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TURKEY COUNTRY STRATEGY

21 Exports‐ $US million (Goods) 134,906.9 152,461.7 151,802.6 157,620.4 171,544.0 188,486.0 22 Imports‐ $US million (Goods) 240,841.7 236,545.1 251,661.3 242,176.9 227,212.0 258,762.0 23 Trade Balance $US mn (Goods) ‐105,935.8 ‐84,083.4 ‐99,858.6 ‐84,556.5 ‐55,668.0 ‐70,276.0

24 Trade Balance/ GDP ‐13,7% ‐10,7% ‐12,1% ‐10,6% ‐7.7% ‐9.2%

25 Current Account Balance $US mn ‐75,008.0 ‐48,535.0 ‐64,658.0 ‐46,377.0 ‐36,626.0 ‐44,821.0 26 Current Acct. Bal./ GDP ‐9.7% ‐6.2% ‐7.9% ‐5.8% ‐5.1% ‐5.9% 27 Forex Reserves (end period‐ exc gold) US$ 78,458.2 99,922.6 110,927.5 106,902.0 110,019.4 108,564.7

Sources: TURKSTAT, Central Bank of the Republic of Turkey, IFS –IMF April 2015, IMF Article IV

Consultation, Report No. 14/329 December 2014, EIU Country Report‐ Turkey April 2015.

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TURKEY COUNTRY STRATEGY 2015‐2018

I. Recent Economic Developments and Outlook

Growth of the Turkish economy has outpaced that of much of the rest of the Black Sea Region

in recent years. Since the 2001 financial crisis, it has grown 85% in real terms cumulatively. After a

stretch between 2002‐2007 where real GDP grew by 6.8% on average, Turkey experienced a slowdown

in 2008‐09 as capital inflows from abroad suddenly ceased, external demand for exports dropped

sharply, and domestic demand was curbed by fear and uncertainty. Fortunately, the recession proved

less severe than elsewhere‐ real GDP grew 0.7% in 2008 and contracted ‐4.8% for 2009. Even though

the economy contracted over 10% at its lowest point, the downturn was short‐lived Hand by mid‐2009

the Turkish economy was growing rapidly, a momentum that was sustained in 2010 and 2011 posting

exceptionally high growth of 9.2% and 8.8% respectively. Part of the recovery was due to low‐base

effects from the downturn, but was fueled by private consumption and gross fixed investment. On the

demand side, private consumption, which accounts for over 70% of GDP, had a big impact on growth

as it increased 6.7% in 2010 and 7.7% in 2011. Gross fixed investment, which normally accounts for 20‐

25% of GDP‐ surged 30.5% in 2010 and 18.0% in 2011 respectively, driven by robust capital inflows.

This was offset by the external sector’s negative contribution, as the current account deficit grew

rapidly.

Fearing overheating, Turkish authorities engineered a "soft" landing in 2012 by making lending

more difficult, and trying to limit credit growth, while the lira also depreciated. The target was private

consumption, which declined ‐0.5%, but private investment suffered even more, with gross fixed

investment declining ‐2.7%. However, this was partly offset by double digit growth in public

investment, and by improvement in the external sector. Even though global conditions worsened with

the Eurozone crisis and conflicts in the Middle East affecting key trade partners, exports increased

13.7% while imports decreased 1.8%. Overall GDP growth slowed to 2.1% in 2012 but recovered in

2013 to 4.2% as private consumption and investment picked up again, government spending also rose,

while the external sector acted as a drag with exports stagnant while imports grew.

This in turn led to a repeat of 2012 policies in early 2014. In order to rebalance the economy,

monetary policy was tightened, macroprudential measures were taken to limit credit growth and the

exchange rate depreciated. Private consumption weakened and investment declined, offset by an

improved external balance and to a lesser degree higher public sector spending. Growth slowed to

2.9% for 2014.

Despite the cyclical peaks and dips, GDP growth averaged 5.4% between 2010‐14, more than

twice the 2.6% Black Sea Region average. Turkey has been largely unaffected by the protracted

recession suffered in the western part of the Black Sea Region from 2010‐12 and the cyclical downturn

in the eastern part that began in 2013 and still persists. It is one of the few countries in the Region to

have defied the worrying trend of under‐investment, as both private and public investment have

grown substantially, if a bit unevenly, with gross fixed investment averaging exceptional 9.8% growth.

The exception is foreign direct investment, which has been weak in the post‐crisis period and has failed

to return to pre‐crisis levels, averaging approximately 1.5‐2.0% of GDP. Instead, the growth of

domestic credit and private external debt indicators suggest that domestic and external borrowing

have underpinned the investment growth.

Although it is not immune to external developments, Turkey’s economy has proven remarkably

steady in recent years even as its linkages with the global economy have grown. For 2015, growth of

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improved by the recent most recent devaluation of the lira. Projections for 2016‐18 are more difficult,

and sustaining real GDP growth of nearly 5% per annum is likely to be challenging, the slowdown

should be moderate with growth on the order of 4% or even slightly higher feasible. With Turkey an

increasingly globalized economy, external factors may impact the projection, and Turkey’s reliance on

external capital inflows has made it vulnerable to monetary policy fluctuations in developed

economies such as the US and the Eurozone. Additional factors that may play a role include

fluctuations in the price of oil and other key commodities, developments in the EU (including Eurozone

turmoil) and most importantly the geopolitical tensions in the Black Sea Region and ongoing conflicts

in the neighboring Middle East.

Turkey’s macroeconomic fundamentals have generally been solid. Public finances have been

well managed and stable and the Government has maintained a relatively tight fiscal policy while

keeping public debt low and on a declining trajectory. Government budget deficits have generally been

at or below ‐2% of GDP in recent years, with the exception of 2009 when they ballooned to ‐5.5% due

to a sudden decline in revenues and increased expenditure owing to targeted stimulus measures to

mitigate the negative impact of the steep decline in private consumption. As the economy picked up,

the deficit improved rapidly to ‐1.4% of GDP within two years, and has stayed low since. Public debt at

end 2014 stood at around 33.7% of GDP with around 37% of this figure external debt and the

remainder locally denominated.

Private external debt at end 2014 stood at approximately 35% of GDP. While this figure is not

unsustainably high, it has risen from the mid 20%s in 2010‐11 and is at a historically high rate. Given

the growth of the economy, the increase in nominal US$ dollars has been rapid. Banks in particular

have increased their reliance on external funding in recent years, which has been on‐lent to the private

sector.

The reliance on external financing is due to Turkey’s persistently large current account deficit.

The current account has been at the epicenter of policy dialogue with international institutions such as

the IMF, and is keenly watched by investors, rating agencies, and others interested in the

macroeconomic climate in Turkey. ‘High Growth, Persistent Imbalances’ is the headline of the

overview chapter of the IMF’s latest report on the Turkish economy1. The current account balance is

linked to the biggest driver of economic growth‐ private and public consumption. When consumption

is weak, the balance improves, and when demand grows, the deficit rises as import growth increases. The current account deficit is also explained by a shortage of savings, as national savings are at

around 14% of GDP, a figure which lies an estimated 6% of GDP below investment. Correcting current

account imbalances lies behind policy interventions to cool demand which led to observed downturns

in growth in 2012 and 2014. As growth slowed, so the current account deficit improved. When fiscal

and monetary policy tools are loosened, demand surges and the current account deficit follows suit.

Another implication of the increased reliance on external financing is increased vulnerability to sudden

reversals in investor sentiment as a result of external events such as monetary policy decisions in

developed economies. Speculation over the US Federal Reserve’s cessation of its quantitative easing

program‐ so called ‘tapering’‐ created considerable volatility in Turkish financial markets in mid‐2013

as external investor sentiment soured suddenly on emerging markets. In order to improve

competitiveness and the current account over the longer term, Turkey’s Tenth Development Plan

(2014‐18) includes a comprehensive second generation structural reform agenda. More specifically, it

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contains a list of 25 ‘Transformation Programs’, with over 1200 specific interventions, which have been

initiated.

The link between domestic demand and import growth suggests a relative lack of

competitiveness, and in fact Turkey’s trade deficit is the key factor behind the current account deficit.

Trade deficits have hovered between ‐10% and ‐14% of GDP between 2010‐2014, fluctuating alongside

domestic demand. However, Turkey’s international trade has grown impressively over the years as the

economy has become increasingly globalized, and export growth has outpaced import growth.

Between 2010‐2014, exports grew by 40% cumulatively while imports rose around 30%. Even more

significantly, the types of exports have changed favorably in terms of diversity and quality. In addition

to traditionally important export sectors such as textiles and light industry, agricultural products, and

minerals, in recent years higher value added exports in areas such as consumer electronics,

automotive parts, and shipbuilding, have grown. Tourism receipts remain a large and growing, further

diversifying sources of foreign exchange generation. On the import side, Turkey’s lack of energy self‐

sufficiency and reliance on other commodity imports accounts for a substantial portion of the trade

deficit.

As the second largest economy in the Black Sea Region, Turkey is an important trade partner

for a number of other BSEC Member Countries, and for many years it was a ‘champion’ of greater

regional trade, with its levels of intra‐BSEC trade growing at an even higher rate than the impressive

growth in overall international trade. However, during 2010‐2014 this trend reversed, as trade with

BSEC countries grew more slowly, with exports rising 36% and imports 24%. Relative to its peak of

19.8%, intra‐BSEC trade as a share of total Turkish international trade has slipped steadily and stood at

15.2% for 2014.

Inflation is another indicator of much focus in recent years. Turkey has a floating exchange rate

and its monetary policy is focused on inflation targeting. The Central Bank of the Republic of Turkey

pursued a tight monetary policy during the 2000s and achieved single digits consistently‐ in stark

contrast to the high double digit rates Turkey experienced annually up to the early 2000s.

Nevertheless, inflation has been above the 5% target and has averaged around 8% between 2010‐14,

reaching 8.9% for 2014 as a result of pass through effects from the depreciation of the lira and rising

food prices. The rate of inflation is affected by many factors, including unfavorable weather conditions

and pressures from energy prices, but it tends to rise when domestic demand grows and to dip when

demand slows. For 2015, the rate is likely to reach 6.5‐7% aided by the end 2014 decline in oil prices

and greater food price stability.

Slowing inflation, in turn has led the Central Bank of the Republic of Turkey to lower interest

rates in early 2015 in due to the gradual improvement of certain risk indicators. However, with the

benchmark lending rate lowered to 7.5% in February 2015, real interest rates have by some

calculations turned negative which, if sustained, risks stoking inflationary expectations and thus

causing erosion of competitiveness and reduced incentives to increase private savings. In order to curb

excess credit growth, and especially lending for consumption, Turkey has implemented a series of

measures to limit such growth without impeding lending for productive/ investment purposes. To this

end, measures have been introduced such as high reserve requirements for short term lending,

increased provisioning rates for uncollateralized consumer loans, maturity limits on consumer loans,

and numerous limits on credit cards, the use of payment installments and cash advances. The

measures have had some success, and credit growth slowed in 2014 relative to 2013, but this is offset

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The banking sector is regulated by the Banking Regulation and Supervision Agency. Banks are

well capitalized (above 15% in the first quarter of 2015, of which almost all Tier 1) and enjoying

adequate liquidity, while non‐performing loans, at less than 3%, are low. The impact of exchange rate

depreciation has been limited, although the growing use of wholesale external funding bears watching

and could generate rollover risks.

II. Overview of Current BSTDB Portfolio

As of 31 December, 2014, the active BSTDB portfolio in Turkey amounted to 16 operations

approved by the Board of Directors (BoD), involving an investment of € 382.7 million. Out of this total

amount, 14 operations were signed for € 288.9 million and the outstanding disbursements were at €

172.1. Turkey ranks first in the BSTDB portfolio, with 25.2% of BoD approved operations, and 21.8% of

signed operations, and it ranks second in the portfolio with 18.2% of amounts outstanding. Relative to

the Bank’s active portfolio at the end of 2010, Board approvals increased by 58.1%, signings by 37.8%,

and amounts outstanding by 8.0%.

Table 2: Active BSTDB Portfolio in Turkey as at end December 2014

All Figures in Euros Million BoD Approval Date Approved Amount Signed Amount Amount Outstanding TurkEximbank* 17‐Dec‐99 32.9 32.9 ‐ Pakel* 12‐Dec‐03 10.7 9.1 9.1

Adana Light Rail 3* 15‐Apr‐06

18‐Jan‐07 37.1 37.1 11.4

Istanbul Metro* 1 12‐Jan‐07 29.7 17.3 1.3

Istanbul Kadikoy ‐ Kartal Metro1 21‐Apr‐08 50.0 50.0 25.0

Emerging Europe Accession Fund 25‐Sep‐09 1.2 1.2 0.4

Balkan Accession Fund1 10‐Aug‐06 0.5 0.5 0.4

Koprubasi Hydroelectric Power 26‐Feb‐10 14.8 11.5 5.7

Alternatif Bank* 3‐Dec‐10 24.7 24.7 24.7

Equity to ADM CEECAT Recovery 21‐Jul‐11 6.4 6.4 4.7

Bankpozitif SME 23‐Jun‐12 20.0 20.0 13.3

TAV Izmir EGE Airport 12‐Nov‐12 40.0 40.0 40.0

Ekspo Faktoring 1‐Dec‐12

11‐Apr‐14 8.2 8.2 6.1

Is Leasing 8‐Oct‐13 30.0 30.0 30.0

Hayat Kimya Sanayi A.S.1 11‐Nov‐14 16.5 ‐ ‐

Ankara Etlik Integrated Health 28‐Nov‐14 60.0 ‐ ‐

Total 382.7 288.9 172.1

III. Review of Country Strategy 2011‐2014: Post‐Evaluation

The current evaluation was performed by the Bank’s Evaluation Office as per the respective

Evaluation Policy. It reveals the performance of the Bank’s 2011‐2014 Country Strategies. Its goal is to

provide accountability to the Board of Directors and Board of Governors as well as facilitate the

decision‐making by the Bank’s Management and Boards on the eventual update of the country

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The evaluation of the respective country strategy compares the stated 2014 targets with actual

results as of end of 2014, and provides a country‐oriented overview and evaluation rating. The 2011‐

2014 Country Strategy was approved by the Board of Directors in early 2011, reflecting an in‐depth

independent evaluation of the implementation of the BSTDB’s earlier strategies, conducted by the

Evaluation Office. It was aligned with the objectives of the Bank’s Business Plan 2011‐2014 and was

therefore evaluated in that context

The implementation of the Country Strategy was very consistent with the Business Plan

implementation not only in terms of overall volumes, but by the exceptionally diversified and

development‐oriented portfolio. While the achieved signed volumes were just as targeted, this was

complemented by a much higher volume of approvals (179%) and by a very balanced coverage of the

sector priorities as defined in the Strategy.

In conclusion, the performance of the strategy is rated as Excellent, as not only the volumetric

targets were met, but the sector coverage was very well aligned with the Strategy. A more

comprehensive overview is presented in the table below.

A more comprehensive overview is presented in the table below.

Table 3: Post Evaluation of 2011‐2014 Country Strategy for Turkey

2011‐ 2014 TARGETS RESULTS Country Strategy Sectors/Priorities Target operations: EUR approved/ EUR signed (million) Actual operations: EUR approved/ EUR signed (million) Evaluation Summary

Turkey 1. Financial sector – priority:

Trade Finance, SME focus, equity.

2. Energy/Infrastructure: energy (efficiency and renewable), transport (urban, port, rail), municipal, mining, utilities, etc.

3. Manufacturing and agri‐ business: industries with growth/export potential, including automotive, machinery, health, food processing.

4. Tourism and Real Estate: focus on tourism. 122/114 218/110 Approved volume: 179% Signed volume: 97% 2. Sector coverage:

2.1.Equity CEECAT Fund (SME) 2.2. Bankpositif SME

2.3. TAV Izmir Airport

2.4. Ekspo Faktoring (financial) 2.5. Is Leasing

2.6. Hayat Kimya (consumer staples)

2.7. Ankara Etlik Health Campus 2.8. Koprubasi HPP (energy)

The Bank covered its priorities/ sectors exceptionally well.

2. Performance Rating: Excellent

Targets met as intended, with a very balanced sector coverage.

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IV. BSTDB Operational Priorities for 2015 ‐ 2018

The Bank’s role and priorities are defined (i) in accordance with the priorities and targets laid

out in its Medium‐term Strategy and Business Plan 2015‐2018 and (ii) country needs and objectives, as

well as (iii) available resources, strategies and policies of BSTDB. In this respect, BSTDB will seek viable

opportunities and will continue closely monitoring the developments in the Turkish economy in order

to stand prepared to support bankable projects. In addition the Bank shall seek co‐financing

opportunities with international financial institutions (IFIs), public sector institutions and private

partners.

BSTDB will focus in the next four years on providing support for the implementation of the

Government program and priorities, while responding to market demand. The Bank will consider

undertaking activities and providing services as may advance its purpose, paying special attention to

activities promoting export of goods and services, and development of infrastructure, including energy

efficiency. In addition, through selected intermediaries, the Bank would attempt to expand its

financing programs in favor of SMEs.

Based on the 2015‐ 2018 BSTDB Business Plan, the Bank would expect on average to sign around four

new operation each year, for approximately € 37‐55 million. Over the four year period, this implies

sixteen new commitments (signed operations) for approximately € 184 million (a range of € 156‐212

million).

These indicative targets are based on the Base Case Scenario of the MTSBP, and given

appropriate circumstances and sufficient operational opportunities the Bank would make efforts to

exceed this level. In case of higher regional economic growth rates, increased demand for Bank

funding, and an improved situation in financial markets, a phased increase in the average number and

size of operations would allow the Bank to move towards achieving the targets envisaged under the

High Case Scenario. Moreover, at the Mid‐Term Review, depending upon performance and prospects,

the above targets may be revised upwards2. Areas for BSTDB Financing:

BSTDB Trade Finance and Financial Sector Strategy for Turkey

BSTDB’s Trade Finance and Financial Sector Strategy has been created in order to develop a

network of financial intermediaries, through whom to deliver trade finance and SME finance products.

Since BSTDB began its operations, the following products have been introduced through selected

financial intermediaries in Turkey for the purpose of Trade Finance, and SME development:

 Short and medium‐term Pre‐export Finance product;

 Medium–term SME Finance product;

 Subordinated loan for SME financing

 Leasing Facility for SMEs

2_Under_no_{circumstances}_would_targets_be_revised_downwards_unless_the_lower_case_scenario_of_the₂₀₁₅_‐₂₀₁₈_BSTDB Business Plan were to be followed.

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 Trade Finance Facility for Factoring company

The financing of trade, particularly the export of manufactured goods and equipment from

Turkey to other BSEC countries, was successfully implemented in previous years through the export

credit agency of Turkey, Turk Eximbank. In addition, the Bank invested in two funds for equity

investment in the region covering Turkey as well, and small scale investments have been made in

Turkey. Furthermore, the first subordinated loan to a bank for SME financing was successfully co‐

financed under a Master Co‐operation Agreement signed with other IFIs. Two new products for leasing

and factoring companies have been introduced recently.

A core priority for the Bank remains the provision of financial support to SMEs which undertake

modernization programs of their production facilities, corporate development or investment

programs.

The Bank intends to use the leasing product not only for financing capital expenditure of SMEs but also

for other companies as an effective financing tool for the promotion of regional trade. Short‐term

credit lines opened to factoring companies for trade related purposes will enable them to offer their

customers financing for working capital, for imports from other countries in the region as well as for

export to all countries. The Bank will seek to increase the number of financial intermediaries as well as

to use existing financial intermediary products effectively.

The Bank will continue to consider the option to take equity participations in selected financial

institutions and funds, and will also seek to use quasi‐equity products, such as subordinated loans.

Energy efficiency needs to be raised, particularly through reduction of heating losses and

improvements of existing systems. The Bank will consider offering energy efficiency credit facilities

through selected financial intermediaries in order to finance energy efficiency investments of SMEs as

well as individuals. The Bank will also keep in regular contact with complementary international

financial institutions (IFIs) such as EBRD, IFC, EIB, DEG and KFW to seek ways to coordinate activities

and share experiences, given the opportunities which exist for joint involvement. Energy and Infrastructure (E&I)

The Bank will continue offering its support for “bankable” project opportunities in the areas of energy

and infrastructure, where investment opportunities are materializing due to Turkey’s growing demand

for energy, electricity and upgrade and rehabilitation of all kinds of national infrastructure.

The Bank will continue to ensure that all BSTDB E&I operations in Turkey meet sound banking

principles, comply with the Bank’s Environmental Rules and Procedures, and incorporate, where

appropriate, Environmental and Social Action Plans.

Turkey has enjoyed close historical economic ties with neighboring countries. In this respect BSTDB will

be prepared to support bankable investments and business opportunities promoting regional

economic cooperation as well as involving investments of Turkish companies in E&I projects in other

BSTDB Member Countries.

The Bank will also work in cooperation with international financial institutions (IFIs), commercial banks

and export credit agencies (ECAs) as an important source of the project co‐financing as well as the

institutional knowledge transfer.

Areas of particular focus include:

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Natural resources

 Projects involving the development and rehabilitation of natural resource facilities upstream,

midstream and downstream;

 Projects involving exploration and production of hydrocarbons both onshore and offshore,

including any technical applications to increase recovery;

 Projects involving construction of new or rehabilitation of existing energy transportation

infrastructure (pipelines, railways, river/maritime transportation facilities, etc). The Bank will

also support projects designed to improve local and regional energy and handling

infrastructure, such as rehabilitation of gas/oil processing and storage facilities;

 Provision of financing for ‘downstream’ operations, particularly the expansion of retail

networks, and upgrading of oil refineries and petrochemical facilities to increase production

and improve the quality and environmental acceptability of refined products; Energy and electricity

 Projects envisaging construction, upgrading, modernization, expansion, operation and

maintenance of all kinds of conventional and renewable energy and electricity capacities;

facilities and infrastructure which facilitates generation, production, distribution, transmission

and sale of energy and electricity;

 Projects, which lead to improved energy efficiency and energy conservation

The Bank will work in cooperation with other IFIs and commercial banks in joint energy and

infrastructure sector projects as an important source of institutional knowledge transfer

Municipal and Social Infrastructure

 Municipal projects with or without sovereign or municipal undertakings or guarantees where

municipalities, local regional governments or companies linked to municipalities or local

regional governments are in the role of the borrower or ultimate guarantor;

 Projects supporting Public‐Private Partnerships, in various sectors of Municipal Infrastructure,

including in particular, the health care sector and waste/water management

 Projects involving waste water, solid waste, hazardous waste treatment and sewage.

Mining

 Projects in the mining sector including, among others, import/export of equipment and

production for further processing; Transportation and Transport Infrastructure

 Support for the development and rehabilitation of key transportation and transport

infrastructure.

Telecommunications and IT Services

 Projects involving upgrade, development and modernization of telecommunications

infrastructure

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Transportation

In addition to its economic growth and fast urbanization, the geographical position of Turkey as

a natural bridge between Eastern Europe and the new emerging markets of the Caucasus and Central

Asia makes transportation a priority sector for the country. Despite the continuous investments in this

sector, significant needs remain, and it will continue to be a priority sector for the Turkish government. The deficiencies in the urban transport infrastructure of various big cities that emerged as a

result of fast urbanization of the country are addressed by local municipalities through inner‐city mass

transportation projects. The Bank has been involved in the past in such projects of local municipalities,

and will continue to seek projects in areas such as light rail and metro lines.

Being surrounded by sea on three sides, maritime transport is very important for Turkey. The

waters of the country serve as a natural transportation route from the Black Sea to Europe, the Middle

East and Africa. Thus, port investments are also very important for the development of the Turkish

economy. The Bank will closely follow developments in this sector and will seek involvement in port

investment projects to the extent possible.

Despite some investments in recent years, the railway system in Turkey needs further

development also. There are various high speed railway projects connecting major cities of the

country; for example, Ankara‐Sivas and Ankara‐Izmir high‐speed railway projects are among the most

advanced projects. These projects are planned to be implemented under a PPP structure, and the Bank

will seek to support such projects wherever possible.

The rapid development in civil aviation in Turkey is expected to continue in coming years.

Turkish government priorities include to improve and enhance air transport, to make Turkey a regional

air transport center internationally, and to provide the connection of airports with the rail system and

other public transport systems. The country’s geographical position and increasing population provides

an opportunity for further growth of this sector. Projects for modernization of existing airports and

their connections with other transport systems will be followed carefully. The Bank will explore the

possibility of financing projects that are planned as Public‐Private Partnerships (PPP).

The logistics sector will also be considered carefully for projects, since its further development

is vital for Turkey to benefit from opportunities arising from the country’s geographic location. In

particular, implementation of projects that contribute to the integration of Turkey with the logistics

systems of the EU and other regions, and which will enable the country to serve as a link between

Europe and Asia, will make a significant contribution to the achievement of the country’s industrial

strategy vision.

In terms of the connection between Pan‐European transport corridors and Central Asia, the

role of Turkey as a member of the Black Sea Economic Cooperation and the Mediterranean basin has

enhanced its importance with respect to East‐West and North‐South connections. Therefore, projects

that contribute to development of these transport corridors will be given priority by the Bank.

Manufacturing

The rapid growth rates of the production sector offers wide financing opportunities for the

Bank. Due to the improvement in the country’s rating, competition among financial institutions to

provide financing to private companies is very high. This reduces BSTDB’s role of ‘additionality’ (or

value added), so the Bank will assign priority to industrial projects which demonstrate high potential to

grow and expand into international markets through exports and direct investments. Particular

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machinery, health and environmental equipment, chemicals including paints, solvents,

pharmaceuticals, rubber and plastic products, and packaging materials, as well as production of

durable consumer goods. Environmental improvement projects will be given special attention.

Turkey produces and exports a wide range of agricultural products. New investment is required

so as to maintain Turkey's position as an exporter of agricultural products. The Bank will support agri‐

business investments that create employment and export opportunities.

Health Sector

To overcome deficiencies in the health care system, the Turkish government initiated the

creation of integrated health campus projects in more than 30 cities. Each campus has a number of

specialized hospital departments, as well as Research & Development laboratories and centers, techno

parks, social facilities, housing and parking lots. Establishment of these projects is regarded as an

essential part of the development of the Turkish healthcare system by the government and they are

thus considered priority projects. Considering their high developmental impact, BSTDB will support

these projects together with other IFIs and commercial banks operating in the country.