Istanbul’s 3rd airport places €11 billion financial burden on future generations

Turkey is planning a massive third airport for Istanbul. It is linked with other mega-projects – a third bridge over the Bosphorus, a motorway and a canal linking the Black Sea with the Sea of Marmara. It is expected that this airport would cost €11 billion, and paying this back would become a burden for Turkish citizens in future – according to Mr Erdoğdu from the main opposition party. He said the Treasury has assured contractors of a financing guarantee worth €4.6 billion should the construction of the airport fail to be realized or if it does not commence operation, plus a €6.5 billion guarantee should the estimated flight volume fail to come to fruition. Mr Erdoğdu said that aside from its environmental effects, the project is economically a mega disaster – it is meant to be a prestige project to rival vast airports around the world. The consortium of 5 contractors spent two years seeking overseas financing for the project but failed, so most of the money has had to come from 6 state-owned banks. There is also wide-scale opposition to the project from scientists and environmentalists concerned about its huge impacts. The 5 companies are estimated to be spending €10.2 billion for construction and paying €22.15 billion euros to the government for operating rights for 25 years.
.

 

 

Deputy: Istanbul’s 3rd airport places huge financial burden on future generations

18.10.2015  (TODAY’S ZAMAN / ISTANBUL)

The ongoing construction of İstanbul’s third airport will place an €11 billion burden on future generations of Turkish citizens, according to main opposition Republican People’s Party (CHP) İstanbul deputy Aykut Erdoğdu, who gave a press conference on financial aspects of the controversial project on Sunday.

Erdoğdu said the Treasury has assured contractors of a financing guarantee worth 4.6 billion euros should the construction of the airport fail to be realized or if it does not commence operation, plus a 6.5 billion euro guarantee should the estimated flight volume fail to come to fruition.

Aside from its environmental effects, the project is economically a mega disaster, Erdoğdu said. The third airport is often touted as one of the 13-year-old Justice and Development Party (AK Party) government’s mega projects for its sheer scale and supposed prestige compared to similar airports around the world.

The contractors spent two years seeking overseas financing for the project but failed, Erdoğdu said, maintaining that they finally obtained most of the required loans from state-owned banks at the behest of President Recep Tayyip Erdoğan.

Turkish consortium Limak-Cengiz-Kolin-Mapa-Kalyon OGG beat three competitors to win the tender for construction of İstanbul’s third airport for 22.15 billion euros ($25.62 billion) in May 2013 The airport’s construction began in June.

The project has been surrounded by controversy since its inception, as many citizens and nongovernmental organizations filed lawsuits over land expropriation. There is also wide-scale opposition to the project from scientists and environmentalists concerned about the impact the construction has had on the area’s surface water resources and the diverse populations of various species of birds and other wildlife.

http://www.todayszaman.com/business_deputy-i-stanbuls-3rd-airport-places-huge-financial-burden-on-future-generations_401854.html

.


New airport eating up state resources, economist warns

The signature ceremony for the loan agreement was attended by Erdoğan along with consortium executives, on Monday.
19.10.2015  (TODAY’S ZAMAN / ISTANBUL)

The staggering amount of money given in loans by state-run lenders to the contractors of İstanbul’s third airport is making it harder for the Turkish private sector to obtain cheap sources of finance, veteran economist Süleyman Yaşar told Today’s Zaman on Monday.

In a signature ceremony on Monday, the five-company-consortium behind the project signed a loan agreement with six Turkish lenders to finance the first stage of the controversial project. Planned to be completed by the first quarter of 2018, the first phase secured a total of 4.5 billion euros, 75 percent of which is to be borrowed from three state-run banks. However, Yaşar warned that public money is being wasted in such vain projects instead of being used to support companies that create value-added production and thereby boost Turkish exports.

“Turkish exports have been contracting for nine successive months but they [policymakers] keep boosting the construction sector, which makes no contribution to Turkey’s sales abroad,” Yaşar said.

Turkey’s export volume has posted a decline in every month between January and September, totaling $145.4 billion over that period, according to the latest official data.

Yaşar added that the government should introduce policies to give export companies access to cheaper loans via state-run lenders.

The government has been strongly criticized over its supports for megaprojects that have damaged the environment. The third airport planned for İstanbul has taken center stage in recent days due to its exorbitant cost, with politicians and columnists stressing the burden that the project could put on public resources.

In a press conference over the weekend, main opposition Republican People’s Party (CHP) İstanbul deputy Aykut Erdoğdu said construction of the airport will cost future generations of Turkish taxpayers 11 billion euros. Erdoğdu also said the government has guaranteed contractors up to 4.6 billion euros should the construction of the airport fail to be completed or if it does not commence operations, plus a 6.5 billion euro guarantee should the flight volume fail to meet expectations.

Erdoğdu also stated that the contractors had looked for overseas financing for the project for two years but failed to find support, adding that they finally obtained most of the required loans from state-owned banks at the behest of President Recep Tayyip Erdoğan.

The consortium borrowed 1.5 billion euros from Ziraat Bankası, 1 billion euros from both Halkbank and VakıfBank, 500 million euros from Denizbank and 300 million euros from both Garanti Bankası and Finansbank, all on a 16-year term. The five companies are estimated to be spending 10.2 billion euros in the construction process and paying 22.15 billion euros — excluding value-added tax — to the government to obtain operation rights for 25 years.

“I think the project will turn out to be a white elephant that will waste a huge amount of public resources,” Yaşar said, adding that he thought the consortium would fail to complete the project.

Erdoğdu also argued on Monday that the loans required for the project had been opened by overseas branches of state lenders in order to ensure that the court of arbitration is located in the UK.

“If the 11.1 billion euro state guarantee is not forthcoming, the public will have to seek their rights in courts in the UK,” Erdoğdu said.

http://www.todayszaman.com/business_new-airport-eating-up-state-resources-economist-warns_401957.html

.


 

Tweets by Daniel Moylan ‏@danielmgmoylan  20.10.2015

Turkey’s opposition party says govt to pay huge sums of public money to contractors if Istanbul 3rd airport doesn’t work out well enough

Sensible transfer of economic risk from contractor, who cannot manage it. Gov’t therefore gets better price from contractor.

Worth remembering that contractor is paying Turkish gov’t for right to build airport, not getting paid.

And this feature of the contract has been publicly known since it was signed: it didn’t need to be ‘revealed’ by opposition.


 

See earlier:

Forests and lakes destroyed to build Istanbul’s vast 3rd airport aerotropolis covering 76 square kilometers of land

Istanbul is building a third airport, north of the city close to the Terkos lake area.  Istanbul already has Atatürk Airport on the European side and Sabiha Gökçen airport on the Asian side (these handle around 45 million and 15 million passengers respectively per year), but both claim to be struggling with increased demand – being well located as a hub between Europe, the Middle East and the East.  Their national airline, Turkish Airlines, is growing fast. The site for the 3rd airport, which is to be an Aerotropolis, not merely an airport, is about 76 square kilometres. The third airport is linked with other forest destroying megaprojects – a third bridge over the Bosphorus, a motorway and a canal linking the Black Sea with the Sea of Marmara. All three are linked and feed into each other.  The vast construction works destroy areas of forest, lakes and ponds – causing serious local concern about biodiversity loss, loss of natural habitat and possible future heat island and water supply problems.  Turkey wants another vast airport, perhaps able to take up to 150 million passengers per year, partly to boost its chances of getting the Olympics in 2024. The busiest airport in the world now, Atlanta, handles about 95 million passengers per year.  A short video shows the ongoing environmental destruction, during the building of the airport. https://vimeo.com/123657571

http://www.airportwatch.org.uk/2015/04/forests-and-lakes-destroyed-to-build-istanbuls-vast-3rd-airport-aerotropolis-covering-76-square-kilometers-of-land/

.

.

Turkey plans to build a 6-runway mega airport near Istanbul to be one of the world’s largest

Turkey is planning to build one of the world’s biggest airports, and one larger than anything in Europe, costing some $5bn.  It wants to make Istanbul a global hub and boost its chances of getting the Olympics in 2020. Turkey is well situated geographically for traffic between the USA and Europe, and the Far East. It is therefore in competition with other Middle East and Gulf countries, which are also building mega-sized airports, such as Dubai and Doha (capital of Qatar). A tender will be held in may for the Turkish airport.  This would be the third airport for Istanbul, which already has Ataturk airport, and Sabiha airport – which handle around 45 million and 15 million passengers respectively per year. The new airport will be near the Black Sea, and is anticipated to be able to cope with 150 million passengers per year. By contrast, Heathrow deals with some 69 million, and Atlanta – the world’s busiest airport – handles some 90 million per year. The plans are for the new 6 runway airport to be open by 2017.

http://www.airportwatch.org.uk/2013/01/istanbul/

 

.

.

 

 

.