkey.