Building in Africa: Turkey’s “Third Way” in China’s Shadow

Africa is a rising “multipolar continent” the place established and rising extra-regional powers are vying for business acquire and geopolitical affect. Turkey has figured prominently on this third surge of overseas curiosity in Africa.[1] Rooted in a redefinition of the nation’s function in worldwide affairs and a convergence of pursuits between state and enterprise elites, Turkey has developed an more and more dense community of ties throughout a number of dimensions all through Africa.[2]

The rising enterprise quantity of Turkish firms in African development markets is illustrative of the progress Turkey has made in securing a robust foothold on the continent. Though Chinese language state-owned enterprises (SOEs) are by far Africa’s largest builders,[3] Turkish development firms have established themselves as succesful and aggressive gamers not simply within the Maghreb however in Sub-Saharan markets as nicely.

The Turkish development {industry} expands overseas

Turkey’s development and contracting {industry} has been on the forefront of the nation’s financial improvement. The sector accounts for about 6% of the general gross home product (GDP) and employs 1.5 million folks. Its share of the general economic system is almost 30% when factoring within the direct and oblique impacts on associated industries akin to development equipment, constructing supplies, engineering, and structure.

It has been 5 a long time since Turkish contractors entered the worldwide market. In 1972, Libya grew to become the primary nation to which Turkish contractors exported their providers.[4] Between then and April 2022, Turkish development companies applied 11,243 initiatives in 131 nations with a complete undertaking worth of $435 billion.[5] With 40 companies among the many prime world firms, based mostly on revenues generated from abroad initiatives, Turkey positioned third after China (78) and america (41) within the Engineering Information-Report (ENR) 2022 High 250 Worldwide Contractors record.[6]

Through the years, the pursuit of enterprise alternatives in overseas markets by Turkish firms has been each a progress and a danger mitigation technique, spurred by stagnant home market situations and fortuitous circumstances in addition to by unexpected adversarial developments within the markets of operation.[7] On a number of events, extreme financial contractions and ensuing bottlenecks within the home development sector have impelled Turkish contractors to pay attention extra on enterprise overseas. This was the case within the early Seventies, when the depressed residence market coincided with the booming demand for development providers within the oil-rich MENA area. It was additionally the case within the wake of the 2001 financial disaster, when diminished enterprise alternatives in Turkey compelled certified firms out of the home market and turned their consideration to potential enterprise alternatives overseas.[8]

The development {industry} was among the many worst hit by a extreme financial downturn sparked by the Turkish foreign money disaster in 2018,[9] which despatched development prices hovering, inflicting builders to postpone some initiatives and sluggish the tempo of others. Turkey’s economic system was simply starting to get well earlier than the fallout of the COVID-19 pandemic dragged it again into troubled waters, undermining the development sector’s restoration at residence and overseas.[10]

Turkish firms have additionally needed to take care of unexpected challenges in markets the place they’d established a foothold. The Russian monetary meltdown in 1998 led to the suspension of Turkish development initiatives. The flattening of oil costs and the calamitous 1990-1991 Gulf Struggle took their toll on Turkish firms working within the Gulf, a few of which have been compelled out of business. Turkish development actions in Russia slumped once more in late 2016, as a result of political tensions between Moscow and Ankara. Across the similar time, Turkish firms that had gained prominence within the Iraqi market have been sidelined owing to strained relations between the pro-Sunni Erdoğan and Shiite-led al-Maliki administrations.[11]

But, Turkish firms’ opportunism, risk-taking, and resilience has nonetheless paid off. Feeding off the regional development growth within the Center East within the Seventies, they concentrated their actions in 5 oil-producing nations: Libya, Saudi Arabia, Iraq, Kuwait, and Iran. When the Iran-Iraq battle (1980-1988) got here to an finish, Turkish contractors elevated their quantity of labor in Iraq.[12] Regardless of the collapse of the Russian economic system in 1998, they remained on the forefront of the development market, taking a number one function in lots of landmark initiatives.[13] In reality, Turkish firms have repeatedly rebounded from adversarial market situations. The newest instance was final 12 months when, recovering from the pandemic-induced droop, the Turkish development sector almost doubled the quantity of its abroad initiatives.[14] The development {industry}’s worldwide undertaking portfolio measurement has saved on rising, and the Turkish labor drive employed in abroad initiatives has risen from 35,000 to 100,000.[15]

Turkish contractors’ means to outlive throughout recessions and obtain regular progress regardless of market downturns is just not merely a matter of excellent fortune however is attributable to their versatile methods, comparative benefits, and rising capabilities. Turkish contractors entered the worldwide market as low-cost bidders to win tenders. By the late Eighties, nevertheless, they’d begun to capitalize on the speedy assimilation of expertise derived from their partnerships with worldwide companies and emerged as a big drive within the Center East and North Africa.[16]

Initially having served as sub-contractors, they regularly moved into administration consultancy, turnkey undertaking implementation, and three way partnership funding;[17] and graduated from labor intensive and small-scale, to technology-oriented and large-scale initiatives.[18] They diversified into world companies akin to banking, tourism, development supplies, and cement manufacturing. And so they seized alternatives to penetrate new markets, notably Russia and Central Asia following the dissolution of the Soviet Union.  

Along with diversifying their abroad markets, Turkish contractors have differentiated the kind of work they carry out. [See Chart 1.] Over time, the proportion of initiatives they’ve undertaken within the housing sector, which had dominated and nonetheless constitutes a big slice of their abroad actions, has shrunk whereas the share of initiatives requiring excessive experience, undertaking administration abilities, and superior expertise (e.g., petrochemical services) has risen. A number of firms have come to specialise in undertaking varieties akin to worldwide airports, railways, and concrete metro programs.[19]

Chart 2. Worldwide Actions by Sort of Work (2021)

Supply: Ministry of Commerce of Turkey

The sample of Turkish abroad contracting companies’ portfolios, too, has modified considerably. Among the bigger Turkish firms have taken on the function of buyers, fairly than solely performing as contractors. Furthermore, they’re presenting extra complete undertaking packages than up to now: finishing up market analysis and feasibility research; getting ready the monetary bundle for the proprietor; and designing, developing, and providing upkeep and restore providers for the power.

The defining function of the state

Geographical proximity and cultural affinities formed Turkish firms’ strategic decisions, facilitated their entry, and contributed to their profitable penetration of Center Japanese and Eurasian markets. Equally essential has been the function of the state. To make certain, authorities intervention within the development {industry} is just not novel, nor within the case of Turkey, is it new. However within the AKP period, the state has turn into extra straight and extensively concerned within the sector.[20] In reality, the state has performed a defining function within the improvement and internationalization of the Turkish contracting sector, particularly over the previous twenty years — the interval when almost 90% of Turkey’s initiatives overseas have been undertaken.[21]

When the Justice and Growth Celebration (Adalet ve Kalkınma Partisi, AK Celebration) swept into workplace in 2002, the nation’s economic system was in a dire state. Recep Tayyip Erdoğan, then as prime minister and later as president, has championed development because the engine of home financial progress and promoted abroad development actions as a way of projecting Turkey’s picture, energy, and affect overseas.[22]

Authorities patronage has been an important consider aiding the internationalization of Turkish development service companies.[23] Development companies, particularly these aligned intently with the AK Celebration, have been among the many major beneficiaries of easy accessibility to credit score within the worldwide market, tax incentives and exemptions, and relaxed public procurement practices.[24] Erdoğan has personally presided over the constructing and functioning of this patronage system, actively directing funding within the housing, power, and infrastructure sectors throughout Turkey. The important thing function that the state has performed — with Erdoğan on the helm — in favoring the development sector by rewarding firms at residence has been complemented by efforts to advertise abroad development inside the context of Turkey’s assertive and expansive overseas coverage.

The diplomatic and enterprise push into Africa

Consistent with his imaginative and prescient of creating Turkey a serious participant on the worldwide stage, Erdoğan has presided over a multidimensional technique for the African continent. Developed inside the framework of the “Opening to Africa Coverage” adopted in 1998, the technique is geared toward bridging the culturally and geographically “close to” Maghreb and the “distant” Sub-Saharan Africa.[25]

Spearheading Ankara’s diplomatic and enterprise drive on the African continent, President Erdoğan, who referred to Turkey as “an Afro-Eurasian state,” has personally employed and licensed using quite a lot of comfortable energy instruments.[26] Quickly after Erdoğan declared 2005 the 12 months of Africa — by the way, a 12 months earlier than China did the identical —Turkey was admitted as an observer member to the African Union (AU). Three years later, the AU designated Turkey a “Strategic Companion.”

Throughout his time in energy, Erdoğan has paid 58 visits to 32 African nations.[27] Turkish Airways now flies to extra locations (61) in Africa than every other airline. The variety of Turkish embassies in Africa has grown from simply 12 in 2002 to 43. The Turkish Cooperation and Coordination Company (TIKA) has arrange 22 native workplaces, and the Maarif Basis operates 175 colleges in 26 nations.[28] In a bid to interact and additional enhance relations with African states, Turkey has constructed mosques and supplied abroad improvement help (ODA) in addition to humanitarian help. Industrial counselors have been deployed throughout the continent to facilitate the Turkish enterprise neighborhood’s easy entry into African markets. Turkey has additionally cast safety ties with African companions: establishing bases in Somalia and Libya; coaching and equipping troops within the Sahel; collaborating in multilateral peacekeeping operations; and promoting arms.[29] 

Turkey’s development firms are brokers in addition to beneficiaries of this multifaceted engagement. They signify the strongest Turkish enterprise presence in Africa.[30] Most Turkish development actions have been within the Maghreb, with initiatives in Algeria and Libya comprising two-thirds of complete African initiatives.[31] However that image is altering. Turkish firms have turn into more and more lively in Sub-Saharan Africa.[32] They’ve fanned out throughout the continent, enterprise initiatives in Algeria, Democratic Republic of Congo (DRC), Equatorial Guinea, Guinea Bissau, Libya, Niger, Senegal, Sierra Leone, South Sudan, Tanzania, Togo, and Tunisia.[33] Within the regional distribution of enterprise quantity, Sub-Saharan Africa accounted for 17% of Turkish contractors’ initiatives, surpassing their conventional market.[34] [See Chart 2]

Chart 2. Regional Distribution of Development Enterprise Quantity (2021)

Supply: Ministry of Commerce of Turkey

Yapı Merkezi, which has applied 62 railway initiatives on three continents, has accomplished or has initiatives ongoing in Algeria, Ethiopia, Morocco, Senegal, Sudan, and Tanzania.[35] Summa İnşaat constructed the Dakar Enviornment, Dakar Worldwide Convention Heart, the Blaise Diagne Worldwide Airport (collectively with Limak), and the airport in Diamey, Niger’s capital. The Albayrak Group constructed and runs operations at Mogadishu port in Somalia, the place it has additionally constructed roads, a hospital, and the Turkish Embassy. The handiwork of Turkish firms is seen throughout the continent, within the type of residential and enterprise complexes, lodges, conference facilities, sports activities stadiums, procuring malls, hospitals, and transportation infrastructure.[36] And because the late 2000s, a brand new wave of smaller-sized entrepreneurs has joined main Turkish companies in concentrating on Sub-Saharan African markets.[37] 

Turkey’s “Third Means”

The profitable penetration of African markets by Turkish development firms, whereas a largely private-led enterprise, is embedded in a broader effort initiated, formed, and shepherded by the state through the AKP period, with President Erdoğan as its chief architect. Though Turkish development initiatives in Africa are discrete enterprise actions, they’re nonetheless intertwined with and complement different strands of Ankara’s complete engagement technique.[38] The deployment of that technique has not occurred in a vacuum. Quite the opposite, it has taken place within the context of intensifying rivalries involving established and rising extra-regional powers. Turkey’s efforts to pursue markets, undertaking energy, and elevate the nation’s standing and status on the African continent replicate these aggressive dynamics — and the actions of Turkish development firms in Africa are inseparable from them.

In making its diplomatic and company push into Africa, Turkey is working in a crowded discipline that, moreover the Western powers and Russia, consists of China, Japan, and India, to not point out the Arab Gulf states. Given this scramble for a presence and affect on the continent, it’s not shocking that Turkey has sought to place itself as an rising world energy dedicated to and able to difficult established patterns of engagement there. Neither is it shocking that, in doing so, Turkey has introduced itself as a viable various to each the Western and Chinese language fashions.

Turkey’s “third approach” combines enterprise with improvement and peace-building; shows a desire to ship help by means of bilateral fairly than multilateral channels; rejects political conditionality; and emphasizes nationwide possession.[39] It’s cloaked in a story that depicts the Ottoman interval favorably as a “consent-based” association[40] and portrays Turkey as a “rising however virtuous energy” and a “pure associate.”[41] It’s a narrative that, with its emphasis on “shared prosperity,” a “partnership of equals,” and “win-win,”[42] deploys language mirroring that of China — Turkey’s largest competitor in African development markets.

Neither Turkish nor Chinese language officers seem desperate to acknowledge publicly their intense head-to-head competitors for enterprise within the African development sector. It’s a competitors to which China, with a lot deeper pockets and having gotten an earlier begin, has dedicated far better assets than has Turkey, particularly because the launching of the Belt and Highway Initiative (BRI) in 2013. But, there have been circumstances the place Turkish firms have underbid Chinese language rivals.[43] Furthermore, in settings the place they’ve operated, Turkish companies for probably the most half have been nicely acquired, gained better visibility, and enhanced their popularity[44] — thereby arguably enhancing their competitiveness.

Nonetheless, there isn’t a denying the huge monetary capabilities that the Chinese language state has delivered to bear and stays able to deploying in help of SOEs in African development markets. It’s exactly this component — financing — that has been the most important issue drawback for Turkish firms. As unbelievable as it’s that they’ll shut the financing hole, Turkish development companies have taken steps to slender it: choosing build-operate-transfer (BOT) and undertaking funding fashions (for which Chinese language firms just lately are displaying much less urge for food); coming into three way partnership partnerships with overseas firms which have entry to personal assets; and securing funds from monetary establishments such because the African Growth Financial institution (AfB) and the World Financial institution.[45]

The Türk Eximbank, regardless of its personal restricted monetary capability, has collaborated with establishments such because the Islamic Company for the Insurance coverage of Funding and Export Credit score (ICIEC) and Japan’s Nippon Export and Funding Insurance coverage (NEXI) to offer helpful help to Turkish firms in managing their publicity, overcoming danger focus, and acquiring cowl towards undertaking non-payment.[46] Moreover, the place they’ve competed and gained initiatives towards China, akin to in Rwanda, Tanzania and Senegal, Turkish contractors have utilized funds from worldwide establishments.

The emergence of Turkey-Japan cooperation in third-country development providers is a probably important improvement on this respect.[47] The Japan Financial institution for Worldwide Cooperation (JBIC) and Japan Exterior Commerce Group (JETRO), along with the Türk Eximbank, have been exploring methods to reinforce cooperation between Japanese and Turkish firms in infrastructure development in Africa.[48] Aside from the potential tangible advantages that such cooperation between Turkey and Japan may yield for his or her firms and African companions is the fascinating query of whether or not such efforts are indicative of a shared curiosity in countering China and never merely in increasing their very own enterprise actions in Africa.[49]

There are different intriguing prospects for third-country collaboration as nicely. Progress in Turkey’s rapprochement with a few of its Gulf Arab neighbors as a part of the broader regional realignment underway might function a catalyst not just for a revival of Turkey’s development enterprise within the Center East and the attraction of Gulf funds to home initiatives but in addition for a shift from proxy political-military conflicts to third-country cooperation within the Horn of Africa and elsewhere on the continent. 

There may be additionally scope for third-country collaboration between Turkey and the European Union (EU). Combining Turkey’s high-quality and cost-effective abilities within the development sector with the EU’s technical and monetary capability might pave the way in which for enterprise climate-resilient public infrastructure initiatives in North Africa.[50]

Conclusion

Underneath the AK Celebration and spearheaded by President Erdoğan, Turkey has sought to current its type of engagement in Africa as a viable various to the creation of latest relations of dependence with Africa related to Western or Chinese language fashions of improvement. Turkey’s development firms have figured prominently as brokers and beneficiaries of Turkey’s bold, multidimensional Africa technique.

Chinese language state-owned and personal enterprises dominate the financing and improvement of infrastructure and capital initiatives in Africa. Nevertheless, Turkish contractors, as a part of their increasing abroad actions, have succeeded in capturing a large share and growing enterprise quantity in African development markets.

The Turkish economic system has these days encountered stiff financial headwinds. Whereas progress topped 11% final 12 months, annual inflation skyrocketed to 73.5% in Could.[51] The battle in Ukraine has elevated challenges for the Turkish economic system, sending the prices of meals, power, and development supplies hovering. However it’s price mentioning that Turkish contractors have weathered earlier durations of financial turbulence, performing nicely in abroad markets whilst they grappled with home challenges, and recovering from slack demand or different adversities of their markets of operation.

Turkey’s development giants are poised to stay a big drive in Africa. By pursuing collaborative third-country development initiatives with a number of extra-regional companions, Turkey is unlikely to supplant China as Africa’s grasp builder. Nevertheless, this strategy might assist slender Turkish contractors’ financing hole, thereby enhancing their progress prospects. It might additionally increase the vary of decisions for African companions in creating the sustainable and resilient infrastructure they desperately want — and in so doing, fulfill Ankara’s promise of a “third approach.”