Debt Guarantee: Implications For Infrastructure
BMI View: The Turkish government's guarantee of private contractors debt will be a catalyst for the construction industry. Though the projects pipeline in Turkey is large, we reiterate that project implementation has stalled due to project financing challenges, and most recently, the corruption allegations against domestic construction players.
From 19 April, the Turkish government will be guaranteeing the finances for public projects with a value of TRY1bn (USD469mn) or more; the guarantee will also be extended to healthcare and education public-private partnerships (PPPs) with a values from TRY500mn upwards.
The aim is to address the major risk to growth in the construction industry, which is a lack of willing capital ( see 'Headwinds Cause Downgrade, But Should Not Blow Infrastructure Growth Off Course', 24 October 2013 and 'Market In Flux, But Growth To Be Maintained', 27 January 2014). A combination of tightening global liquidity, a major sell off in the lira and a corruption probe heavily focussed on the construction industry has left the infrastructure financing space heavily squeezed over the past year.
|Projects Waiting To Move Forwards|
|Key Qualifying Turkish Infrastructure Projects Value By Status, USDbn|