CONTRACTORS EYE FOREIGN PROJECTS FOR A QUICK RECOVERY AFTER THE OUTBREAK

THE CORONAVIRUS OUTBREAK HAS DAMAGED NEARLY EVERY SECTOR IN ALMOST EVERY CORNER OF THE WORLD, INCLUDING CONSTRUCTION.

Even before the pandemic, the construction sector had already been dealing with decreasing demand and delays in payments from the public sector. Now it must also contend with the fall out of pandemic mitigation efforts. Sector representatives said the curfew and domestic travel restrictions have decelerated current projects. But as the impact of the outbreak eases, they hope to gain momentum as the sector receives more projects from abroad with new business models. “Direct income support and incentives for the real sector are needed to keep demand alive,” Nurettin •zdebir, President of AS•, said.

SURVIVE WITHOUT PRODUCTION?

According to •zdebir: The current health crisis is evolving into an economic crisis. This will deepen existing issues in the real economy. A lot of companies have halted production and it’s important to determine how long this will continue. The increasing value of TRY in the past gave birth to two issues: First came luxury consumption; we’ve purchased luxuries which we didn’t earn. Second, industrialists steered the economy toward construction when their sector was weak. We’ve seen these issues before; now we have to get over them on our own.

FORCE MAJEURE

Edip Yenigun, a member of the Board at Yenigun Insaat: The construction sector is facing a lot of issues because infrastructure activities are not covered by force majeure. Also, banks should implement mechanisms to ease the liquidity issue across markets and meet the credit debt demands of the business world as quickly as possible.

We expect new tax relief packages and regulations from the government to fight the deterioration in cash flows. In our country, there are a total of 440,000 construction companies. The government should rank these in terms of what they do and how competent they are.

MORE EFFICIENT BUDGET

Celal Kologlu, Speaker of AS•: We’re focusing on completing investments in health and food security. We’re conducting our projects with the necessary health measures and additional precautions. During this process, we’re also trying to take advantage of the curfew and domestic travel restrictions. For example, we’ve accelerated our work at the Istanbul Airport for a third runway. Also, companies are completing various transportation projects across the country. The outbreak showed the need for a new and more cautious road map. •ur sector should do the same. We need to identify and capitalize on key investments and financial opportunities, and create new models. We need to use our budgets more efficiently and complete the most urgent projects.

THE GOVERNMENT SHOULD PAY ITS DEBT

Taner •zdemir, President of the Board of Directors of Caner Insaat: Companies that make contractual agreements will receive a serious amount of money. The increasing maturities and the postponement of government debt are causing issues. The government should pay its debts to the market. There can be exceptions, but the government should establish a system in which billings are under regulations in line with the law, not managers’ personal choices.

TOO MANY ACTORS IN THE MARKET

Cetinay Alper Tekin, Deputy Manager of Betonel Prefabrik Beton Elemanlari: The management of private and public operations should be based on performance. We want an environment where performance is evaluated objectively and fairly. Goods and services providers are expectated to do more due to the private sector’s investment. There are too many actors in the market. The government should prepare a quality accreditation system where employers are allowed to pick their employees. This would be better for both the customer and goods and services producers.

Selahattin Duzbasan, General Manager of Commerce of Ilgaz Insaat: The foreign exchange rate is increasing well above the estimates of the real sector and it reflects badly on producers

and customers. This situation makes the markets unstable. •f course, this instability means bad news for construction costs, namely equipment costs, and maturities. The Ministry of Transportation’s total contract amount stands at TRY 320 billion and our budget for these contracts is TRY 40 billion. Since TRY 10 billion of this budget is set aside for natural disasters, the available budget is TRY 30 billion. This means we’ve already agreed on various contracts and we have already prepared our expenditures for the next 10 years. Public contractors’ expectations are very pessimistic due to this situation. In the last 18 years, the government revised the tender legislation 21 times. These changes include positive impacts, but sector representatives should be included in discussions over the revision of legislation.

TURKEY NEEDS TO LOOK OVERSEAS

Serhan Yildiz, Chairman of Cevser Insaat: Public construction companies like ours secure projects and complete the task at hand one way or another. However, quality is also important. The government should implement a quality point system for Work Completion Certificates. In this way, all projects will be completed. The company will either complete the task or hand it to another company. But I believe all parties in a project should be evaluated. In Turkey, opportunities for the construction sector will decrease in the next five years. We need to go abroad eventually.

CONSULTANCY COMPANIES NEEDED

Ihsan Cetinceviz, Deputy Chairman of •nur Taahhut Tasimacilik Insaat: We continue to take precautions to protect our employees and their families. We’ll continue to work on our projects as soon as the lockdown eases. We have enough construction companies abroad but we need more project and consultancy companies. We are working on projects, including roads, dams, bridges, viaducts, and tunnels, but unfortunately, we are not able to work on these projects. •ur companies should take steps forward for new projects and supervision. As we put our projects on hold, we see that foreign companies

are taking our places.

THE LACK OF PRICE DIFFERENCE

Cansen Cinar, Deputy Chairman of Kalebozan Muhendislik: Main contractors in recent tenders are buying these tenders using foreign exchange, but subcontractors need to pay in lira. The sector is facing various issues in this exchange. They want more cutbacks and this causes distress for companies. They buy with foreign exchange but the main contractors demand liras in domestic projects. But they do not reflect this one-year price difference in the contract. The project suffers from losses. This is our main trouble.

GOVERNMENT SUPPORT NEEDED

Ceyhun Alver, •zver Insaat Ticaret Sanayi Chairman: Earthquakes in Istanbul are a very important issue. If we don’t take the necessary measures, we will face a host of problems which will take Turkey back 50 years. Instead of creating new zoning areas, we should renovate old buildings. Turkey has a huge potential and this potential is not limited to businesses. The government should support the sector more broadly. I believe business development activities should be run by the government with public support. Contractors can operate as subcontractors under a company with government approval. Moving to a new country and chasing new projects requires a huge amount of resources.

PRIVATE BANKS’S RESPONSIBILITY

Berker Bulbuloglu, Board Member of Bulbuloglu Insaat: Construction is one of the leading sectors in our country. That’s why the sustainability of the sector is crucial. In macro terms, we need to separate the construction sector from others. Financial measures, incentives, and government support are very important these days. Just like public banks, private banks should take responsibility and do what’s necessary. Decreasing business activity in Turkey will lead to heavy losses. That’s why I believe business should continue with the necessary measures.

SUPPORT R&D TO SAVE ENERGY

Cigdem Isik, Manager of Genc Isik: 90 percent of Turkey’s land sits on fault lines and that’s why urban transformation is very important. As a civil engineer, I believe our cities are facing very significant infrastructure issues. Reducing energy consumption in households should not be limited to monetary savings. R&D activities are necessary. We can help by providing funds for young entrepreneurs. This would be a good investment not only for the sector but also for our future. Instead of providing a huge amount of funds for an idea, we can support various projects through a mutual fund.

A SINE QUA NON FOR CONTRACTS

Merdan Hurmeydan, Chairman of Sistem Elektromekanik Tesisler Sanayi ve Ticaret: In 2020, the government prioritized cutting back on public expenditures. That’s why various projects received lower amounts, or nothing at all. The continuity of fixed costs then becomes a burden for our companies. I believe we will get through this difficult time with strong measures by our government. When worksites are closed and operations stop due to reasons that have nothing to do with the contractors, new legislation should ban technical personnel and equipment pools from worksites. Recent developments show us the price difference system in tenders is not working. Price differences in tender documents should be a sine qua non of contracts.