Türkiye’s Evolving Infrastructure Landscape: Driving Growth Through Resilience and Sustainability

1. Introduction

Infrastructure serves as the backbone of economic growth, facilitating trade, mobility, and access to essential services. As populations burgeon and urbanization accelerates, the pressures intensify for modern, resilient infrastructure that caters to current needs and future challenges. In Türkiye, as well as globally, the focus on infrastructure has shifted dramatically—driven by technological innovations, growing environmental consciousness, and dynamic societal demands.

From the surge of electric vehicles (EVs) to major advancements in information technology, investment priorities in infrastructure are undergoing transformation. Increasingly, green infrastructure—an approach championed by the United Nations Sustainable Development Goals (SDGs)—is at the forefront of national agendas. The recent draft Climate Law of Türkiye is a testament to this shift. This article will explore Türkiye’s infrastructure investment landscape, comparing it with global trends, highlighting emerging priorities, sectoral gaps, and financing challenges.

2. Türkiye’s Infrastructure Legal Framework

Türkiye’s roadmap for infrastructure development is anchored by a framework of constitutional provisions, sector-specific laws, and strategic investment agendas. Central to this legal environment is the Public Procurement Law No. 4734, which oversees the tendering of public infrastructure projects, ensuring they are conducted transparently and competitively.

Public-Private Partnership (PPP) mechanisms also play a pivotal role, particularly in large-scale ventures. However, these are primarily governed by various sectoral laws—such as the Health PPP Law and the Electricity Market Law—instead of a single, unified PPP framework. Coordination occurs under the aegis of the Ministry of Treasury and Finance and the Presidency of Strategy and Budget, which scrutinize project feasibility, financial models, and stipulations for risk distribution.

The Build-Operate-Transfer (BOT) model has emerged as a prevalent mechanism for executing infrastructure projects, especially in transportation and energy sectors. Notably, BOT contracts usually encapsulate international arbitration provisions to ensure neutral dispute resolution, an essential aspect for attracting both domestic and foreign investments.

Adding another layer of significance is the Environmental Law No. 2872 and the Environmental Impact Assessment Regulation. The newly proposed climate law seeks to mesh sustainability and compliance with environmental standards into project approvals—thus aligning national practices with global Environmental, Social, and Governance (ESG) standards.

To amplify the influx of foreign infrastructure investment—a historical pillar of Türkiye’s economic strategy—there is ongoing discourse around refining existing PPP legislation and fostering a more robust investment climate.

3. Türkiye’s Growing Infrastructure Needs

Over the last decade, Türkiye has witnessed robust economic growth, averaging 4.5% annually. This surge has spurred urbanization, a rising population, and rapid industrial expansion—a trifecta intensifying the demand for infrastructure. Historically, Türkiye has relied heavily on PPPs to bridge the investment gap; however, this strategy has not fully sufficed.

Looking ahead, it is estimated that Türkiye will funnel approximately USD 569 billion into infrastructure by 2040. Yet, the actual infrastructure requirements are tallied at around USD 975 billion, indicating a substantial shortfall. Over half of this anticipated demand aligns with the transportation sector, while the energy sector accounts for about a quarter of the total.

Recent allocations reveal that 49% of Türkiye’s 2024 infrastructure budget is earmarked for railway projects, underscoring the importance of transportation in the nation’s developmental strategy.

3.a. Telecom Infrastructure: Lagging Behind

While transportation-related infrastructure captures much of the narrative, the telecommunications sector rings alarm bells. Projections indicate that Türkiye will need around USD 100 billion in telecom infrastructure by 2040. Amidst a global digitalization wave—particularly pronounced following the pandemic—Türkiye struggles with its position, ranking 111th out of 181 countries in fixed internet speed and still predominantly operating on 4.5G networks. This technological lag highlights a critical need for focused policy initiatives and substantial investment.

3.b. Sustainability and the Green Infrastructure Agenda

Shifts toward sustainability are driving global infrastructure agendas. Mechanisms like carbon pricing, increased EV adoption, and a transition to renewable energy signal a greater emphasis on green infrastructure. The forthcoming Climate Law of Türkiye is poised to establish a carbon taxonomy that will enhance green infrastructure investments.

In this regard, Türkiye has made noteworthy strides. For instance, the emergence of TOGG, a domestic EV brand, is expected to accelerate EV adoption significantly. Projections suggest that between 5 and 11 million EVs could grace Turkish roads by 2035. Additionally, Türkiye is among the top 10 countries globally in terms of renewable energy capacity growth, with expectations that capacity will surge by 64% between 2022 and 2027.

The Green Transformation Support Program, implemented under a recent regulation, emphasizes investments that align with circular economy principles and sustainability goals. It encourages investors to craft detailed reports mapping out their green transformation strategies, solidifying the commitment to sustainable practices at the facility level.

Furthermore, new guidelines from the Capital Markets Board of Türkiye pave the way for financing green infrastructure projects through instruments like green debt instruments and sustainable lease certificates.

4. Global Infrastructure Trends and Investment Gaps

A persistent challenge for Türkiye revolves around securing adequate financing for its infrastructure projects. Domestic savings alone fall short of meeting escalating investment needs, and accessing external financing has grown increasingly complex amid global economic fluctuations and rising interest rates.

Historically, Türkiye secured USD 204 billion in infrastructure investment via PPPs between 1986 and 2023. However, the projected requirements of USD 569 billion—by 2040—indicate that reliance on PPPs is insufficient. This scenario calls for innovative financing solutions and the diversification of funding sources.

Globally, most infrastructure investment demand is likely to emerge from Asia, with China facing a staggering USD 2 trillion gap between its infrastructure needs and current investment trends. In addition to domestic challenges, decreasing global investments—particularly in traditional sectors—are further complicating Türkiye’s quest to fill its infrastructure void.

Increased competition for global investment capital is an additional hurdle for Türkiye. With its strategic positioning between Europe and Asia, the country must navigate a challenging landscape fraught with risks as it strives to bridge its infrastructure gap.

5. Strategic Priorities for the Future

As Türkiye’s infrastructure landscape evolves, several priorities will demand focused attention. Transportation remains central, but a concerted push for telecom infrastructure and sustainability initiatives is critical. Despite commendable progress in renewable energy and EVs, challenges surrounding financing and digital infrastructure development remain significant.

To bolster its competitiveness and resilience, Türkiye must explore diversified funding avenues beyond traditional PPP models, aligning its infrastructure priorities with emerging global trends in both digitalization and sustainability. Prioritizing these sectors will prove essential for sustaining long-term economic growth and ensuring national competitiveness in an increasingly interconnected world.

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