The strategic geographical position allows Turkey to expand its economic activities in both Europe with the European Union, but also in Central Asia and the Caucasus. At the same time, Turkey is an important trade centre. The projects regarding the construction of high speed lines and Marmaray project make the countries on the two continents prefer Turkey for freight and passenger transport between Europe and Asia, which will tilt the balance in favor of railway transport and will surely bring significant progress to the country’s economy.
Turkey is a country with an undeniable economic potential. Investment opportunities exceed by far those in the neighbouring countries and are favoured by the extraordinary geographical position but also by recent economic and political processes. Turkey will always maintain its statute of connection platform between Asia and Europe so that, talking about communications and transport modes, we can only stress once again their vital importance to Turkish economy. After decades when railways have been ignored by investors, we can today say that their time in Turkey has come. In the last four decades, Turkey has known an outstanding economic growth. The energy industry in the country is often represented by the coal industry (especially lignite and pit coal), located in Northwestern Anatolia. The electric energy is manufactured in hydroelectric power plants and thermoelectric power plants. In 2008, more than 90% of Turkey’s fuel demand came from outside the country. Turkey supports the project of an oil pipeline between its ports, Samsun at the Black Sea and Ceyhan at the Mediterranean Sea, which already serves as hub for the pipelines that bring oil from Azerbaijan and Iraq. Since 2003, Russia has been the first trade partner of Turkey with exchanges exceeding USD 38 Billion in 2007. Hundreds of Turkish companies develop their activity in Russia, about 2 million Russians come in Turkey every year (1 million according to other estimations), while Russia ensures 65% of Turkey’s gas demand through Blue Stream. Although 97% of the country’s territory is located in Asia Minor, nowadays Turkey pertains more to the political, economic and even cultural European context. In fact, starting 2005, Turkey has been formal candidate to the European Union, a wish expressed even since 1987. Turkey’s territory expands on two continents, 97% of the country’s surface is in Asia (Anatolia) and 3% in Europe (the Balkan Peninsula) which increases its economic advantages. It has borders with eight countries, Greece and Bulgaria in North-West, Georgia, Armenia and Azerbaijan in North-East, Iran (Persia) in East and Iraq and Syria in South.
Business development facilities
Turkey holds the 73rd position in World Bank’s Doing Business classification being considered a country with medium potential for business facilities. In 2009, the country dropped 10 positions in the classification in comparison with the 63rd position held in 2008 when it also recorded a drop as compared with the previous year. In 2009, Turkey also recorded slight drops for all of the ten indicators used by the World Bank, the lowest positions being held by Dealing with Construction Permits (133), Employing Workers (145) or Closing Business (121) indicators, while higher positions were held by Registering Property (36) or Enforcing Contracts (27) indicators. Turkey is not among the most active countries in what concerns the introduction of reforms in the last years, although small legislative improvements making things easier for investors occur every year. In 2009, Turkey was one of the countries which facilitated the credit granting.
However, Turkey doesn’t provide a railway connection between the two continents but things are about to change once the Marmaray project will be finalized. Marmaray is the second important submarine railway tunnel in Europe. The Government in Ankara declared that EUR 11.65 Billion will be invested in the railways by 2020. Member of the Organisation for Economic Co-operation and Development (OECD), Turkey is one of the first 20 economies in the world. The Turkish economy, although on the increase in the last few years mainly due to investments, is still recording a significant current account deficit and high external debts. Future economic and legislative reforms are expected, which, together with the perspective of accessing the EU, will attract important foreign investments. Turkey is characterized by World Bank as a country with high medium revenues (Upper Middle Income) and a GDP per capita of USD 11,900 (2008).
Monopole in the railway transport system
The transport system in Turkey has a strategic international importance. Turkish Railways (TCDD) already owns the entire national railway transport as well as seven of the country’s largest ports. Therefore, TCDD holds monopole on rail transport services. Most of the railway lines in Turkey have been built by private companies and in 1923, all these lines were nationalized. That is why TCDD operates as a state-owned company under the authority of the Turkish Ministry of Transport. TCDD is a unitary company and not a holding, as in most western countries and has subsidiaries operating as suppliers in the railway industry but which are, in turn, under the suborder of TCDD. These companies are TÜLOMSAS (Turkish Locomotive and Engine Industry Inc.), the locomotive manufacturing plant, TÜDEMSAS (Turkish Railway Machines Industry Inc.), freight wagon manufacturer and TÜVASAS (Turkish Wagon Industry Inc.), passenger car manufacturer. TCDD depends on state subsidies, estimated at around USD 500 Million per year, while the estimate losses seem to reach USD 1 Billion every year. The suburban lines around the cities are managed by companies, TCDD divisions, so we can talk about a monopole of state railways. The Turkish railway network covers a relatively small distance and is mostly non-electrified. However, it can count on significant traffic in passenger transportation. With respect to cargo traffic, we can say that the cargo volume shipped on railways is not very significant. “On the contrary, after 1990, the railway traffic in Turkey has reached a dead-end with cargo traffic increasing only 0.9% per year and a traffic of passengers carried of nearly 4% per year”, Louis Thompson, former railway expert within World Bank points out in a report elaborated for the International Transport Forum (ITF).
According to Louis Thompson, TCDD’s activity has, in fact, dropped in all its segments. More precisely, in 2007, the ratio between revenues and costs was 79.3% in suburban passenger transport, 16.7% in InterCity traffic and 31.9% in cargo transport. These ratios have two odd aspects, on the one hand because it seems that cargo transport had not been profitable and on the other hand because suburban passenger transport was less non-profitable than either cargo transport or intercity train transport. “However, the problem of low railway cargo traffic seems to stem from the fact that TCDD has severely dropped the charges for this transport category over the last 20 years, while neither traffic nor productivity have significantly increased”, Louis Thompson believes. Almost 80% of TCDD’s traffic is focused on just half the entire railway network, while for the other half the network, subsidies are less financially confirmed. As I have already said before, the positive figures in passenger transportation are, however, encouraging. It is important to say that TCDD’s tariffs for transport and railway safety have not been regulated, allowing TCDD to establish its own tariffs. In practice, TCDD has been restrained by the implication of politics in the affairs of state-owned undertakings. Needless to say that there has probable been a connection between increasing TCDD’s subsidies and the company’s policy on tariffs. This might be giving a clue about the unusual high tariffs for suburban transport but there is no apparent explanation for the low charges in cargo transport. Turkish Minister of External Affairs, Ahmed Davutoglu, has brought into discussion the establishment of an Eurasian Union, similar to the European Union, Newz.az agency reported. The declaration has been made recently at the beginning of February during a reunion with the Turkish ambassador in the Eurasian countries. “Eurasia could become a force of world economy. Our connections with Russia provide new cooperation opportunities in the region”, the Turkish Minister of Foreign Affairs declared. Davutoglu has requested the development and reinforcement of the political and economic connections between Eurasian countries, drawing attention on the fact that the rich energy resources of the region around Turkey can promote the world’s economy. According to the Turkish Minister of Foreign Affairs, the Eurasian countries should build railway networks and cross-border and maritime connections, which will strengthen the political and economic relationships in the region.
Reform…is on the right track
Apparently, the railway reform is on the right track which is good news for both Turkey, as a country that wants to access the European Union and will have to align to most of the norms already implemented by the Member States, but also for potential investors who want to enter the railway market in Turkey. Once these norms are complementary, they can ease both TCDD’s activity as project manager but also the work of European railway suppliers who manifested their intention to collaborate in the projects launched by Turkey in the area of high speed transport. The railway reform was considered in 2001 when discussions with World Bank representatives were initiated. World Bank’s aid was required for both consultancy and financing. TCDD’s reorganisation involves two aspects: the railway reform and the separation and concession of ports. The railway reform is based on the European model. In fact, the reform seeks to separate the infrastructure manager from the operators, provide free access for all freight operators, establish an access charge, and transfer suburban operations to local authorities with services provided by operators based on a contract, as well as separate rolling stock manufacturing facilities. It also seeks to establish regulatory, security and certification bodies. TCDD’s reorganisation is one of the conditions accepted by Turkey based on the EU agreements.
Turkey bets on high-speed lines
Currently, Turkey has 8,699 km of railways, only 442 of which are doubled and 1,928 electrified (electrified lines, especially in Istanbul and Ankara). The railway connections available at borders are with Bulgaria, Greece, Iran, Syria, the one with Armenia has been closed since 1992 and the line connecting Turkey and Georgia (Kars, Georgian border) is under development. Projects for developing high speed lines to both Central Asia and Europe are under full development. The construction of Eskişehir-Istanbul high speed line, as part of the second phase of the high speed line construction connecting Ankara to Istanbul, is under development and will be inaugurated in 2013. Infrastructure works on Ankara – Konya high speed line (212 km) were finalized, while works on the superstructure line began in July 2009. Ankara – Konya high speed line will be launched towards the end of 2010. Its finalization with a speed of 250 km/h will establish a new travel time of 1 hour 15 minutes between Ankara and Konya, while the travel time between Istanbul and Konya will also be reduced to 3 hours 30 minutes. Works on Ankara-Sivas high speed line were initiated in 2009. This project will cut off the existing line by 141 km, from 602 km to 461 km. The travel time between Ankara and Sivas will be of 2 hours 51 minutes. Moreover, studies are being elaborated concerning the high speed lines from Ankara, Izmir (594 km), Bursa-Osmaneli (106 km), Istanbul-Edirne (230 km) and Ankara (Yerköy)-Kayseri (150 km). “Turkey has tried to impose itself as a connection platform between Asia and Europe. In 2008, the total volume of rail cargo transport between the two continents was of USD 75 Billion, Suleyman Karaman, TCDD President declared. According to the latest reports made public, Turkey’s revenue potential could rise to USD 7 Billion per year, through the development of cargo train connection to the international network”, Karaman added. The construction of Marmaray tunnels advances rapidly and the launch of the tunnel beneath Bosphorus Strait is scheduled for the end of 2013. The project of the tunnel crossing Bosphorus Strait on the underground as part of Marmaray project is considered the project of the century and is highly important as it links Asia and Europe directly on railways. The plan includes the construction of 1,387 metres of submerged tunnels of a total of 13,558 metres of tunnels. The existing railway line between Halkali, on the European side and Gebze, on the Asian side, will be completely rehabilitated, while the number of lines will increase to three. Two lines of this route, covering a total distance of 76 km, will provide urban transport services, the other lines being used by YHT trains (Turkish high speed trains).
by Elena Ilie
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