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For Erodgan’s Istanbul Canal project, critics claim very few winners | Business and economic news

Istanbul, Turkey – About 500 years ago, Sultan Suleiman the Magnificent considered building a canal to pass through the Bosphorus. Now that dream is about to come true with Turkey’s newest and most ambitious “super project” launched under President Recep Tayyip Erdogan.

Plans to build a 25-mile (40-kilometer) waterway running north of Istanbul to connect the Marmara Sea to the Black Sea are already underway, with plans to begin this summer, in mid-2021.

According to government estimates, with an estimated construction period of seven years and prices ranging from $ 9.3 billion to $ 14.6 billion, the Istanbul Canal has been regarded by its backers as an early adopter. The smart investment will be profitable in the form of transportation revenue and reduced traffic in the Bosphorus.

But skeptics are many. In terms of geopolitics, The project has raised doubts about Turkish commitments to the international treaty governing the shipping of maritime shipping in the Bosphorus and the Dardanelles.

It has also been criticized as one of Erdogan’s other super projects that could jeopardize the environment, cost the state money and make the Turkish economy, which is heavily dependent on external finance, even even more easily affected by the change in global investor sentiment.

‘Crazy project’

The Istanbul Canal is the latest in a series of infrastructure projects that the government has been working on since 2013, when Erdogan announced a $ 200 billion build over 10 years.

The list of completed super projects so far includes one of the largest airports in the world, railway and road tunnels under the Bosphorus and a suspension bridge connecting Europe with Asia are ranked as one of the largest in the world.

Another transcontinental bridge at the Dardanelles will be completed next year.

Dozens of smaller plans have also been built to the point where only a week goes by without a section of newly opened highways, airports or railroad tracks.

However, the Istanbul Canal can overshadow everything. Dubbed Erdogan’s “crazy project” when he first proposed it in 2011, the canal will be the jewel in the crown of the president’s legacy, forever changing the city where he grew up. .

Turkish President Recep Tayyip Erdogan at the official opening of Istanbul’s new airport, in Istanbul, Turkey, October 29, 2018 [File: Murad Sezer/Reuters]

The government has praised the canal for its potential to reduce the number of ships passing through the Bosphorus – one of the busiest and most difficult to navigate waterways in the world. It also highlights the amount of money the canal can obtain from ships passing through it.

But critics note that traffic flow across the Bosphorus has decreased significantly in recent years, especially as new pipelines make the transportation of oil and gas less efficient.

From 2008 to 2018, the number of ships in the Bosphorus has decreased from 54,400 to 41,100 per year, according to the Turkish Ministry of Transport. Maritime accidents in the strait have also decreased by a third since 2003, according to Turkey’s coastal safety agency.

Some are also questioning whether the canal will fill Turkey’s coffers to the extent that the government has predicted, noting that ships can now pass through the Bosphorus for a nominal fee and there will be little incentive to pay to use the canal.

Furthermore, past super projects have stifled the public as expected revenue fails to meet ambitious forecasts, prompting the government to underwrite construction contract companies. -Operate-Transfer.

According to the report, the government paid more than $ 515 million in 2019 to the operator of the third Bosphorus bridge, which opened five years ago, to make up for the shortfall in expected toll revenue.

Green Party co-spokesperson Koray Dogan Urbarli said the same could happen with the Istanbul Canal.

“We, as taxpayers, will compensate for ships that do not pass through the canal under our sponsorship,” he told Al Jazeera.

Yavuz Sultan Selim Bridge, also known as the third Bosphorus bridge, connects the European and Asian shores of Istanbul, Turkey [File: Osman Orsal/Reuters]

Urbarli also said that the canal would destroy the lakes and rivers that supply water to Istanbul and threaten marine and freshwater ecosystems.

Gulcin Ozkan, finance professor at King’s College London, said the cost-benefit analysis of such projects seems “misleading” from the financial and environmental standpoint.

She told Al Jazeera: “Most super projects in Turkey require significant environmental costs, driven by experts, environmentalists and specialist bodies such as the Union of Engineers and Ants. Turkish architects have always despised.

‘Lucky few’

Such protests against the government’s canal yard have sparked speculation that the biggest beneficiaries of the super project will be private contractors to build a “new city” on 8,300 hectares (20,510 acres). UK) around the proposed canal.

Shares of real estate companies rose as much as 8.65% on the Istanbul exchange after the canal’s zoning plan was approved on March 27.

Haluk Levent, an economics professor at Istanbul Bilgi University, describes the canal project as the “first phase of the Ponzi scheme” that could promote inequality.

He told Al Jazeera: “The main growth model in Turkey over a long period of time is based on renting money,” and as a result has led to deepening social problems. unemployment and income inequality. “

“It is important that the city will be built around the canal and income from this city,” Urbarli said. “The agricultural land that was acquired at a very low price will suddenly be converted into a residential area and we will see a lucky few become richer.”

Commitment to the Montreax Convention

The canal has also raised concerns about Ankara’s commitment to the Montreux Convention, allowing Turkey to control the Bosphorus and the Dardanelles, while ensuring access to civilian ships during peacetime. manufacturing ships back and forth.

A group of retired Turkish admirals warned against stepping back from the 1936 Convention of Montreux was arrested last week.

Accessed to comment on criticism of the canal, the presidential office introduced Al Jazeera to a section on its website outlining the government’s argument for its proposal and comments. Erdogan on Wednesday.

In a question and answer session with young people, Erdogan said the canal “has nothing to do with Montreux” and will allow Turkey “to completely establish our own independence, our own sovereignty. “.

Most lawyers agree that the canal is out of the convention’s objective but could threaten the treaty, increase the prospects of increased militarization in the Black Sea as well as question traffic in the Bosphorus. how will be regulated.

A ferry travels through the Bosphorus [File: Umit Bektas/Reuters]

Growth and vulnerability

Under the 19-year rule of the Justice and Development Party of Erdogan, Turkey experienced a period of prolonged economic expansion, largely supported by a construction boom thanks to easy credit from people. foreign.

But in recent years the picture has become more bleak, as Turkey’s reliance on external finance worsens whenever global investor sentiment is against the lira.

The lira has halved in value since the currency crisis of 2018, hitting a record low of 8.52 against the US dollar in November.

For now, inflation is stuck at double digits, last month reaching 16.2% on a yearly basis. The unemployment rate is also still at a high level, reaching 13.4% in February.

The lira’s woes intensified last month after Erdogan unexpectedly fired Turkish central bank chief Naci Agbal, who raised interest rates in an effort to curb inflation – and who regained his credibility. This bank with investors. Agbal was in office just four months when Erdogan showed him the door, making him the third central banker to be sacked by the president in the past two years.

Many have argued that Agbal lost his job because Erdogan believes high interest rates cause inflation – a stance that contradicts economic orthodoxy because higher interest rates increase borrowing costs and are therefore seen as an anti-inflationary measure. .

A banner says ‘Where is $ 128 billion?’ hanged at the Beyoglu district office of the main opposition People’s Republican Party (CHP) in Istanbul, Turkey [File: Dilara Senkaya/Reuters]

Agbal is also said to be investigating how Turkey is spending some $ 128 billion in foreign exchange reserves protect the lira under the stewardship of Erdogan’s son-in-law, Berat Albayrak, who resigned as finance minister in November.

During its first meeting on Thursday watched by Agbal’s successor, newly appointed central bank chief Sahap Kavcioglu, the bank kept the benchmark rate unchanged and give up the commitment to maintain tight monetary policy.

The lira fell from 8.05 to 8.15 against the dollar on news.

Lira’s weakness is not only felt by the Turkish consumer. Every time the currency depreciates against the dollar, Turkish companies that incur debts in foreign currencies, especially the dollar, see their service costs rise.

That radioactive dust has cast shadows over famous construction plans such as Istanbul’s new airport.

Infrastructure projects have previously fueled growth, but the existence of foreign currency guarantees, often lasting up to 25 years of operation, diminishes their value to Turkey.

A loss like the lira has experienced in recent years “greatly increases the financial impact of state guarantees on these large projects,” Ozkan said.

She explained: “The state guarantee also extends to the revenue guarantee, which appears to be set at an impractical level in normal times, thus leading to disastrous consequences after economic activity suffers. stagnation during the COVID-19 pandemic. “This is especially the case for Istanbul Airport, with most of the air routes closed since 2020.”

Such a shortage leads to “a growing hole in public finance,” said Ozhan. Turkey’s public debt is about 268 billion USD, or about 40% of gross domestic product by the end of 2020.

Istanbul Mayor Ekrem Imamoglu, who represents the main opposition party, is the main critic of the canal, describing it as “one of the greatest risks this city has faced in all of history”.

Instead, he has called for spending money on public transport, water supply, social projects, education and earthquake protection measures.

“The Canal Istanbul project is like a big and risky surgery that no one wants to go through unless it’s absolutely necessary,” he said at a meeting last year. “We’re talking about an operation that will cut the city down and fundamentally damage its critical systems.”



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