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  • 1. Invest in Turkey’s InfrastructureMarch 28, 2013Mehmet ŞimşekMinister of Finance
  • 2. Outline2InfrastructureneedsStrongEconomyFiscalStrengthSoundBankingSectorSolid realsectorbalancesheetPositiveLong-TermOutlook
  • 3. Infrastructure3
  • 4. Why Infrastracture?4Promotinggrowth andprosperityImproving qualityof lifeEnhancingCompetitiveness
  • 5. Infrastructure needs are shaped by5Economic growthDemographic developments: ageing, urbanization, singletons...Environmental factors: climate change, rising quality standards...Technological progress especially in information and communicationsTrends towards decentralization and growing local public involvementMaintenance, upgrade, and rehabilitation of existing infrastructure
  • 6. Global Infrastructure$71 trillion is needed for globalinfrastructure investments by 2030$11 trillion is needed just for transportation6OECD estimates infrastructure investment needs to be around3.5% of world GDP through 2030.Source: OECD, Strategic Transport Infrastructure Needs to 2030
  • 7. Infrastructure Investment Needs2,63,15,53,83,13,45,64,12,02,53,03,54,04,55,05,56,0EU Other AMs EMs WorldActual Spent Estimated Needs7%,GDPSource: McKinsey, 2013, Infrastructure Productivity: How to Save $1 trillion a year?
  • 8. Meeting Investment Needs Amid FiscalConsolidation is a Challenge0510152025 JapanUSIrelandSpainGreeceUKPortugalFranceItalyBelgiumNetherlandsCanadaGermany8DebtReductionNeededthrough2011-20toreach60%Debt-to-GDPby2030(%,GDP)Source: McKinsey, 2013, Infrastructure Productivity: How to Save $1 trillion a year?
  • 9. Turkey: Infrastructure9
  • 10. Fiscally it is Less of a Challenge36603035404550556065Debt-to-GDPTurkey Maastricht Criteria101,3311,522,533,5Budget Deficit-to-GDPTurkey Maastricht Criteria
  • 11. 11Financing planned investments is achallengeNeeds are vast• $350 bn required forplanned investmentprojects by 2023PPP• Tap private sources offinancing, expertise &efficiency
  • 12. PPP in TURKEY12* In 2013 prices•$9 Billion*1986-2002•$32.5 Billion*2003-12
  • 13. Turkey: Key Infrastructure Investments• Highways• Railways• Airlines• PortsTransportation• Health• EducationOther13
  • 14. Turkey: Investment in TransportationOver the past 10 years, $75 billioninvested in transportation14
  • 15. 2002 6,101 km2012 22,253 kmTarget for 2015 26,500 kmTarget for 2019 31,000 kmTarget for 2023 36,500 kmConstruction of Dual Carriageways15
  • 16. 1,714 KmTotal of Motorways4,387 KmTotal of State andProvincial DualCarriagewaysTotal: 6,101 KmDual CarriagewayNetwork(January 1, 2003)2,236 KmTotal of Motorways20,017 KmTotal of State andProvincial DualCarriagewaysTotal: 22,253 KmDual CarriagewayNetwork(March 5, 2013)Before 2003, only 6 cities were connected to each other via dual carriageway. Now, we have 74 cities16
  • 17. Targets for Construction of RailwaysBy 2023 $ 45 billion worth ofinvestment10,000 km worth of new highspeed railway network4,000 km of new conventionalline2023-35 1,480 km of high speedrailway lines956 km of conventional line17
  • 18. İSTANBULEDİRNEESKİŞEHİRPOLATLIANKARAKONYAİZMİRSİVASAFYONKAYSERİBURSA ERZİNCANERZURUMKARSMERSİNADANA GAZİANTEPDİYARBAKIRELAZIĞMALATYAZONGULDAKSAMSUNBANDIRMAVANTATVANAdapazarıBİLECİKRailwaysPRE-REPUBLIC RAILWAY NETWORK 4,136 km MAINLINEEARLY YEARS OF THE REPUBLIC (1923-1950) 3,764 km MAINLINE (134 km on annual average)1951-2003 945 km MAINLINE (18 km on annual average)2004-2011 1.086 km ANAHAT (136 km on annual average)UNDER CONSTRUCTION 3,434 km MAINLINE
  • 19. İSTANBULESKİŞEHİR POLATLIANKARAKONYASİVAS212 km533 km405 kmYOZGATYerköyAFYONİZMİRMANİSA 624 kmBURSA BİLECİK110 kmOn-GoingCompletedPlannedHigh Speed Railway Projects
  • 20. 2020032013Number of airportswith scheduledflights=49Number of airportswith scheduledflights=49Number of airportswith scheduledflights = 26Number of airportswith scheduledflights = 26Number of airports with scheduled flights (49)Airports under construction or to be constructed (5)Planned Airports (2)Airports
  • 21. PPP in AviationZafer AirportAdnan Menderes AirportInternational Terminal21Çukurova AirportNumber of Contracted Projects: 17Value of Projects: $13.2 billionAntalya AirportInternational Terminal
  • 22. The 3rd Airport in Istanbul150 million passengersAn area of 90 million m222
  • 23. Projects of the Century -IMarmaray Channel IstanbulEurasia Tube Tunnel 3rd Bridge23
  • 24. Projects of the Century - IIİzmit Gulf Transit İstanbul-İzmir HighwayHigh-Speed Train throughAnkara-Bursa-İstanbul24
  • 25. PPP in PortsDalaman MarinaDatça MarinaGazipaşa MarinaMuğla-Ören MarinaKumkuyu MarinaKarasu Port Project6 Projects under Construction
  • 26. Other Infrastructure InvestmentsHealthEducation26
  • 27. Healthcare: TargetsIncrease the number of healthcare facilitiesEnhance the quality of the healthcare servicesApply state-of-the-art technologies in thehospital management
  • 28. Healthcare ExpendituresSource: The Ministry of Finance0204060802002 201313,267,9Healtcare Expenditures(billionTL)
  • 29. PPP in Healthcare SectorKayseri Integrated Health CampusAnkara Etlik Integrated Health CampusAnkara Bilkent Integrated Health CampusProjects are worth $2.5 billionContracted ProjectsElazığ Integrated Health CampusManisa Training and Research HospitalProjects Awarded
  • 30. PPP in Healthcare SectorProjects in the Tendering Process• Bursa Integrated Health Campus• İstanbul İkitelli Integrated Health Campus• Konya Karatay Integrated Health Campus• Mersin Integrated Health Campus• Yozgat Training and Research Hospital• Adana Integrated Health Campus• Physical Therapy and Rehabilitation, Psychiatry and High-Security Forensic PsychiatryHospitals• Gaziantep Integrated Health Campus• Isparta City Hospital• İzmir Bayraklı Integrated Health Campus• Kocaeli Integrated Health Campus• Eskişehir Integrated Health Campus
  • 31. PPP in Healthcare SectorProjects Planned• İstanbul Bakırköy Integrated Health Campus• İstanbul Üsküdar State-Owned Hospital• Samsun Integrated Health Campus• Denizli City Hospital• Ankara Sincan State-Owned Hospital• Trabzon Fatih State-Owned Hospital• Şanlıurfa City Hospital• İzmir Yenişehir City Hospital• Tekirdağ State-Owned Hospital
  • 32. Healthcare IndicatorsWe’ve achieved in 9 years what OECD countries did in 31 years!Infant Mortality Rate (per thousand)OECD(excluding Turkey)TURKEY31 years9 years
  • 33. Increasing Life ExpectancyAverage Life Span (Year)Source: TURKSTAT, Ministry of Health
  • 34. Education: TargetsImproving access to and quality of educationHaving mandatory pre-school educationFATiH: Furnishing each school with smart boardsReducing number of students per classroom below 30Increasing the number of private universities
  • 35. 11.368.1102030405060702002 2013Source: Ministry of FinanceEducation Budget (billion TL)BillionTL
  • 36. 9,417810121416182002 2013Source: Ministry of FinanceShare of Education Budget%36
  • 37. Investment in EducationOver the last decade,• We built 181,000classrooms• Hired 357,000 teachers37Source: Ministry of Education
  • 38. Build-Lease-Transfer Model in Education40,000 additional classrooms by end-2016.42 education campuses in 22 cities
  • 39. Gross Schooling RatesSource: Ministry of Development11,296,580,835,846,4108,492,681,61030507090110130Preschool(age of 4-5 )Primary School Secondary School Higher Education2002-2003 2011-201239
  • 40. Strong Economy40
  • 41. 2012: Soft LandingGrowingEconomyNarrowingCurrent AccountDeficitDecliningInflationLowerUnemploymentFallingPublicDebt41
  • 42. Managed Soft LandingSource: TURKSTAT, Medium-Term Program, IMF5,42,05,83,24,7-6-4-202468102007 2008 2009 2010 2011 2012Central and eastern Europe Latin America and the Caribbean Turkey42
  • 43. Current Account Deficit Narrowed(12MonthRolling,USDbn)Source: CBRT43-80-60-40-20020402002-147102003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-147102013-1Current AccountCurrent Account without Energy ImportsCurrent Account + Net FDI + Net Errors and Omissions
  • 44. 10,310,510,8 10,610,2 10,311,014,011,99,89,28,59,09,510,010,511,011,512,012,513,013,514,02002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Falling Unemployment Rate (%)Lowest level seen ina decadeSource:TURKSTAT 44
  • 45. 107,2125,599,16,202040608010012014019801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201245Declining Inflation Rate (y/y, %)Source: TURKSTATLowest rate for the past 44 years
  • 46. Public Debt on a Downward Trend46Source: Treasury26,231,3 30,0 31,327,6 26,2 25,329,9 28,121,5 20,235,4 23,919,110,46,53,3 2,92,70,90,8-2,261,555,249,141,734,029,5 28,232,528,922,318,0-551525354555652002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q3Net TL Net FX Total NetPublicSectorNetDebt(%,GDP)
  • 47. Outlook for 2013Faster GrowthSlight Increasein C/A DeficitDecliningInflationLowerUnemploymentFallingPublicDebt47
  • 48. PMI & Manufacturing IndexSource: CBRT, HSBC80859095100105110115120303540455055602007-13579112008-13579112009-13579112010-13579112011-13579112012-13579112013-1PMI (Left)Manufacturing Index (s.a.) (Right)48
  • 49. Consumer & Real Sector Confidence IndexSource: CBRT, TURKSTAT50556065707580859050607080901001101201302007-13579112008-13579112009-13579112010-13579112011-13579112012-13579112013-1Real Sector Confidence Index (Left) Consumer Confidence Index (Right)49
  • 50. Looser Monetary Policy(%)Source: CBRT4,58,55,54567891011121314October11October11December11December11January12February12March12April12May12Jun12July12August12September12October12November12December12January13February13March13CBRT Funding Rate O/N Borrowing O/N Lending Policy Rate50
  • 51. Falling Lending Rates(%)Source: CBRT 5181012141618202224262804.01.200804.03.200804.05.200804.07.200804.09.200804.11.200804.01.200904.03.200904.05.200904.07.200904.09.200904.11.200904.01.201004.03.201004.05.201004.07.201004.09.201004.11.201004.01.201104.03.201104.05.201104.07.201104.09.201104.11.201104.01.201204.03.201204.05.201204.07.201204.09.201204.11.201204.01.201304.03.2013Personal Vehicle Housing Commercial
  • 52. Credit Growth is Picking UpNote: Credit Growth is adjusted for exchange rate movementsSource: CBRT13weekmovingavg.,y-on-y%5220,4051015202530354045 2011-Jan.Feb.Mar.MarApr.May.Jun.July.Aug.Sep.Oct.Nov.Dec.2012-Jan.Feb.Mar.MarApr.May.Jun.July.Aug.Sep.Oct.Nov.Dec.2013-Jan.Feb.Mar.
  • 53. Employment is Supportive of GrowthSource: TURKSTAT2021222324252008…2009…2010…2011…2012…Employmentsinceend-2007(MnPeople,s.a.)53
  • 54. Other Factors Supportive of GrowthUrbanRenewalSale of 2BLandRemoval ofReciprocityInvestmentGrade Rating54
  • 55. Fiscal Strength55
  • 56. Lower Deficit10,87,94,10,1-1,30,21,65,53,00,41,3 1,5 1,2 0,9-2,00,02,04,06,08,010,012,02002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Maastricht Criteria: 3%Medium-Term Program(2013-15)Achieved Maastricht Criteria except 2009Source: Ministry of DevelopmentBudgetDeficit-to-GDP,%56
  • 57. 74,067,759,652,746,539,9 40,046,142,439,236,035,033,031,030,035,040,045,050,055,060,065,070,075,02002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Medium-Term Program(2013-15)Lower DebtDebt-to-GDP,%Satisfying Maastricht Criteria since 2004Maastricht Criteria: 60%Source: Treasury 57
  • 58. Public Sector is now a Net External Creditor88.4-31.3-40-30-20-10010203040506070809020022003200420052006200720082009201020112012Q3PublicNetExternalDebt(BillionTL)Source: Treasury 58
  • 59. Government Interest Payments85.716.7 15.214.83.43.00246810121416020406080100 20022003200420052006200720082009201020112012201320142015Interest Payments/Tax Revenues (%)(Left) Interest Payments/GDP (%) (Right)Medium-Term Program(2013-15)Source: Ministry of Finance59
  • 60. Public Invesment ExpendituresPublicInvesmentExpenditures(BillionTL)7,9 8,0 8,711,714,716,521,724,432,837,640,25101520253035404520022003200420052006200720082009201020112012Source: Ministry of Finance60
  • 61. Sound Banking Sector61
  • 62. Steady GrowthTotal assets in the banking sector has increased more than 5 foldsSource: Banking Regulation and Supervision Agency 622004006008001.0001.2001.400200220032004200520062007200820092010201120122013-1TotalAssets(billionTL)
  • 63. Well Capitalized Banking Sector Capital adequacy ratio twice the minimum legal limit of 8 %.CapitalAdequacyRatio,%Target Rate 12%Legal Rate 8%Source: BRSA63051015202530352003…592004…592005…592006…592007…592008…592009…592010…592011…592012…592013…
  • 64. Strong Asset QualitySource: Banking Regulation and Supervision Agency 642002 2013-149799Loans(billionTL)2002 2013-117,62,9NPLRatioofLoans(%)
  • 65. Capital Adequacy Ratio*65(%)* Latest available ratiosSource: Banking Regulation and Supervision Agency , IMF8101214161820BelgiumIrelandTurkeyDenmarkGermanyBosnia-Her.SwedenBulgariaAustriaEnglandHungaryFinlandRomaniaHollandPolandItalySpainFrancePortugalSloveniaSwedenGreece
  • 66. Strong ProfitabilityDuring 2007-11, when a number of banks went bankrupt around the world,annual capital profitability of our banking sector was around 20.4%.* Latest data, monthlySource: IMFReturnonEquity*(%)6617,9-40-30-20-100102030CanadaAustraliaCzechRepublicTURKEYBrazilFinlandGermanyUnitedStatesFranceJapanAustriaSpainNetherlandsUnitedKingdomDenmarkPortugalBelgiumItalyGreece
  • 67. Solid Real Sector Balance Sheet67
  • 68. Strong Household Balance SheetSource: CBRT, ECB*2012 Q1(HouseholdLiabilities,%ofGDP,2012Q3)65,720,30 20 40 60 80 100 120 140 160DenmarkNetherlandsIrelandUnited Kingdom (GB)PortugalSwedenSpainEuro areaFinlandGreece (GR)MaltaGermanyFranceBelgiumLuxembourgAustriaItalyEstoniaPolandLatviaHungaryCzech RepublicSloveniaSlovakiaLithuaniaTurkey68
  • 69. Rising Household Income & Improving Income Distribution6960,543,236,8 36,0 34,8 34,229,727,421,25,20102030405060701 2 3 4 5 6 7 8 9 10Source: TURKSTAT(2002-11,%,RealIncrease)(Ordered by Income Share of Decile Groups)
  • 70. Strong Corporate Balancesheet70Source: CBRT, Cetinkaya, March 2013, BRSA(Corporateliabilities,%,GDP)36,80 20 40 60 80 100 120LuxembourgSpainPortugalNetherlandsIrelandDenmarkItalySloveniaAustriaSwedenGreeceFranceLatviaEstoniaTurkeyGermanyFinlandBelgiumUnited KingdomHungaryLithuaniaSlovakiaCzech RepublicPoland
  • 71. Positive Long-Term Outlook71
  • 72. GDPSource: TURKSTAT, Medium-Term Program,PwC200220502002$ 230billion2050$ 5 trillion2012$ 799 billion2023$ 2 trillion72
  • 73. GDP per CapitaSource: TURKSTAT, Medium-Term Program,PwC200220502002$ 3,4922012$10,6732023$ 25,0002050$ 50,00073
  • 74. Ambitious TargetsSource: IMF, PricewaterhouseCoopers1. USA2. China3. India4. Japan5. Germany6. Russia8. UK7. Brazil9. France10. Italy11. Mexico12. South Korea13. Spain14. Canada15. Indonesia16. Turkey17. Iran18. Australia19. Taiwan20. Poland2011 (GDP-PPP) 2050Top 10in the WorldTop 3in Europe6th in Europe16th in the World74
  • 75. Determinants of Long-Term GrowthQuality of InstitutionsDemographicsProductivity75
  • 76. Quality of InstitutionsCombattingcorruptionCreating a levelplaying fieldImprovinginternationalcompetitiveness76
  • 77. Corruption Perceptions Index (2002)(65th among 102 countries)3144 4558 59657073 74962030405060708090100ItalyGreeceBrazilMexicoChinaTURKEYArgentinaIndiaRussiaIndonesiaSource: Transparency International77
  • 78. Corruption Perceptions Index (2012)(54th among 176 countries)Source: Transparency International5469728094 94102105118133405060708090100110120130140TURKEYBrazilItalyChinaGreeceIndiaArgentineMexicoIndonesiaRussia78
  • 79. Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(71st among 125 countries)384547 48535457 59697130354045505560657075ItalyIndiaGreeceChinaRussiaArgentinaBrazilMexicoIndonesiaTURKEYSource: World Economic ForumGlobal Competitiveness Index (2005)79
  • 80. (43rd among 144 countries)Source: World Economic ForumGlobal Competitiveness Index (2012)2941 42 434849 50 5359 6067717378942030405060708090100ChinaPolandItalyTURKEYBrazilPortugalIndonesiaMexicoIndiaHungaryRussiaSlovakRepublicUkraineRomaniaArgentinaMoved up 16 places in a year2nd fastest rising country80
  • 81. (20th among 38 countries)Source: DeloitteGlobal Manufacturing Competitiveness Index (2013)818121415192021232526282932333538510152025303540BrazilMexicoPolandUKCzechRep.TURKEYSwedenNetherlandsFranceArgentinaRussiaRomaniaItalySpainPortugalGreece
  • 82. (16th among 38 countries)Source: DeloitteGlobal Manufacturing Competitiveness Index(In the Next 5 Years)823131618 1921 22 23 2426 2729313437 380510152025303540BrazilMexicoTURKEYPolandUKSwedenCzechRep.RussiaNetherlandsArgentinaFranceRomaniaSpainItalyPortugalGreeceIn the next 5 years, Turkey will move up to 16th in the world and2nd in Europe, overtaking the UK, Poland and Czech Republic.
  • 83. (84th among 175 countries)Source: World BankEase of Doing Business (2006)6269 70 7184939710811112213113860708090100110120130140 MexicoItalyUruguayRomaniaTURKEYArgentinaRussiaChinaGreeceBrazilIndonesiaIndia83
  • 84. (71st among 185 countries)Source: World BankEase of Doing Business (2012)4871 7273 7884 8991112124 128 130 13213720406080100120140MexicoTURKEYRomaniaItalyGreeceCrotiaUruguayChinaRussiaArgentinaIndonesiaBrazilIndiaUkraine84
  • 85. Favorable DemographicsSource: EurostatShareof15-24yearsoldinTotalPop.(%)16.879111315171921AndorraItalyGreeceSpainPortugalGermanySloveniaIrelandBulgariaLuxembourgSwitzerlandCroatiaCzech…AustriaLiechtensteinSerbiaHungaryNetherlandsFinlandFranceDenmarkUnited…NorwaySwedenEstoniaUkraineMaltaPolandLatviaSlovakiaMontenegroLithuaniaIcelandFormer…GeorgiaTurkeyMoldovaAzerbaijan85
  • 86. 2,01,00,30,70,20,40,60,81,01,21,41,61,82,0Turkey USA EU-27 OECDAnnualAveragePopulationGrowthRate(%,2001-11)Growth Rate of Working-Age PopulationSource: OECD, Eurostat, TURKSTAT 86
  • 87. Have Investors noticed the Transformation?87
  • 88. Int’l Companies Operating in Turkey (1000s)Source: Ministry of Economy885,66,78,811,715,016,119,121,925,229,633,1 33,3051015202530352002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Jan
  • 89. Foreign Direct Investment InflowsSource: CBRTBilliondollar14,8122,70204060801001201401980-2002 2003-201289
  • 90. REER AppreciationSource: CBRT(2003=100)55657585951051151251351989-171990-171991-171992-171993-171994-171995-171996-171997-171998-171999-172000-172001-172002-172003-172004-172005-172006-172007-172008-172009-172010-172011-172012-172013-1Linear Trend90
  • 91. 91