| Turkish Construction Sector |
Kaynak :
01.03.1996 -
İstanbul Ticaret Odası İngilizce dergisi
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Yazdır
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ECONOMIC BACKGROUND
By the start of 1994, as a result of the economic over-expansion, growing foreign trade and public sector deficits, rising inflation and downgradings of the Turkey’s eredit rating by the international rating agencies, a deep crisis was born. The crisis created uncertainty and instability which firstly affected the financial sector, and then the economy as a whole. In April 1994, the grovernment introduced a stabilization and structural adjustment programme (the April 5th Measures) designed to stabilize the economy, correct the macroeconomie imbalanees and promote sustainabIe growth. The programme was based upon a series of measures to reduce the public sector defieit, tightly control monetary, credit, foreign exchange and interest rate policies.”
In addition,.the government initiated consultation meetings with the IMF, leading to the endorsement of a stand-by agreement. Key economic indicators of the Turkish economy in 1994 were as fol1ows: Inflation rose to record levels (150% in wholesale-and 126% in consumer prices). GNP growth became negative from 8.1% in 1993 to -6% in 1994 (which was the highest rate of decline sinee 1945). The escape from the Turkish Lira accelerated leading to 167% devaluation against the US Dollar. Investments were cut down, salaries and personnel expenditures were kept to a minimum.
Turkey’s attempts to achieve immediate stability in prices and in the foreign exchange market in the short-term have proved fruitful, but medium and longterm measures addressing the structural causes of the macroeconomic imbalances still continue to be vital problems. Turkish companies have recovered from the crisis surprisingly well. The private sector has once again demonstrated impressive flexibility and dynamism in adjusting to shocks. One of the encouraging results was that the ecomony again showed an upward growth trend in 1995. Industrial production rose sharply and GNP growth reached 7.9% in the first nine months of 1995. The high performance of exports appeared to have been another driving force behind the increased economic activity. Inflation in 1995 fell acutly to.its chronic level ( 65% in wholesale and 79% in eonsumer prices), On the other hand, Turkey officially entered the Customs Union with the European Union on January 1, 1996. The Customs Union will probably encourage direct foreign investments in Turkey and a trade expansion is expected between Turkey and the EU member countries. RESIDENTlAL CONSTRUCTION Due to economic recession in 1994, the number of housing completions decreased by 10%. Combined with the government’s tight budgetary plans, the residential construction sector continued stagnant in 1995. The number of housing completions in the nine months of 1995 showed a 18.2% decrease compared to the same period of 1994. Housing completion figures between 1992-1995 are given below:
(x) January – September
Source : State Institute of Statistics (DIE)
It is a fact in Turkey that the supply cannot meet the demand for urban housing, and the annual housing shorfall figure is estimated to be 150.000 units. The greater part of this shortage is being filled by iIlegal residential construction. Illegal constructions are not included in the statistics and should be added to the officially released housing construction figures. NON-RESIDENTIAL CONSTRUCTION
Non-residential construction is closely related to the, economy’s growth performance.In spite of the stagnation non-residential output did not decrease in 1994 (in order to complete starts in 1993), but its growth trend was downward. In 1995 non-residential construction continued to decline and dropped considerably. In the nine first months of 1995 the non-residential construction decreased by 28% in terms of area. The breakdown of the non-residential construction is as follows according to completions : Area of Construction (Thousand m² )
(x) January – September Source : State Institute of Statistics (DIE) CIVIL ENGINEERING
Investment in civil engineering dec1ined sharply in 1994. Financing of major infrastructural projects slowed down reflecting the economic policy pursued. The amount of the 1994 investment expenditures in civil engineering was 2.4 billion ECU.
1994 investment expenditures in civil engineering by major sectors are given below:
CONTRACTING SERVICES ABROAD
The transformation experienced in the 1980s in the Turkish economy and the consequent opening up of the Turkish market to the world have also increased the international competitive capacity of the Turkish construction sector. Turkish contractors have undertaken projects in the Middle East, North Africa, Russia and Central Asian Turkic Republics, ranging from construction of major infrastructure to the restoration of monumental buildings. |
From the 1970s to the end of 1994 the total business volume of foreign construction projects reached about 33.1 billion USD. Of these foreign projects an 18 billion USD volume has been realized as of the end of 1994. GENERAL SITUATION OF THE TURKISH CONSTRUCTION SECTOR
The Turkish construction sector displayed a favourable outlook in 1993 and exhibited a 7.9% expansion in real terms compared to the previous year; this expansion stemmed from the private sector housing activities and public infrastructure investments. The annual growth rate of the construction sector was 3.1 % in 1991 and 6.2 % in 1992. On the other hand, the share of the sector in GNP was 6.4 % in 1992 and 1993, and 6.7 % in 1994. At the beginning of 1994 as result of the financial crisis, the construction sector (like many others in the economy) suffered a slow down and a period of recession. The government policy of reducing investments, the flow of capital to more profitable but speculative- means, the huge rise in interest rates, the increase in the prices of construction materials in rapid succession affected the sector adversely and caused stagnation. Parallel to the decline in housing and infrastructure investments, production and sales fell in the market for construction materials; consequently the construction sector showed a 2 % dec1ine in 1994. In the first half of 1995 construction sector continued to be under the influence of recession. Residential, non-residential and infrastructural construction activities slowed down. Even though in the first half of 1995 major sectors entered an upward trend, it seems that the construction sector needs a longer recovery period. In the first six months of 1995 with respect to the same period of the previous year, the construction sector decreased by 2.4 %.
Number of Contracting Firms and Volume of Contracts Undertaken Abroad as of the End of 1994.
Source: Prime Ministry Foreign Contracting Services (*)
Construction eeiivities canceled HOUSING NEEDS AND HOUSING SHORTAGES There are different opinions concerning the scope and the size of the housing shortage in Turkey. As the number of homeless is negligible, some may say that there is no housing shortfal1 in this country. But the number of illegally built houses (shanties) is quite high. Since the supply of quality housing cannot meet the total demand, illegally built houses seem to fıll the shortage. This difference should also be considered in the housing shortage. In the last 40 years, eleven amnesties have been declared for the illegally built houses, which encourages this kind of construction. The essence of the problem seems to be political. In the past, these kind of houses were constructed overnight with primitive tools and materials; today contemporary methods and materials are being used resulting in livable dwellings rather than shanties. They are constructed on public lands seized by the local land mafia. Two third of people living in illegal dwellings are tenants; they pay rent to so-cal1ed owners. On the other hand, in the course of time, shanties usually are legalized and in so being reduce the overall quality of the constructed urban enıvironrnent.
In Turkey the annual population growth rate is 1.6%, while the urbanization growth rate is around 5 %. On the other hand, the family size is declining; the current average household number is below 5. This is another factor increasing the need for housing. Although exact numbers relating to the housing shortage are not available, in the scope we expressed the annual housing shortfall in Turkey is estimated at 150.000 units.
FIuctuations in housing construction makes it difficult to meet the housing shortage. High inflation rate, financing shortages, rapid price increases in construction inputs and land, insufficierıt level of credit provided by the Mass Housing Fund and misallocation of credits are important factors affecting negatively the demand coming from the Iarge social groups. The problem of land is also crucial in the solution. Lands belonging to municipalities or the state should be properly zoned within an urban plan and offered to the construction market in order to solve the land problem. On the other hand, the expansion of the Fund and the bank credits are important with regard to financing. The housing sector is very sensitive to the macroeconomic policies; the sector faces problems whenever tight monetary and fiscal policies are implemented. Therefore, it can be expected that the solution for a stable housing sector will depend upon a stable ecorıomic trend without recessions. With unfavourable market conditions, there will be no improvement in the sector and the shortfall in the housing will increase and the shortage will be met by illegall y built houses.
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