EBRD gives strong support to Turkish economy in challenging environment

LONDON/ISTANBUL

AP photo

The European Bank for Reconstruction and Development (EBRD) has said it continued to deliver strong support for Turkey in 2016 with a combination of a powerful investment program and backing of crucial sector policies to modernize the country’s economy and build its resilience to shocks. 

In a challenging year, the EBRD invested 1.9 billion euros in Turkey which reconfirmed its position as the top destination for the Bank’s funding, said the EBRD in a statement late on Jan. 17. 

Turkish projects represented 20 percent of the EBRD’s total 9.4 billion euro investment last year across some three dozen countries on three continents, according to the statement. 

“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, said the Bank. 

 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, it added.

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, according to the statement. 

The Bank made a strong contribution to Turkey’s hospital building program under the public-private partnership model. The Bank financed new health campuses in the Turkish cities of İzmir and Kocaeli, alongside Export Development Canada (EDC) and the Overseas Private Investment Corporation (OPIC), the US government’s development finance institution. 

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 Elazığ 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 mobilizing 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 Vakıfbank’s mortgage-backed bond, the first of its kind in Turkey, said the Bank. 

The Bank also added that it had continued working closely with local lenders to reach out to small and medium-sized enterprises (SMEs) across the country. 


Tackling refugee crisis

The Bank also joined international efforts to tackle the refugee crisis caused by the civil war in Syria. It extended a 5 million euro loan and a 5 million euro grant to the city of Gaziantep, which experienced a sharp increase in population, for the acquisition of 50 new buses.

The share of environmental financing soared to half of the Bank’s 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. 

Continuing to support key foreign investors, the Bank also financed the expansion plans of tire 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, said the Bank. 

With EBRD financing, Brisa is investing in a new tire plant in Aksaray province where it expects to create over 550 jobs for young people. The Bank will help develop technical and vocational training programs 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, according to the statement. 

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.